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RSM220-14S - Midterm - marking guideline (for posting).pdf

Rotman Commerce
Course Code
Xin Baohua
Study Guide

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RSM220 Midterm (110 minutes) Thursday, February 13, 2014
FIRST NAME _______________________________________
LAST NAME ________________________________________
STUDENT NUMBER:__________________________________
L0101 T 8-10 WO 20 Dragan Stojanovic
L0201 T 10-12 WO 20 Dragan Stojanovic
L0301 T 3-5 WO 20 Dragan Stojanovic
L0401 W 2-4 WO 20 Baohua Xin
L0501 W 4-6 WO 20 Baohua Xin
Aids allowed: Non-programmable calculator only.
1. Write legibly. Illegible answers will not be graded.
2. There are 5 questions on # pages. 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.
3. Pencil or pen may be used. However, papers written in pencil or papers with white outs will not be re-marked.
4. Your 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.
Question Marks Marks Awarded
1 20
2 21
3 35
4 23
5 11
Total 110

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Page 2 of 12
QUESTION 1 (20 marks)
REQUIRED: Please answer the following questions by choosing (clearly circling) the best answer (2 marks each).
1.The information provided by financial reporting pertains to
A. individual business enterprises, rather than to industries or an economy as a whole or to members of society as
B. business industries, rather than to individual enterprises or an economy as a whole or to members of society as
C. individual business enterprises, industries, and an economy as a whole, rather than to members of society as
D. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.
2. Under IFRS, in a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows
1. operating activities. 2. investing activities. 3. financing activities.
A. 1 only;
B. 1 or 3;
C. 1 or 2;
D. 2 only.
3. With regard to the authority of AcSB over IFRS, which of the following statements is NOT true?
A. IFRSs are part of Canadian GAAP only after they are approved by the AcSB.
B. The AcSB may decide not to adopt an IFRS when adopting it into Canadian GAAP.
C. To keep accounting standards comparable across countries, when adopting an IFRS into Canadian GAAP, the AcSB cannot
modify it.
D. At present, CPA Canada Handbook includes all effective IFRSs as issued by the International Accounting Standards Board.
4. In establishing financial accounting 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, issuing an exposure draft and establishing the new GAAP.
C. the researching of the legal implications of proposed new accounting standards.
D. the requirement that all accountants must receive a copy of financial standards.
5.Information is neutral if it
A. provides benefits which are at least equal to the costs of its preparation.
B. can be compared with similar information about an enterprise at other points in time.
C. would have no impact on a decision maker.
D. cannot be selected to favour one set of stakeholders over another.
6.Working capital is
A. capital which has been reinvested in the business.
B. unappropriated retained earnings.
C. cash and receivables less current liabilities.
D. none of these.

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7. Which of the following statements about the purpose/status of the conceptual framework is NOT true?
A. The conceptual framework facilitates the consistent and logical formulation of standards.
B. If there is a conflict between the Conceptual Framework and an IFRS, the Conceptual Framework prevails as it is the
“constitution” of financial reporting.
C. This Conceptual Framework does not define standards for any particular measurement or disclosure issue.
D. The conceptual framework provides a basis for the use of judgment in resolving accounting issues.
8. Materiality
A. is entity specific.
B. is determined exclusively by the magnitude of the items to which the information relates.
C. concerns a uniform quantitative threshold set by the standards setting body.
D. is an enhancing qualitative characteristic.
9. Which of the following organizations is involved in developing financial reporting standards in Canada?
1 IASB; 2 AcSB; 3 FASB; 4 OSC
A. 1 and 2
B. 2 and 4
C. 1, 2 and 4
D. 1, 2, 3 and 4.
10. Audited annual financial statements are required to be released within a certain period after the end of the fiscal year. However
some of the invoices and receipts related to the transactions in the reporting year may have not been received by then.
Identity the conflicting ENHANCING qualitative characteristics in this scenario.
A. relevance vs. reliability.
B. completeness vs. timeliness.
C. timeliness vs. verifiability.
D. cost vs. benefit.
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