FINANCIAL ACCOUNTING 4 EXAMINATION
Time: 4 Hours
All calculations must be shown in an orderly manner to obtain part marks.
Round all calculations to the nearest dollar.
Narratives for journal entries are not required unless specifically requested.
Assume a December 31 fiscal year-end unless specifically stated otherwise.
Assume all amounts are material unless directed otherwise.
Assume all companies are public companies unless otherwise noted.
Assume no companies use differential reporting unless otherwise noted.
for each of the following unrelated items. Answer
of these items
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.
2 marks each
Use the following information to answer parts (a) and (b).
On January 1, 2004, PJ Company acquired 30% of the common shares of SL Company for $510,000. The
fair values of SL’s assets equalled book values except for production equipment, which had a fair value of
$240,000 in excess of book value and a remaining useful life of 4 years. PJ’s share of goodwill on
acquisition totalled $48,000. Goodwill impairment was nil in 2004 and 25% in 2005. For the years 2004
and 2005, SL reported the following:
Dividends declared and paid
On January 1, 2004, what was SL’s net book value of shareholders’ equity?
1) $ 900,000
2) $ 1,100,000
3) $ 1,300,000
4) $ 1,500,000
If PJ has significant influence over SL, how much investment income would PJ report from its
investment in SL for 2005?