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353-Practice Midterm..doc

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BUSI 353

BUSI 353PRACTICE MIDTERM QUESTIONSSolutions in the Back of this DocumentSuggestionTry the questions under the time constraints indicated for the questionReview the solution only after trying the questionQUESTION 1Short Answer and Multiple ChoiceRecommended Time Allocation15 MinutesaAccording to CICA Handbook section 1000 ASPE what are the qualitative characteristics of useful information4 MarksbExplain what is meant by the semistrong form of the Efficient Markets Hypothesis EMH and discuss the accounting implications of an efficient market4 Marksc Under the IFRS Conceptual Framework 2012 one of the Fundamental qualitative characteristics is RelevanceWhat is the meaning of Relevance in the conceptual framework2 MarksMultiple ChoiceCircle the Best Answer1 Mark eachUnderIFRSwhatisthecriticaleventdateforcutoffofeventsafterthereportingperiod1AOnedaypriortothereleaseegpublicationofthefinancialstatementsB90daysafteryearendCThedatethatthefinancialstatementsareauthorizedbytheapplicablepartyDThedatethattheauditorscompletetheirworkUnderIFRSwhichoftheitemsbelowwouldnotbepresentedonastatementofcomprehensiveincome2AextraordinaryitemsBrevenueCincomeDothercomprehensiveincomeQUESTION 28 MarksRecommended Time Allocation15 MinutesOn November 1 2010 Jeremiah Company JC was sued by a customer who injured herself when she slipped on a waxy floor on October 2 2010Lawsuits against JC occur periodicallyThe customer has filed a lawsuit for 100000 for lost wages and another 40000 for medical and related costsAt JCs yearend December 31 2010 the lawsuit was unresolvedAn initial meeting with JCs lawyers in early November 2010 indicated that JC is probably going to be held partially liable but is unlikely to have to pay the full 140000At the time of this meeting the lawyers were not prepared to estimate the amount of probable loss but felt the range was 20000 to 100000The lawyers for both sides had a meeting on January 7 2011 where the issues were discussed and a settlement was ultimately proposed by JCs lawyers for 60000The customers lawyer stated that he would ask whether this was acceptable to his client the customerOn January 19 2011 a counterproposal was made by the customers lawyer asking for 90000 as a settlementThis counterproposal was rejected but another meeting between the lawyers is scheduled for early FebruaryToday is January 28 2011 and the financial statements for JCs 2010 yearend are about to be finalizedThe accountant has not yet recorded anything and has come to you for adviceJC is a private company that uses ASPEREQUIREDDiscussExplain the appropriate accounting for this situation
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