Chapter 1
Recognition and Measurement
16
d) Canada Moose, Snobis’ largest competitor, has sued Snobis recently alleging that the
company stole its designs. The lawyers indicated that it is quite likely that the lawsuit will
be accepted and the company will be forced to declare bankruptcy because it will no
longer be allowed to produce any of its products and a large penalty will need to be paid.
Management, in the meanwhile, continues to operate as usual. No notes to the financial
statements or any changes to the valuation of the company’s assets were made.
AP-6A (
3
)
Lisa Martok has incorporated her small nail salon in January and decided to ask her friend,
a first-year accounting student, for advice on how to keep her books. Her friend has
recommended her to adopt IFRS and prepare monthly financial statements. What basic
concept does her friend seem to be missing? Explain.
AP-7A (
4
)
Milkman Inc. has the following assets as of December 31, 2016.
Trucks
$550,000
Accumulated Depreciation
45,000
Cash
130,000
Accounts Receivable
90,000
Prepaid Insurance
30,000
Required
a) Arrange the items in the liquidity order that is commonly presented on the statement of
financial position under IFRS.
