Global Corp., a new U.S.-based company, is interested in financial
reporting under international accounting standards (IFRS). They have
decided to account for their transactions under both U.S. GAAP and IFRS
for a one-year period. At the end of the one-year period, they will
prepare their financial statements and notes under each of the methods.
As the accountant, you are responsible for journalizing the
transactions and preparing any necessary adjusting entries, ledgers,
trial balances, financial statements, footnotes, etc.
January 1,2011
1. Global issues 250,000 shares of $5 par value common stock for a total of $2,000,000.
2. Global issues 25,000 shares of mandatory redeemable preferred stock for $100 per share.
February 15, 2011
3. Global purchases 100,000 inventory items at a cost of $10 per item.
Global will use the perpetual method and FIFO, if the methods are
allowed. (Global pays cash.)
4. Global purchases land for use as a parking lot for its employees. The purchase price is $200,000. (Global pays cash.)
May 1, 2011
5. Global purchases marketable securities that it plans to hold as
\"available for sale\" securities. Global pays $1,000,000 for 5,000
shares of Hewlett Hacker.
6. Global sells 5,000 of its inventory items and receives $14 cash per item.
June 30, 2011
7. Global leases two similar assets in two different manufacturing
plants. The leases were separately negotiated. The assets each have an
economic life of ten years and a seven-year lease. Global\'s incremental
borrowing rate is 6%. The leases neither transfer ownership nor have
bargain purchase options. Additional details for each leased asset
follow:
Asset A: Has a fair market value of $100,000 and payments under the
lease are $15,000 each year. The first payment is due at the inception
of the lease.
Asset B: Has a fair market value of $100,000 and payments under the
lease are $15,500 each year. The first payment is due at the inception
of the lease.
8. Global purchases a building as investment property and pays $110,000 cash.
9. Global purchases a building to be used in the production or supply of goods or services and pays $250,000 cash.
Oct 2, 2011
10. Global sold 2000 units of inventory to a Japanese company for
1,500,000 yen with settlement due on 12/31/. The spot rate on Oct
1,2011 was 1 JPN=$.0105. On that same day, Global entered into forward
contract with investment bank JP Morgan. According to the terms of the
forward contract. Global will sell 1,500,000 yen to J.P Morgan at a
forward rate equal to 1 JPN = $.0096
December 31, 2011
Additional Information:
1. The following information is available for the remaining inventory items purchased on February 15, 2005:
Net Realizable Value (NRV) = $9.10
Replacement Cost = $8.70
NRV minus normal profit margin = $8.05
2. The land purchased on February 15 is found to contain hazardous waste. The land is now determined to be worth only $170,000.
3. Hewlett Packard shares are now selling for $225/share on the equity market.
4. The building purchased as investment property, on June 30, is appraised at $130,000.
5. The building purchased to be used in the production or supply of
goods or services, on June 30, is now determined to be worth $275,000.
6. Global annual depreciation for fixed assets is based on a pro rata monthly basis. Global uses the straight-line convention. Buildings and investment property have estimated useful lives of 10 years.
7. Ignore taxes for this exercise