/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Question 6IFRS What is an onerous contract? Giv... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 13: Question 6IFRS (page 715)

What is an onerous contract? Give two examples of an onerous contract.

Short Answer

Expert verified

An onerous contract is a contract where the predetermined costs required for settling the debts included in the contract surpass the financial benefits that are supposed to be obtained under it.

Two examples of the onerous contract are:

  • Contract for renting a property of no use.
  • Contract made for renting a piece of land and equipment to drill for oil.

Step by step solution

01

Meaning of Onerous contract

An onerous contract is a contract where the investment of the business will be more than its return.

Contracts can be onerous initially, or they can turn into onerous afterward with the fluctuation in situations resulting from a rise in expected costs or a reduction in the anticipated cash benefits related to the contract.

02

Examples of onerous contract

Examples of the onerous contract are:

  • Lessee still paying under the terms of an operating lease even though the asset is of no use for him.
  • Revenue from contracts with customers when a contract becomes onerous due to a penalty clause.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

(Debt Investments) Presented below is information from a bond investment amortization schedule with

related fair values provided. These bonds are classified as available-for-sale.

12/31/17 12/31/18 12/31/19

Amortized cost \(491,150 \)519,442 \(550,000

Fair value 497,000 509,000 550,000

Instructions

(a) Indicate whether the bonds were purchased at a discount or a premium.

(b) Prepare the adjusting entry to record the bonds at fair value on December 31, 2017. The Fair Value Adjustment account

has a debit balance of \)1,000 before adjustment.

(c) Prepare the adjusting entry to record the bonds at fair value on December 31, 2018.

Question: In determining the amount of a provision, a company using IFRS should generally measure:

(a) Using the midpoint of the range between the lowest possible loss and the highest possible loss.

(b) Using the minimum amount of the loss in the range.

(c) Using the best estimate of the amount of the loss expected to occur.

(d) Using the maximum amount of the loss in the range.

Question: E13-1 (L01) (Balance Sheet Classification of Various Liabilities) How would each of the following items be reported on the balance sheet? (a) Accrued vacation pay. (j) Premium offers outstanding. (b) Estimated taxes payable. (k) Discount on notes payable. (c) Service warranties on appliance sales. (l) Personal injury claim pending. (d) Bank overdraft. (m) Current maturities of long-term debts to be paid (e) Employee payroll deductions unremitted. from current assets. (f) Unpaid bonus to officers. (n) Cash dividends declared but unpaid. (g) Deposit received from customer to guarantee (o) Dividends in arrears on preferred stock. performance of a contract. (p) Loans from officers. (h) Sales taxes payable. (i) Gift certificates sold to customers but not yet redeemed.

(Fair Value Measurement) Presented below is information related to the purchases of common stock by Lilly

Company during 2017.

Cost Fair Value

(at purchase date) (at December 31)

Investment in Arroyo Company stock \(100,000 \) 80,000

Investment in Lee Corporation stock 250,000 300,000

Investment in Woods Inc. stock 180,000 190,000

Total \(530,000 \)570,000

Instructions

(Assume a zero balance for any Fair Value Adjustment account.)

(a) What entry would Lilly make at December 31, 2017, to record the investment in Arroyo Company stock if it chooses to

report this security using the fair value option?

(b) What entry(ies) would Lilly make at December 31, 2017, to record the investments in the Lee and Woods corporations,

assuming that Lilly did not select the fair value option for these investments?

Leon Wight, a newly hired loan analyst, is examining the current liabilities of a corporate loan applicant. He observes that unearned revenues have declined in the current year compared to the prior year. Is this a positive indicator about the client鈥檚 liquidity? Explain.
See all solutions

Recommended explanations on Business Studies Textbooks

Operational Management

Read Explanation

Project Planning & Management

Read Explanation

Accounting

Read Explanation

Business Case Studies

Read Explanation

Business Development

Read Explanation

Organizational Communication

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.