Question

Transcription

Question

The Societies of Management Accountants of Alberta, Manitoba, New Brunswick, Newfoundland,
Northwest Territories and Nunavut, Nova Scotia, Ontario, Prince Edward Island, Saskatchewan, and the Yukon,
Certified Management Accountants Society of British Columbia, Ordre des comptables en management accrédités du Québec
Sample 2008
Entrance Examination
(Time Allowed: 4 hours)
Notes:
i)
All answers must be indicated on the scannable multiple-choice answer sheet.
Work done on the question paper and examination foolscap will NOT be marked.
ii)
Included in the examination envelope is a supplement consisting of formulae and
tables. It is a standard supplement that may be useful for answering questions on
this paper.
iii)
Examination materials must NOT BE REMOVED from the examination
writing centre. All examination materials (i.e. answer sheet, used and unused
foolscap sheets, envelope, supplement and question paper) must be submitted
to the presiding officer before you leave the examination room.
TABLE OF CONTENTS
Examination:
Instructions .......................................................................................................... 1
Strategic Management ....................................................................................... 3
Risk Management and Governance ................................................................... 4
Performance Management ................................................................................. 7
Performance Measurement .............................................................................. 19
Financial Management ..................................................................................... 23
Financial Reporting ........................................................................................... 27
Cross-Competency ........................................................................................... 40
Solution:
Summary ........................................................................................................... 43
Strategic Management ..................................................................................... 44
Risk Management and Governance ................................................................. 44
Performance Management ............................................................................... 46
Performance Measurement .............................................................................. 56
Financial Management ..................................................................................... 62
Financial Reporting ........................................................................................... 65
Cross-Competency ........................................................................................... 74
Supplement of Formulae and Present Value Tables............................. 76
* This supplement is provided to all candidates with the examination.
Sample 2008 Entrance Examination
INSTRUCTIONS:
Use the multiple-choice answer sheet provided to record your answers to the questions.
Be sure to enter your four-digit envelope number on the multiple-choice answer sheet.
Select the BEST answer for each of the following 105 questions and record your
answer on the multiple-choice answer sheet by blackening the appropriate answer
space (i.e. oval) with a soft lead (HB) pencil. Answer all questions. Mark ONLY ONE
ANSWER for each question.
Sample Question:
189.
(-) Market research and public relations costs are
a)
b)
c)
d)
e)
engineered variable costs.
discretionary variable costs.
committed fixed costs.
discretionary fixed costs.
engineered fixed costs.
Assuming you select choice d) for your answer, you should blacken the “d” space on
line 189 in the “ANSWERS” area of the multiple-choice answer sheet as shown below:
189
a
b
c
d
e
Question Weighting:
Your performance will be based on the total weighted value of the questions answered
correctly. Note that all questions are assigned the same weight, except for those
specified with a plus (+) sign (i.e. has a higher weight) or minus (-) sign (i.e. has a lower
weight). In the above example, there is a minus sign at the beginning of the question,
signifying that the question has a lower weighted value than the average question.
Singular Versus Plural Phrasing:
For simplicity of wording, all questions are phrased as though there is a single correct
answer, even when there are multiple correct answers. For example, the correct answer
to a question that is worded, “Which of the following is...,” may be the choice that refers
to two or more of the other choices, e.g. “Both a) and b) above.”
CMA Canada
1
Calculator Policy and Supplement
The following models of calculators are authorized for use on the Entrance Examination
effective January 2008:
Texas Instruments
TI BA II Plus (including the Professional model)
Hewlett Packard
HP 10bII (or HP 10Bii)
Sharp
EL-738C (or EL 738)
The supplement accompanying the Entrance Examination contains present value
tables.
2
CMA Canada
Strategic Management
1.
(-) A corporate mission statement
a) specifies the end results of planned activities.
b) is an open-ended statement of what the organization wishes to accomplish.
c) quantifies what the organization wishes to accomplish and specifies the timeframe
for achieving its goals.
d) specifies the purpose or reason for the organization’s existence and the scope of its
operations.
e) is the pattern of beliefs, expectations, and values shared by an organization’s
members.
2.
The presence of the Internet has made industry information more readily available. This
has the most impact on
a)
b)
c)
d)
e)
3.
rivalry among competing firms.
barriers to entry for new competitors.
potential development of substitute products.
bargaining power of suppliers.
bargaining power of customers.
Which of the following, is the most important requirement for successful execution of a
low-cost competitive position?
a) Systems that are designed to make all organization members accountable for cost
control.
b) Technological leadership in product design.
c) Effective supply-chain management.
d) A non-union labour force.
e) Ability to develop advanced product features.
4.
(-) Which of the following statements regarding decentralization is usually FALSE?
a)
b)
c)
d)
e)
5.
It facilitates the evaluation of local managers by top management.
It aids in the motivation of local managers.
It leads to goal congruence between local managers and top management.
It reduces problems to a manageable size and provides quicker response times.
Both a) and b) above.
An organization that has successfully adopted the philosophy of continuous
improvement would normally use which of the following change management strategies
to manage this philosophy?
a)
b)
c)
d)
e)
Sensitivity training.
Quantum change.
Unfreezing by strengthening the driving force for change.
Incremental change.
Refreezing to maintain the desired changes.
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3
Risk Management and Governance
6.
Internal control comprises the plan of organization, the procedures and records that are
concerned with the safeguarding of assets, and the
a)
b)
c)
d)
e)
7.
Internal control consists of the overall plan of organization and the procedures that are
mainly concerned with
a)
b)
c)
d)
e)
8.
safeguarding the assets and providing reliable financial records.
promoting organizational efficiency and policy adherence.
optimizing the use of resources.
both a) and b) above.
all of a), b) and c) above.
Some of the more important controls that relate to automated accounting information
systems are validity checks, limit checks, field checks, and sign tests. These are
classified as
a)
b)
c)
d)
e)
9.
decision processes of management.
reliability of financial records.
authorization of transactions.
achievement of administrative objectives.
none of the above.
control total validation routines.
hash totaling.
data access validation routines.
output controls.
input validation routines.
Which of the following statements regarding the control environment is true?
a) If employees are competent, reliable and possess integrity, the company’s assets
will remain safe and accounting data will be relatively free of errors, even if other
elements of a control environment are missing.
b) Employees who fail to take vacation time are demonstrating their reliability and do
not require a close examination of their work.
c) Errors are more likely to occur when a manager insists that employees strictly
adhere to their assigned tasks and responsibilities than when a manager allows
employees to share the responsibilities for completing the department’s tasks.
d) In order to safeguard assets, all transactions must be initiated or approved by a
person who has the requisite authority or that person’s delegate.
e) Both a) and d) above.
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CMA Canada
10.
Effective internal control over the purchasing of raw materials should usually include
which of the following procedures?
a) Obtaining third-party written quality and quantity reports prior to the payment for the
raw materials.
b) Determining the need for the raw materials prior to preparing the purchase order.
c) Systematic reporting of product changes which will affect raw materials.
d) Both b) and c) above.
e) All of a), b) and c) above.
11.
The purpose of internal controls is to reduce or mitigate the risks faced by a business.
Which of the following risks is LEAST LIKELY to be reduced or mitigated by internal
controls?
a)
b)
c)
d)
e)
12.
(-) The primary responsibility for preventing fraud in an organization lies with
a)
b)
c)
d)
e)
13.
management.
the internal auditor.
security personnel.
the audit committee of the board of directors.
the external auditor.
An example of an internal control weakness is to assign to a department supervisor the
responsibility for
a)
b)
c)
d)
e)
14.
The risk of inappropriate accounting policies or procedures.
The risk of fines and sanctions for non-compliance with laws and regulations.
The risk of losses on short-term investments.
The risk of inadequate customer service.
The risk of defective products.
reviewing and approving time reports for subordinate employees.
initiating requests for salary adjustments for subordinate employees.
authorizing payroll cheques for terminated employees.
distributing payroll cheques to subordinate employees.
hiring new employees for the department.
Which of the following is LEAST LIKELY to be detected by an internal control system?
a)
b)
c)
d)
e)
Fraudulent actions by a group of employees.
Duplicate payments to suppliers.
Deviations from written procedures.
Fraudulent actions by an individual employee.
Unauthorized disbursements.
CMA Canada
5
15.
Quality of work life programs and quality circles are examples of
a) participative structures and processes aimed at improving productivity.
b) new organizational structures that are rapidly replacing traditional functional
organizations.
c) people-focused approaches to organizational change.
d) both a) and c) above.
e) all of a), b) and c) above.
16.
A Canadian oil drilling firm was operating in a foreign country. The government of the
foreign country took ownership of the assets of the drilling firm and offered the Canadian
company compensation in the form of cash and a continuing operating agreement.
Which of the following best describes what happened?
a)
b)
c)
d)
e)
17.
Nationalization.
Privatization.
Expropriation.
Repatriation.
Confiscation.
Which of the following describes the role of the board of directors in the strategic
management of a company?
a) To evaluate the calibre of the senior executives’ skills in formulating and
implementing the company’s strategies.
b) To formulate the overall company strategy and delegate strategy implementation to
corporate management.
c) To oversee the company’s strategic actions by critically appraising and ultimately
approving strategic action plans.
d) To determine the corporate vision upon which the company’s strategy is based, and
to oversee management’s strategic action plans.
e) Both a) and c) above.
18.
The role or duties of the board of directors of public companies have become
increasingly important since the passing of legislation such as Sarbanes-Oxley in the
United States and the Canadian Securities Administrators Multi-Lateral Instruments.
Which of the following is NOT a role of the board of directors?
a) Overseeing the company’s direction, strategy, and business approaches.
b) Aligning key executive and board remuneration with shorter-term interests of the
company and its shareholders.
c) Evaluating the calibre of senior executives’ strategy-making and strategy-executing
skills.
d) Monitoring the effectiveness of the company’s governance practices.
e) Ensuring the integrity of the corporation’s accounting and financial reporting
systems.
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CMA Canada
Performance Management
19.
(-) Direct costs are costs that
a)
b)
c)
d)
e)
are carefully predetermined and usually expressed on a per-unit basis.
relate specifically to a particular cost object.
change in total in direct proportion to changes in a cost driver.
are unavoidable and cannot be changed no matter what action is taken.
differ among alternative courses of action.
The following information pertains to questions 20 and 21.
Omega Company manufactures three chemicals in a joint process. The manufacturing costs of
the joint process include $35,000 of direct materials and $55,000 of conversion costs. All three
chemicals are then processed further before they are sold. Other pertinent data are as follows:
Chemicals
A
B
C
20.
Separable Costs
$78,000
$103,000
$44,000
Final Sales Value
$120,000
$180,000
$100,000
(+) Using the estimated net realizable value method, the joint costs allocated to
Chemical B would be
a)
b)
c)
d)
e)
21.
Sales Value at Split-off
$40,000
$80,000
$60,000
$40,000.
$51,500.
$41,200.
$40,500.
$39,600.
The decision to process all three chemicals beyond the split-off point is suboptimal. If the
optimal decision had been made, the income of Omega Company would have improved
by
a)
b)
c)
d)
e)
$5,000.
$2,000.
$7,000.
$3,000.
$4,000.
CMA Canada
7
22.
The following information is available for the manufacturing operations of ABC Ltd. for
the month of March:
Direct materials purchased
Direct labour payroll
Direct labour rate per hour
Factory overhead rate per direct labour hour
Direct materials
Work in process
Finished goods
Opening Inventory
March 1
$30,000
$12,000
$72,000
$82,000
$60,000
$15.00
$10.00
Ending Inventory
March 31
$37,000
$18,000
$93,000
Cost of goods available for sale for the month of March is
a)
b)
c)
d)
e)
23.
Instead of using overhead rates based on actual cost, using predetermined annualized
overhead rates will
a)
b)
c)
d)
e)
24.
$241,000.
$169,000.
$148,000.
$187,000.
$175,000.
allow for earlier and better cost control.
eliminate seasonal variability in the overhead costs assigned.
eliminate the need for accumulating actual overhead costs.
result in more accurate product costs.
both a) and b) above.
Which of the following statements regarding Total Quality Management is FALSE?
a) It is a philosophy that makes quality values the driving force behind leadership,
design, planning, and improvement initiatives.
b) It involves managing the entire organization such that it excels in all aspects that are
important to the customer.
c) It views quality as being essential for long-term financial success.
d) It typically applies to products rather than services.
e) It makes use of both statistical process control and statistical quality control tools.
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CMA Canada
25.
DeBerg Company has developed the following sales projections for its second and third
quarters:
April
May
June
$100,000
120,000
140,000
July
August
September
$160,000
150,000
130,000
Normal cash collection experience has been that 50 percent of sales are collected
during the month of sale, 30 percent in the month following sale, and 15 percent in the
second month following sale. The remaining 5 percent of sales is never collected.
DeBerg’s budgeted cash collections for the third quarter are
a)
b)
c)
d)
e)
26.
$337,000.
$439,000.
$418,000.
$440,000.
$423,000.
(+) Dundas Company uses an activity-based costing system. Consider the following
information:
Manufacturing
Activity Area
Machine setup
Material handling
Milling
Assembly
Cost Driver Used As
Application Base
Number of setups
Number of parts
Machine hours
Direct labour hours
Conversion Cost per Unit of
Application Base
$180
$15
$50
$30
During the past month, 60 units of a component were produced. Three setups were
required. Each unit needs 35 parts, 4 direct labour hours and 6 machine hours. Direct
materials cost $140 per finished unit. All other costs are classified as conversion costs.
If the company would like its gross margin to be 35% of sales, what price should it
charge per unit of the component (rounded to the nearest dollar)?
a)
b)
c)
d)
e)
$1,477
$1,468
$1,683
$1,094
$3,126
CMA Canada
9
Carleton, Bronte and Associates is a law firm which employs 8 full-time attorneys and 10
paraprofessionals. Direct and indirect costs are allocated to clients on a professional labourhour basis which includes both attorney and paraprofessional hours. The following table
contains budgeted and actual data for Year 9:
Salary per attorney
Salary per paraprofessional
Indirect costs
Professional labour hours
Budgeted
Actual
$92,000
$95,000
$41,600
$47,840
$691,200 $711,936
28,800
29,200
Carleton, Bronte and Associates use the budgeted costing system in allocating direct and
indirect costs to its clients. The law firm bills its clients at a rate of 180 percent of professional
labour costs.
27.
For Carleton, Bronte and Associates, the direct and indirect cost rates used in allocating
costs to the clients are (to the nearest cent):
a)
b)
c)
d)
e)
28.
$42.41 and $24.38.
$43.00 and $24.72.
$39.45 and $23.67.
$40.00 and $24.00.
none of the above.
Carleton, Bronte and Associates have two clients. Client Smith requires 13 attorney
hours and 31 paraprofessional hours while Client Jones requires 25 attorney hours and
19 paraprofessional hours. Client Smith requires significantly more travel and
communication time than Client Jones.
