ca_exm_fa1_2003-06 - CGA-CANADA FINANCIAL ACCOUNTING 1...

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CGA-CANADA FINANCIAL ACCOUNTING 1 EXAMINATION June 2003 Marks Time: 3 Hours 12 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 (1) is the best answer for item (a), 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. No account will be taken of any explanations you offer. Note: 1 1 / 2 marks each a. Wolfe and Fevrier observed the following error in its financial statements. An amount of $20,000, received from a customer as a deposit for an item with a sales value of $80,000, was credited to sales. The goods are expected to be delivered after the year end. What is the effect of this error? 1) Liabilities understated, net income understated, and owner’s equity understated by $20,000 2) Liabilities overstated, net income overstated, and owner’s equity overstated by $60,000 3) Liabilities understated, net income understated, and owner’s equity understated by $60,000 4) Liabilities understated, net income overstated, and owner’s equity overstated by $20,000 b. Peter’s Plumbing has taken a set of financial statements to the bank to request a loan. The company’s assets are reflected on the balance sheet at the amount paid to purchase them. The manner in which assets have been recorded is consistent with which of the following accounting principles? 1) Monetary principle 2) Cost principle 3) Business entity principle 4) Revenue recognition principle c. In the December 31, 2001 year-end inventory count for Parts Ltd., ending inventory was incorrectly valued at $50,000 instead of $62,000. Beginning inventory and all purchases are valued at the same unit price. Assuming that the December 31, 2002 inventory balance was correctly determined, what would the impact of the December 31, 2001 ending inventory error be on the December 31, 2002 financial statements? 1) Assets understated, income understated, owner’s equity understated 2) Assets overstated, income overstated, owner’s equity overstated 3) Assets correctly stated, income overstated, owner’s equity correctly stated 4) Assets correctly stated, income understated, owner’s equity correctly stated d. Henderson Ltd. bonds are trading at 103 1 / 2 . What does this indicate? 1) The coupon rate is 3 1 / 2 % higher than the market rate. 2) The bonds pay 3 1 / 2 % interest. 3) The bonds are currently traded at $1,035 per $1,000 bond. 4) The market interest rate is 103 1 / 2 % of the coupon rate. Continued. .. EFA1J03 ©CGA-Canada, 2003 Page 1 of 7
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e. On January 1, 2001, Schwab Ltd. issued $1,000,000 of 8%, 5-year bonds when the market interest rate was 10%. Schwab received $922,770 cash for the bonds. The bonds pay interest semiannually. On December 31, 2001, the market interest rate changed to 12%. Which of the following statements is true? 1) The discount on the bonds will be increased on December 31 to reflect the change in the market
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This note was uploaded on 05/19/2010 for the course DFDAS 220 taught by Professor Ding during the Fall '10 term at Academy of Art University.

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ca_exm_fa1_2003-06 - CGA-CANADA FINANCIAL ACCOUNTING 1...

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