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A3595E1W12_white.doc

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Department
Administrative Studies
Course Code
ADMS 3595
Professor
Sung Kwon

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YORK UNIVERSITY Name _____________,_________________ SCHOOL OF ADMINISTRATIVE STUDIES (Last) (First) Professor Sung Kwon (Course Director) and Ms. Trish Farrell ADMS 3595 I.D. # ______________________________ Intermediate Financial Accounting II EXAM I, Winter 2012 Section ______________________________ (White Version) Type Points Available Points Earned I. Multiple Choice 30 @ 2 = 60 _____________ II. Premiums 11 _____________ III. Bonds Payable 14 _____________ IV. Taxable income and Deferred Tax 15 _____________ ___ Total 100 ___ _____________ INSTRUCTIONS 1. Check exam carefully to be sure you have all thirteen pages. 2. When you are instructed to begin the exam, put your name and student I.D. number on this cover sheet and indicate your section number. 3. You have 120 minutes to complete the exam. 4. Please fill in a scantron form with a pencil only. 5. Show your calculations and work to support your answers for problem questions. 6. Write in pen or pencil neatly because if we cannot understand what you have written, we cannot give you marks. 7. The exam is closed-book, and you can use only nonprogrammable calculators (i.e., no laptop/pocket computers are allowed) into the exam room. 8. When the end of the exam is announced, stop writing and turn your exam over immediately. I. Multiple Choices Questions: (30 @ 2 points). Circle the best answer and copy it to your SCANTRON form. Only your answers on the SCANTRON form will be graded. 1. According to the Exposure Draft of Proposed Amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets a. Only conditional obligations are recorded. b. Liabilities must have measurement certainty. c. The term “contingent liabilities” is eliminated. d. A conditional obligation related to an unconditional obligation is not recognized. 2. Which of the following liabilities is NOT a financial liability? a. Income taxes payable. b. Accounts payable. c. Notes payable. d. Both a) and b). 3. A liability is classified as current under IFRS if, a. It is not expected to be settled in the entity’s normal operating cycle. b. It is held primarily for trading. c. It is due more than 12 months from the end of the reporting period. d. The entity has an unconditional right to defer its settlement for at least 12 months after the balance sheet date. 4. Which of the following is NOT part of the definition of a trade accounts payable? a. a balance owed to others for goods, supplies or services. b. an amount related to the entity’s ordinary business activities. c. a good, supply or service purchased on open account. d. an amount related to the owner’s personal activities. 5. Which of the following dividends are recognized in the accounting records as a liability? a. Accumulated but undeclared dividends on cumulative preferred shares. b. Stock dividends. c. Cash dividends. d. Both a) and c). 6. As of July 1, 2010, businesses in Ontario should record what entry on the purchase of taxable goods and services? a. A debit to HST recoverable for the amount of the HST paid. b. An increase to the cost of the item acquired by the GST paid. c. Credit HST payable for the amount of the HST charged on sales. d. An increase to the cost of the item acquired by the PST paid. 7. Accumulating rights to benefits (for employees) a. Are often mandated by provincial labour law. b. Include vested rights that do not depend on the employee’s continued service. c. Are rights that accrue with employee service. d. All of these statements are correct. 2 8. ABC Corporation has a bonus plan with their senior executives which pays the management group bonuses of 12% based on profits after deducting the bonus but before deducting income taxes. ABC Corporation earned $300,000 in 2012 and pays tax at 40%. What is the amount of the bonus for 2012? a. $36,000. b. $32,143. c. $22,689. d. $25,714. 9. Harold’s Auto Sales uses the expense approach to account for warranties. They sell a used car for $15,000 on Oct 25, 2011, with a one year warranty covering parts and labour. Warranty expense is estimated at 2% of the selling price, and the appropriate adjusting entry is recorded at Dec 31, 2011. On March 12, 2012, the car is returned for warranty repairs. This cost Harold $100 in parts and $60 in labour. When recording the March 12, 2012 transaction, Harold would debit Warranty Expense with a. $ 0 b. $ 60. c. $160. d. $300. 10. Presented below is information available for Lozell Company. Current Assets Cash $ 4,000 Marketable securities 75,000 Accounts receivable 61,000 Inventories 110,000 Prepaid expenses 30,000 Total current assets $280,000 Total current liabilities are $80,000. To two decimals, the acid-test ratio for Lozell is a. 3.50 b. 3.13 c. 1.75 d. .81 11. Under current IFRS requirements, a contingent liability is recognized if a. the amount of the loss can be reliably estimated and it is probable that an asset has been impaired or a liability incurred as of the financial statement date. b. the amount of the loss cannot be measured reliably but it is probable that an asset has been impaired or a liability incurred as of the financial statement date. c. it relates to a lawsuit commenced after the balance sheet date, the outcome of which can be reliably measured. d. it relates to an asset recognized as impaired after the balance sheet date. 3 12. Which of the following statements is NOT correct for both long-term notes payable and bonds payable? a. both have fixed maturity dates. b. both carry a stated interest rate. c. both are traded on public securities markets. d. both are valued at the present value of its future interest and principal cash flows. 13. Mosstown Corp issued ten year bonds with a maturity value of $400,000. If the bonds were issued at a premium, this indicates that a. the market rate was higher than the stated rate. b. the stated rate was higher than the market rate. c. the market and stated rates were the same. d. no relationship exists between the two rates. 14. XYZ Co. uses the straight line method to amortize bond discounts and premiums. On March 1, 2012 XYZ issued $500,000 of 10% interest bonds payable semi-annually on January 1 and July 1, at 105 plus accrued interest. How much cash does XYZ receive on March 1, 2012? a. $500,000. b. $525,000. c. $533,333. d. $550,000. 15. On January 1, 2011, Heartland Ltd sold five year, 12% bonds with a face value of $500,000. Interest will be paid semi-annually on June 30 and December 31. The bonds were sold for $538,500 to yield 10%. Using the effective interest method of amortization of bond discount or premium, interest expense for 2011 is a. $50,000. b. $53,696. c. $53,850. d. $60,000. 16. Which of the following statements is INCORRECT regarding the recording of the related increase or accretion in the carrying amount of an asset retirement obligation (ARO)? a. Under private enterprise standards, it is recognized as interest expense. b. Under private enterprise standards, it is recognized as an operating expense (but not as interest expense). c. Under IFRS, it is recognized as a borrowing cost. d. The amount should be calculated using the same discount (interest rate) as was used to calculate the initial present value of the ARO. 17. In a troubled debt restructuring in which the debt is settled by a transfer of assets with a fair market value less the carrying amount of the debt, the debtor would recognize a. a gain on the settlement. b. no gain or loss on the settlement. c. a loss on the settlement. d. none of the above. 4 Use the following information for questions 18 through 20: On December 31, 2010, Diaz Corp. is in financial difficulty and cannot pay a $900,000 note with $90,000 accrued interest payable to Cameron Ltd, which is now due. Cameron agrees to accept from Diaz equipment that has a fair value of $435,000, an original cost of $720,000, and accumulated depreciation of $345,000. Cameron also forgives the accrued interest, extends the maturity date to December 31, 2013, reduces the face amount of the note to $375,000, and reduces the interest rate to 6%, with interest payable at the end of each year. 18. Diaz should recognize a gain or loss on the transfer of the equipment of a. $0. b. $60,000 gain. c. $90,000 gain. d. $285,000 loss.. 19. Diaz should recognize a gain on
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