Solution Manual for Intermediate Accounting, Vol. 2, 2nd Edition

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Resource ManualLori NovakRed River CollegeforIntermediateAccountingVolume 2|Second EditionKin LoUniversity of British ColumbiaGeorge FisherDouglas College

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ContentsPreface......................................................................................................................2■Sample Syllabus 1 (traditional classroom) ....................................................................3■Sample Syllabus 2 (online course).................................................................................8■Student Handout “How to get an A”............................................................................12■Tips for taking the course from traditional to hybrid, blended or online.....................13Volume 2Chapter11Current Liabilities and Contingencies .......................................................15Chapter12Non-Current Financial Liabilities ..............................................................21Chapter13Equities ......................................................................................................26Chapter14Complex Financial Instruments .................................................................31Chapter15Earnings Per Share.....................................................................................36Chapter16Accounting for Income Taxes....................................................................41Chapter17Pensions and Other Employee Future Benefits .........................................46Chapter18Accounting for Leases ...............................................................................50Chapter19Statement of Cash Flows ...........................................................................56Chapter20Accounting Changes ..................................................................................60

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3SYLLABUSIntermediate Accounting 2Semester: _______________________Effective date: ____________________Class days and times:MondayTuesdayWednesdayThursdayFridayCOURSE DESCRIPTIONIn this course, students will learn about measurement, valuation and presentation ofliabilities and shareholders’ equity elements. Specific topics covered are financial andnon-financial liabilities, complex financial instruments, contributed capital, retainedearnings, and accumulated other comprehensive income, leases, pensions, income taxesand accounting changes. International Financial Reporting Standards and AccountingStandards for Private Enterprises are continually referenced as the relevant GAAP for thislevel of financial accounting. With the completion of Intermediate Accounting 1 & 2,students will have a solid foundation in financial accounting and may use this educationto launch a career or continue on to advanced accounting courses and programs.At the end of this course, you will be able to:•apply the conceptual framework and International Financial AccountingStandards to make choices between acceptable methods of accounting forliabilities and shareholders’ equity items.•measure and account for financial and non-financial liabilities.•measure and account for complex debt and equity instruments.•explain how income taxes are accounting for and reconciled with governmentrequired reporting. Measure and account for permanent and temporarydifferences related to income taxes.•account for leases from both the perspective of the lessee and lessor usingappropriate measurement criteria and techniques.•identify different types of pensions and the components of each. Preparecalculations for pension expense and account for pension assets and liabilities.•explain earnings per share disclosures and calculate both basic and dilutedfigures.•record and report accounting changes in the financial statements usingappropriate measurement and presentation criteria.•list the disclosures required for the various liability and shareholders’ equityitems.

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4NEEDS AND RESOURCESRequired BackgroundTo successfully complete this course, you must have completed Intermediate Accounting1. A grade of C or better is recommended. Students should have a solid understandingof fundamental accounting.Required MaterialsTo successfully complete this course, you will need:•Intermediate Accounting, Second Edition, Volume 2, Kin Lo, George Fisher.ISBN __________________•Internet access•Financial calculatorOnline Resources•CICA Handbook (electronic access provided _____________)COURSE SCHEDULE (suggested based on 16 week term- 1 hour class time)WeekClassTopicRequiredReadingAssignments1Chapter 11Introduction to LiabilitiesP.504-508P11-52Current liabilitiesP.509-527P11-8, P11-15, P11-353ContingenciesP.527-534P11-384Commitments & GuaranteesP.534-536P11-475Assignment review6Chapter 12Introduction to non-current financialliabilitiesP.565-572P12-3, P12-57Accounting for non-financial liabilitiesP.572-583P12-7,P12-13, P12-218Derecognition of financial liabilitiesP.584-588P12-309Comprehensive Example & other issuesP.588-597P12-42, P12-4710Assignment review11Chapter 13Components of equityP.620-627P13-2, P13-3,P13-10, P13-1112Contributed capital equity transactionsP.628-637P13-22, P13-2513Retained earnings equity transactionsP.637-642P13-3614Statement of changes in equity &Comprehensive illustrationP.642-650P13-44, P13-3715Assignment review