Using the budgeted costing system with one direct cost rate and one indirect cost rate
based on professional labour hours, which of the following statements is CORRECT?
a) Total costs assigned to both Client Smith and Client Jones are the same.
b) Total costs assigned to Client Smith are higher than that to Client Jones because
Client Smith requires significantly more travel and communication time.
c) Total costs assigned to Client Jones are higher than that to Client Smith because
attorney hours are more expensive than paraprofessional hours.
d) Indirect costs assigned to Client Smith are higher than that to Client Jones because
Client Smith requires more paraprofessional hours.
e) Direct costs assigned to Client Jones are higher than that to Client Smith because
Client Jones requires more attorney hours.
10
CMA Canada
The managers of ACME Manufacturing are discussing ways to allocate the cost of service
departments, such as Quality Control and Maintenance, to the production departments. To aid
them in this discussion, the controller has provided the following information:
Service Departments Production Departments
Quality
Control Maintenance Machining Assembly
Budgeted overhead costs before
$350,000
allocation
Budgeted machine hours
—
Budgeted direct labour hours
—
Budgeted hours of service:
—
Quality control
10,000
Maintenance
29.
$200,000
$400,000
$300,000
$1,250,000
—
—
50,000
—
—
25,000
50,000
25,000
7,000
—
21,000
18,000
7,000
12,000
35,000
40,000
(+) Using the direct allocation method, the total service department costs allocated to the
Machining department would be
a)
b)
c)
d)
e)
30.
Total
$782,500.
$300,000.
$120,000.
$382,500.
$262,500.
(+) Using the step-down method of allocating service costs beginning with Maintenance,
the Quality control costs allocated to the Machining department would be
a)
b)
c)
d)
e)
$300,000.
$262,500.
$234,000.
$210,000.
$252,632.
------------------------31.
If total sales volume variance is $2,100 unfavourable, total sales mix variance is $900
favourable, and market share variance is $500 favourable, then the market size variance
is
a)
b)
c)
d)
e)
$2,500 unfavourable.
$700 unfavourable.
CMA Canada
11
Ex Company, which produces a single product, began operations on January 1, Year 1.
Material A is added at the start of the production process and packaging material B is added at
the end of the process. Conversion costs are incurred uniformly throughout the process.
Inspection takes place when manufacturing is completed, but before packaging material B is
added. Spoiled units are discarded. Normal spoilage for this production process is 4% of good
output. Production data for the first quarter of Year 1 was as follows:
Units started
Good units completed and transferred-out
Ending work-in-process inventory
18,000 units
15,000 units
2,000 units
Using a first-in, first-out (FIFO) process costing system, Ex Company incurred the following
costs per equivalent unit during the first quarter:
Material A
Material B
Conversion costs
$11.00
$0.80
$15.00
The cost of ending work-in-process inventory using FIFO process costing was $34,000.
32.
The loss from abnormal spoilage for the first quarter was
a)
b)
c)
d)
e)
33.
(+) In terms of conversion, what was the percentage of completion of the ending work-inprocess inventory?
a)
b)
c)
d)
e)
12
$16,080.
$10,720.
$10,400.
$15,600.
$26,800.
65.4%
34.7%
54.5%
40.0%
63.4%
CMA Canada
34.
Maryville Company uses three different types of chemicals in manufacturing a deluxe
brand of lawn fertilizer. The standard amount of Chemicals X, Y and Z used in
manufacturing a 20-kg. bag of lawn fertilizer is 5 kg., 7 kg. and 8 kg., respectively. The
budgeted purchase prices of Chemicals X, Y and Z are $1.00 per kg., $0.40 per kg. and
$0.20 per kg., respectively.
Operating data for 20,000 bags of lawn fertilizer produced in May are as follows:
Chemical X
Chemical Y
Chemical Z
Actual input quantity
97,900 kg.
132,000 kg.
210,100 kg.
Actual input price
$1.05
$0.36
$0.18
Which of the following statements is TRUE?
a)
b)
c)
d)
e)
35.
Important types of control systems and procedures for accounting information systems
are feedback, feedforward, and preventive. Which of the following represents one of
each type of control, in the following order: feedback, feedforward, and preventive?
a)
b)
c)
d)
e)
36.
Direct materials price variance for each of Chemicals X, Y and Z is favourable.
Direct materials quantity variance for all three chemicals in total is favourable.
Direct materials mix variance for each of Chemicals X, Y and Z is favourable.
Direct materials yield variance for all three chemicals in total is unfavourable.
None of the above.
Cost accounting variances, separation of duties, and cash planning.
Cost accounting variances, cash budgeting, and organizational independence.
Cash budgeting, cost accounting variances, and separation of duties.
Inventory control, capital budgeting, and cash budgeting.
Cash budgeting, capital budgeting, and hiring qualified employees.
In which marketing situation is intensive distribution most appropriate?
a)
b)
c)
d)
e)
Designer line of clothing.
Branded toothpaste.
Power tools.
Financial services.
None of the above.
CMA Canada
13
The following information pertains to questions 37 to 39.
The Wye Co. Ltd. expects to produce 11,000 units of product RGW during its first year of
operations. The following standard manufacturing costs per unit were established based on this
expected production volume:
Direct materials
Direct labour
Variable overhead
Fixed overhead
$13
12
11
6
Unit standard cost
$42
No variable selling and administrative costs were incurred during the year. At the end of the first
year of operations, the accountant prepared income statements utilizing actual absorption
costing, normal variable (direct) costing, normal absorption costing, standard variable (direct)
costing, and standard absorption costing. These five income statements, labelled A through E,
are produced below (in random order):
A
$540,000
B
$540,000
C
$540,000
D
$540,000
E
$540,000
Cost of sales
346,500
324,000
400,500
378,000
423,000
Variances:
Direct materials
Direct labour
Variable overhead
Fixed overhead
Other costs
15,000
150,000
5,000
20,000
15,000
150,000
15,000
10,000
80,000
5,000
20,000
15,000
10,000
80,000
80,000
511,500
514,000
505,500
508,000
503,000
$ 28,500
$ 26,000
$ 34,500
$ 32,000
$ 37,000
Sales
Operating income
37.
Which income statement was prepared using actual absorption costing?
a)
b)
c)
d)
e)
38.
Which income statement was prepared using standard variable costing?
a)
b)
c)
d)
e)
14
A
B
C
D
E
A
B
C
D
E
CMA Canada
39.
How many units of product RGW were actually produced during the year?
a) 10,000
b) 8,333
c) 10,667
d) 9,000
e) 11,667
------------------------40.
The budgeted income for RST Ltd. for next year is as follows:
Sales – 125,000 units @ $40
Variable manufacturing costs
Fixed manufacturing costs
Sales commissions - $2.60 per unit
Fixed selling and administration expenses
Operating income
$5,000,000
$2,000,000
1,250,000
325,000
950,000
4,525,000
$ 475,000
Assume that a regular customer has requested RST Ltd. to provide a quote for a special
order of 20,000 units. RST Ltd. has sufficient capacity to fill the order and would be
required to pay only $8,000 in sales commissions for the order. If RST Ltd. would like the
special order to make a contribution to operating income of $48,000, the sales price per
unit that should be quoted to the customer for the special order is
a)
b)
c)
d)
e)
41.
$40.00.
$20.20.
$28.80.
$36.40.
$18.80.
One of the major problems of a new accounting information system is its failure to
achieve the desired results. Which of the following processes will best ensure the
attainment of goals?
a) Appointment of a chief information officer to oversee the installation.
b) Installation of a multi-level security system to prevent unauthorized access during
system installation.
c) Documentation of data flow to ensure the reports are sent to the managers.
d) Performing a feasibility study prior to the installation of the system.
e) Setting up proper documentation of the system architecture.
CMA Canada
15
PTM Ltd. is a Canadian manufacturer of hardware parts. A large company is open for tenders
on a three-year contract for 150,000 units of part X per year. PTM Ltd. currently supplies this
model to another company for $6.50 per unit. The probabilities of PTM Ltd. being awarded the
contract at various bid prices are estimated as follows:
Probability
100%
90%
65%
40%
10%
Bid Price Per Unit
$5.00
$5.50
$6.00
$6.50
$7.00
PTM Ltd.’s standard cost for producing Part X is $4.80 per unit ($3.60 variable + $1.20 fixed) at
a standard activity of 375,000 units per year. The company’s production capacity is 600,000
units per year. If PTM Ltd. is awarded the contract, fixed overhead costs will increase by
$12,000 per year.
42.
(+) Which bid price for the three-year contract would have the most favourable expected
impact on PTM Ltd.’s income?
a)
b)
c)
d)
e)
16
$5.00
$5.50
$6.00
$6.50
$7.00
CMA Canada
43.
(+) The chances of PTM Ltd. being awarded the contract would change if Company X, a
major competitor, decides to not submit a bid for the contract. Assume the following
incremental income if PTM Ltd. is successful in obtaining the contract at various bid
prices, and assume the following probabilities of success if Company X bids or does not
bid on the contract:
Bid Price
Per Unit
$5.00
$5.50
$6.00
$6.50
$7.00
Incremental Income If
Successful
$200,000
$275,000
$350,000
$425,000
$500,000
Probability of PTM Ltd.’s Success
If Company X
If Company X
Bids
Does Not Bid
100%
100%
90%
100%
65%
100%
40%
85%
10%
25%
There is a 65% chance that Company X will submit a bid. Using a decision table model,
what is PTM Ltd.’s expected value of submitting a bid of $6.50 for the contract?
a)
b)
c)
d)
e)
$144,500
$425,000
$361,250
$170,000
$236,938
-------------------------
CMA Canada
17
44.
Symons Inc. produces two products, A and B. Sales and production data for next month
are as follows:
Selling price per unit
Variable cost per unit
Machine 1 – machine hours per unit
Machine 2 – machine hours per unit
Maximum demand for next month
A
$200
$110
3
2
500 units
B
$170
$100
2
1.5
1,000 units
Demand for next month includes a signed contract for 300 units of product B. During
next month, Symons Inc. has 2,500 machine hours available on each of Machines 1 and
2. The company maintains no beginning or ending inventories of the products.
Management wants to formulate the linear programming problem in planning production
for next month that would maximize profits.
Which of the following is a proper formulation of the problem?
a) Objective function:
Maximize $200A + $170B
Constraints:
3A + 1.5B ≤ 2,500
A ≤ 500; B ≤ 1,000; A, B ≥ 0
b) Objective function:
Constraints:
3A + 2B ≤ 2,500
2A + 1.5B ≤ 2,500
A ≤ 500; B ≤ 1,000; A ≥ 0; B ≥ 300
c) Objective function:
Maximize (3A x $90) + (2B x $70) + (2A x $90)
+ (1.5B x $70)
Constraints:
5A + 3.5B ≤ 5,000
A ≤ 500; B ≤ 1,000; A, B ≥ 0
d) Objective function:
Constraints:
3A + 2B ≤ 2,500
2A + 1.5B ≤ 2,500
A ≤ 500; B ≤ 1,000; A, B ≥ 300
e) Objective function:
Constraints:
3A + 1.5B ≤ 2,500
A ≤ 500; B ≤ 1,000; A, B ≥ 300
18
CMA Canada
Performance Measurement
45.
Robert Motoz is the manager of Division B of a large manufacturing company. Division B
purchases all of its direct materials from Division A at a negotiated transfer price.
Division B manufactures a product and sells this product on the market. Robert Motoz
makes all production efficiency decisions for the division, including replacing and
upgrading manufacturing equipment. The above represents which of the following types
of responsibility centre?
a)
b)
c)
d)
e)
46.
Cost centre.
Revenue centre.
Profit centre.
Investment centre.
Discretionary centre.
ZIL Inc. operates two divisions, which are treated as investment centres. Data for each
division for Year 4 are as follows (in ’000s):
Net income
Total assets
Division A
$65,000
$400,000
Division B
$140,000
$850,000
The company’s required rate of return is 15%. The president wishes to evaluate the
performance of these divisions and is not sure whether to use return on investment
(ROI) or residual income (RI) as the performance measure. Which division performed
better based on the ROI and RI performance measures?
a)
b)
c)
d)
e)
47.
Division A, because its RI is higher than that of Division B.
Division B, because its ROI and RI are higher than those of Division A.
Division A, because its ROI is higher than that of Division B.
Both a) and c) above.
None of the above.
To determine the transfer price that will govern the sale of goods between divisions in
different countries, in addition to respecting the laws of the countries, a firm should
a)
b)
c)
d)
e)
ignore the fair market value for the product.
give prime consideration to the overall profit of the firm.
do whatever is necessary to minimize customs duties.
do whatever is necessary to maximize foreign subsidiary net income after taxes.
none of the above.
CMA Canada
19
OEM Company, which manufactures sports equipment, consists of several divisions. Each
division operates as a profit centre with full autonomy. Division B informed Division A that it has
changed its transfer pricing policy from variable-cost plus to full-cost plus pricing. Division A
decided to purchase component EX1 outside the company when Division B increased the
transfer price from $156 to $164 per unit. Information for Division A and Division B with respect
to component EX1 is as follows:
Outside price for component EX1
Division A’s annual purchases
Division B’s variable cost per unit
Division B’s fixed manufacturing cost
Division B’s production capacity
Division B’s capacity utilization
$160
10,000 units
$120
$1,000,000
50,000 units
100%
All units of component EX1 produced by Division B can be sold in the market. Variable selling
cost is $7 per unit for external sales. All other selling and administrative costs are fixed,
regardless of whether component EX1 is sold to Division A or other external customers.
48.
Which of the following statements is true?
a) Division A purchases 10,000 units of component EX1 from the outside supplier at a
price of $160 and the company saves $40,000 in costs.
b) Division B sells 10,000 units of component EX1 to Division A at $164 and the
company income increases by $110,000.
c) Division A purchases 10,000 units of component EX1 from Division B because
Division B has idle capacity if Division A purchases the component externally.
d) Division B sells all 50,000 units of component EX1 to external customers and the
company maximizes its income.
e) Division A purchases 10,000 units of component EX1 from Division B and the
company income increases by $70,000.
49.
Now assume that Division B is currently selling 46,000 units externally instead of 50,000
units, and has not changed its transfer pricing policy. What is the minimum transfer price
per unit that Division B would accept to provide Division A with the 10,000 units it
requires?
a)
b)
c)
d)
e)
20
$120.00
$125.00
$137.00
$160.00
$144.00
CMA Canada
50.
(-) The process of measuring products, services and practices against the industry
leaders and striving to match their performance is called
a)
b)
c)
d)
e)
51.
A well-designed performance measurement system will include measures that
a)
b)
c)
d)
e)
52.
continuous improvement.
best practices strategy.
the focus strategy, one of Porter’s competitive strategies.
benchmarking.
total quality management.
are related to the goals of the organization.
primarily focus attention on short-term concerns.
are reasonably objective and easily quantified.
both a) and c) above.
all of a), b) and c) above.
Return on investment is a common method of evaluating the performance of managers
in investment centres because it
a)
b)
c)
d)
includes the major elements that the manager controls.
is not easily manipulated.
allows for comparisons between centres in different industries.
motivates managers to make decisions that are congruent with the overall goals of
the organization.
e) all of the above.
