Reference no: EM132991171

Question 1 - Tomaco Corporation is a fast growing mining company. The company developed a zinc mine in northern Quebec on January 1, 2010, at a cost of $1,000,000. Tomaco was legally required to clean up the site and restore the environment to its original, pristine conditions at the end of the mine's 12-year useful life, at an estimated cost of $200,000. Tomaco estimated that 60% of the cost of environment cleanup was caused by acquiring the mine, and that the remaining 40% of the cost would be caused by extracting minerals from the mine. Mining operations in 2010 and 2011 increased the cost of site cleanup at the end of the mine's useful life by $13,800 and $15,800, respectively. The estimated residual value of the mine is $10,000, and Tomaco used straight-line depreciation. Tomaco prepared financial statements in accordance with IFRS.

a) Prepare journal entries to record the acquisition of the mine, and the asset retirement obligation for the zinc mine, on January 1, 2010. Use 6% as the discount rate?

b) Prepare all journal entries required for the mine and the asset retirement obligation at December 31, 2010?

c) Prepare all journal entries required for the mine and the asset retirement obligation at December 31, 2011.

Question 2 - On January 1, 2015, Tomaco Corp. purchases 12% bonds with face value of $211,200. The bonds are dated January 1, 2015, and will mature on January 1, 2020. The bonds will pay interest on December 31 of each year. Tomaco pays $227,212 for the bonds to yield 10% (market rate). Tomaco accounts for the bonds at FV-OCI. Tomaco's fiscal year end is December 31. Fair values of the bonds on December 31, 2015 and 2016 respectively are:

2015 $225,648

2016 $199,408

a. Prepare a table to show interest income, interest received and premium or discount amortization for the bonds for each of the five years.

b. Prepare all the necessary journal entries at the end of 2015, to record interest income and adjustments to fair value.

c. Prepare all the necessary journal entries at the end of 2016, to record interest income and adjustments to fair value.

Question 3 - Tomaco is a machine tool maker. The company makes and sells a home electrical generator which comes with a two-year assurance-type warranty. The company sold 960 units of the electrical generator at an average price of $1,800 per unit in 2011. The company estimated that warranty costs would average $219 per generator over two years. Actual costs incurred by Tomaco to honour warranty claims in 2011 totalled $84,500 ($70,000 for labor, $12,000 for parts and the rest cash).

a. Prepare journal entries to record the sales of electrical generators in 2011 and the use of resources used to honour warranty claims.

b. Prepare a journal entry to record the warranty liability at the end of 2011.

c. Assume Tomaco accounted for its warranty as the service-type. The two-year warranty, if sold separately, would have a retail price of $400 per electrical generator. The 960 electrical generators had 16 months left on their warranties at the end of 2011 on average. Prepare all journal entries for 2011.