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5WeekClassTopicRequiredReadingAssignments16Chapter 14Introduction to complex financialinstrumentsP.675-681P14-617Accounting for complex financialinstrumentsP.682-688P14-8, P14-10, P14-15,P14-1618Assignment review19Accounting for complex financialinstruments/Compensation plansP.688-694P14-27,P14-320Hedging & hedge accountingP.694-704P14-37, P14-3921Assignment review22Term test review23Term test (Chapters 11-14)24Chapter 15Introduction to basic & diluted EPSP.726-735P15-5, P15-9,P15-1625Calculating diluted EPSP.735-746P15-22, P15-24, P15-2826Other factors effecting EPSP.746-752P.15-3527Assignment review28Chapter 16Introduction to income taxP.776-784P.16-629Applying the accrual methodP.784-795P16-10, P16-11, P16-1530Tax losses & other considerationsP.795-802P16-30, P16-32, P16-36,P16-3731Assignment review32Chapter 17Introduction to pension plans & accountingP.821-825P17-2, P17-5,P17-733Accounting for defined benefit plansP.825-837P17-13, P17-15, P17-19,P17-2134Presentation & disclosures & other issuesP.837-843P17-25, P17-2935Assignment review36Term Test review37Term Test (Ch11-17, comprehensive)38Chapter 18Introduction to leasesP.860-866P18-739Classifying & accounting for leasesP.866-874P18-9, P18-18

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6WeekClassTopicRequiredReadingAssignments40Other factors & lease typesP.874-885P18-26, P.18-28, P18-31,P18-3641Assignment review42Chapter 19Introduction to the Statement of Cash FlowP.904-911P19-2, P19-3,P19-8, P19-10, P19-15,P19-1843Formatting the Statement of Cash FlowP.911-918P19-2344Preparation of the Statement of Cash FlowP.918-933P19-33, P19-3845Specific cash flow items & comprehensiveexampleP.933-943P19-4146Assignment review47Chapter 20Introduction to accounting changesP.980-990P20-1, P20-548Retrospective adjustmentsP.990-997P20-9, P20-13, P20-16,P20-23, P20-2649Assignment review50Final Exam review51Final Exam review52Final Exam (Ch11-20, comprehensive)POLICIES AND PROCEDURESGeneral Rules:[Insert explanation of classroom rules and procedures, including such topics as attitude,behavior, attendance, tardiness, incomplete work, and so on. Describe rules andconsequences.]Grading Policies:•Term Test 115%•Term Test 235%•Final Exam50%Grading Scale:[If applicable, insert grading scale, linking number and letter grades.]

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7ADDITIONAL INFORMATION[Insert additional information, specific to your school, class, students, or topic.]CONTACT INFORMATIONProfessor/instructor name:_____________________________Contact phone number:________________________________Email address:_______________________________________Course URL:________________________________________Office hours:MondayTuesdayWednesdayThursdayFriday

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8SYLLABUSIntermediate Accounting 2Semester: _______________________Effective date:____________________Class days and times:MondayTuesdayWednesdayThursdayFridayCOURSE DESCRIPTIONIn this course, students will learn about measurement, valuation and presentation ofliabilities and shareholders’ equity elements. Specific topics covered are financial andnon-financial liabilities, complex financial instruments, contributed capital, retainedearnings, and accumulated other comprehensive income, leases, pensions, income taxesand accounting changes. International Financial Reporting Standards and AccountingStandards for Private Enterprises are continually referenced as the relevant GAAP for thislevel of financial accounting. With the completion of Intermediate Accounting 1 & 2,students will have a solid foundation in financial accounting and may use this educationto launch a career or continue on to advanced accounting courses or programs.At the end of this course, you will be able to:•apply the conceptual framework and International Financial AccountingStandards to make choices between acceptable methods of accounting forliabilities and shareholders’ equity items.•measure and account for financial and non-financial liabilities.•measure and account for complex debt and equity instruments.•explain how income taxes are accounting for and reconciled with governmentrequired reporting. Measure and account for permanent and temporarydifferences related to income taxes.•account for leases from both the perspective of the lessee and lessor usingappropriate measurement criteria and techniques.•identify different types of pensions and the components of each. Preparecalculations for pension expense and account for pension assets and liabilities.•explain earnings per share disclosures and calculate both basic and dilutedfigures.•record and report accounting changes in the financial statements usingappropriate measurement and presentation criteria.•list the disclosures required for the various liability and shareholders’ equityitems.

