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University of Toronto St. George
Rotman Commerce
Xin Baohua

UNIVERSITY OF TORONTOROTMAN SCHOOL OF MANAGEMENTRSM220 Midterm 110 minutesThursday February 14 2013FIRST NAME LAST NAME STUDENT NUMBERCIRCLE YOUR LECTURE SECTION L0101T 810WO 25Dragan StojanovicL0201T 1012WO 25Dragan StojanovicL0301T 35WO 25Dragan StojanovicL0401W 24WW 121Baohua XinL0501W 46WO 30Baohua XinL0601R 24WW 121Scott DouglasAids allowed Nonprogrammable calculator onlyInstructions1Write legibly Illegible answers will not be graded2There are 5 questions on 15pages Answer each question in the space provided If you need additional space use the back of the page facing the question and clearly identify the question being answered 3Pencil or pen may be used However papers written in pencil or papers with white outs will not be remarked4Your invigilator will NOT clarify any questions for you during the test You may make any assumptions you believe are needed to answer a question However you only receive marks for the answer if the assumptions you made are indeed needed for the question Make sure you show all calculations for full marks QuestionMarksMarks Awarded 1 1023036430 534Total110RSM22013W WinterMidtermPage 1 of 16Following formulas are provided for your reference PMTPVn1rPresentvalueofalumpsum PresentvalueofanannuityQUESTION 1 10 marksREQUIRED Please answer the following questions by choosing circling the best answer 2 marks each 1Ratios used to determine how effectively a company uses its assets includeabook value per share binventory turnovercpayout ratiodquick ratio2Significant accounting policies may NOT beaselected on the basis of judgementbselected from existing acceptable alternativescpeculiar to a particular industrydomitted from financial statement disclosure3On January 1 2012 OrangeInc purchased an equipment at 21488 The asset is expected to generate cash flows of 10000 at the end of each year for two years ie end of 2012 and end of 2013 OrangeInc expects to use the equipment evenly in the two years and at the end of the second year the capital asset will have a residual value of 5000 Assume that the riskfree interest rate is 10 Under ideal conditions accounting theory how would OrangeInc report the equipment on the Balance Sheet at December 31 2012 rounding to the nearest dollaraat 13636bat 13244cat 12397dat 90914Which of the following is a limitation of the balance sheetaIt does not inform us the companys ability to pay short term debtbJudgements and estimates are used in deriving some of the numberscCash balance is not reporteddNone of the above5An example of an item which is an element of working capital isaaccrued interest on notes receivableblongterm investmentscretained earningsRSM22013W WinterMidtermPage 2 of 16
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