Acco 310 Midterm

CONCORDIA UNIVERSITY buttocks MOLSON SCHOOL OF BUSINESS DE articulationMENT OF ACCOUNTING ACCO 310/4 Winter 2011 mid(prenominal) TERM EXAMINATION All sections February 11, 2011 600 to 900 P. M. Marks minutes Question 1 24 43 Question 2 25 45 Question 3 35 63 Question 4 16 29 100 180 Materials Allowed Silent, cordless calculators ( monetary calculators argon permitted) explanation dictionaries hesitancy 1- 24 MARKS- 43 MINUTESPlease answer exclusively parts of this promontory in your answer booklet PART A- MULITPLE CHOICE Select the high hat Answer 1. Which of the next criteria essential be met before an event or gunpoint should be put down for news reporting purposes? a. The event or item can be measured objectively in financial terms. b. They are probable. c. The event or item is an element. d. All of these must be met. 2. Which of the chase is a proveable event or item? a. Changes in managerial polity b. The value of human resources c. Changes in indivi dualnel d. None of these 3. Which of the following never affects the ongoing years income statement? a. Correction of an amortization wrongful conduct made two years ago. b. Using raw materials in the ware process c.Divid eat up declaration and subsequent payment d. None of these affect the current years income statement. 4. An accrued expense can best be described as an heart and soul a. nonrecreational and currently matched with earnings. b. paid and non currently matched with earnings. c. not paid and not currently matched with earnings. d. not paid and currently matched with earnings. 5. If, during an be full point, an expense item has been incurred and consumed but not up to now paid for or recorded, then the end-of-period adjusting entry would involve a. a obligation account and an asset account. b. an asset or contra-asset and an expense account. c. a financial obligation account and an expense account. d. receivable account and a revenue account. 6. In posting fro m the general diary, an expense item was debited to a liability account in error. Which of the following is true? a. The net income for the period ordain be understated by the amount of the expense. b. The net assets at the end of the period will be unaffected. c. The trial balance will be push through of balance. d. None of these. 7. Which of the following statements is not an objective of financial reporting? a. hand over schooling that is useful to users in making resource onlyocation decisions. b. go out information about an entitys economical resources, obligations, and equity/net assets. c.Provide information on the liquidation value of an effort. d. Provide information about changes in an entitys economic resources, obligations, and equity/net assets. 8. In establishing financial chronicle standards, due process refers to a. the process of giving interested parties ample opportunity to express their views. b. the practice of researching, creating a task force, issu ing an exposure drawing and establishing the new GAAP. c. the researching of the legal implications of proposed new accounting standards. d. the leadment that all accountants must receive a copy of financial standards. 9.. The purpose of the International story Standards Board (IASB) is to a. evelop a single set of high quality, understandable and internationalist financial reporting standards for general purpose financial statements b. develop a uniform currency in which the financial transactions of companies throughout the universe of discourse would be measured. c. increase the transparency of financial reporting by achieving a single, global method of accounting.d. arbitrate accounting disputes between auditors and international companies. 10. chiefly accepted accounting principles include a. specific rules, practices and procedures. b. broad principles and conventions of general applications programmes c. underlie concepts (the conceptual framework) d. all of these. 11. Professional public opinion plays an important role in Canada because a. he business environment is complex and there cannot be a rule for every situation. b. Canadian accounting standards are based originally on general principles rather than specific rules. c. professional accountants have the get wind and education that enables them to apply GAAP principles. d. all of these. 