53.
Recent studies have found that personality dimensions affect work-related behaviour
and job performance. Which of the following is the most valuable personality dimension
for a customer relations employee to successfully handle requests and complaints from
customers?
a)
b)
c)
d)
e)
54.
Conscientiousness.
Emotional stability.
Openness to experience.
Agreeableness.
Introversion.
Which of the following can reduce the effectiveness of behaviour modification
procedures such as positive reinforcement?
a)
b)
c)
d)
e)
Individual differences.
Employee participation in determining rewards.
Group norms.
Both a) and c) above.
All of a), b) and c) above.
CMA Canada
21
55.
Which of the following is a motivator according to Herzberg’s motivator-hygiene theory
as well as a growth need according to ERG theory?
a)
b)
c)
d)
e)
56.
Increased job responsibility.
Technical competence of the boss.
Relationships with customers.
Comfortable working conditions.
Job security.
Mr. Brown and Mr. Green hold the same position in two different companies in the same
industry. Mr. Brown is a member of a union and Mr. Green is not. Mr. Brown and Mr.
Green receive similar compensation and incentive packages.
What caused this to happen?
a)
b)
c)
d)
e)
57.
Union spillover effect.
Pay equity legislation.
Human rights legislation.
Employment standards acts.
Both a) and d) above.
Which of the following actions committed by a management accountant is ethically
questionable?
a) Near the end of a fiscal year with lower than expected profits, suggesting that an
expensive advertising campaign be delayed until the next fiscal year.
b) Recommending that the highest quality and least expensive bid for a certain supply
be rejected on the basis that the supplier’s practices have a detrimental effect on the
ecological environment.
c) At the request of the division manager, using the most favourable projections to
support a proposal without drawing any attention to the potentially unfavourable
projections.
d) Reporting to the controller a suspicion that a line manager is providing incorrect
production data in an effort to increase his year-end bonus.
e) Near the end of a fiscal year with lower than expected profits, suggesting that
performance incentives to sales staff for the fourth quarter be increased.
22
CMA Canada
58.
Mr. and Mrs. Smith have two children, Angela aged 4 and Brent aged 2. Mr. Smith is
employed by a large manufacturing company and usually works between 45 and 60
hours per week. Mr. Smith’s compensation and incentive plan consists of base pay plus
individual incentive, four weeks vacation and comprehensive basic and extended
medical and dental coverage for his family. Mrs. Smith has been out of the job market for
five years to look after her children and is considering returning to work provided the
compensation and incentive package is attractive. Which of the following incentive
packages would be attractive to Mrs. Smith?
a)
b)
c)
d)
e)
59.
Job sharing and on-site child care facilities.
Permission to work from home and flexibility.
Regular training workshops and company car.
All of a), b) and c) above.
(+) Mr. Smith owns and manages a Canadian-controlled private corporation (CCPC) with
a total corporate tax rate of 18.12%. The corporation has profits of $25,000 before
salaries and income tax. Mr. Smith will receive his only income in the form of salary or
dividends from the CCPC he manages. Mr. Smith’s personal income would be taxed at
15.5% federally and 10% provincially. The full $25,000 will be distributed either as
dividends or salary. Ignoring the effects of federal and provincial personal tax credits, if
the corporate earnings are distributed in the form of dividends rather than salary, Mr.
Smith will (rounded to the nearest dollar)?
a)
b)
c)
d)
e)
save $5,249 in personal income taxes.
pay $150 more in personal income taxes.
pay $1,594 more in personal income taxes.
Financial Management
60.
Kim Inc. is planning to invest in a two-year project that is expected to yield cash flows
from operations, net of taxes, of $50,000 in the first year and $80,000 in the second
year. Kim Inc. requires an internal rate of return of 15%. The maximum that the company
should be willing to invest in this project is
a)
b)
c)
d)
e)
$81,670.
$103,980.
$163,340.
$152,941.
$130,000.
CMA Canada
23
YG Inc. is determining its cost of capital for future investment decisions. Management believes
that the company’s current market value capital structure is optimal and intends to maintain this
structure into the future. Current debt has an interest rate of 9%, but any new debt will only
require an interest rate of 6%. Preferred shares have a par value of $80 and pay a dividend of
$8 per year. These preferred shares are currently trading in the market at a price of $45 per
share. The current price of YG Inc.’s common stock is $50 per share and the company just paid
the annual cash dividend of $4 per share. YG Inc. expects to increase its dividend by 10% each
year into the foreseeable future. The current market value of the company’s debt and equity are
as follows:
Debt
Preferred shares
Common equity
$8,000,000
$2,000,000
$10,000,000
The company’s marginal tax rate is 40%.
61.
What are YG Inc.’s after-tax cost of debt and preferred shares for purposes of
determining the weighted average cost of capital (rounded to the nearest tenth of a
percent)?
a)
b)
c)
d)
e)
62.
Cost of debt = 3.6%
Cost of debt = 5.4%
Cost of debt = 3.6%
Cost of debt = 5.4%
Cost of debt = 3.6%
Cost of preferred shares = 10.7%
(+) Assume that, for purposes of determining the weighted average cost of capital, the
appropriate after-tax cost of debt is 3.9% and the appropriate cost of preferred shares is
14.2%. What is YG Inc.’s weighted average cost of capital (rounded to the nearest tenth
of a percent)?
a) 7.4%
b) 10.6%
c) 12.4%
d) 12.0%
e) 8.6%
24
CMA Canada
63.
(+) A bond was issued on June 1, Year 1, and it matures on June 1, Year 15. The
present date is June 1, Year 5, and the June 1, Year 5, coupon payment has just been
paid. The bond has a face value of $1,000, a coupon rate of 8% compounded semiannually, and a current yield of 10% compounded semi-annually. Ignoring taxes, what is
the current dollar price of the bond?
a)
$846.
b)
$878.
c) $1,135.
d) $1,173.
e)
$875.
64.
GEF Inc. believes that if it acquires HIP Ltd., the resulting combined company will
experience synergistic annual operating savings of $1,000,000 before taxes. Currently,
HIP Ltd. generates annual after-tax cash flows of $4,000,000. Both the current annual
cash flows and the synergistic savings are expected to continue indefinitely. Assuming
an income tax rate of 40% and a required rate of return of 16%, what would be the
maximum amount that GEF Inc. should be willing to pay for HIP Ltd?
a)
b)
c)
d)
e)
65.
A company issued rights as part of a recent financing. It takes three (3) rights plus $12
to purchase one new share. Shares currently trade at $15 each and the rights are about
to expire. The minimum value of the rights is
a)
b)
c)
d)
e)
66.
$21,250,000
$31,250,000
$18,750,000
$28,750,000
$25,000,000
$9.
$1.
$4.
$0.
$3.
(+) An individual has the following portfolio of investments:
Investment 1
Investment 2
Investment 3
Investment 4
Amount
$20,000
$40,000
$70,000
$10,000
Rate of Return
8%
6%
3%
10%
What is the expected rate of return for the entire portfolio?
a) 3.00%
b) 5.07%
c) 6.75%
d) 7.00%
e) 27.00%
CMA Canada
25
67.
The measurement of the systematic risk associated with Avery Inc. shares in relation to
average assets results in a value of 3. The market risk premium is 12% and the current
return on short-term government bonds is 5.5%. Avery Inc.’s rate of return on equity is
a)
b)
c)
d)
e)
68.
Acme Limited offers credit terms of a 2% discount if paid within 10 days or the full
balance is due within 30 days (2\10, net 30). If 20% of Acme’s customers pay cash on
delivery, 60% pay on day 10, and 20% pay on day 30, the average collection period is
a)
b)
c)
d)
e)
69.
41.5%.
17.5%
36.0%.
25.0%.
28.5%.
20 days.
12 days.
average receivables divided by average daily sales.
annual credit sales divided by average receivables.
both b) and d) above.
(+) The revenues, expenses and capital structure of a company are as follows:
Sales
Variable costs (40% of sales)
Fixed costs (excluding interest and taxes)
Debt (at 10% annual interest)
Equity (100,000 shares)
$500,000
$200,000
$120,000
$800,000
$1,200,000
Given the information provided above, what is the degree of operating leverage for this
company?
a)
b)
c)
d)
e)
70.
Mr. Rollet currently owns land (capital property) that he intends to transfer to Holdco
using the “rollover” provision, subsection 85(1) of the Income Tax Act. The land has a
fair market value of $28,000 and an adjusted cost base of $40,000. Mr. Rollet will
receive from Holdco as consideration for the land, a $10,000 note and one of its no par
value common shares. The minimum amount that Mr. Rollet can elect (which determines
his deemed proceeds of disposition) under subsection 85(1) is
a)
b)
c)
d)
e)
26
1.5
1.7
2.8
1.8
2.5
$28,000.
$40,000.
$10,000.
$38,000.
$30,000.
CMA Canada
71.
(+) On November 1, Year 10, Ken Walker sells a capital property for $300,000. The
adjusted cost base of the property is $110,000 and selling costs amount to $8,000. Ken
receives an immediate cash payment for the entire sales price on November 10. The
total taxable capital gain that would be included in Ken’s net income for tax purposes for
Year 10 would be
a) $118,000.
b) $91,000.
c) $95,000.
d) $182,000.
e) $190,000.
72.
In 2005, Ted Graves planned to invest in preferred shares of taxable Canadian
corporations. These shares paid a dividend of $10,000 annually. The amount of federal
income tax that Ted would have paid on this income in 2005 (assuming he was in the
top federal tax bracket of 29% and surtaxes are ignored) is
a)
b)
c)
d)
e)
$2,900.
$967.
$1,958.
$1,208.
$3,625.
Financial Reporting
73.
In preparing its year-end adjusting entries, the Jesson Co. Ltd. neglected to adjust the
prepaid insurance account for the amount of insurance expired during the year. As a
result of this error,
a) net income is understated, the retained earnings balance is understated and the
assets are understated.
b) net income is overstated, the retained earnings balance is overstated and the assets
are correctly stated.
c) net income is understated, the retained earnings balance is overstated and the
assets are overstated.
d) net income is overstated, the retained earnings balance is overstated and the assets
are overstated.
e) none of the above are correct.
CMA Canada
27
74.
(+) The following is a condensed income statement for a Canadian-controlled private
corporation for the year ended December 31, Year 7 (in ’000s):
Sales
Cost of goods sold
Salaries and wages
Amortization
Advertising and promotion
Miscellaneous
Income before income taxes
Income taxes
Net income
$9,500
$4,200
500
800
700
1,000
7,200
2,300
920
$ 1,380
Other information:
1. The cost of goods sold includes inventory valued using the LIFO method. The value
of inventory using the LIFO and FIFO methods are as follows (in ’000s):
Opening inventory
Ending inventory
LIFO
$125
$145
FIFO
$140
$155
2. The company claims the maximum allowable capital cost allowance (CCA) each
year. No capital assets were purchased or disposed of during Year 7. Undepreciated
capital cost balances at the beginning of the year (in ’000s):
Class 8 (20% CCA rate)
Class 10 (30% CCA rate)
$1,950
$1,300
3. The miscellaneous expenses include the following (in ’000s):
Interest on income taxes paid after due date
Interest with respect to the acquisition of 80% of the
shares of another Canadian corporation
Contribution to a registered federal political party
$50
$15
$10
What is the taxable income for the company for Year 7 (in ’000s)?
a)
b)
c)
d)
e)
28
$2,375
$2,385
$2,325
$2,390
$2,370
CMA Canada
75.
(+) H Ltd., a construction company, recognizes revenue on a percentage of completion
basis. H Ltd. has only one project in process for a total contracted price of $42,000,000.
The project was started in Year 1 and is expected to be completed in Year 3. Data
relating to the project are as follows (in ’000s):
Billings
Costs incurred during the year
Expected costs to complete
Year 1
$14,000
$12,000
$24,000
Year 2
$14,000
$13,000
$15,000
Year 3
$14,000
$14,000
0
The gross profit (loss) reported by H Ltd. in Year 2 in ’000s is
a) $(750).
b) $2,000.
c) $1,250.
d)
$0.
e) $1,000.
76.
MM Co. sells equipment on an instalment basis and appropriately uses the instalment
sales method of accounting. The following data is available for instalment sales made in
Years 1 and 2:
Instalment sales
Cost of sales
Collections during the year - on Year 1 sales
- on Year 2 sales
Year 1
$600,000
$420,000
$210,000
Year 2
$850,000
$680,000
$210,000
$250,000
What amount of realized gross profit should be reported on MM Co.’s Year 2 income
statement?
a) $170,000
b) $50,000
c) $113,000
d) $138,000
e) $92,000
77.
Which of the following transactions or events would generally qualify as an extraordinary
item?
a) Losses with respect to inventories due to an unforeseen technological breakthrough.
b) Losses from a fluctuation in foreign exchange rates due to a major stock market
collapse.
c) Expropriation of a corporation’s land and building for highway expansion.
d) Income tax reductions on utilization of previously unrecognized prior period losses.
e) Losses suffered due to inadequate fire insurance coverage.
CMA Canada
29
78.
TKC Ltd. sells product A for $5,000 each, including a one-year warranty. It also offers a
two-year extended warranty for $400 that takes effect after the original one-year
warranty period. On the basis of past experience, the initial one-year warranty costs the
company an average of $80 per unit sold, and the extended warranty costs $300 per
extended warranty sold. During Year 10, the company sold 300 units of the product and
160 extended warranties. Actual warranty costs incurred in Years 10, 11, 12 and 13 for
the units of product A sold in Year 10 were as follows:
Year 10
Year 11
Year 12
Year 13
$12,000
$24,000
$24,000
$12,000
Assuming all sales and warranty expenses are incurred evenly over the year, what
amounts would be recorded on the December 31, Year 10 and Year 11 balance sheets
pertaining to these warranties?
a) Warranty liability
b) Unearned warranty revenue
Warranty liability
c) Unearned warranty revenue
d) Unearned warranty revenue
Warranty liability
e) Unearned warranty revenue
Warranty liability
79.
Year 10
$60,000
$64,000
$12,000
$64,000
$64,000
$60,000
$64,000
$24,000
Year 11
$36,000
$48,000
$32,000
$48,000
$36,000
$64,000
-
The Farell Co. Ltd. had a net loss of $160,000 last year. The following data for last year
are available:
Dividends paid
Amortization expense
Increase in accounts payable
Proceeds from issuing shares
Retirement of debt
$40,000
$30,000
$15,000
$100,000
$50,000
What was the amount of net cash provided (or used) from operations last year?
a)
b)
c)
d)
e)
30
$(205,000)
$(130,000)
$(115,000)
$65,000
$75,000
CMA Canada
80.
Information regarding accounting policies adopted by a company is essential to financial
statement users. Which of the following is an example of a required disclosure for
merchandise inventory?
a)
b)
c)
d)
e)
81
Identification of major suppliers.
Composition of inventory, i.e. raw material, work-in-process, and finished goods.
Change in the basis of inventory valuation from the previous period.
Method of determining cost of inventory.
Both c) and d) above.
