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Chapter 3: 5ISTQ (page 150)

The purpose of presenting comparative information in the

transition to IFRS is:

(a) to ensure that the information is a faithful representation.

(b) to be in accordance with the Sarbanes-Oxley Act.

(c) to provide users of the financial statements with information on GAAP in one period and IFRS in the other period.

(d) to provide users of the financial statements with information on IFRS for at least two periods.

Short Answer

Expert verified

The correct option is 鈥渄鈥�.

Step by step solution

01

Explanation to correct option

When the company is opting to use IFRS instead of GAAP, then in this case company is required to present the statements issued in the past least two years, as per the IFRS. This is done to provide the information and show the effect, to the users of financial statements.

02

Explanation of incorrect options

Option a) Comparative financial statements are prepared on the basis of IFRS at the transition date does not indicate the faithful representation.

Option b) The Sarbanes-Oxley Act has no relation to the conversion from GAAP to IFRS.

Option c) In the first and second periods, IFRS is used to prepare the financial statements.

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Most popular questions from this chapter

(a) How are the components of revenues and expenses different for a merchandising company? (b) Explain the income measurement process for a merchandising company.

Question: What are reversing entries, and why are they used?

Mason Advertising was founded in January 2013. Presented below are adjusted and unadjusted trial balances as of December 31, 2017.


MASON ADVERTISINGTRIAL BALANCEDECEMBER 31, 2017


UnadjustedAdjusted

Dr.

Cr.

Dr.

Cr.

Cash

\( 11,000

\) 11,000

Accounts Receivable

20,000

23,500

Supplies

8,400

3,000

Prepaid Insurance

3,350

2,500

Equipment

60,000

60,000

Accumulated Depreciation鈥擡quipment

\( 28,000

\) 33,000

Accounts Payable

5,000

5,000

Interest Payable

鈥�0鈥�

150

Notes Payable

5,000

5,000

Unearned Service Revenue

7,000

5,600

Salaries and Wages Payable

鈥�0鈥�

1,300

Common Stock

10,000

10,000

Retained Earnings

3,500

3,500

Service Revenue

58,600

63,500

Salaries and Wages Expense

10,000

11,300

Insurance Expense

850

Interest Expense

350

500

Depreciation Expense

5,000

Supplies Expense

5,400

Rent Expense

4,000

4,000

\(117,100

\)117,100

\(127,050

\)127,050

Instructions

  1. Journalize the annual adjusting entries that were made. (Omit explanations.)
  2. Prepare an income statement and a statement of retained earnings for the year ending December 31, 2017, and an unclassified balance sheet at December 31.
  3. Answer the following questions.
    1. If the note has been outstanding 3 months, what is the annual interest rate on that note?
    2. If the company paid $12,500 in salaries and wages in 2017, what was the balance in Salaries and Wages Payable on December 31, 2016?

E3-6 (L03) (Adjusting Entries) Karen Weller, D.D.S., opened a dental practice on January 1, 2017. During the first month ofoperations, the following transactions occurred.1. Performed services for patients who had dental plan insurance. At January 31, \(750 of such services was performed but notyet billed to the insurance companies.2. Utility expenses incurred but not paid prior to January 31 totaled \)520.3. Purchased dental equipment on January 1 for \(80,000, paying \)20,000 in cash and signing a \(60,000, 3-year note payable.The equipment depreciates \)400 per month. Interest is \(500 per month.4. Purchased a one-year malpractice insurance policy on January 1 for \)12,000.5. Purchased \(1,600 of dental supplies. On January 31, determined that \)500 of supplies were on hand.InstructionsPrepare the adjusting entries on January 31. (Omit explanations.) Account titles are Accumulated Depreciation鈥擡quipment,Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, PrepaidInsurance, Supplies, Supplies Expense, Utilities Expenses, and Accounts Payable.

When the accounts of Daniel Barenboim Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.

  1. The prepaid insurance account shows a debit of \(5,280, representing the cost of a 2-year fire insurance policy dated August 1 of the current year.
  2. On November 1, Rent Revenue was credited for \)1,800, representing revenue from a subrental for a 3-month period beginning on that date.
  3. Purchase of advertising materials for \(800 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of \)290 are on hand.
  4. Interest of $770 has accrued on notes payable.

Instructions

Prepare the following in general journal form.

  1. The adjusting entry for each item.
  2. The reversing entry for each item where appropriate.
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