fa4m06 - CGA-CANADA FINANCIAL ACCOUNTING 4 EXAMINATION...

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EFA4M06 ©CGA-Canada, 2006 Page 1 of 10 CGA-CANADA FINANCIAL ACCOUNTING 4 EXAMINATION March 2006 Marks Time: 4 Hours Notes: 1. All calculations must be shown in an orderly manner to obtain part marks. 2. Round all calculations to the nearest dollar. 3. Narratives for journal entries are not required unless specifically requested. 4. Assume a December 31 fiscal year-end unless specifically stated otherwise. 5. Assume all amounts are material unless directed otherwise. 6. Assume all companies are public companies unless otherwise noted. 7. Assume no companies use differential reporting unless otherwise noted. 30 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each a. WNA Inc. reported future income tax liabilities of $50,000 at the end of 2004. Income tax rates decreased from 40% in 2004 to 30% in 2005. What is the tax effect of this change in tax rates for WNA? 1) Assuming that the change in rates was announced in 2005, future income tax liabilities at the end of 2004 will be retroactively decreased. 2) Assuming that the change in rates was announced in 2005, future income tax expense for 2005 will not be affected by this change. 3) Assuming that the change in rates had been announced in 2004, future income tax liabilities at the end of 2005 will decrease. 4) Assuming that the change in rates was announced in 2005, future income tax expense for 2005 will be reduced. b. Which of the following practices is not in accordance with GAAP? 1) A qualifying enterprise uses the CICA Handbook section on differential reporting to account for income taxes using the taxes payable method. 2) An enterprise prepares financial statements in accordance with a disclosed basis of accounting and states that this basis provides a fairer presentation than what would be achieved by following the recommendations of the CICA Handbook . 3) An enterprise prepares financial statements using the U.S. dollar as the reporting currency. 4) A company uses the temporal method to translate the financial statements of a self-sustaining subsidiary that is operating in a highly inflationary environment. Continued. ..
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EFA4M06 ©CGA-Canada, 2006 Page 2 of 10 c. Which of the following financial statements would likely be the most effective in predicting an entity’s ability to pay dividends over the next 5 years? 1)
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fa4m06 - CGA-CANADA FINANCIAL ACCOUNTING 4 EXAMINATION...

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