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CGA-CANADA FINANCIAL ACCOUNTING 4 EXAMINATION June 2003 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 asked for. 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. 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 (1) is the best answer for item (a), 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. No account will be taken of any explanations you offer. Note: 2 marks each a. Which of the following is not a fundamental focus of the Accounting Standards Board’s international program? 1) Harmonization with U.S. GAAP 2) Convergence with the highest quality international accounting standards 3) Working with the FASB to agree on much-needed improvements to existing standards 4) Provision of uniform accounting standards for multinational corporations b. Which of the following is not considered to be an important source of generally accepted accounting principles (GAAP) when the CICA Handbook recommendations do not say anything about an accounting issue? 1) Accounting Guidelines 2) Abstracts of Issues Discussed by the Emerging Issues Committee (EIC) 3) Canada Business Corporations Act 4) Standards published by the International Accounting Standards Board c. Companies often seek innovative ways of expanding their capital base without recording any increase in debt obligations. Ingenious new financial instruments now being used may provide off-balance-sheet financing that results in price risk. Which of the following best defines price risk? 1) The risk that the other party will not honour its commitment 2) The risk that the company itself may be unable to fulfill its commitment 3) The risk that interest or currency rates will move unfavourably 4) The risk that the firm’s share price may decline if full disclosure is provided Continued. .. EFA4J03 ©CGA-Canada, 2003 Page 1 of 11
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Note: Use the following information to answer parts (d) and (e). JK uses split accounting for its convertible bonds. On July 1, 2002, JK issued $1,000,000 (face value) of convertible bonds with a nominal interest rate of 8% and an effective interest rate of 6%. Interest is paid semi-annually and the bonds mature on June 30, 2007. The bonds were issued for cash proceeds of $1,085,308. If JK had issued these bonds without a conversion feature, the company would have been required to issue the bonds with a yield of 10%.
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This note was uploaded on 05/08/2010 for the course BUSINESS AIT 707 taught by Professor Raminrezaeinia during the Spring '09 term at Seneca.

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