December 2008 - Exam

December 2008 - Exam - L AST NAME FIRST NAME STUDENT # 1...

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LAST NAME FIRST NAME STUDENT # 1
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Desautels Faculty of Management McGill University Introduction to Financial Accounting MGCR 211 FINAL EXAMINATION December 4, 2008 **VERSION A** Circle your lecturer’s name Lecturer: Catherine Fortin SECTION Lynn DeGrace Lawrence Tenenbaum Karen Zajdman-Borden Instructions This is a closed book exam You are allowed a translation dictionary Only non-text storing calculators are allowed This exam consists of 7 questions and a total of 27 pages All questions are to be answered on this examination paper. Answer in the space provided and do not exceed the space allowed Show your calculations and explain your reasoning You have 3 hours to complete this exam You must return this examination to the invigilator Question Marks available Grade 1 36 2 21 3 15 4 22 5 20 6 18 7 18 TOTAL 150 TOTAL on 100 2
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Question 1 Justin is a young music producer in the Montreal Region. He specializes in Rock bands and has recently started a company called City Records Inc. Justin is good for seeking music talent but unfortunately, he has a limited accounting and business background. Justin wishes to expand his company and create a jazz label. In order to expand, Justin will need to obtain a $200,000 loan from the bank. The bank has requested that Justin provides audited financial statements for their year end of December 31 st , 2008. Justin has hired you to help him with the preparation of the financial statements and also to provide general business advice. Part I - 6 marks ( 7 minutes) a) To enter the Jazz market, Justin met with Jim Wood, a well know music agent in Toronto. Jim indicated that he was also interested in starting a record company that specialized in Jazz. Jim had the idea of forming a partnership called Clarinet Tunes. Justin was very happy at the opportunity to be associated with Jim and to start this project. However, Justin was confused with the proposal of a partnership and asked you to explain what was involved with a partnership vs. an incorporated business such as City Records. (3 marks) b) After discussing the partnership idea, Jim said that he would be willing to make the shareholder’s agreement with conditions that profit is split 40% to Jim and 60% to Justin. He also said that Justin could be the General Partner and the he would be happy being a Limited Partner. Since Justin is younger and full of energy, he indicated that Justin could take on a bigger involvement in Clarinet. Justin wanted you to review this proposal from Jim and indicate any advantages or disadvantages. (3 marks) 3
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City Records Balance Sheet At December 31, 2008 Assets Current Assets Cash 2,700 Accounts Receivable 22,000 Short Term investments 8,420 Prepaid Rent 1,030 CD Inventory 31,500 65,650 Long Term Asset Note Receivable 6,000 Recording Equipment 72,000 Recording Rights 25,000 Building 101,000 Collectible items 6,100 210,100 Total Assets 275,750 Liabilities Short Term Liability Accounts Payable 72,000 Accrued charges
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December 2008 - Exam - L AST NAME FIRST NAME STUDENT # 1...

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