Surfing the Standards Cases
Surfing the Standards Case 1: Nonmonetary Exchanges
On rare occasions, a company will acquire property, plant, or equipment in a nonmonetary exchange in which two entities exchange one nonmonetary asset for another nonmonetary asset.
Read sections 5, 20, and 30 of ASC 845-10. Describe the accounting treatment for a nonmonetary exchange that has commercial substance. Apply the accounting to the following two independent scenarios
Scenario 1. ALR Sporting Goods, Inc. has four basketball goals it uses for demonstrations. The goals were originally purchased for $750 each.
Scenario 2. Assume that instead of ALR trading its basketball goals the company gives NPR 100 shares of its common stock. The stock has a par value of $10 per share and is currently trading at $35 per share. What is the journal entry for ALR?
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Intermediate Accounting
- Indicate whether each of the following statements is true or false. 1. Assets purchased on long-term credit contracts should be recorded at the present value of the consideration exchanged. 2. Companies account for the exchange of non-monetary assets on the basis of the book value of the asset given up or the fair value of the asset received. 3. Under IFRS, all gains on non-monetary exchanges are recognized, regardless of whether the transaction has commercial substance or not.arrow_forwardFor PFRS 15 to apply, a contract with a customer should meet which of the following conditions? I. The contract has been approved by the parties to the contract. II. Each party's rights in relation to the goods or services to be transferred can be identified. III. The payment terms for the goods or services to be transferred can be identified. IV. The contract has commercial substance. V. It is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be collected. A.I, III, IV and V B.I, II, III and IV C.I, II, III, IV and V D.I. II. III and Varrow_forwardStep 1 of the "five-step model" states that certain conditions must be satisfied before an entity can account for a contract with a customer. Which of the following is not one of these conditions? Oa The entity and the customer have approved the contract and are committed to perform their contractual obligations. O b. The payment terms can be identified. O citis certain that the entity will collect the consideration to which it is entitled. Od. Each party's rights about the goods or services concerned can be identified.arrow_forward
- In a sale-leaseback transaction, the owner of an asset sells it and immediately leases it back from the new owner.The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally acceptedaccounting principles.Required:1. Obtain the relevant authoritative literature on disclosure requirements pertaining to a seller-lessee in a saleleasebacktransaction. Use your institution’s Academic Accounting Access to the FASB Accounting StandardsCodification ( www.fasb.org ) or through your school library’s subscription to a research database thatincludes the Codification. What is the specific citation that describes the guidelines for determining the disclosurerequirements in the notes to the financial statements?2. List the disclosure requirements.arrow_forwardPAS 16 states that if an exchange transaction causes a significant change in cash flows, the transaction has commercial substance. In transactions of this type, at what amount should the entity record the asset received? Book Value plus Boot Book Value Fair Value inminsic valuearrow_forwardForward contracts are: Answer a. Contracts usually involving the exchange of a commodity or financial instrument. b. Easily resold c. Always standardized d. An agreement between more than two partiesarrow_forward
- When cash is involved in an exchange having commercial substance _________________. a. a gain or loss is computed by comparing the fair value of the asset received with the fair value of the asset given up b. only gains should be recognized c. gains or losses are recognized in their entirety d. only losses should be recognizedarrow_forwardProblem 4 Archibald Corporation, a public corporation exchanged an asset with Bass Industries. The following information was provided by both companies. Archibald Bass Original cost of the $320,000 $430,000 asset Accumulated 256,000 344,000 depreciation Fair value of the 80,000 120,000 interest Required-arrow_forwardRece vable Question 2 of 18 For trade receivables, the fair value is deemed equal to the Select the correct response: O the amount due from the buyer without adjustment for any trade discounts allowed the price in a binding sale agreement exchange price between a seller and a buyer after taking into account the amount of any trade discounts and volume rebates allowed by the entity. the quoted price of the receivable in an active market < Previousarrow_forward
- Under PFRS 15, when shall a consignor recognize revenue from its consignment sales? A When the consignor receives cash remittance from the consignee. B When it is probable that future economic benefits will flow to the consignor and the fair value of the revenue can be measured reliably. C When the consignor enters into a consignment contract with a consignee. D When the consignor satisfies its performance obligation under consignment contract.arrow_forwardThe cost of a nonmonetary asset acquired in exchange for another nonmonetary asset when the exchange has commercial substance is usually recorded atarrow_forwardQuestion: Classify each of following items as a contingent liability, a provision or neither: (e) an agreement to act as guarantor for another firm’s borrowings? (f) environmental damage that an entity has undertaken to repair ? ******correct answer please **********arrow_forward