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9NEEDS AND RESOURCESRequired BackgroundTo successfully complete this course, you must have completed Intermediate Accounting1. A grade of C or better is recommended. Students should have a solid understandingof fundamental accounting.Required MaterialsTo successfully complete this course, you will need:•Intermediate Accounting, Second Edition, Volume 2, Kin Lo, George Fisher.ISBN __________________•Internet access•Financial calculatorOnline Resources•CICA Handbook (electronic access provided _____________)Student ReadinessEach week students will be required to work through a chapter in the textbook asindicated on the schedule below and complete the indicated assignment by the due date.Assignments must be uploaded into the course dropbox no later than 11:59pm on the duedate. In addition to assignments, students will be assigned a partner for work on thecases. There are four cases in total that students will be expected to work though. On thedue date, each group must post their findings, analysis, and commentary to the coursediscussion board no later than 11:59pm. Separate and private discussion boards will beset up for group collaboration.COURSE SCHEDULE (suggested for 16 week online course)WeekTopicRequiredReadingAssignmentsDue Date1Chapter 11Current LiabilitiesP.504-536P11-472Chapter 12Non-current Financial LiabilitiesP.565-597P12-423Chapter 13EquitiesP.620-650P13-444Discussion post due–Chapter 13 Case 1Peterborough Printers5Chapter 14Complex Financial InstrumentsP.675-704P14-396Discussion post due–Chapter 14 Case 1Ultramart7Chapter 15Earnings per shareP.726-752P15-358Chapter 16Accounting for income taxP.776-802P.16-36

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Preface10WeekTopicRequiredReadingAssignmentsDue Date9Chapter 17Pensions and Other Employee FutureBenefitsP.821-843P17-2910Discussion post due – Chapter 17 Case 2Tubular Ltd.11Chapter 18Accounting for LeasesP.860-885P18-3112Chapter 19Statement of Cash FlowsP.904-943P19-4113Chapter 20Accounting ChangesP.980-997P20-2614Discussion post due – Chapter 20Capstone Case 1 Gibraltar Enterprises15Review Week16Final Exam (Ch11-20, comprehensive)POLICIES AND PROCEDURESGeneral Rules:[Insert explanation of classroom rules and procedures, including such topics as attitude,behavior, attendance, tardiness, incomplete work, and so on. Describe rules andconsequences.]Grading Policies:•10 Assignments (2% each)20%•3 Chapter Case Discussion posts (5% each)15%•Capstone Case Discussion post15%•Final Exam50%Grading Scale:[If applicable, insert grading scale, linking number and letter grades.]ADDITIONAL INFORMATION[Insert additional information, specific to your school, class, students, or topic.]CONTACT INFORMATIONProfessor/instructor name:_____________________________Contact phone number:________________________________Email address:_______________________________________

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Preface11Course URL:________________________________________Office hours:MondayTuesdayWednesdayThursdayFriday

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Preface12STUDENT HANDOUTTips on how to use the resources and online tools to get an A in this class:■READ the chapter.Yes, I know it’s hard, but it’s an important 30 minutes to an hourspent in learning this material.■WATCH the Demo Docs.Right after reading, view the interactive multi-mediademo docs for the chapter.■PRACTISE homework online.Sure it makes sense when your professor goes overthe assignment—they’ve been doing this for a long time. There is no substitute fordoing problems/exercises. That’s how you learn accounting. And the onlinehomework assignments are algorithmic, so they are already set up for you to practiseproblems until you “get it.”■STUDY in groups.Creating study groups is a great way to expand your learning.These groups will not only increase your number of resources to go to for help, butthey also create a sort of accountability that will help keep you on track for success.■Learn WHY as well as HOW.Sure the “how” to do it is a big part of accounting,but if you can learn why you are doing a particular accounting task, it will be mucheasier to perform the task.■RELATE topics to your personal life or job.The best way to ensure youunderstand a topic is to apply it to your life or job.■ASK questions.When online, use the “Ask my instructor” button to ask specifichomework questions at the point you have them. Also, ask questions while in class.Don’t assume you are the only one who doesn’t understand. Your questions help youand other students learn.

