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Unformatted text preview: EFA2M10 ©CGA-Canada, 2010 Page 1 of 8 CGA-CANADA FINANCIAL ACCOUNTING: ASSETS [FA2] EXAMINATION March 2010 Marks Time: 3 Hours 28 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. When companies prepare accrual-based financial statements rather than cash-based financial statements, they are emphasizing which of the following assumptions, principles, or constraints? 1) Going concern principle 2) Materiality constraint 3) Historical cost principle 4) Time period assumption b. Which of the following qualitative characteristics of accounting information is most important if you want reliable financial statement information? 1) Predictive ability 2) Feedback value 3) Verifiability 4) Timeliness c. Kate is preparing adjusting journal entries for her company’s financial statements for the third quarter ended September 30, 2009. Which of the following is not an example of an adjusting entry? 1) An entry to adjust the income summary account 2) An entry to adjust the prepaid insurance account 3) An entry to adjust the amortization expense account 4) An entry to adjust the interest expense account for a bank loan d. On January 1, 2009, QT acquired a capital asset for $5,000 cash and an additional payment of $3,000 on January 1, 2010, plus accrued interest at 10% (the market rate of interest). On March 1, 2009, the replacement cost of the capital asset is $11,000 and on July 1, 2009 its net realizable value is $12,000. Which measurement method would be most appropriate for recording the capital asset? 1) On January 1, 2009 it should be recorded at the net present value of $7,727. 2) On January 1, 2009 it should be recorded at the historical cost of $8,000. 3) On March 1, 2009 it should be recorded at the replacement cost of $11,000. 4) On July 1, 2009 it should be recorded at the net realizable value of $12,000. Continued... EFA2M10 ©CGA-Canada, 2010 Page 2 of 8 e. XG manufactures clothes for sale to retailers in Quebec. On January 1, 2009, XG invested $20,000 in shares of a Canadian bank, which it classified as held-for-trading. On December 31, 2009, these shares had a fair market value of $25,000. Where would this increase in value be reflected in the shareholders’ equity section of XG’s balance sheet? 1) Retained earnings 2) Contributed surplus 3) Accumulated other comprehensive income 4) Common shares f. ACT is an acting school in Toronto, Ontario. On January 1, 2009, it issued bonds to help pay for a new theatre for its productions. If the bonds were issued at a discount (as opposed to being issued at face value), how would the discount affect ACT’s December 31, 2009 net income (or other...
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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.

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