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EFA4M07 ©CGA-Canada, 2007 Page 1 of 11 CGA-CANADA FINANCIAL ACCOUNTING 4 EXAMINATION March 2007 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. Which of the following is true regarding the use of differential reporting? 1) If a company ceases to use the differential reporting option, it should restate the financial statements of all prior period financial statements accordingly. 2) Consent of the owners must be provided annually. 3) Selecting the differential reporting option for income taxes means that differential reporting should also be used for other options such as share capital. 4) If one shareholder withdraws his or her consent to use differential reporting, signed consent to continue to use differential reporting will be required by owners of at least 90% of the remaining voting shares. b. Fair presentation in accordance with GAAP includes providing financial statements that give a faithful representation of the substance of transactions and events. Fair presentation is achieved by 3 of the following. Which is not one of the key elements of fair presentation according to the CICA Handbook ? 1) Applying GAAP as established by the Accounting Standards Board 2) Providing information in a clear and readily understandable manner 3) Providing information in the notes to the financial statements to explain any departures from GAAP 4) Providing sufficient information about transactions or events having an effect on the balance sheet Continued. ..
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EFA4M07 ©CGA-Canada, 2007 Page 2 of 11 Note: Use the following information to answer parts (c) and (d). On January 1, 2005, BB Company acquired 25% of the common shares of GG Corporation for $550,000, giving it significant influence. At that time, GG’s financial statements included common shares of $300,000 and retained earnings of $1,300,000. There was no difference between the book value and fair value of GG’s identifiable assets and liabilities. c.
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