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Unformatted text preview: EFA2J09 ©CGA-Canada, 2009 Page 1 of 8 CGA-CANADA FINANCIAL ACCOUNTING: ASSETS [FA2] EXAMINATION June 2009 Marks Time: 3 Hours 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 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. A student at JA University sued the university for an injury suffered at a campus pub. The university is defending the lawsuit as it feels that the university was not responsible for the injury. Existence of the lawsuit was described in the notes to JA’s financial statements. What accounting principle, assumption, or constraint is being applied in this situation? 1) Conservatism 2) Realization principle 3) Full-disclosure principle 4) Time period assumption b. At December 31, 2007, the following data was available for a building owned by NU Company: Building cost $ 800,000 Accumulated amortization — building $ 600,000 Estimated residual value at end of useful life $ 50,000 Estimated remaining useful life 10 years A small room was built on the back of the building at a cost of $50,000. The room was completed on June 30, 2008 and was used as office space commencing July 2, 2008. What is the effect of this expenditure on income before taxes for 2008? 1) Income will decrease by $2,632 2) Income will decrease by $5,000 3) Income will decrease by $5,263 4) Income will decrease by $50,000 c. Ari owns a pizza shop, a consulting business, and a real estate holding company. Separate financial statements are prepared for each business independent of the other businesses. What accounting principle or assumption is being applied in this situation? 1) Time period assumption 2) Separate entity assumption 3) Full-disclosure principle 4) Unit-of-measure assumption Continued... EFA2J09 ©CGA-Canada, 2009 Page 2 of 8 d. Which of the following statements is not a condition for recognition of an item in the financial statements? 1) The item has an appropriate basis of measurement. 2) A reasonable estimate can be made of the amount involved. 3) For items involving obtaining or giving up future benefits, it is probable that such benefits will be obtained or given up. 4) Cash was either paid or received in exchange for this item. e. YM Company determines the allowance for doubtful accounts by aging its accounts receivable. At the end of 2007, the balance in the allowance account was $50,000. During 2008, YM wrote off $5,000 and collected a $3,000 receivable that had been previously written off as uncollectible. At the end of 2008, the aging schedule indicated that the balance of the allowance for doubtful accounts should be $64,000. What is the bad debt expense for 2008?...
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This note was uploaded on 03/30/2012 for the course ACCOUNTING 1204 taught by Professor Chang during the Spring '11 term at Nanjing University.
- Spring '11
- Financial Accounting