12. The exercise of professional judgement does not involve which of the following a. the use of knowledge gained through education. b. the application of knowledge gained through experience. c. the use of ethical decision making. d. none of these. PART B ( 3 MARKS) Explain why providing information to users is a ambitious task. PART C ( 9 MARKS)Presented below are three independent, unrelated statements regarding the formulation of generally accepted accounting principles. Each statement contains about incorrect or debatable statement(s). Statement I The users of financial accounting statements have co inciding and conflicting needs for statements of various types. To meet these needs, and to replete the financial reporting responsibility of guidance, accountants prepare unlike sets of financial statements for different users. Statement II The AcSB should be responsive to the needs and viewpoints of the entire economic community, not just the public accounting profession. The AcSB, therefore, will succeed because it will deal effectively with all interested groups. Statement IIIStarting on January 1, 2011 all companies in Canada must use IFRS. This is because Canada has extensive economic relations with the fall in States and all US companies are required to use IFRS. Instructions admit YOUR ANSWERS IN POINT FORM DO NOT WRITE AN seek Evaluate separately of the independent statements and identify the areas of fallacious reasoning in each and rationalise why the reasoning is incorrect. Complete your discussion of each statement before proceeding to the next statement. QUESTI ON 2- 25 MARKS- 45 MINUTES For each of the following items, indicate A. The appropriate balance plane categorizeification of the item B. the usual valuation of the item C.The additional manifestation required for the item, if any All of your responses should be in accordance with IFRS. 1. harsh shares 8. Long-term bonds payable 2. Prepaid expenses 9. Land (in use) 3. Natural resources10. Land (future place site) 4. Property, plant, and equipment11. Patents 5. Trade accounts receivable12. Trading securities 6. Copyrights13. Trade accounts payable 7. Merchandise inventory QUESTION 3- 35 MARKS- 63 MINUTES The following schedule was prepared by your colleague to summarize the corrections required to adjust the accounts of WNR Inc. and to form the al-Qaida of the revised financial statements that will be prepared for the years conclusion declination 31, 2009 and 2010. Adjustments required 3 depreciation expense- never previously recorded (3,200) (4,000) 4 Remo val of unrealized gain on available for cut-rate sale investments (40,000) 5 Adjust for contingent lawsuit (80,000) Total adjustments 111,800 (74,000) Tax (expense) or saving (44,720) 29,600 Revised Net Income 292,080 145,600 Additional Information The companys tax rate is 40%. The company has only one class of common shares issued and outstanding, Class A common shares. As at the end of 2009, there were 1,000 shares outstanding for a total value of $10,000. As at the end of 2010, the company had 2,500 common shares issued and outstanding for a total amount of $55,000. The company was incorporated on Nov. , 2008 and began operations on January 1, 2009. On declination 15, 2010, the company declared a dividend of $5 per share to all its shareholders of record on that date. The dividend was payable on January 15th, 2011. It is now February 11, 2011 and your colleague, a big master in this weeks 649 lottery draw, has suddenly quit his job, and l eft(a) the country indefinitely. Your boss has asked that you review the document left and prepare the following 1. For each adjustment shown on the schedule, an explanation of what the likely error was, to require the adjustment shown on the schedule. It is believed that all of the adjustments shown on the schedule are correct.Ensure that you explain fully the extent and effect of the error on all pertinent accounts (balance sheet and income statement accounts). (10 marks) 2. For each of the adjustments shown on the schedule, prepare the required adjusting journal entry assuming that the books for 2010 are still open. INCLUDE INCOME TAXES (15 marks) 3. Using all of the information from above, prepare a Statement of Changes in Shareholders Equity, for the period January 1, 2009 to December 31, 2010 in proper format, including all of the disclosures required as per IFRS and Part 1 of the CICA Handbook. ( 10 marks) QUESTION 4-16 MARKS- 29 MINUTES You have just set down an interview with an exciting new start-up company in the biotech industry.As the company management is comprised solely of cientists, they have hired a local CA starchy to interview the applicants for the accounting position that you are interviewing for. The company is anxious that the person they hire be technically proficient in all aspects of financial statement presentation as the rest of the management team is not well versed in the area of accounting and finance. During the interview, the CA asks you to sate a short written test to explain fully, the disclosure required, for an enterprise that follows Part 2 of the CICA Accounting Handbook ( Private Enterprise Gaap) with take note to the following areas 1. Discontinued operations ( 8 marks) 2. Statement of Cash Flows ( 8 marks) You may use point form in your response to these issues.