Question

The following are various accounts: Indicate whether each of the items below should be classified under...

The following are various accounts:

Indicate whether each of the items below should be classified under IFRS on December 31, 2020, as a current or long-term liability or under some other classification. Consider each item independently from all others; that is, do not assume that all of them relate to one particular business.

1.

Bank loans payable of a winery, due March 10, 2024 (the product requires aging for five years before it can be sold)

select a classification under IFRS

2.

$10 million of serial bonds payable, of which $2 million is due each July 31

$2 million bonds payable

select a classification under IFRS

$8 million bonds payable

select a classification under IFRS

3.

Amounts withheld from employees’ wages for income tax

select a classification under IFRS

4.

Notes payable that are due January 15, 2023, where the business’s operating cycle is less than one year.

select a classification under IFRS

5.

Interest payable on a note payable (the note is due January 15, 2023, and the interest is due June 30, 2021)

Interest payable

select a classification under IFRS

Note payable

select a classification under IFRS

6.

Credit balance in a customer’s account arising from returns and allowances after collection in full of the account

select a classification under IFRS

7.

Bonds payable of $2 million maturing June 30, 2024

select a classification under IFRS

8.

An overdraft of $1,000 in a bank account (no other balances are carried at this bank)

select a classification under IFRS

9.

An overdraft of $1,000 in a bank account (other accounts are carried at this bank and have positive account balances)

select a classification under IFRS

10.

Deposits made by customers who have ordered goods

select a classification under IFRS

Assume instead that the company follows ASPE.

1.

Bank loans payable of a winery, due March 10, 2024 (the product requires aging for five years before it can be sold)

2.

$10 million of serial bonds payable, of which $2 million is due each July 31

$2 million bonds payable

$8 million bonds payable

3.

Amounts withheld from employees’ wages for income tax

4.

Notes payable that are due January 15, 2023, where the business’s operating cycle is less than one year.

5.

Interest payable on a note payable (the note is due January 15, 2023, and the interest is due June 30, 2021)

Interest payable

Note payable

6.

Credit balance in a customer’s account arising from returns and allowances after collection in full of the account

7.

Bonds payable of $2 million maturing June 30, 2024

8.

An overdraft of $1,000 in a bank account (no other balances are carried at this bank)

9.

An overdraft of $1,000 in a bank account (other accounts are carried at this bank and have positive account balances)

10.

Deposits made by customers who have ordered goods

Homework Answers

Answer #1

a.   

IFRS

1. Current liability since the operating cycle of the winery is 5 years.
2. Current liability, $2,000,000; long-term liability, $8,000,000.
3. Current liability (amount actually held in trust).
4. Noncurrent liability
5. Interest payable is a current liability and the note payable is noncurrent liability.
6. Current liability.
7. Noncurrent liability.
8. Current liability.
9. Current asset – netted against other cash balances.
10. Current liability.

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