The following pertains to G Co.’s temporary investment portfolio as at December 31:
Temporary
Investments
Canadian Air shares
Superior shares
Volatile bonds
Face
Value
$100,000
Number of
Shares
1,000
10,500
Cost
$31,500
$246,750
$92,750
Market
Unrealized
Value
Gain(Loss)
$39,375
$7,875
$243,625
($3,125)
$92,000
($750)
What amount of net temporary investments should be reported on G Co.’s December 31
balance sheet if all the investments in the portfolio have been classified as held for
trading?
a)
b)
c)
d)
e)
82.
$378,875
$371,000
$375,000
$378,250
$367,125
On January 1, Year 5, Co. Q purchased 25% of the publicly-traded common shares of
Co. R for $3 million. Co. Q is a major customer of Co. R. The book value of Co. R on
that date was $11 million and the fair value of a major asset with a 25-year remaining life
was $1 million greater than its book value. During Year 5, Co. R’s reported net income
was $500,000 and it paid dividends of $200,000. The market value on December 31,
Year 5, of the Co. R shares held by Co. Q was $3.1 million. What amount(s) should Co.
Q record on its Year 5 income statement in relation to its investment in Co. R’s shares?
a) $115,000 of investment income.
b) $50,000 of dividend income.
c) $50,000 of dividend income and $100,000 of unrealized holding gain.
d)
$0
e) $125,000 of investment income.
CMA Canada
31
83.
LL Inc. purchased land with an old building on it for the purpose of constructing a new
facility. The following expenditures were incurred in relation to the new facility:
Architect fees
Cash paid for land and old building (80% attributed to land)
City assessment for drainage project
Cost of survey before construction
Excavation for basement before construction
Legal fees for title search
New building construction
Removal of old building
Salvage received from sale and removal of old building materials
Trees and landscaping after completion of building
$3,600
$200,000
$2,600
$500
$18,500
$1,500
$1,500,000
$25,000
$5,500
$7,300
What is the value of the building account at completion of construction?
a)
b)
c)
d)
e)
84.
$1,518,500
$1,581,600
$1,522,100
$1,522,600
$1,529,400
Assume you are employed as the chief accountant for DrawPro Inc., a computer
software company. The company was developing a new software program called
Graphics Tool. At the end of the year, the director of research estimated that $1 million
was spent during the year for the Graphics Tool program. He asked you to reduce his
expenses by capitalizing $1 million as research and development costs.
Prior to capitalizing the research and development costs, which of the following
questions would NOT be considered in ensuring that your statements would be in
accordance with generally accepted accounting principles?
a)
b)
c)
d)
e)
32
Has the future market for Graphics Tool been clearly defined?
Is the Graphics Tool program technologically feasible?
Are the costs related to research activities or development activities?
Does management intend to launch the Graphics Tool program upon completion?
How soon will the Graphics Tool program be ready to begin marketing?
CMA Canada
Consider the following information regarding a 4-year, non-cancellable capital lease:
Lease term (January 1, Year 1, to December 31, Year 4)
Residual value at end of lease
Annual lease payment, due at the beginning of each year
Fair value of asset, January 1, Year 1
Economic life of asset
Present value of lease payments
Lessee’s incremental annual borrowing rate
Lessor’s implicit rate of return (known to lessee)
4 years
$11,000
$22,890
$90,000
4 years
$81,915
10%
8%
There is no bargain purchase option or renewal option at the end of the lease, and no executory
costs. Both the lessee and lessor use straight-line amortization for similar assets.
85.
What is the total amount of expenses pertaining to the lease that would be recorded in
the lessee’s financial statements in Year 1?
a)
b)
c)
d)
e)
86.
$20,479
$27,032
$22,890
$24,508
$25,201
Assume that the lessor had manufactured the asset at a cost of $75,000 and would
usually sell such an asset at a price equal to its fair market value of $90,000. Also
assume that the lease would not qualify as an operating lease for accounting purposes
for the lessor. By what amount would the lessor’s profits before taxes for Year 1 be
increased as a result of the lease?
a) $4,772
b) $15,000
c) $19,722
d) $6,890
e) $8,522
CMA Canada
33
87.
(+) The following information relates to SEN Ltd.’s defined benefit pension plan for
Year 20:
Actual return on pension fund assets
Expected return on pension fund assets
Pension benefits paid to retirees
Amortization of unrecognized past service costs
Amortization of unrecognized net actuarial loss
Interest on accrued benefits (projected benefit obligation)
Service costs
$160,000
$184,000
$90,000
$120,000
$66,000
$290,000
$640,000
What was SEN Ltd.’s net pension expense for Year 20?
a)
$932,000
b) $1,022,000
c)
$956,000
d)
$800,000
e)
$866,000
ODP Inc.’s year-end shareholders’ equity at December 31, Year 5, consisted of the following:
Preferred shares, 8%, cumulative, convertible, 50,000 issued
Common shares, 200,000 issued
Retained earnings
$1,000,000
$2,000,000
$1,600,000
Each preferred share is convertible into two common shares. On January 1, Year 6, ODP Inc.
issued stock options that entitled the holder to purchase 60,000 common shares at $18 per
share. On September 30, Year 6, ODP Inc. issued 100,000 common shares for $1,500,000
cash. The company’s reported net income after taxes for Year 6 was $450,000 (assume a 40%
tax rate). Prior to Year 5, dividends were paid annually; however, no preferred or common
dividends were declared or paid in either Year 5 or Year 6. No preferred shares were converted
and none of the stock options were exercised by the end of Year 6. The average market price of
ODP Inc.’s common shares during Year 6 was $15 per share.
88.
What is ODP Inc.’s basic earnings per share for Year 6 (rounded to the nearest cent)?
a)
b)
c)
d)
e)
34
$1.50
$2.00
$1.23
$1.29
$1.64
CMA Canada
89.
(+) Now assume that ODP Inc. had paid preferred dividends each year and a dividend of
$0.50 per common share was declared and paid on December 31, Year 6. What is ODP
Inc.’s fully-diluted earnings per share for Year 6 (rounded to the nearest cent)?
a)
b)
c)
d)
e)
$1.38
$1.14
$1.88
$1.44
$1.64
------------------------90.
Company P has acquired 70% of a retail store operation by purchasing the assets and
assuming the liabilities of Company Q for net proceeds of $800,000. Company Q’s
balance sheet on the date of the sale with related fair market values is as follows:
Book Value
Fair Market Value
Assets:
Cash
Other current assets
Property, plant & equipment
Total assets
$ 60,000
173,000
457,000
$690,000
60,000
383,000
560,000
$1,003,000
Liabilities and shareholders’ equity:
Liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
$240,000
450,000
$690,000
$ 240,000
$
What is the value assigned to goodwill to be included in Company P’s consolidated
balance sheet?
a) $37,000
b) $265,900
c) $110,000
d) $97,900
e) $350,000
CMA Canada
35
Another World Inc. (AWI) is a foreign subsidiary of a Canadian company in its second year of
operation. The following December 31 year-end balances, denominated in the host country’s
foreign currency (FC), appeared in the records of AWI:
Cash
Accounts receivable
Inventory (FIFO basis)
Capital assets
Accounts payable
Capital stock
Retained earnings, January 1
Sales
Cost of sales
Other operating expenses
Year 1
30,000 FC
45,000 FC
40,000 FC
190,000 FC
55,000 FC
10,000 FC
0 FC
550,000 FC
200,000 FC
10,000 FC
100,000 FC
Year 2
150,000 FC
90,000 FC
75,000 FC
180,000 FC
25,000 FC
10,000 FC
240,000 FC
600,000 FC
250,000 FC
10,000 FC
120,000 FC
Other Information:
1) The inventory was purchased evenly over the fourth quarter of each respective year.
2) Capital assets were purchased on January 1, Year 1.
3) Capital stock was issued on January 1, Year 1.
4) Sales, purchases and expenses occurred evenly throughout each year.
5) Exchange rates were as follows:
January 1
December 31
Average for the year
Average for the fourth quarter
91.
(+) If AWI is financially and operationally independent of its Canadian parent, the
amounts that should appear on the Year 2 translated year-end financial statements of
AWI (in Canadian dollars) are
a)
b)
c)
d)
e)
36
1 FC = CDN$
Year 1
Year 2
0.36
0.30
0.30
0.34
0.33
0.32
0.31
0.35
inventory $24,000, sales $192,000, amortization expense $3,200
CMA Canada
92.
(+) If AWI uses the current rate method, what amount of cumulative translation gain/loss
should appear on AWI’s December 31, Year 2, balance sheet?
a)
b)
c)
d)
e)
$9,800 gain
$6,600 gain
$4,400 gain
$6,800 gain
$0
------------------------93.
(+) RJT Inc. has been profitable in Years 1 to 5, but in Year 6 it incurred an unusual
accounting loss before taxes of $100,000. RJT Inc. had $40,000 of accounts receivable
that was recognized as revenue for accounting purposes in Year 6, but would not be
recognized for tax purposes until Year 7.
Other Information:
1. RJT Inc. has eligible past taxable income of $90,000 against which any Year 6
taxable loss can be carried back.
2. RJT Inc. expects to generate substantial profits again in each of the next 5 years.
3. RJT Inc.’s current income tax rate of 40% has remained unchanged for the past 5
years.
4. At the end of Year 5, there were no future tax assets or liabilities recorded on RJT
Inc.’s balance sheet.
In RJT Inc.’s Year 6 financial statements, what amounts will be disclosed as current and
future income tax expenses and/or benefits?
a)
b)
c)
d)
e)
94.
Current tax benefit of
$36,000;
$56,000;
$0;
$24,000;
$36,000;
future tax benefit of
future tax expense of
future tax expense of
$4,000
$16,000
$40,000
$16,000
$16,000
(+) On December 9, Year 10, Company X, a Canadian company, acquired inventory
from a British supplier for £100,000, with payments due in British pounds (£) on January
8, Year 11. Exchange rates for the British pound were as follows:
December 9, Year 10
December 31, Year 10
January 8, Year 11
£1 = $1.50
£1 = $1.55
£1 = $1.57
For Company X, with a December 31 year end, these transactions resulted in a foreign
currency transaction
a)
b)
c)
d)
e)
loss of $0 in Year 10 and loss of $7,000 in Year 11.
loss of $5,000 in Year 10 and loss of $2,000 in Year 11.
gain of $5,000 in Year 10 and gain of $2,000 in Year 11.
gain of $0 in Year 10 and gain of $7,000 in Year 11.
loss of $55,000 in Year 10 and loss of $2,000 in Year 11.
CMA Canada
37
Selected data from RCL Inc.’s financial statements are presented below (in thousands):
Cash
Marketable securities
Accounts receivable (net)
Merchandise inventory
Tangible fixed assets (net)
Total assets
Current liabilities
Total liabilities
Common shares
Retained earnings
Net sales (100% on account)
Cost of goods sold
Operating expenses excluding amortization
Amortization
Interest expense
Income tax
Net income
Common dividends declared and paid
95.
$1,800
1,080
468
160
19
29
44
40
$1,900
1,045
412
200
26
87
130
60
What is the quick ratio for Year 10?
a)
b)
c)
d)
e)
96.
December 31
Year 10
Year 9
$ 87
$ 111
40
50
180
190
432
366
640
800
1,379
1,517
455
517
695
837
500
500
184
180
3.03
0.44
1.62
1.98
0.67
What is the merchandise inventory turnover in days (using 365 days in a year) for RCL
Inc. Corporation in Year 10?
a) 74 days
b) 135 days
c) 81 days
d) 124 days
e) 202 days
38
CMA Canada
97.
What is the times interest earned for Year 10?
a) 4.8 times
b) 37.9 times
c) 2.3 times
d) 16.8 times
e) 3.3 times
98.
What is the total debt-to-equity ratio for Year 10?
a)
b)
c)
d)
e)
1.39
1.02
0.35
0.50
3.78
------------------------99.
On January 1, Year 1, BDS Inc. issued $1,000,000 of 8% bonds due in five years, with
semi-annual interest payments on June 30 and December 31 each year. Because the
investors were only willing to accept an effective annual interest rate of 10%
(compounded semi-annually), the bonds sold for $922,783. Using the effective interest
method, what would BDS Inc. record as interest expense for the period January 1 to
June 30, Year 1?
a)
b)
c)
d)
e)
100.
$46,139
$40,000
$36,911
$50,000
$47,772
(-) Which of the following items is NOT a required disclosure for a publicly traded entity
with significant operating segments?
a)
b)
c)
d)
e)
Cash flow from operations for each segment.
Factors used to identify the reportable segments.
Amortization of capital assets for each segment.
A reconciliation of the reporting segment’s revenue to the enterprise’s total revenue.
The method of accounting for any transactions between segments.
CMA Canada
39
101.
CLC is a not-for-profit organization that helps children improve their literacy and uses
fund accounting to report its activities. Mr. Donovan donated $250,000 to CLC to be
used to finance a specific event to promote children’s literacy. In which of the following
funds would CLC record the donation?
a)
b)
c)
d)
e)
General fund.
Special (reserve) fund.
Capital fund.
Fiduciary fund.
Endowment fund.
Cross-Competency
HGML Co. produces one product using a single machine that has a capacity of 100,000 units
per year. Last year, the company produced and sold 80,000 units. It is considering replacing the
machine with a new, automated machine that would eliminate all direct labour costs, but would
require a higher grade of direct materials and a licensing fee of $1 per unit. The production
costs using the new versus the old machine at two production activity levels are as follows:
Direct materials
Direct labour
Amortization
Licensing fee
Other overhead
Total
80,000 units
Old Machine New Machine
$120,000
$152,000
80,000
50,000
70,000
80,000
350,000
280,000
$600,000
$582,000
100,000 units
Old Machine New Machine
$150,000
$190,000
100,000
50,000
70,000
100,000
380,000
310,000
$680,000
$670,000
The selling price of the product is $10 per unit. All selling and administration costs are fixed at
$300,000 per year, which would not change if the new machine is acquired. The company has a
40% tax rate and an after-tax cost of capital of 10%. The new machine would have a life of three
years, which is the same as the remaining useful life of the old machine. Neither machine would
have a material disposal value at the end of three years. Other data pertaining to the two
machines are as follows:
Original capital cost
Current market value
Current book value
Undepreciated capital cost
Capital cost allowance rate
40
Old Machine
$250,000
$120,000
$180,000
$195,500
30%
New Machine
$210,000
$210,000
30%
CMA Canada
102.
Assuming the company continues to use the old machine, what is the contribution
margin per unit of the product?
a)
b)
c)
d)
e)
103.
$7.50
$4.00
$6.925
$3.70
$6.00
(+) What is the incremental CCA tax shield if the new machine is purchased as opposed
to keeping the old machine?
a) $25,773
b) $27,000
c) $8,591
d) $4,152
e) $20,618
CMA Canada
41
Company A is a publisher specializing in the post-secondary education market. One of
Company A’s strategies for the upcoming year is to expand e-book development and usage. Ebook usage is increasing at colleges and universities and the company would like to increase its
market share. The following table provides selected results for Company A for the past three
years:
Total sales
Contribution margin
Net operating income
Year 8
Year 9
E-books
E-books
Company Segment Company Segment
(’000s)
(’000s)
(’000s)
(’000s)
$30,000
$2,400
$31,500
$3,150
8,400
821
8,568
1,213
3,000
235
3,240
485
Year 10
E-books
Company Segment
(’000s)
(’000s)
$32,400
$4,212
8,904
1,761
3,300
889
The sales volume (’000s of dollars) for e-book usage market for the past three years is as
follows:
Year 8
Year 9
Year 10
104.
