RSM 221 Final Exam Winter 2010 (Solution)

RSM 221 Final Exam Winter 2010 (Solution) - Question 1 (7...

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Question 1 (7 marks) Question 2 (12 marks) a. Mark allocation: (3 marks) – basic EPS (7 marks) - diluted EPS including calculations b. Basic EPS: ($560,000- (1,000 * 10))/200,000 = $2.75 (2 marks)
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Question 3 (11 Marks) a. (5 marks) b. (3 marks) Loss due to goodwill impairment 80,000 Goodwill 80,000 c. (3 marks) Value of a business above the fair value of its net assets. Represents potential excess earnings, customer loyalty and can be a ‘catch all’ for various intangible assets that cannot be measured. (Other valid points. Question 4 (16 Marks) Requirement a): Under GAAP, trading securities are marked-to-market at each balance sheet date. The securities would appear on Giant Motors’ balance sheet at $25 million, as a current asset. 3 marks Requirement b): Giant Motors’ 2008 income statement is impacted in two ways as a result of its investment in Crane Tire.
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a) Giant Motors would recognize dividend income of $750,000 (i.e., $15,000,000 x 0.05). 2 marks b) In addition, Giant Motors would report an unrealized loss of $5,000,000 (before tax) because of the decline of the market value of the investment from $30 million to $25 million. 2 marks Requirement c): Under GAAP, available-for-sale securities are also marked-to- market at each balance sheet date. Thus, the securities would appear on Giant Motors’ balance sheet at $25 million, as a long term investment. 3 marks Requirement d): Giant Motors would still report the $750,000 of dividend income
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This note was uploaded on 06/07/2011 for the course RSM 221 taught by Professor Scott during the Winter '09 term at University of Toronto.

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RSM 221 Final Exam Winter 2010 (Solution) - Question 1 (7...

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