Errata for Beechy, Conrod & Farrell
Intermediate Accounting, 5th Edition – Volume 2
(Updated November 7th, 2013)
Chapter 12
PAGE 709 –
Under the heading “Borrowing Costs Defined”, the fourth full paragraph and ensuing bullet points should be revised to read as follows (difference highlighted in red):
Capitalization beginswhen the entity first meets all of the following conditions:
•Interest is paid on borrowed funds;
•A payment is made on the asset; and
•Activities begin that will make the asset ready to use.
Chapter 13
PAGE 806 – ASSIGNMENT 13-24
The first line of the shareholders’ equity information provided should state:
Preferred shares; $1 dividend, 240,000 shares issued and outstanding$6,000,000
Chapter 14
PAGE 831 –
On the fifth line from the bottom of the page, the first sentence contains an error in which the word lower should be replaced with higher, such that the sentence reads:
“Options may lapse because the exercise price is higher than the common share price.”
Chapter 15
PAGE 885 –
On the third line from the bottom of the page, delete the word “30%”, such that the last sentence of the paragraph reads as follows:
“Columns 4 to 6are completed by applying the tax rate, entering the zero opening balances for this firstyear of operation, and then subtracting.”
PAGE 893 –
In the last paragraph on the page, the second sentence contains an error in which the number $13,200 should be replaced with $8,250. The sentence should read:
“This will reduce the credit balance in the liability by $8,250: ($33,000 × 25%).”
PAGE 894 –
The last sentence of the first full paragraph contains an error in which the number $42,400 is incorrect. The sentence should be revised to read:
“This can also be verified as $796,000 of cumulative CCA minus $690,000 of cumulative depreciation = $106,000 × 25% = $26,500.”
In the journal entries presented on this page, the 20X3 entry should be revised as follows (Deferred income tax should be presented as a debit):
20X3
Income tax expense / 214,750Deferred income tax ($230,000 - $197,000) × 25% / 8,250
Income tax payable / 223,000
Chapter 17
PAGE 977 –
The first sentence on the page should be revised to state that the inception date of the lease in question is 25 January. The correct sentence should read as follows:
For the lease with Builders Inc., the inception of the lease is 25 January, while the commencement of the lease term is 1 February.
PAGE 985 –
In the second-last sentence of third full paragraph on this page, immediately above the heading ‘Depreciating Leased Assets’, the reference to Exhibit 7-4 should correctly state Exhibit 17-4.
In the first sentence of the paragraph after the heading ‘Depreciating Leased Assets’, the reference to Exhibit 7-5 should correctly state Exhibit 17-5.
PAGE 990 –
In some editions of the text: in the third set of journal entries on this page, the first account listed should be “Insurance Expense” rather than “Interest Expense”, as shown below:
Insurance expense / 20,000Lease liability / 180,000
Cash / 200,000
PAGE 992 – EXHIBIT 17-9
For this exhibit, the journal entry for 1 April 20X3 should read as follows, in which the Lease Liability is debited $180,000, rather than credited:
1 April 20X3
Interest expense15,195
Lease liability15,195
Insurance expense20,000
Lease liability180,000500,781
Cash200,000
PAGE 996 –
The final journal entry on this page should read as follows:
Deferred gain on sale and leaseback of building / 450,000Depreciation expense, leased building / 450,000
PAGE 1026 – CASE 17-2
In the third sentence of the first paragraph on this page, the following correction should be made:
The sentence “The new corporation would then lease the equipment to GWC with an initial lease term of five years.” should be revised to state “The new corporation would then lease the equipment to SC with an initial lease term of five years.”
PAGE 1028 – ASSIGNMENT 17-1
The first paragraph of the assignment should be revised to read as follows (differences in red):
A17-1 Operating Lease: On 15 August 20X1, Argyle Ltd. signed a 3-year lease to rent a computer system from Basil Ltd. for $10,000 per month. The lease will commence on 31 October 20X1. The rent is $10,000 per month. Three months’ rent is payable at the lease inception and will be applied to the final three months of the lease term; remaining rent is due at the beginning of each month. Basil will install the system and have it operational by 1 October 20X1.
Chapter 18R
PAGE 18-44 – ASSIGNMENT 18R-13
Computer Imaging Limited
Non-contributory Defined Benefit Pension Plan
Actuarial Report, 31 December 20X8
Current Service Cost
Computed by the projected unit credit method $ 85,375
Actuarial revaluation, effective 31 December 20X8
Experience gains for
Mortality $ 7,875
Employee turnover 12,625
Decrease in defined benefit obligation due to
increase in bond yield rate 49,500
Net actuarial gains $ 70,000
20X8 funding
Current service cost $85,375
Past service cost 38,853
Less revaluation gains of 20X8 (70,000)
Total cash contribution to plan $ 54,228
Pension plan asset portfolio
Market value, 1 January 20X8 $1,075,790
Contributions 54,228
Portfolio performance, 20X8
Interest, dividends, and capital gains 151,685
Market value, 31 December 20X8 $1,281,703
SFP Accumulated OCI, pension, 1 January 20X8 100,900 dr.
Retained earnings, 1 January 20X87,800,000 cr.
20X8 Earnings, prior to any pension expense 5,850,000 cr.
Required:
1. Analyze the three elements of pension accounting for 20X8: service cost, net interest and revaluations. Prepare entries, and also an entry for the contribution to the fund during
20X8.
2. Calculate 20X8 earnings, after pension expense is recorded. Ignore any income tax. Also calculate comprehensive income, the closing balance of retained earnings, accumulated OCI, and the SFP accrued pension liability as of 31 December 20X8. Prove that the SFP liability account represents the net defined benefit position of the pension fund.
Chapter 20
PAGE 1180 –
The last line of the second paragraph on page 1180 should read as follows:
Nevertheless, the year-end 20X5 amounts are identical to those in Exhibit 20-4 under retrospective application.
PAGE 1180 – EXHIBIT 20-8
The lower section of Exhibit 20-8, the Sunset Corporation Statement of Changes in Equity-Retained Earnings Section, should be revised as follows (changes highlighted in red):
Statement of Changes in Equity—Retained Earnings SectionBeginning balance, as previously reported / $201,000 / $92,000
Add: Cumulative effect of inventory accounting policy change, net of tax of $3,000 / 7,000 / —
Beginning balance, restated / 208,000
Add: Net income (from above) / 210,000 / 189,000
Deduct: Dividends declared / (88,000) / (80,000)
Ending balance / $330,000 / $201,000
PAGE 1208 – ASSIGNMENT 20-14
In the financial statement excerpts provided for Simpson Limited, the ending Inventory amount provided for the year 20X5 should be $19,700 as shown below, rather than $16,100.
20X720X620X5
Income statement
Cost of goods sold $790,000$705,200$676,800
Balance sheet
Inventory $ 34,500$ 30,900$ 19,700
Retained earnings statement
Opening retained earnings$331,000$260,800$211,500
Net income 104,70091,20070,300
Dividends (21,000) (21,000) (21,000)
Closing retained earnings $414,700$331,000$260,800