$100,000
120,000
144,000
(+) According to trend or horizontal analysis, which of the following statements is true?
a) The company contribution margin is increasing at a greater rate than company net
operating income.
b) The company is increasing its share of the e-book usage market.
c) The e-book segment is performing better than the company as a whole.
d) both a) and b) above.
e) both b) and c) above.
105.
Company A takes into consideration the impact on the triple bottom line (economic,
environmental and social criteria) when developing their strategies. Which of the
components of the triple bottom line does Company A’s strategy for the upcoming year
emphasize?
a)
b)
c)
d)
e)
Economic only.
Environmental only.
Social only.
All of the above.
End of Exam
42
CMA Canada
Solutions to Sample 2008 Entrance Examination
Answer Summary:
1
d
26
c
51
d
76
c
101
b
2
a
27
d
52
a
77
c
102
e
3
a
28
a
53
d
78
b
103
a
4
c
29
d
54
d
79
c
104
e
5
d
30
a
55
a
80
e
105
d
6
b
31
d
56
a
81
c
7
e
32
c
57
c
82
a
8
e
33
d
58
d
83
c
9
e
34
d
59
e
84
e
10
d
35
b
60
b
85
e
11
c
36
b
61
e
86
c
12
a
37
e
62
c
87
a
13
d
38
b
63
e
88
e
14
a
39
a
64
d
89
a
15
d
40
e
65
b
90
b
16
c
41
d
66
b
91
c
17
e
42
b
67
a
92
b
18
b
43
e
68
b
93
a
19
b
44
b
69
b
94
b
20
e
45
d
70
a
95
e
21
c
46
b
71
b
96
b
22
a
47
b
72
c
97
a
23
b
48
e
73
d
98
b
24
d
49
c
74
a
99
a
25
c
50
d
75
a
100 a
CMA Canada
43
Strategic Management
1.
Answer: d.
The mission statement deals with the organization’s present business scope (who we
are and what we do).
2.
Answer: a.
While the presence of the Internet affects all the competitive forces (choices a to e), it
has the most impact on rivalry among competing firms (choice a). The ability to gather
information on the Internet enables firms to find out more about their competitors, which
serves to fuel and intensify the competitive rivalry.
3.
Answer: a.
4.
Answer: c.
Under decentralization, the benefits of a decision for one subunit may result in greater
costs to another subunit, resulting in suboptimal decision making and goal
incongruence. The other choices are all true.
5.
Answer: d.
Incremental change is an evolutionary strategy involving the fine-tuning of the existing
organization and taking small steps towards the change effort’s objectives. Continuous
improvement usually applies incremental change because it attempts to make small
improvements to existing work processes. As well, incremental change produces less
resistance and involves less risk than a quantum change strategy (choice b). Unfreezing
and refreezing are components of the force field model of managing change which
begins with unfreezing the current situation (choice c), producing a disequilibrium
between the driving and restraining forces, and ends with refreezing (choice e), which
reinforces and maintains the new role patterns. Choices a), c), and e) are change
management techniques that would have limited effectiveness in a continuous
improvement environment.
Risk Management and Governance
6.
Answer: b.
7.
Answer: e.
The definition of internal control indicates that it consists of the policies and procedures
established and maintained by management to assist in achieving its objective of
ensuring the orderly and efficient conduct of the entity’s business. This includes the
strategic plan of organization and all the related methods adopted within the business to
optimize the use of resources (choice c), prevent and detect errors and fraud,
compliance with policies, plans, laws and regulations, safeguard assets (choice a),
assure accuracy and reliability of accounting records (choice a), promote organizational
economy and efficiency (choice b) and encourage use of effective decision-making
processes. Therefore, choice e) is the correct answer.
8.
Answer: e.
44
CMA Canada
9.
Answer: e.
The control environment pertains to the overall attitude, awareness and actions of
directors and management regarding internal controls and their importance in the entity.
Factors affecting the control environment include the philosophy and operating style of
the directors and management, the organizational structure, methods of assigning
authority and responsibility, and methods of imposing control. The most important factor
in safeguarding an entity’s assets and in securing reliable accounting data is the quality
of the personnel. If employees are competent, reliable and possess integrity, they will
perform their duties carefully and honestly, and it is likely that the assets will remain safe
and the accounting data relatively free of errors, even if other elements of a control
environment are missing (choice a). Also important is that proper authorization
procedures be in place to ensure that all transactions are initiated or approved by a
person who has the requisite authority or has been properly delegated the approval
authority (choice d).
Although it may appear that an employee who never takes a vacation is demonstrating
loyalty and devotion to the entity, the employee may just be doing this to prevent another
employee, who may be temporarily assigned the vacationing employee’s duties, from
discovering irregularities and even fraud, such as lapping. Therefore, choice b) is false.
Irrespective of how competent and reliable an entity’s personnel may be, in order to
ensure that all necessary tasks are performed in an efficient and timely manner, it is
important that the authority and responsibility of each employee be clearly defined.
Therefore, choice c) is false.
10.
Answer: d.
11.
Answer: c.
Choices a), b), d) and e) are all common risks that internal controls attempt to reduce or
mitigate. Choice c) is correct because internal controls cannot control external risks,
such as those associated with short-term investments.
12.
Answer: a.
The principal mechanism for preventing fraud is control. Primary responsibility for
establishing and maintaining control rests with management. Such prevention is
ultimately a matter of policies and procedures established by management.
13.
Answer: d.
It is a control weakness for a department supervisor to distribute payroll cheques to
subordinates. It is possible for the department supervisor to hire fictitious employees and
to cash their cheques using the fictitious identities. Choices a), b), c) and e) are
appropriate responsibilities of a department supervisor.
14.
Answer: a.
Fraudulent actions by a group of employees (i.e. collusion) is difficult to detect by an
internal control system. Such controls can be circumvented by a group of employees
who collude to defraud the company.
CMA Canada
45
15.
Answer: d
Quality of work life programs and quality circles are examples of people-focused
approaches to organizational change that improve the quality of work life for employees
(choice c) as well as group and organizational productivity (choice a). They are not
organizational structures (choice b).
16.
Answer: c.
Expropriation is a form of nationalization where the government compensates the firm
for taking over its assets.
Choice a) – Nationalization in general describes when a government takes over the
assets of a private firm.
Choice b) – Privatization is the reverse of nationalization.
Choice d) – Repatriation would restrict the amount of profits the Canadian firm could
take out of the foreign country to Canada.
Choice e) – Confiscation is nationalization when the government does not compensate
the foreign firm in anyway.
17.
Answer: e.
The lead responsibility for formulating and executing corporate strategy falls to key
managers. The chief strategic role of the board of directors is to exercise oversight and
see that the strategic management is done in a manner that benefits the shareholders
(for investor-owned organizations) or stakeholders (for not-for-profit organizations). This
is done by 1) critically appraising and ultimately approving strategic action plans (choice
c), and 2) evaluating the strategic leadership skills of the CEO and others in line to
succeed the incumbent CEO (choice a). Therefore, the board of directors approves, but
does not actually formulate, the strategy (choice b) or the corporate vision (choice d).
18.
Answer: b.
The board of directors has many roles or duties including overseeing the company’s
direction, strategy, and business approaches (choice a); evaluating the calibre of senior
executives’ strategy-making and strategy-executing skills (choice c); monitoring the
effectiveness of the company’s governance practices (choice d); and, ensuring the
integrity of the corporation’s accounting and financial reporting systems (choice e). Key
executives and board remuneration should be aligned with the longer-term interests
rather than the shorter-term interests of the company and shareholders. Therefore,
choice b) as stated is not correct and is the answer.
Performance Management
19.
46
Answer: b.
A direct cost is a cost that can be traced directly to the product or service being costed.
Choice a) describes a standard cost, choice c) describes a variable cost, choice d)
describes a fixed cost and choice e) describes a relevant cost. While a direct cost may
also be a standard, variable, fixed or relevant cost, these costs may not always be direct
costs.
CMA Canada
20.
Answer: e.
Chemical A
Chemical B
Chemical C
Final Sales Value
$120,000
180,000
100,000
-
Separable Costs
$ 78,000
103,000
44,000
=
=
=
=
Net Realizable Value
$ 42,000
77,000
56,000
$175,000
Joint costs allocated to Chemical B = $77,000 ÷ $175,000 x ($35,000 + $55,000)
= 44% x $90,000 = $39,600
Choice a) – Uses sales value at split-off as allocation base: ($80,000/$180,000) x
$90,000 = $40,000
Choice b) – Uses ratio of separable costs to final sales value for Chemical B as the
allocation base: ($103,000/$180,000) x $90,000 = $51,500
Choice c) – Uses separable costs as allocation base: [$103,000/($78,000 + $103,000 +
$44,000)] x $90,000 = $41,200
Choice d) – Uses final sales value as allocation base: ($180,000/$400,000) x $90,000
= $40,500
21.
Answer: c.
Chemical A
Chemical B
Chemical C
Net Realizable
Value
$ 42,000
77,000
56,000
$175,000
-
Sales Value at
Split-off
$ 40,000
80,000
60,000
$180,000
=
=
=
=
Increase(decrease)
in Income
$ 2,000
(3,000)
(4,000)
$(5,000)
The net realizable value (i.e. incremental revenue minus separable costs of processing
the chemicals further after split-off) of both Chemicals B and C are less than their sales
values at split off. Therefore, if Chemicals B and C were not processed beyond split-off,
income would be $3,000 + $4,000 = $7,000 higher.
Choice a) –
Choice b) –
Choice d) –
Choice e) –
CMA Canada
Incremental income for processing all chemicals further.
Incremental income for Chemical A if processed further.
Increase in income if Chemical B was not processed further.
Increase in income if Chemical C was not processed further.
47
22.
Answer: a.
Direct materials used ($30,000 + $82,000 - $37,000)
Direct labour used
Factory overhead applied ($60,000/$15 x $10)
Total manufacturing costs incurred
Work in process inventory – March 1
Work in process inventory – March 31
Cost of goods manufactured
Finished goods inventory – March 1
Cost of goods available for sale
$ 75,000
60,000
40,000
175,000
12,000
(18,000)
169,000
72,000
$241,000
Choice b) – Cost of goods manufactured of $169,000
Choice c) – Cost of goods sold: $241,000 - $93,000 = $148,000
Choice d) – This equals the total manufacturing costs plus the opening work in process:
$175,000 + $12,000 = $187,000
Choice e) – Total manufacturing costs of $175,000
23.
Answer: b.
24.
Answer: d.
Total Quality Management (TQM) can be defined as “managing the entire organization
so that it excels on all dimensions of products and services that are important to the
customer.” Therefore, choice d) is false. The other statements are true.
48
CMA Canada
25.
Answer: c.
The budgeted cash collections for the third quarter are calculated as follows:
Cash collections from:
Total cash collections
May — $120,000 × 15% =
June — $140,000 × 45% =
July — $160,000 × 95% =
Aug. — $150,000 × 80% =
Sept. — $130,000 × 50% =
$ 18,000
63,000
152,000
120,000
65,000
$418,000
Choice a)
Ignores collections from May and June sales.
Cash collections from: July — $160,000 × 95% =
$152,000
120,000
Aug. — $150,000 × 80% =
65,000
Sept. — $130,000 × 50%=
$337,000
Choice b)
Assumes uncollectible amounts are collected in the second month following
sale.
Cash collections from: May — $120,000 × 20% =
$ 24,000
70,000
June — $140,000 × 50% =
160,000
July — $160,000 × 100% =
120,000
Aug. — $150,000 × 80% =
65,000
Sept. — $130,000 × 50% =
$439,000
Choice d)
Assumes all third quarter sales are collected in the third quarter.
Cash collections from: July — $160,000 × 100%=
160,000
150,000
Aug. — $150,000 × 100%=
130,000
Sept. — $130,000 × 100%=
$440,000
Choice e) Assumes 5% of April sales are collected in July.
Cash collections from: April — $100,000 × 5% =
$ 5,000
18,000
May — $120,000 × 15% =
63,000
June — $140,000 × 45% =
152,000
July — $160,000 × 95% =
120,000
Aug. — $150,000 × 80% =
65,000
Sept. — $130,000 × 50% =
$423,000
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49
26.
Answer: c.
Direct materials
Machine set up (3 x $180/60)
Materials handling ($15 x 35)
Milling ($50 x 6)
Assembly ($30 x 4)
Manufacturing cost per unit
$140
9
525
300
120
$1,094
Price to achieve gross margin of 35% = $1,094/.65 = $1,683 (rounded).
Choice a) – Gross margin percentage is applied incorrectly: $1,094 x 1.35 = $1,477
(rounded)
Choice b) – Direct materials costs are not included in manufacturing costs: ($9 + $525 +
$300 + $120)/.65 = $954/.65 = $1,468 (rounded)
Choice d) – Cost of $1,094, i.e. markup is not applied
Choice e) – Gross margin percentage is applied incorrectly: $1,094/.35 = $3,126
(rounded)
27.
50
Answer: d.
Budgeted costing system uses budgeted costs and budgeted professional labour hours
(PLH) in establishing the direct and indirect cost rates.
Budgeted direct cost rate = ($92,000 x 8 + $41,600 x 10) ÷ 28,800 PLH
= $40.00 per PLH
Budgeted indirect cost rate = $691,200 ÷ 28,800 PLH = $24.00 per PLH
Choice a)
Incorrectly uses actual costs and actual PLH to determine the rates:
Actual direct cost rate = ($95,000 x 8 + $47,840 x 10) ÷ 29,200 PLH
= $42.41 per PLH
Actual indirect cost rate = $711,936 ÷ 29,200 PLH = $24.38 per PLH
Choice b)
Incorrectly uses actual costs to determine the rates:
Direct cost rate = ($95,000 x 8 + $47,840 x 10) ÷ 28,800 PLH
= $43.00 per PLH
Indirect cost rate = $711,936 ÷ 28,800 PLH = $24.72 per PLH
Choice c)
Incorrectly uses actual PLH to determine the rates:
Direct cost rate = ($92,000 x 8 + $41,600 x 10) ÷ 29,200 PLH
= $39.45 per PLH
Indirect cost rate = $691,200 ÷ 29,200 PLH = $23.67 per PLH
Choice e)
The direct and indirect cost rates are $40.00 and $24.00 per PLH,
respectively (choice a).
CMA Canada
28.
Answer: a.
Both direct and indirect costs are allocated based on professional labour hours, which
include both attorney and paraprofessional labour hours, Client Smith and Client Jones
should cost the same because they use the same number of professional labour hours
(Smith: 13 + 31 = 44; Jones = 25 + 19 = 44).
