1. Selling expenses include Freight outwards + Advertisements + Sales commissions = $5,000 + $5,000 + $3,000 = $13,000.

2. General and administrative expenses include Depreciation of office equipment + Rent + Utilities + Salaries = $20,000 +$5,000 + $4,000 + $7,500 = $36,500.

3. Other revenues and gain include Dividends + Gain on sale of furniture + Gain from cash flow hedge with Radel (gain from ineffective cash hedge goes to the income statement) = $10,000 + $13,000 + $2,000 = $25,000. Gain from cash flow with Proxy Ltd. would be recognized in other comprehensive income as this is gain from effective cash flow hedge.

4. Other expenses and losses include Loss due to floods $70,000. Unusual and infrequent gains or losses were recognized under extraordinary items earlier. Now they are recognized under other expenses and losses or non-operating gains and losses. Decrease in fair value of security held as ‘available for sale’ is an unrealized loss and would not be included in the income statement. It would be recognized in other comprehensive income.
   
   

Total loss from discontinued operations (before tax) 120,000
Less: tax savings (i.e. 30%) 36,000
Net loss from discontinued operations (net of tax) 84,000

The form and content of and requirements for financial statements included in filings with the SEC are set forth in Regulation S-X. Regulation S-X rules, in general, are consistent with generally accepted accounting principles (GAAP) but contain certain additional disclosure items not required by GAAP. S-X Regulations are closely related to Regulation S-K which lays out the reporting requirements for various SEC filings by companies registered with the SEC.

When part of an audit is performed by an accountant other than the principal accountant and the principal accountant’s report refers to that other accountant’s report or when the prior period’s financial statements are audited by a predecessor accountant, the separate report of the other accountant must be included in the filing.

Corporate insiders, meaning a company's officers and directors and any beneficial owners of more than ten percent of a class of the company's equity securities registered under Section 12 of the Securities Exchange Act of 1934 – must file with the SEC a statement of ownership regarding those securities. The initial filing is on Form 3. If the issuer is already registered under Section 12, the insider must file a Form 3 within ten days of becoming an officer, director, or beneficial owner. Changes in ownership are reported on Form 4 and must be reported to the SEC within two business days. Insiders must file a Form 5 to report any transactions that should have been reported earlier on a Form 4 or were eligible for deferred reporting.

Rules 3-01 to 3-20 of Regulation S-X establishes the following uniform instructions governing the periods to be covered for financial statements included in most registration statements, periodic reports filed with the SEC.

a. Audited balance sheets as of the end of the last two fiscal years.
b. Audited statements of income and cash flows for each of the last three fiscal years. Changes in stockholders’ equity for each of the last three years may be presented in a note or separate statement.
c. Comprehensive income must be shown for each year that an income statement is shown but may be reported below the total for net income in a statement that reports the results of operations or in a separate statement of comprehensive income that begins with net income.

If a registrant has revised its prior year interim financial statements to retrospectively apply a new or existing accounting standard (for example, retroactively restating to reflect discontinued operations), the SEC staff would expect the registrant to file revised annual financial statements prior to filing a new or amended registration statement, if the effect is material to the prior periods. These revised financial statements are typically provided in a form 8-K. If revised financial statements are not filed, the basis of presentation would differ between the prior year interim and annual financial statements.

The latest fiscal year of consolidated subsidiaries must end within 93 days of the registrant’s fiscal year end. For differences in year-end, the registrant must disclose the closing date of the subsidiary and the effect of intervening events which materially affect the financial position or results of operation. Where fiscal years differ by more than 93 days, statements of the subsidiary should be adjusted to a period that more nearly corresponds with the fiscal period of the parent.

The SEC has no preference as to the chronological order (that is, left to right or right to left) used in presenting the financial statements. However, the same order must be used consistently throughout the filing, including numerical data in narrative sections.

The deadline to file form 10-K for a large accelerated filer (with a public float of $700 million or more) is 60 days from year end. For other accelerated filers (with a public float of between $75 million to $700 million), the deadline is 75 days from year end and for non-accelerated filers (public float of less than $75 million), the deadline is 90 days from year end.

Interim financial statements that are filed with the SEC must be reviewed by an independent auditor and the review report must be filed with the financial statements. The statements do not have to be audited. The balance sheet must include both the balance sheet as of the end of the most recent fiscal quarter and as of the end of the preceding fiscal year. A balance sheet for the corresponding fiscal quarter for the preceding year is not required.

