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Chapter 3: Q3ISTQ (page 150)

Which statement is correct regarding IFRS?

(a) IFRS reverses the rules of debits and credits, that is,debits are on the right and credits are on the left.

(b) IFRS uses the same process for recording transactionsas GAAP.

(c) The chart of accounts under IFRS is different becauserevenues follow assets.

(d) None of the above statements are correct.

Short Answer

Expert verified

The correct option is 鈥渂鈥�.

Step by step solution

01

Explanation to correct option

The process of recording the transactions are similar under both GAAP and IFRS. In both the method journal, ledger and chart of accounts are similar.

It includes the following procedures.

  1. Record transactions in appropriate journals.
  2. Posting journals to ledgers.
  3. Prepare unadjusted trial balance
  4. Adjusting journal entries recording
  5. Prepare adjusted trial balance
  6. Prepare financial statements from adjusted trial balance
  7. Recording closing journal entries
  8. Prepare post-closing trial balance (Optional)
  9. Recording of reversing entries and posting it to ledgers (Optional)
02

Explanation to incorrect options

Option a) Under the IFRS, debits are on the left side and credits are on the right side.

Option c) The chart of accounts under IFRS are similar to GAAP.

Option d) Transactions recording procedures are similar under GAAP and IFRS, hence Option b is correct.

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Most popular questions from this chapter

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.

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 theother period.

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

BE3-10 (L03) At the end of its first year of operations, the trial balance of Alonzo Company shows Equipment \(30,000 and zero balances in Accumulated Depreciation鈥擡quipment and Depreciation Expense. Depreciation for the year is estimated to be \)2,000. Prepare the adjusting entry for depreciation at December 31, and indicate the balance sheet presentation for the equipment at December 31.

BE3-1 (L02) Transactions for Mehta Company for the month of May are presented below. Prepare journal entries for each of these transactions. (You may omit explanations.) May 1 B.D. Mehta invests \(4,000 cash in exchange for common stock in a small welding corporation. 3 Buys equipment on account for \)1,100. 13 Pays \(400 to landlord for May rent. 21 Bills Noble Corp. \)500 for welding work done

Question: Presented below is the trial balance of the Crestwood Golf Club, Inc. as of December 31. The books are closed annually on December 31.


CRESTWOOD GOLF CLUB, INC.

TRIAL BALANCE

DECEMBER 31

Debit

Credit

Cash

\(15,000

Accounts receivables

13,000

Allowance for doubtful accounts

\)1,100

Prepaid insurance

9,000

Land

350,000

Building

120,000

Accumulated depreciation 鈥� building

38,400

Equipment

150,000

Accumulated depreciation 鈥� equipment

70,000

Common stock

400,000

Retained earnings

82,000

Dues revenue

200,000

Green fees revenue

5,900

Rent revenue

17,600

Utilities expenses

54,000

Salaries and wages expenses

80,000

Maintenance and repair expenses

24,000

\(815,000

\)815,000

Instructions

(a) Enter the balances in ledger accounts. Allow five lines for each account.

(b) From the trial balance and the information given below, prepare annual adjusting entries and post to the ledger accounts. (Omit explanations.)

(1) The buildings have an estimated life of 30 years with no salvage value (straight-line method).

(2) The equipment is depreciated at 10% per year.

(3) Insurance expired during the year \(3,500.

(4) The rent revenue represents the amount received for 11 months for dining facilities. The December rent has not yet been received.

(5) It is estimated that 12% of the accounts receivable will be uncollectible.

(6) Salaries and wages earned but not paid by December 31, \)3,600.

(7) Dues received in advance from members $8,900 were recorded as Dues Revenue.

(c) Prepare an adjusted trial balance.

(d) Prepare closing entries and post.
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