Choice b)
Choice c)
Choice d)
Choice e)
29.
Travel and communication time is irrelevant in the allocation of direct and
indirect costs to the clients.
The higher salaries paid to attorneys are irrelevant in the allocation of direct
and indirect costs to the clients.
Indirect costs assigned to the clients are based on total professional labour
hours and not just paraprofessional hours.
Direct costs assigned to the clients are based on total professional labour
hours and not just attorney hours.
Answer: d.
Service department costs are allocated directly to the production departments under the
direct allocation method as follows:
Quality control: $350,000 × (21,000/28,000) =
Maintenance:
$200,000 × (18,000/30,000) =
Total service department costs allocated to Machining department
$262,500
120,000
$382,500
Choice a) – Includes machining department costs: $382,500 + $400,000 = $782,500
Choice b) – Uses incorrect denominators (total hours): [$350,000 x (21,000/35,000)] +
[$200,000 x (18,000/40,000)] = $300,000
Choice c) – Represent the allocated maintenance costs of $120,000 only
Choice e) – Represents the allocated quality control costs of $262,500 only
30.
Answer: a.
The step-down allocation method allows for partial recognition of services rendered by
service departments to other service departments. This is done by allocating one service
department’s costs to another before allocating the second service department’s costs to
the production departments. The allocation of Quality Control department costs to the
Machining department is calculated as follows:
[$350,000 + ($200,000/40,000 × 10,000)]/28,000 × 21,000 = $300,000
Choice b) – Direct method: $350,000 x (21,000/28,000) = $262,500
Choice c) – Uses the wrong allocation rate: [($200,000 x 7,000/35,000) +
$350,000]/30,000 x 18,000 = $234,000
Choice d) – Ignores costs of maintenance and uses wrong denominator:
$350,000/35,000 x 21,000 = $210,000
Choice e) – Reciprocal method: Quality Control cost (QC) = $350,000 + (10,000/40,000)
x [$200,000 + (7,000/35,000) x QC] = $400,000 + .05QC = $400,000/.95
= $421,053
Allocation to Machining = (21,000/60,000) x $421,053 = $252,632
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51
31.
Answer: d.
Sales volume variance
Sales mix variance
Sales quantity variance
Market share variance
Market size variance
$2,100
+ 900
$3,000
+ 500
$3,500
unfavourable
favourable
unfavourable
favourable
unfavourable
Choice a)
Incorrectly deducted the market share variance from the sales quantity
variance: $2,100 + $900 - $500 = $2,500 unfavourable
Choice b)
Incorrectly deducted the sales mix variance from the sales volume
variance: $2,100 - $900 + $500 = $1,700 unfavourable
Choice c)
Incorrectly deducted sales mix variance from the sales volume variance
and the market share variance from the sales quantity variance:
$2,100 - $900 - $500 = $700 unfavourable
Choice e)
Unfavourable market size variance implies that actual market size is less
than estimated market size.
32.
Answer: c.
Total spoilage = 18,000 - 15,000 - 2,000 = 1,000 units
Normal spoilage = 4% x 15,000 = 600 units
Abnormal spoilage = 1,000 - 600 = 400 units
Loss from abnormal spoilage = 400 x ($11.00 + $15.00) = $10,400
33.
Answer: d.
Conversion costs = Cost of ending work in process - Cost of material A
= $34,000 - ($11.00 x 2,000)
= $34,000 - $22,000 = $12,000
Equivalent units of conversion costs = $12,000 ÷ $15.00 = 800 units
Percentage of completion = 800 equivalent units ÷ 2,000 total units = 40% complete
Choice a)
Choice b)
Choice c)
Choice e)
34.
52
Incorrectly divided by the sum of the cost per equivalent unit for Material A
and Conversion Costs: ($34,000 ÷ $26.00) ÷ 2,000 units = 65.4%.
Incorrectly included the cost per equivalent unit for Material B:
[$34,000 - (2,000 x $11.80)] ÷ $15.00 ÷ 2,000 units = 34.7%.
Incorrectly divided the conversion costs in ending work-in-process
inventory by the cost per equivalent unit for Material A:
($12,000 ÷ $11.00) ÷ 2,000 units = 54.5%.
Incorrectly divided by the total cost per equivalent unit:
($34,000 ÷ $26.80) ÷ 2,000 = 63.4%
Answer: d.
Since the actual total amount of direct materials used (97,900 kg. + 132,000 kg. +
210,100 kg. = 440,000 kg.) is greater than the standard total amount of direct materials
allowed for actual production of 20,000 bags of lawn fertilizer (20 kg. x 20,000 bags =
400,000 kg.), direct materials yield variance for all three chemicals in total is
unfavourable.
CMA Canada
Choice a) Direct materials price variance for Chemical X is unfavourable because actual
purchase price ($1.05) is greater than budgeted purchase price ($1.00); direct
materials price variance for Chemical Y is favourable because actual
purchase price ($0.36) is less than budgeted purchase price ($0.40); and
direct materials variance for Chemical Z is favourable because actual
purchase price ($0.18) is less than budgeted purchase price ($0.20). Thus,
the statement is FALSE.
Choice b) Direct materials quantity variance
Chemical X $1.00 x (97,900 kg. – 5 kg. x 20,000) $ 2,100 favourable
Chemical Y $0.40 x (132,000 kg. – 7 kg. x 20,000) $ 3,200 favourable
Chemical Z $0.20 x (210,100 kg. – 8 kg. x 20,000) $10,020 unfavourable
Total direct materials quantity variance
$ 4,720 unfavourable
Thus, the statement is FALSE.
Choice c) Direct materials mix variance for Chemical X is favourable because actual mix
(97,900/440,000 = 0.2225) is less than budgeted mix (5/20 = 0.25); direct
materials mix variance for Chemical Y is favourable because actual mix
(132,000/440,000 = 0.30) is less than budgeted mix (7/20 = 0.35); and direct
materials mix variance for Chemical Z is unfavourable because actual mix
(210,100/440,000 = 0.4775) is greater than budgeted mix (8/20 = 0.40). Thus,
the statement is FALSE.
Choice e) Incorrect because (d) is TRUE.
35.
Answer: b.
36.
Answer: b.
The maximum market coverage occurs through intensive distribution, in which the
manufacturer attempts to persuade as many retailers as possible in an area to carry the
product. Intensive distribution is usually required for brand-name convenience goods,
such as branded toothpaste.
37.
Answer: e.
Under actual absorption costing, cost of good sold is calculated as the actual rate x
actual inputs used for both direct and indirect costs. Therefore, no variances would be
calculated.
38.
Answer: b.
Under standard variable costing, cost of good sold is calculated as the standard variable
cost x the standard inputs allowed for actual outputs. Therefore, there may be variable
cost variances but no fixed cost variances.
39.
Answer: a.
Statements C and D must represent absorption costing because each shows a fixed
overhead variance and statements A and B, which do not show a fixed overhead
variance, must represent variable costing. Therefore, the $150,000 other costs shown in
statements A and B must represent the actual fixed overhead and fixed selling and
administration expenses. The $80,000 other costs under statement E (actual absorption)
represent the actual fixed selling and administration expenses. The $70,000 difference
less the $10,000 fixed overhead variance represents the total fixed overhead applied for
CMA Canada
53
actual inputs. Therefore, $60,000 ÷ $6 per unit = 10,000 units produced.
An alternative method of calculating units produced is as follows:
Operating income statement B (i.e. standard variable costing)
Operating income statement D (i.e. standard absorption costing)
Fixed overhead in ending inventory
Divide by $6 standard cost per unit
Number of units in ending inventory
Number of units sold
Number of units produced
40.
$514,000
508,000
6,000
÷
6
1,000
9,000
10,000
Answer: e.
RST Ltd. has sufficient capacity to fill the order; therefore, there are no opportunity costs.
Desired contribution margin = $48,000/20,000 units = $2.40/unit.
Variable costs = ($2,000,000/125,000 units) + ($8,000/20,000 units) = $16.00 + $0.40
= $16.40.
Therefore, the sales price should be $16.40 + $2.40 = $18.80 per unit.
Choice a) – $40.00 is the regular sales price per unit.
Choice b) – Regular selling price less fixed manufacturing costs less fixed selling and
administrative costs less sales commissions saved
= $40.00 – ($1,250,000 + $950,000)/125,000 units – ($2.40 - $0.40
= $40.00 - $17.60 - $2.20 = $20.20.
Choice c) – Includes all the manufacturing costs
= ($2,000,000 + $1,250,000)/125,000 units + $0.40 + $2.40
= $26.00 + $0.40 + $2.40 = $28.80.
Choice d) – Includes all costs less the savings in sales commission
= ($4,525,000/125,000 units) - $2.20 + $2.40 = $36.20 - $2.20 + $2.40
= $36.40.
41.
54
Answer: d.
During the installation of an accounting information system (AIS), one common mistake
is the lack of preliminary investigation such as defining the problem and identifying the
objectives, costs and benefits of the proposed solution. This results in the installation of
many an AIS without assessing other possible solutions to the problem. The most
important step is to do a proper study of the situation and perform a feasibility study prior
to the installation of an AIS.
CMA Canada
42.
Answer: b.
Since fixed costs would remain the same regardless of the bid price, they are not
relevant to the decision.
a)
b)
c)
d)
e)
Price
$5.00
$5.50
$6.00
$6.50
$7.00
Var.
Cost/Unit
$3.60
$3.60
$3.60
$3.60
$3.60
A
B
CM/Unit
$1.40
$1.90
$2.40
$2.90
$3.40
Probability
100%
90%
65%
40%
10%
C=AxB
Expected
Incremental
CM/unit
$1.40
$1.71
$1.56
$1.16
$0.34
C x 150,000
Expected
Incremental
Total CM
$210,000
$256,500
$234,000
$174,000
$51,000
The highest expected incremental income would occur at a bid price of $5.50 per unit.
43.
Answer: e.
If PTM Ltd. bids $6.50 for the contract and Company X also bids on the contract, the
expected value is $425,000 x 40% x 65% = $110,500.
If PTM Ltd. bids $6.50 for the contract and Company X does not bid on the contract, the
expected value is $425,000 x 85% x 35% = $126,438.
Expected value of submitting a bid of $6.50 = $110,500 + $126,438 = $236,938
Choice a) – Incorrectly applies the probabilities: $425,000 x 85% x 40% = $144,500
Choice b) – Assumes expected value is 100% of the incremental income: $425,000
Choice c) – Considers only the expected value if Company X does not bid: $425,000 x
85% = $361,250
Choice d) – Considers only the expected value if Company X bids: $425,000 x 40%
= $170,000
44.
Answer: b.
The objective function describes the objective of maximizing total contribution margin.
The first constraint represents the Machine 1 capacity constraint, i.e. (3A + 2B ≤ 2,500).
The second constraint represents the Machine 2 capacity constraint, i.e. (2A + 1.5B ≤
2,500. The remaining constraints represent the demand constraints and the nonnegativity constraint.
Choice a) – Objective function maximizes revenue rather than income; machine
constraints incorrectly represented (assumes Machine 1 is used for
Product A and Machine 2 is used for Product B); ignores the contracted
demand for Product B constraint.
Choice c) – Inappropriately includes machine hours requirements in the objective
function; inappropriately combines the Machine 1 and Machine 2
constraints; ignores the contracted demand for Product B constraint.
Choice d) – Objective function maximizes revenue rather than income.
Choice e) – Objective function maximizes variable costs rather than income; machine
constraints incorrectly represented (assumes Machine 1 is used for
Product A and Machine 2 is used for Product B).
CMA Canada
55
Performance Measurement
45.
Answer: d.
Robert Motoz is responsible for sales, cost control (including the cost of direct materials
by negotiating the transfer price), and capital purchasing decisions for Division B.
Therefore, Division B represents an investment centre.
46.
Answer: b.
ROI Division A = $65,000/$400,000 = 16.3%
ROI Division B = $140,000/$850,000 = 16.5%
RI Division A = $65,000 - ($400,000 x .15) = $5,000
RI Division B = $135,000 - ($850,000 x .15) = $7,500
Division B has a higher ROI and RI.
47.
Answer: b.
In transfers between divisions located in different countries, the company should give
prime consideration to the overall profit of the firm while also respecting the laws of the
countries. Differential tax rates, tariffs, customs duties, and governments incentives are
some of the factors that would influence the decision for setting transfer prices that
would maximize overall company profits.
Choice a) – In order to respect the laws of the countries, the transfer price must often be
set at the fair market value of the product.
Choice c) – Minimizing custom duties is one of the factors that influence overall
company profits. Sometimes there is a trade-off between the cost of
customs duties and the cost of taxes in determining the overall effect of
transfers on company profits.
Choice d) – Overall company profits may be maximized by minimizing, rather than
maximizing, foreign subsidiary net income after taxes.
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CMA Canada
48.
Answer: e.
From the company’s perspective when all 50,000 units of component EX1 are sold at
$160 to external customers:
Contribution margin from sales of 50,000 units
$1,650,000
($160 – ($120 + $7)) x 50,000 units
Cost of purchasing 10,000 units from external supplier
1,600,000
$160 x 10,000 units
Net contribution
$ 50,000
From the company’s perspective when 40,000 units of component EX1 are sold at $160
to external customers and 10,000 units supplied to Division A
Contribution margin from sales of 40,000 units
$1,320,000
($160 – ($120 + $7)) x 40,000 units
Incremental costs of supplying 10,000 units to Division A
1,200,000
$120 x 10,000 units
Net contribution
$ 120,000
Division A should purchase 10,000 units from Division B at $164 because there is an
increase in income of $70,000 for the company as a whole.
Choice a) There is a cost saving of $40,000 (($164 - $ 160) x 10,000 units) to Division
A if Division A purchased the 10,000 units from an external supplier. The
statement is FALSE.
Choice b) There is an increase in income of $110,000 {[($164 - ($160 - $7)] x 10,000
units} to Division B if Division B sold the 10,000 units to Division A. The
statement is FALSE.
Choice c) There is no idle capacity in Division B when Division A purchased the 10,000
units from an external supplier because Division B can sell all units
produced, i.e. 50,000 units, in the market. The statement is FALSE.
Choice d) The company’s income is not maximized when Division B sells 50,000 units
to external customers because Division A also has to purchase 10,000 units
from an external supplier. The company’s income is maximized when
Division B sells 40,000 units to external customers and transfers 10,000
units to Division A. The statement is FALSE.
CMA Canada
57
49.
Answer: c.
In order to supply Division A with the units it requires, Division B will lose some of its
external sales. The transfer price must take into account the contribution margin lost on
the external sales as well as the variable selling cost savings:
Contribution margin per unit on lost sales = ($160 - $120) x 6,000 units / 10,000 units
= $24
Transfer price = Variable cost per unit less variable selling costs savings + lost
contribution margin per unit = $120 - $7 + $24 = $137.
Choice a) Does not take into account the lost sales or the variable selling costs
savings: Transfer price = variable costs = $120.