The form 6K is filed semi-annually (not quarterly) by foreign private issuers. This is similar to Form 10-Q and contains unaudited financial statements, certain disclosures and interim period MD&A.

According to SFAS 2, engineering costs until product is ready for manufacture relates to R&D activity and therefore, must be expensed immediately.

December 31, year 1:

ASU 2017-04: To simplify the subsequent measurement of goodwill, FASB eliminated Step 2 from the goodwill impairment test.

Goodwill impairment is the amount by which the unit’s CV exceeds its FV. However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

The CV of reporting unit is greater than FV of reporting unit by $50,000. Therefore impairment of goodwill is $50,000. Therefore the journal entry is debit to impairment loss and credit to goodwill by $50,000.

3. & 4. IFRS calculates the impairment using one–step model. The carrying amount of the asset is compared with its recoverable amount. The impairment loss is measured as the amount by which the asset's carrying amount exceeds its recoverable amount.

Fair value less costs to sell — the "amount obtainable from the sale of an asset or cash-generating unit in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal."

Value in use — the "present value of the future cash flows expected to be derived from an asset or cash-generating unit."

5. The inventory should be measured at Lower of Cost or Market in case of retail inventory method of valuation of inventory. Wherein Market is middle of following three numbers:

Based on the above explanation, we can calculate the loss which should be booked in statement of income:

The cost for 5,000 units of inventory is $105. Other details are:

b) Floor = Net realizable value – Normal profit margin = $95 – ($95*10%) = $85.5.

So here the Market is middle of above three i.e., $89.25 which is the replacement cost.

Inventory should be valued at lower of $105 or $89.25 i.e., $89.25.

Note: Inventory will be valued at lower of cost or net realizable value in the case of IFRS.

If warrants were exercised in full (which is the diluted earnings per share), the earnings per share would be $0.07. Since none of the options given have this amount, this statement has to be deleted.

4. The increase in the SG&A expenses was due to ongoing litigation with a former employee resulting in an increase of $600 in legal fees during year 9.
   
   

Refer to note 6- Legal proceedings. The company spent legal costs of $800 and $200 (difference of $600) for the six months ended June 30 for year 9 and year 8 respectively. This would have been part of the SG&A costs. Provision for income tax or unrealised loss on trading security is not a SG&A cost. Also there has been an unrealised gain on trading security. The depreciation expense for six months endeing year 8 is $235 and for year 9 is $250, this is only a $15 difference (see under cash flow from operating activities).

The amount that is reflected in the Income statement as Sales Revenue is the Net Sale that is arrived after deducting returns and discounts

3. $41,800. Cost of new machine includes the actual cost of the machine, sales tax paid on the machine and installation costs = $36,000 + $2,100 + $3,700 = $41,800. Finance charges on purchase loan is not capitalized as this is not constructed. It is purchased.

2. $316,000. Cost of warehouse includes the actual cost incurred which is the total cost of labor, materials, and overhead to construct the warehouse and the interest cost to be capitalized (interest cost incurred during the construction period for assets constructed for own use or for resale as a discrete project needs to be capitalized) = $305,000 + $11,000 = $316,000. Interest cost incurred before or after the construction period is not capitalized to the asset. Thus, the Interest incurred from 9/1 through 12/31 is not capitalized as it is incurred after the construction period. Costs incurred to grade and pave driveways and parking lots is a land improvement cost and costs to repair water line ruptured during excavation is expensed.

2. Treasury stock:
   
   

Treasury stock is a company's own stock that it has reacquired from shareholders. When a company buys back shares, the expenditure to repurchase the stock is recorded in a contra equity account of the balance sheet.

10. Allowance for uncollectable accounts:
    
    

The allowance for doubtful accounts is a reduction of the total amount of accounts receivable appearing on a company’s balance sheet, and is listed as a deduction immediately below the accounts receivable line item. This deduction is classified as a contra asset account. It represents management’s best estimate of the amount of accounts receivable that will not be paid by customers.

2. Accounting entry: C.
   
   

In assigning of accounts receivables, they are not transferred to the assignee and remain on the balance sheet. The accounts receivable assigned are identified by placing them in an "Accounts receivable assigned" account. A finance charge is levied by the factor and the difference between the value of accounts receivable and the finance charge is immediately given as cash to the company.

3. Accounting entry: E.
   
   

When accounts receivable are pledged to secure a loan, only disclosure is required in the financial statements at the balance sheet date, mentioning that they have been pledged for securing a loan. There is no need to adjust the accounts receivable.

