ca_exm_fa3_2009-03

ca_exm_fa3_2009-03 - EFA3M09 ©CGA-Canada, 2009 Page 1 of 7...

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Unformatted text preview: EFA3M09 ©CGA-Canada, 2009 Page 1 of 7 CGA-CANADA FINANCIAL ACCOUNTING: LIABILITIES & EQUITIES [FA3] EXAMINATION March 2009 Marks Time: 3 Hours Notes: 1. All calculations must be shown in an orderly manner to obtain part marks. 2. Round all calculations to the nearest dollar, except for EPS and financial ratios where two decimal places should be used. 3. Unless otherwise indicated, use straight-line amortization. 4. Assume a December 31 fiscal year end for all questions, unless otherwise indicated. 5. If a test of materiality is required, use 5%. 6. Narratives for journal entries are not required. When preparing journal entries, be careful to select account titles that clearly indicate where the item will appear in the financial statements. For example, if something is to be on the income statement, it should be labelled as a revenue, expense, or extraordinary item. 20 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 distinguishes a partnership from a corporate form of business? 1) In a partnership, profits are taxed in the individual tax return of the partner. 2) Partnerships continue to exist upon withdrawal of a partner. 3) In a partnership, partners cannot enter into contracts on behalf of the other partners. 4) Partners are not responsible for the partnership debt in insolvency situations. b. Raylene, Rock, and Ron are partners. Their capital balances and profit and loss ratios are as follows: Capital Balance Profit/Loss Ratio Raylene $ 150,000 0.60 Rock $ 80,000 0.20 Ron $ 120,000 0.20 Ron retires and receives a cash payment of $140,000. Which of the following accounts would be debited to record Ron’s retirement, assuming the bonus method is used? 1) Cash for $400,000 2) Raylene, capital for $15,000 3) Rock, capital for $20,000 4) Ron, capital for $140,000 c. A company received an investment tax credit for the purchase of equipment. How should the investment tax credit be recorded? 1) As a reduction to the equipment account 2) As contributed capital 3) As a reduction to income tax expense 4) As a reduction to cash Continued... EFA3M09 ©CGA-Canada, 2009 Page 2 of 7 d. Which of the following would cause income taxes payable to be higher than income tax expense? 1) Dividends from a taxable Canadian corporation 2) Golf club dues 3) CCA claimed higher than amortization 4) Rent revenue collected in advance e. A company’s accounts receivable turnover ratio increased from 7.5 to 8.0. Which of the following statements is correct regarding this information?...
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