Reference no: EM133100106
Question - Fast Ltd. is a public company that prepares its consolidated financial statements in accordance with IFRS. Its net income in Year 2 was $200,000, and shareholders' equity at December 31, Year 2, was $1,800,000.
Mr. Lombardi, the major shareholder, has made an offer to buy out the other shareholders, delist the company, and take it private. Thereafter, the company will report under ASPE. You have identified the following two areas in which Fast's accounting principles differ between IFRS and ASPE.
1. Fast incurred research and development costs of $500,000 in Year 1. Thirty percent of these costs were related to development activities that met the criteria for capitalization as an intangible asset. The newly developed product was brought to market in January, Year 2, and is expected to generate sales revenue for 10 years.
2. Fast acquired equipment at the beginning of Year 1 at a cost of $100,000. The equipment has a five-year life with no expected residual value and is depreciated on a straight-line basis. At December 31, Year 1, Fast compiled the following information related to this equipment:
Expected future cash flows from use of the equipment $85,000
Present value of expected future cash flows from use of the equipment 75,000
Net realizable value 72,000
Required -
(a) Determine the amount at which Fast should report each of the following on its balance sheet at December 31, Year 2, using (1) IFRS and (2) ASPE. Ignore the possibility of any additional impairment or reversal of impairment loss at the end of Year 2. Assume that Fast wants to minimize net income.
(i) Research and development
(ii) Equipment
(b) Prepare a reconciliation of net income for Year 2 and shareholders' equity at December 31, Year 2, under IFRS to an ASPE basis.
Calculate the net increase or decrease in the cash balance
: Ending cash balance as per the balance sheet 20,000. Calculate the net increase or decrease in the cash balance for Starr
|
What tax savings will result
: If the firm reduces its reported income by the amount of the depreciation expense calculated in part a, what tax savings will result
|
Determine the percentage return for the investment
: During the time it was held, it received $200 in income. If the initial value was $3,000, determine the percentage return for the investment
|
What is the value of the stock today
: Analysts expect that dividend to be $10.00/share and grow at a 3% rate. If the appropriate rate of return for the stock is 12%, what is the value of the stock
|
Prepare a reconciliation of net income for year two
: Prepare a reconciliation of net income for Year 2 and shareholders' equity at December 31, Year 2, under IFRS to an ASPE basis
|
Maintain plans for scheduling quality assurance
: Apply complex decision making to select appropriate testing techniques and Write professional level management, planning, quality assurance and testing document
|
What is the total present value of Option two
: Option 2: Make a payment of $22,000 immediately and the balance of $23,550 in 3 months to settle the invoice. What is the total present value of Option two
|
Prepare journal entries for this equipment
: Prepare journal entries for this equipment for the years ending December 31, 2020, and December 31, 2021, under (1) U.S. GAAP and (2) IFRS
|
Internal and external factors would affect glaxo smithkline
: Explain in depth how each of the following internal and external factors would affect Glaxo SmithKline. Please quote your reference
|