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Preface13Tips for Taking Your Course from Traditional to Hybrid,Blended, or Online1.Don’t try to take the “entire” course online in one semester.Decide on a two-semester strategy for implementation, implementing graded online homework FIRST. Byonly implementing the homework portion of the online solution, you don’t overwhelmyourself with having to learn every piece of the online component in one semester,regardless of whether it is MyAccountingLab or some other solution. Additionally, thisallows you the flexibility to add other graded assignments later that first semester, if youchoose.2.Define homework by chapter in your syllabi, rather than identifying specificexercises or problems. During the first semester, as you and your students getaccustomed to the online resources, you may need to be more flexible. Further, this getsyour students used to looking “online” for their assignments.3.Schedule one day in class in a computer lab (or some class time, if you can’t getinto a computer lab), to demonstrate.This allows you to gain a “captive audience” sothat you can show the class some of the resources you want them to use. It also allowsyou to highlight some of the resources that they may find useful in their learning.4.Use MyAccountingLab’s static/book match problems to demonstrate in classproblems or exercises.This is a good way to not only save you time in setting up inclass assignments, but also demonstrates to the student the completion ease of theMyAccountingLab homework solution. I set up a “static” course that has all the bookmatch problems in it and use that course for demonstrating this in class.5.Same as Item 4, except using only the Excel spreadsheets.Have the students printout the Excel or PDF worksheets for book match/static questions before covering thematerial in class. Again, this establishes the online centre as the “go to” place for studentsto glean information.6.The first assignments I give after demonstrating the online login/registration aresubmitted via their online e-mail account.For this, I use the “e-mail students option”from the gradebook. I submit their first assignment via e-mail to try inmyaccountinglab.com. This is a “bonus” points only assignment; the students are eager totry online tools (no penalty—only bonus point reward) and it gets them registered morequickly in myaccountinglab.com. I suggest using something like the built-in pre-testchapter questions.7.Have students give each other feedback.One of the problems with teaching online isthat giving feedback to all of your students all the time can quickly get out of control. Theway to deal with this is to have students give the initial drafts of their papers to otherstudents for feedback. You give a grade to the feedback based on how helpful the original

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Preface14author finds it. Then you only have to review papers one time, and many of the problemsshould be worked out before you see them.8.Set up discussion forums. You might, for example, ask a critical thinking question onone of the key chapter topics. Your students will have a certain amount of time to (1) postan answer to your question, and (2) post a response or comment on the answer of anotherstudent. You can offer extra credit for the “best” response.Alternatively, you might ask students to answer one of the end-of-chapter or additionalonline questions/case problems within a set period of time. The first one to respond canget an extra credit point. The first student who “adds value” to the answer can also get anextra point.

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15CHAPTER 11Current liabilities and contingenciesLEARNING OBJECTIVES11-1.Describe the nature of liabilities and differentiate between financial and non-financialliabilities.11-2.Describe the nature of current liabilities and account for common current liabilitiesincluding provisions.11-3.Describe the nature of contingent assets and liabilities and account for these items.11-4.Describe the nature of commitments and guarantees and apply accrual accounting tothem.OVERALL APPROACHThis chapter serves two roles. The first is an overview of liabilities, and the second isdetailed coverage of current liabilities, contingencies, and commitments. Chapter 12 thendeals with non-current financial liabilities, while later chapters cover other morespecialized topics that partially involve liabilities (complex financial instruments,accounting for income taxes, pensions, leases).KEY POINTSOverview of liabilities: Section B (Pages 506-508) discusses the definition, recognition,classification, and measurement of liabilities. Here, classification precedes measurementbecause the method of measurement depends on the classification of the particularliability.The definition of a liability was first introduced in Chapter 2 as part of the conceptualframework. As it will have been a considerable length of time since students coveredChapter 2, it is important to review the three essential characteristics of a liability (apresent obligation, arising from past events, and future outflow of resources). It is usefulto compare these characteristics with those that define an asset.The recognition of liabilities, consistent with other financial statement elements, dependson the ability to reliably measure the liability. Reliable measurement does not requirecertainty—liabilities can be recognized even if they are uncertain in amount or timing.It is necessary to distinguish financial from non-financial liabilities because themeasurement bases differ. Financial liabilities are a type of financial instrument, so thestandards for financial instruments are important for these liabilities.

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