Choice b) Includes fixed manufacturing cost when calculating the lost contribution
margin: CM per unit lost = [$160 - $120 – ($1,000,000/50,000)] x 6,000 units
/ 10,000 units = $12; Transfer price = $120 - $7 + $12 = $125.
Choice d) Uses the external selling price as the transfer; transfer price = $160.
Choice e) Disregards the variable selling cost savings: Transfer price = $120 + $24
= $144.
50.
Answer: d.
Benchmarking is based on the concept that reinventing something that someone else is
already using successfully makes no sense. It involves finding the company that is the
best performer for a certain key activity (i.e. the best-in-class company), determining the
difference in performance between your company and the best-in-class company, and
developing tactical programs to match or improve on the best-in-class company’s
performance. The other choices are more general strategies, e.g. benchmarking might
be a component of a continuous improvement or TQM strategy.
51.
Answer: d.
The measures in a performance measurement system should relate to the goals of the
organization (choice a), be reasonably objective and easily quantifiable (choice c), and
should be applied consistently and regularly. It should also be designed to balance
managers’ attention on both short- and long-term concerns. Otherwise, managers may
make decisions that result in higher current year profit, for example, at the expense of
investments that would result in even greater profits in future years. Therefore, choice b)
is not appropriate and choice d) is correct.
52.
Answer: a.
Return on investment (ROI) is a popular approach to incorporating the investment base
into a performance measure because it blends all the major ingredients of profitability
(revenues, costs and investments) under the control of the manager into a single
number [choice a]. It can be manipulated fairly easily by such actions as deferring
needed investments [therefore, choice b) is not correct]. It allows for comparisons
between other investment centres in the same industry, not in different industries
[therefore, choice c) is not correct]. ROI sometimes motivates managers to make
decisions that are not congruent with the organization’s overall goals [therefore, choice
d) is not correct].
58
CMA Canada
53.
Answer: d.
Agreeableness includes the traits of being courteous, good-natured, empathetic, and
caring. People with a high degree of agreeableness are very good at effectively handling
customer relations and conflict-based situations.
Choice a) – Conscientiousness refers to people who are careful, dependable, selfdisciplined and set high goals for themselves. While this is a useful
personality dimension for a customer relations employee, it is not as
important as agreeableness.
Choice b) – People with high emotional stability are poised, secure, and calm. While this
is a useful personality dimension for a customer relations employee, it is not
as important as agreeableness.
Choice c) – Openness to experience generally refers to the extent that people are
sensitive, flexitive, creative and curious. While this is a useful personality
dimension for a customer relations employee, it is not as important as
agreeableness.
Choice e) – Introversion refers to people who are quiet, shy and cautious. These are not
ideal traits for a customer relations employee.
54.
Answer: d.
There are two general limitations to the use of behavioural modification procedures and
principles: individual differences (choice a) and group norms (choice c). One way that an
effective manager can account for individual differences is to allow employees to
participate in determining their rewards (choice b). Therefore, choice d) is the correct
answer.
55.
Answer: a.
Increased job responsibility provides greater job satisfaction which is a motivator
according to Herzberg and satisfies growth needs according to the ERG theory. The
other choices are hygiene factors that according to Herzberg would act as demotivators
or dissatisfiers if they were not present. Choices b), c) and e) are relatedness needs
according to ERG theory. Choice d) is an example of an existence need according to
ERG theory.
56.
Answer: a.
Pay equity legislation relates to closing the wage gap between women and men (choice
b). Human rights legislation guarantees every person equal treatment in regard to
employment and opportunity for employment regardless of race, colour, creed/religion,
gender, etc. (choice c). Employment standards acts specify minimum terms and
conditions of employment (choice d). The union spillover effect (choice a) refers to nonunion companies offering their employees the same wages, benefits, and working
conditions won in rival unionized companies to avoid being unionized and attract and
keep good employees. The compensation and incentive package received by Mr. Green
is entirely due to union spillover, and to any government legislation (choices b, c, and d).
Therefore, choice e) is incorrect and choice a) is the correct answer.
CMA Canada
59
57.
Answer: c.
The management accountant should ensure that the potential risks associated with a
proposal be considered as well as the potential rewards. It would not be ethical to show
only the most favourable potential outcomes of a proposal. To do so, even at the request
of the division manager, compromises the management accountant’s competence,
objectivity and integrity.
Choice a) – Delaying an expensive advertising campaign does not represent an ethically
questionable action and could be a reasonable option in the circumstances.
Even if the advertising expenditure was not delayed, it could be argued that
the matching principle would support expensing the advertising costs in the
next fiscal year, if the impact on sales is likely to be felt only in the next
fiscal year.
Choice b) – Supporting a supplier that has practices that are detrimental to the
ecological environment by accepting their bid would be unethical, even if the
bid is the least expensive and of the highest quality.
Choice d) – This represents a correct response to a suspicion of a co-worker committing
an unethical act.
Choice e) – Increasing performance incentives is a legitimate option for management to
consider in the situation and does not represent an ethically questionable
action.
58.
Answer: d.
On-site child care facilities and the opportunity to job share (choice a) would be
appealing to a mother with a four-year old and a two-year old, especially if her husband
works long hours. Regular training workshops (choice c) would not be as appealing
because her husband works long hours and would not be available to watch the children
after hours. A company car (choice c) would be a taxable benefit, not suitable for
transporting children and therefore, not appealing to Mrs. Smith. Permission to work
from home and flexibility (choice b) would be appealing as these incentives would
provide Mrs. Smith with the opportunity to be near her children. Since choice a) and
choice b) would be attractive to Mrs. Smith, choice d) is the most correct answer and
choice e) is incorrect.
60
CMA Canada
59.
Answer: e.
Salaries are distributed out of profits before tax and dividends are distributed out of after
tax profits.
Dividends received = after tax profits: $25,000 – ($25,000 x 18.12%) = $25,000 - $4,530
= $20,470
Grossed up dividends: $20,470 x 5/4 = $25,587.50
Taxes on dividends: [Grossed up dividends x (combined federal and provincial tax
rates)] – [Grossed up dividends x (combined federal and provincial dividend tax credit)]
= [$25,587.50 x (15.5% + 10%)] – [$25,587.50 x (13 1/3% + 6 2/3%)]
= $6,524.81 - $5,117.50 = $1,407.31
Salary received = $25,000
Taxes on salary = Salary x (combined federal and provincial tax rates)
= $25,000 x (15.5% + 10%) = $6,375.00
Net increase (savings) in taxes = Taxes on dividends – taxes on salary
= $1,407.31 - $6,375.00 = ($4,967.69) or ($4,968) rounded
Choice a) Dividend gross-up is ignored
Taxes on dividends: [Dividends x (combined federal and provincial tax rates)]
– [Dividends x (combined federal and provincial dividend tax credit)]
= [$20,470 x (15.5% + 10%)] – [$20,470 x (13 1/3% + 6 2/3%)]
= $5,219.85 - $4,094.00 = $1,125.85
= $1,125.85 - $6,375.00 = ($5,249.15) or ($5,249) rounded
Choice b) Dividend tax credit was ignored
Taxes on dividends: [Grossed up dividends x (combined federal and
provincial tax rates)] = [$25,587.50 x (15.5% + 10%)] = $6,524.81
= $6,527.81 - $6,375.00 = $149.81 or $150 rounded
Choice c) Incorrectly assume salaries were distributed out of after tax income:
Salary received = $25,000 - ($25,000 x 18.12%) = $25,000 - $4,530 =
$20,470
Taxes on salary = Salary x (combined federal and provincial tax rates)
= $20,470 x (15.5% + 10%) = $5,219.85
= $1,407.31 - $5,219.85 = ($3,812.54) or ($3,813) rounded
Choice d) Ignored corporate taxes and the dividend tax credit:
Dividends received = before tax profits: $25,000
Grossed up dividends: $25,000 x 5/4 = $31,250
Taxes on dividends: [Grossed up dividends x (combined federal and
provincial tax rates)] = [$31,250 x (15.5% + 10%)] = $7,968.75
= $7,968.75 - $6,375.00 = $1,593.75 or $1,594 rounded
CMA Canada
61
Financial Management
60.
Answer: b.
($50,000 × .870) + ($80,000 × .756) = $103,980
61.
Answer: e.
After-tax cost of debt = interest rate for new debt x (1 - tax rate) = .06 x .6 = 3.6%.
Cost of preferred shares = Dividend ÷ current market price of a preferred share = $8/$45
= 17.8%.
Choice a) – Applies tax rate to cost of preferred shares: $8/$45 x .6 = 10.7%
Choice b) – Uses interest rate for old debt: .09 x .6 = 5.4%;
applies tax rate to cost of preferred shares: $8/$45 x .6 = 10.7%
Choice c) – Uses par value of preferred shares: $8/$80 = 10%
Choice d) – Uses interest rate for old debt: .09 x .6 = 5.4%
62.
Answer: c.
Cost of common equity = (dividend for period 1 ÷ current market price per share) +
dividend growth rate = [($4 x 1.1)/$50] + .1 = $4.40/$50 + .1 = .0880 + .1 = 18.8%
Proportion of debt, preferred shares and equity = 40%, 10%, 50%, respectively.
Weighted average cost of capital = (40% x 3.9%) + (10% x 14.2%) + (50% x 18.8%)
= .0156 + .0142 + .094 = 12.4%
Choice a) – Does not add dividend growth rate in calculating cost of common equity:
.0156 + .0142 + (50% x $4.40/$50) = 7.4%
Choice b) – Applies tax to dividend in calculating cost of common equity:
.0156 + .0142 + {50% x [($4.40 x .6)/$50 +.1]} = 10.6%
Choice d) – Used last year’s dividend in calculating cost of common equity:
.0156 + .0142 + {50% x [($4/$50) + .1]} = 12.0%
Choice e) – Applies tax to the calculated cost of common equity:
.0156 + .0142 + (50% x .188 x .6) = 8.6%
63.
62
Answer: e.
Price = Present value of face value of the bond + Present value of semi-annual interest
of 8% x $1,000/2 = $40 for 10 x 2 = 20 periods at 10%/2 = 5%.
Price = ($1,000 x .377) + ($40 x 12.462) = $875.
CMA Canada
64.
Answer: d.
The maximum amount that GEF Inc. should be willing to pay for HIP Ltd. would be the
amount that provides GEF Inc. with exactly a 16% return on investment (or a net present
value of zero using a 16% discount rate). This amount is calculated as follows:
[$4,000,000 + ($1,000,000 x .6)]/.16 = $4,600,000/.16 = $28,750,000.
Choice a) – After-tax operating savings are subtracted instead of added: ($4,000,000 $600,000)/.16 = $21,250,000
Choice b) – Uses before-tax operating savings: ($4,000,000 + $1,000,000)/.16
= $31,250,000
Choice c) – Before-tax operating savings are subtracted instead of added: ($4,000,000 $1,000,000)/.16 = $18,750,000
Choice e) – Ignores synergistic savings: $4,000,000/.16 = $25,000,000.
65.
Answer: b.
The minimum value of a right is 1/3 x ($15 - $12) = $1.
Choice a) –
Choice c) –
Choice d) –
Choice e) –
($15 - $12) x 3 = $9
$12 ÷ 3 = $4
Assumes minimum value is zero.
$15 - $12 = $3
66.
Answer: b.
($20,000/$140,000 x 8%) + ($40,000/$140,000 x 6%) + ($70,000/$140,000 x 3%) +
($10,000/$140,000 x 10%) = 5.07%.
67.
Answer: a.
The capital asset pricing model (which is an equation of the securities market line
showing the relationship between expected return and beta) is used to determine the
required return for Avery Inc.’s shares:
Rj = Rf + Bj (Rm - Rf), where Rf = risk-free rate of 5.5%, Bj = beta of 3, and
(Rm - Rf) = risk premium of 12%
Rj = 5.5% + 3 (12%) = 41.5%
Choice b) –
Choice c) –
Choice d) –
Choice e) –
68.
Rj = 5.5% + 12% = 17.5%
Rj = 3 x 12% = 36%
Rj = 5.5% + (12% - 5.5%) x 3 = 25%
Rj = 12% + (5.5% x 3) = 28.5%
Answer: b.
The average collection period is the weighted average period within which the value of
receivables is collected. Acme’s average collection period is 12 days: (0.2 x 0) + (0.6 x
10) + (0.2 x 30) = 12 days.
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63
69.
Answer: b.
Operating leverage reflects the extent to which fixed assets are utilized and fixed costs
are incurred to support operations in a firm. The degree of operating leverage may be
defined as the percentage change in operating income that occurs as a result of a
percentage change in sales volume. The following are two ways to calculate the degree
of operating leverage (note, EBIT in the following is an acronym for “earnings before
interest and taxes” and is equal to $500,000 - $200,000 - $120,000 = $180,000):
1) 1 + (Fixed costs ÷ EBIT) = 1 + ($120,000 ÷ $180,000) = 1.7
2) (Sales - Variable costs) ÷ EBIT = ($500,000 - $200,000) ÷ $180,000 = 1.7
Choice a) – EBIT ÷ Fixed costs = $180,000 ÷ $120,000 = 1.5
Choice c) – Sales ÷ EBIT = $500,000 ÷ $180,000 = 2.8
Choice d) – EBIT ÷ (EBIT - Interest) = $180,000 ÷ ($180,000 - $80,000) = 1.8 (financial
leverage)
Choice e) – Contribution margin ÷ Fixed costs = $300,000 ÷ $120,000 = 2.5
70.
Answer: a.
The minimum amount of the elected proceeds of disposition is equal to the greater of
1) the fair market value of the non-share consideration received (i.e. $10,000 note), and
2) the lesser of i) the fair market value of the property (i.e. $28,000) and ii) the adjusted
cost base of the capital property (i.e. $40,000).
Therefore, the minimum amount is $28,000.
71.
72.
Answer: b.
Proceeds of disposition
Less:
Adjusted cost base
Disposition costs
Total capital gain
Non-taxable (50%*)
Total taxable capital gain
$300,000
$110,000
8,000
Answer: c.
Dividend
Gross up (25%)
$10,000
2,500
Taxable dividend
$12,500
Federal tax (29% x $12,500)
Dividend tax credit ($2,500 x 2/3)
$3,625
1,667
Federal tax payable
$1,958
118,000
$182,000
91,000
$ 91,000
Choice a) – Fails to gross up dividend or to take the dividend tax credit:
$10,000 x 29% = $2,900
Choice b) – Fails to gross up dividend and calculates dividend tax credit incorrectly:
($10,000 x 29%) - (2/3 x $2,900) = $967
Choice d) – Incorrectly calculated dividend tax credit: $3,625 - (2/3 x $3,625) = $1,208
Choice e) – Neglects the dividend tax credit: $12,500 x 29% = $3,625
64
CMA Canada
Financial Reporting
73.
Answer: d.
74.
Answer: a.
