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(ACCT202)[2010](s)final~1406^_10049.pdf
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ACCT 202 Financial Accounting II Spring 2010 Final Examination
Date: May 28, 2010 (Friday)
Time: 8:30am C 11:00am (2.5 Hours)

This exam paper contains SEVEN (7) pages (including this cover page).
Instructions:
1.
This is a CLOSED book examination.

2.
This exam contains FIVE (5) questions. ALL questions are compulsory.

3.
Answer all questions in the answer booklet provided.

4.
Write your name, student number, and lecture section number (L1: Mon 1630-1750 & Fri 1200-1320; L2: Mon 1330-1450 & Fri 0900-1020) on the cover of the answer booklet.

5.
START EACH QUESTION ON A NEW PAGE. Indicate the question no clearly.

6.
SHOW YOUR WORKINGS. If you do not show your workings, you may not receive full credit for a correct answer and you will not receive any partial credit for an incorrect answer.

7.
Materials, aids and instruments allowed during the examination: present value tables and electronic financial calculators ONLY.

8.
Budget your time wisely. You have 150 minutes to get a maximum of 150 marks. On average, use 1 minute to get every 1 mark.

9.
You may keep this exam paper. Answers to this exam will be released on LMES in the afternoon. Please report any problem in the answers immediately.



TURN OFF YOUR MOBILE PHONES!!!


(a) Under US GAAP, what criteria must be met before a lease can be properly accounted for as a capital (finance) lease on the books of the lessee? What are the differences between US GAAP and IFRS?
(11 marks/minutes)
(b) Identify two circumstances in which the lessor and the lessee may classify a lease differently. Which lease classification criterion (criteria) is (are) being affected?

(4 marks/minutes)
(c) On January 1, 2011, A Ltd leased a machine from B Ltd. The machine cost B Ltd $130,000 to manufacture, and had a fair value equal to the lessors net investment in the lease on January 1, 2011. The lease agreement contained the following clauses:
Lease term 4 years Annual rental payment, in advance $40,000 (first payment 1/1/11, thereafter on Dec 31 each year) Estimated residual value at end of the lease term $15,000 Residual value guaranteed by lessee $nil Lessees incremental borrowing rate 8% Lessors implicit interest rate on the lease 8%
The expected useful life of the machine is six years. A Ltd intends to return the machine to the lessor at the end of the lease term.
Both the lessor and the lessee classify the lease as a capital (finance) lease.

REQUIRED:
(i) Prepare the lease schedules for both the lessor and the lessee. (13 marks/minutes)
CONTINUE ON NEXT PAGE
(ii) Prepare the journal entries for both the lessor and the lessee for the years ended December 31, 2011 and 2014 only.
Indicate the date besides the journal entries.
If no entry is required for a particular year, indicate the year and state no entry.
(22 marks/minutes)
(iii) Assume that the lease agreement included a clause under w