5. Accounting entry: F.
   
   

When a note receivable is discounted, without recourse, it is considered a sale transaction. Notes should be removed from the balance sheet by crediting them and loss should be recognised. Debit cash and loss on notes receivable discounting, credit notes receivable and interest income for actual interest earned.

Asset retirement obligation (ARO) is initially recognized as a liability at FV or PV of expected future restoration cost using adjusted risk -free discount rate, hence the yield on Sovereign Bonds of 6% will be considered as an appropriate discount rate. XYZ Inc. expects to incur the landscaping cost of $5,000,000 at the end of the tenure. This must be accounted at the present value of future cashflow to be discounted @ 6% (as explained in # 1). Hence, ARO of $5,000,000 * .558 (PV factor at the end of 10 years as per PV Table exhibit) = 2,791,974 will be recognized as ARO liability.

If a previously nonmarketable equity security becomes marketable (for example, due to a change in circumstances, it now has a fair value that is readily determinable), the cost basis of the nonmarketable security (reduced by any other-than-temporary impairment that has been recognized) shall become the basis of the security. If a change in marketability provides evidence that an other-than-temporary impairment has occurred, a write-down shall be recorded before applying the guidance in this subtopic, and the loss shall be classified consistently with other write-downs of similar investments (this presumes that the nonmarketable security had not been accounted for under the equity method).

An unrealized gain or loss may need to be recorded through net income for equity securities, on the date the security becomes marketable if the initial cost basis is different than fair value.

6. Incorrect.
   
   

When an investment no longer qualifies for the equity method (e.g., due to a decrease in the level of ownership), the investment’s initial cost basis should be the carrying amount of the equity method investment prior to the decrease in ownership. The equity method earnings or losses should remain as part of the initial cost basis of the security (i.e., the carrying amount should not be adjusted retroactively). An unrealized gain or loss may need to be recorded through net income, on the date the security no longer qualifies for the equity method if the initial cost basis is different than fair value. Changes are recorded prospectively.

7. Correct.
   
   

Dividend and interest income from marketable securities is classified under “Operating activity” in a statement of cash flow.

Equity securities purchased under a forward contract or by exercising an option will be recorded at their fair values at the settlement date.

As per ASC 815-10-35-6, changes in the fair value of forward contracts and purchased options on equity securities within the scope of this subsection shall be recognized in earnings as they occur. Changes in observable price or impairment of forward contracts and purchased options on equity securities without readily determinable fair value shall be recognized in earnings as they occur. Equity securities purchased under a forward contract or by exercising an option shall be recorded at their fair values at the settlement date.

i) Equity investments with readily determinable fair values (marketable securities).

ii) Equity investments without readily determinable fair values (non-marketable securities).

Equity investments with readily determinable fair values: ASC 321 requires equity investments that have readily determinable fair values to be measured at fair value through net income.

Equity investments without readily determinable fair values: An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

$80 million is the cost paid, so that would be the investment’s carrying value for investment in common stock of Reesan Inc. as this is a non-marketable security.

7. Deduction to the balance as per cash books should be $2,070.
   
   

Bank charges that have been debited in the bank statement needs to be deducted from the cash books. Total bank charges amount to $70 (i.e. $10 + $10 + $50). Check issued by J. Jones A/c for $2,000 was returned due to non-sufficient funds. This was not credited in the bank statement. This also should be deducted from the cash book as the company is not going to get credit for this amount. Thus, the total deduction to cash book would be $2,070.

6. The total of these checks adds up to $6,000.
   
   

Checks issued to Pebbles enterprises for $6,000 and Star and Moon Ltd. for $3,500 are not reflecting in the bank statement. However, there is a stop payment order for the check issued to Star and Moon Ltd. and has to be added to the cash books as the new check to Star and Moon for $4,000 is dated only as of the next year. The check issued to Pebbles is probably not yet presented to the bank for payment. Thus this check of $6,000 is to be deducted from the bank balance.

8. Addition to the balance as per cash books should be $6,000.
   
   

Bank has credited $2,500 interest on government securities directly into the company’s account. This is not reflected in the cash book as the company would not have been aware about the credit. This has to be added to the cash book. There is a stop payment order for the check issued to Star and Moon Ltd. of $3,500 and has to be added back to the cash books as the new check to Star and Moon for $4,000 is dated only as of the next year and consequently needs to be deducted only in the next year.