Name: ________________________________
University of Guelph
College of Management & Economics
ACCT 3330 – FALL 2012
Intermediate Financial Accounting I
Midterm Exam #1
October 9, 2012
Time:
Marks:
Weighting:
Questions:
80 minutes
40
15% of course grade
3
Instructions:
1. Record your name and student number on all pages of this exam.
2. Calculators are the only aid allowed.
3. The exam is 80 minutes in length. Budget your time wisely.
4. Those students answering this examination paper in pencil may not query their
grades.
5. You are reminded that cheating is a serious offence, which can result in
expulsion from the university.
Question
1
2
3
Total
Available
10
10
20
40
Score
1
Name: ________________________________
Question 1 (10 marks)
Conference Limited has the following balances in its general ledger on December 31, 2011 (in
thousands of Canadian dollars):
Debit
Retained earnings 31, December 2010
Sales revenue
Interest expense
Cost of sales
Accumulated other comprehensive income, 31
December 2010
Dividends paid
Gain on sale of equipment
Income tax expense (Note 1)
Selling and administrative expense
Amortization on furniture and fixtures for 2011
Write-off of inventory resulting from flood
damage
Additional contributed capital
Unrealized gain on investments valued at Fair
Value through OCI
Expenses – Abel division (Note 2)
Revenues – Abel division (Note 2)
Loss on disposal of Abel division (Note 2)
Error correction (Note 3)
Credit
$40,000
18,000
$780
8,000
1,350
2,000
3,000
?
3,400
1,050
530
18,000
49,500
112,000
87,000
44,000
20,000
Note1: Income tax expense on all types of income is 40%
Note 2: On June 30, Conference sold the assets of Abel division for $251,000, when
the carrying value was 295,000. For financial reporting purposes the disposal was
considered a disposal of a segment of the business.
Note 3: The error correction involves a gain of $20,000 applicable to October 2010, not
previously recorded.
Required:
Prepare, in good form, a statement of comprehensive income. Use a multi-step income
statement format.
Note to students:
1. Correct statement without calculations or explanations receive full marks
2. Incorrect statement with calculations and/or explanations to help understand how the
numbers were arrived at may receive partial marks <Start your writing from the next
page>
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Name: ________________________________
Conference Ltd.
Statement of Comprehensive Income
For the Year Ended December 31, 2011
(In thousands)
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Name: ________________________________
Question 2 (10 marks)
Connectivity Mobile Incorporated provides cellular phone services. The company conducts a
special sales campaign in which new subscripts will get a high –end cell phone for only $100 if
they sign a 36 month contract that has a service fee for $100 per month. Thus, the total price
of the cell phone plus 36 months of services is $3,700. The company normally sells the phone
for $1,000. Current subscribers pay $60 per month for comparable service; they are not
permitted to take advantage of the $100 cell phone offer.
Required:
(a) Using the fair value method, how would Connectivity allocate the contract price to the
various elements of the sale? Discuss and show your calculations.
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Name: ________________________________
ii)
Explain the main concepts of the earnings approach and the contract based
approach. What are the conceptual differences between the two approaches.
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Name: ________________________________
Question 3 (20 marks)
The balance sheet of Maple Corporation follows:
Maple Corporation
Balance Sheet
December 31, 2011
(in thousands)
Assets
Current Assets
Cash
Temporary trading securities ‐ fair value through net income
Accounts receivable (Note 1)
Merchandise inventory
Supplies inventory
Investment in subsidiary company (Note 2)
Total current assets
Property plant and equipment
Buildings and land
Less: Accumulated Depreciation
Land held for future use
Total property plant and equipment
Liabilities & Equity
Current liabilities
Accounts payable
Unamortized premium on bonds payable
Stock dividends payable (Note 3)
Taxes payable (Note 4)
Other payables
Total current liabilities
$ 26,000
18,000
25,000
20,000
4,000
200,000
$ 197,000
15,000
25,000
‐
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$ 237,003
$ 293,000
Long‐term liabilities
Bonds payable
60,000
Accumulated other comprehensive income 44,997
Total long‐term liabilities
104,997
Total liabilities
342,000
91,000
31,000
150,000
210,000
Other Assets
Investments in bonds held to maturity 19,000
Total assets
$ 522,000
Shareholders' equity
Common shares issued 85,000
Retained Earnings
95,000
Total shareholders' equity
180,000
Total liabilities and shareholders' equity
$ 522,000
Note 1: Included in accounts receivable are customers with $13,200 in credit balances and
the Allowance for doubtful accounts of $3,000.
Note 2: Maple Corporation owns 100% of the shares of its subsidiary.
Note 3: Stock dividend payable is based on 1,000 common shares issued which have a
current market value of $25 per share.
Note 4: The taxes payable account has a $15,000 credit balance which has been offset by a
$15,000 cash fund.
Required:
a) Evaluate the balance sheet. Identify and explain 7 deficiencies in Maple Corporation’s
balance sheet. For each deficiency identified provide the proper treatment. Assume the
company follows IFRS. Complete your answer in the chart provided.
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Name: ________________________________
Deficiencies & Proper treatment
7
Name: ________________________________
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Name: ________________________________
b) Identify any qualitative characteristics, elements and/or foundational principals of the
conceptual framework that were violated in the Maple Corporations balance sheet. For
each item identified provide an explanation.
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