Net income
Income tax provision
Adjust ending inventory – from LIFO to FIFO
Adjust beginning inventory – from LIFO to FIFO
Interest re late payment of income taxes
Political contribution
CCA ($1,950 x .2 + $1,300 x .3)
Taxable income
$1,380
920
800
10
(15)
50
10
(780)
$2,375
Choice b) – Reverses the adjustments for inventory: $2,375 + $15 + $15 - $10 - $10
= $2,385
Choice c) – Neglects to adjust for interest on late payment of income taxes: $2,375 $50 = $2,325
Choice d) – Adds back interest re acquisition of shares: $2,375 + $15 = $2,390
Choice e) – Neglects adjustments for inventory and political donation: $2,375 - $10 +
$15 - $10 = $2,370
75.
Answer: a.
Gross profit reported in Year 1:
$12,000 costs to date + $24,000 expected costs to complete = $36,000 total expected
cost
% complete in Year 1 = $12,000/$36,000 = 33.3%
Gross profit reported in Year 1 = 33.3% x ($42,000 - $36,000) = 33.3% x $6,000
= $2,000
Gross profit reported in Year 2:
$12,000 Year 1 costs + $13,000 Year 2 costs + $15,000 estimated costs to complete
= $40,000 total expected costs
% complete in Year 2 = $25,000/$40,000 = 62.5%
Gross profit reported in Year 2 = [62.5% x ($42,000 - $40,000)] - $2,000 recognized in
Year 1 = 62.5% x $2,000 - $2,000 = $1,250 - $2,000 = $(750) (i.e. a loss of $750)
76.
Answer: c.
Gross profit percentage on Year 1 sales = ($600,000 - $420,000)/$600,000 = 30%
Gross profit percentage on Year 2 sales = ($850,000 - $680,000)/$850,000 = 20%
Realized gross profit in Year 2 = ($210,000 x 30%) + ($250,000 x 20%) = $113,000
Choice a) – Gross profit on all Year 2 sales: $850,000 - $680,000 = $170,000
Choice b) – Includes only realized gross profit on Year 2 collections: $250,000 x 20%
= $50,000
Choice d) – Uses 30% gross profit percentage on all collections: ($210,000 + $250,000)
x 30% = $138,000
Choice e) – Uses 20% gross profit percentage on all collections: ($210,000 + $250,000)
x 20% = $92,000
CMA Canada
65
77.
Answer: c.
Choices a), b), d) and e) do not qualify as extraordinary items because they result from
risks inherent in the enterprise’s normal business activities. The expropriation of land
(choice c) is clearly not typical, infrequent and not dependent primarily on a
management decision; therefore, it qualifies as an extraordinary item.
78.
Answer: b.
For the initial one-year warranty, the entire expected warranty cost is expensed in
Year 10 (matching principle) and a liability is recorded for warranty costs expected to be
paid out in future periods. For the extended warranty, the warranty revenue is amortized
over the extended warranty period, and costs under the warranty are expensed in the
period incurred. Therefore, in Year 10, a current warranty liability for the initial one-year
warranty of (300 x $80)/2 = $12,000 would be recorded. For the extended warranty, the
entire revenue collected of 160 x $400 = $64,000 would be recorded as unearned
revenue. On December 31, Year 11, all of the initial one-year warranty period would
have lapsed, and one-quarter of the two-year extended warranty period would have
lapsed. Therefore, there would be no warranty liability, and the unearned revenue
balance would be $64,000 x ¾ = $48,000.
Choice a) – Assumes warranty revenue is earned in Year 10 and records expected
extended warranty costs as a liability.
Choice c) – Assumes all sales made at beginning of Year 10.
Choice d) – Records expected extended warranty as a liability.
Choice e) – Assumes all sales made at end of Year 10.
79.
Answer: c.
Net loss from operations
Add back amortization
Add back increase in accounts payable
Cash provided (used) from operations
$(160,000)
30,000
15,000
$(115,000)
80.
Answer: e.
According to section 3030.10 of the CICA Handbook, the basis of valuation, or method
determining the cost of inventory, (e.g. FIFO, LIFO, average cost) is a required
disclosure (choice d). Section 3030.13 states that any change in the basis of inventory
valuation from the previous period and its effects are a required disclosure (choice c).
The composition of inventory (choice b) is desirable, but not required. Identification of
major suppliers (choice a) is not required. Therefore, choice e) is the correct answer.
81.
Answer: c.
If temporary investments are classified as held for trading, they should be reported at fair
value at each balance sheet date. The fair value of the temporary investments =
$39,375 + $243,625 + $92,000 = $375,000.
Choice a) – Uses highest value: $39,375 + $246,750 + $92,750 = $378,875.
Choice b) – Uses cost: $31,500 + $246,750 + $92,750 = $371,000.
Choice d) – Uses cost of shares and face value of bonds: $31,500 + $246,750 +
$100,000 = $378,250.
Choice e) – Uses lower of cost or market: $31,500 + $243,625 + $92,000 = $367,125.
66
CMA Canada
82.
Answer: a.
Co. Q owns more than 20% of Co. R’s shares and it is a major customer of Co. R.
Therefore, Co. Q has significant influence over Co. R and should account for the
investment using the equity method. Co. Q’s share of Co. R’s income should be
recognized as investment income and Co. Q’s share of the excess of fair value over
book value of the asset should be amortized over the life of the asset and charged
against investment income in Co. Q’s income statement. Note that the excess paid over
book value for the shares was $3 million - (25% x $11 million) = $250,000, which is the
same amount as Co. Q’s share of the excess fair value over book value for the asset
(i.e. $1,000,000 x 25% = $250,000). Dividends received should be recorded as a
reduction in the Investment in Co. R on the balance sheet. Therefore, Co Q should only
record investment income of ($500,000 x 25%) - ($250,000/25) = $125,000 - $10,000
= $115,000 on its income statement.
Choice b) – Assumes only dividends received are recorded as income: $200,000 x 25%
= $50,000.
Choice c) – Assumes dividend and unrealized holding gains are recorded as income:
$200,000 x 25% = $50,000 dividend income and $3.1 million - $3 million
= $100,000 unrealized holding gain.
Choice d) – Assume all activities are recorded through the investment account on the
balance sheet and nothing is recognized on the income statement.
Choice e) – Neglects to deduct amortization of excess of fair value over book value of
assets: Investment income = $500,000 x 25% = $125,000.
83.
Answer: c.
All costs incurred up to the excavation for the new building are considered land costs.
Salvage proceeds reduce the cost of the land. Special assessments such as drainage
are charged to land because of their permanent nature. This includes landscaping.
Value of building account = $3,600 + $18,500 + $1,500,000 = $1,522,100.
Choice a) – Excludes architect fees: $18,500 + $1,500,000 = $1,518,500.
Choice b) – Includes original cost of old building and removal of old building and salvage
in addition to correct costs: $1,522,100 + (20% x $200,000) + $25,000 $5,500 = $1,581,600.
Choice d) – Includes survey cost: $1,522,100 + $500 = $1,522,600.
Choice e) – Includes trees and landscaping cost: $1,522,100 + $7,300 = $1,529,400.
84.
Answer: e.
In accordance with generally accepted accounting principles, development costs (but not
research costs) can be capitalized if certain criteria are met. Choices a), b) and d) relate
to three of the specified criteria for capitalizing development costs. Choice c) must be
answered before even considering the criteria. Only choice e) is not one of the criteria
for capitalizing development costs.
CMA Canada
67
85.
Answer: e.
Interest expense = ($81,915 - $22,890) x 8% = $4,722
Amortization expense = $81,915/4 = $20,479
Total expense in Year 1= $25,201
Choice a) – Amortization expense of $20,479 only
Choice b) – Assumes lease payments are at end of year:
Total expense = ($81,915 x 8%) + $20,479 = $27,032
Choice c) – Lease payment of $22,890
Choice d) – Uses lessee’s incremental borrowing rate of 10% to determine the amount
to capitalize: $22,890 + $22,890 x 2.487 = $79,817
Interest expense = ($79,817 - $22,890) x 8% = $4,554
Amortization expense = $79,817/4 = $19,954
Total expense in Year 1 = $4,554 + $19,954 = $24,508
86.
Answer: c.
The lease would be classified as a sales-type lease:
Gross profit from sales of asset = $90,000 - $75,000 = $15,000
Interest revenue = ($81,915 - $22,890) x 8% = $4,772
Total increase in profits before taxes in Year 1= $15,000 + $4,772 = $19,772.
Choice a) – Treat as a direct financing lease – recognize interest revenue of $4,772
only.
Choice b) – Profit from sale of asset of $15,000 only.
Choice d) – Treat as an operating lease: Rental revenue of $22,890 minus amortization
of ($75,000 - $11,000)/4 years = $6,890
Choice e) – Amortize profit from sale of asset over 4 years:
($90,000 - $75,000)/4 + $4,772 = $8,522
87.
Answer: a.
Pension expense = service costs + interest on accrued benefits - expected return on
pension fund assets + amortization of past service costs + amortization of net actuarial
unrecognized loss = $640,000 + $290,000 - $184,000 + $120,000 + $66,000
= $932,000.
Choice b) – Includes pension benefits paid to retirees: $640,000 + $290,000 - $184,000
+ $120,000 + $66,000 + $90,000 = $1,022,000.
Choice c) – Includes actual return on pension fund assets instead of the expected
return: $640,000 + $290,000 - $160,000 + $120,000 + $66,000 = $956,000.
Choice d) – Deducts the amortization of unrecognized net actuarial gain (i.e. treats it like
a loss): $640,000 + $290,000 - $184,000 + $120,000 - $66,000 = $800,000.
Choice e) – Does not include amortization of unrecognized net actuarial loss: $640,000
+ $290,000 - $184,000 + $120,000 = $866,000.
68
CMA Canada
88.
Answer: e.
Dividends on cumulative preferred shares are deducted in the numerator, whether
declared or not. However, only the dividends pertaining to the current year are used in
calculating earnings per share (EPS).
Basic EPS = (Net income - Preferred dividends) ÷ Weighted average common shares
outstanding = [$450,000 - (8% x $1,000,000)] ÷ [200,000 + (100,000 x 3/12)] =
$370,000/225,000 = $1.64
Choice a) – Neglects to deduct preferred dividends and uses year end number of
shares: $450,000/(200,000 + 100,000) = $1.50
Choice b) – Neglect to deduct preferred dividends: $450,000/225,000 = $2.00
Choice c) – Uses year end number of shares: $370,000/300,000 = $1.23
Choice d) – Deducts preferred dividends for both Years 5 and 6: [$450,000 - (2 x 8% x
$1,000,000)] ÷ [200,000 + (100,000 x 3/12)] = $1.29
89.
Answer: a.
The earnings per share must be calculated assuming the conversion of the convertible
securities at the beginning of the year, unless the convertible security is antidilutive (i.e.
upon conversion, the earnings per share would increase instead of decrease). If the
preferred shares were converted, the dividend of 8% x $1,000,000 = $80,000 would be
saved, but the number of common shares would be increased by 50,000 x 2 = 100,000
shares. Therefore, if the preferred shares are converted, the diluted EPS =
$450,000/(200,000 + 100,000 + 3/12 x 100,000) = $450,000/325,000 = $1.38. This is
less than the basic EPS of ($450,000 - $80,000)/225,000 = $1.64. Therefore, the
conversion of the preferred shares should be included in the calculation of diluted EPS.
Stock options are included in EPS calculations through the treasury stock method. This
method assumes that the proceeds from exercising the stock options would be used to
buy common shares for the treasury at the average market price for the year. If the
exercise price is lower than the average market price, the option is dilutive and should
be considered in the calculation of EPS. If the exercise price is higher than the average
market price, the option is antidilutive and should not be included in the calculation of
EPS. Since the option price of $18 per share is greater than the $15 average price per
share, the options should not be included in the calculation. Therefore, the fully diluted
EPS is $1.38.
Choice b) – Deducts preferred dividend from net income: ($450,000 - $80,000)/325,000
= $1.14
Choice c) – Adds preferred dividend to net income (i.e. assumes preferred dividend was
previously deducted in net income calculation): ($450,000 +
$160,000)/325,000 = $1.88.
Choice d) – Assumes options should be converted in the calculation: $450,000/[200,000
+ 100,000 + 25,000 + 60,000 - ($18 x 60,000/$15)] = $450,000/313,000 =
$1.44
Choice e) – Assumes neither the conversion of the preferred shares nor the exercising
of the options would apply: [$450,000 - (8% x $1,000,000)] ÷ [200,000 +
(100,000 x 3/12)] = $370,000/225,000 = $1.64
CMA Canada
69
90.
Answer: b.
Goodwill is calculated as follows: Cost - proportion of Fair value = $800,000 ($1,003,000 - $240,000) x 70% = $265,900.
Choice a) Uses 100% of the fair value = $800,000 - $763,000 = $37,000
Choice c) Uses book value of total assets = $800,000 - $690,000 = $110,000
Choice d) Uses 70% of fair value of total assets = $800,000 - $1,003,000 x 70%
= $97,900
Choice e) Uses shareholders’ equity = $800,000 - $450,000 = $350,000
91.
Answer: c.
Since AWI is financially and operationally independent of its Canadian parent, it is a selfsustaining foreign operation and its statements should be translated using the current
rate method. Under the current rate method, assets and liabilities should be translated
using the December 31, Year 2, exchange rate of 0.34 and income statement items
should be translated using the 0.32 average rate for Year 2: inventory = 75,000 FC x .34
= $25,500; sales = 600,000 FC x .32 = $192,000; amortization = 10,000 FC x .32 =
$3,200.
Choice a) – uses the average rate for Year 2 of .32 for all.
Choice b) – uses the Dec. 31, Year 2, rate of .34 for all.
Choice d) – uses the Year 2 4th quarter average for inventory (.35) and the Dec. 31,
Year 2, rate of .34 for sales and amortization.
Choice e) – uses the Year 2 4th quarter average rate for inventory (.35) and the Year 2
average rate of .32 for sales and amortization.
92.
Answer: b.
Cash
Accounts receivable
Inventory (FIFO basis)
Capital assets
Accounts payable
Capital stock
Retained earnings, January 1
Sales
Cost of sales
Other operating expenses
Cumulative translation gain
Year 2
150,000 FC
90,000 FC
75,000 FC
180,000 FC
25,000 FC
10,000 FC
240,000 FC
600,000 FC
250,000 FC
10,000 FC
120,000 FC
Rate
.34
.34
.34
.34
.34
.36
.33
.32
.32
.32
.32
Translated
$ 51,000 dr
30,600 dr
25,500 dr
61,200 dr
8,500 cr
3,600 cr
79,200 cr
192,000 cr
80,000 dr
3,200 dr
38,400 dr
6,600 cr
Choice a) – Uses the temporal method.
Choice c) – Capital stock and retained earnings translated at the year-end rate for
Year 2 of 0.34.
Choice d) – Capital stock translated at the year-end rate for Year 2 of 0.34.
Choice e) – Assumes all accounts are translated at the same rate.
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CMA Canada
93.
Answer: a.
Accounting loss
Temporary difference
Loss for tax purposes
$(100,000)
(40,000)
$(140,000)
RJT Inc. will be able to carry back $90,000 to offset past taxable income, resulting in a
current income tax refund receivable of $90,000 x .4 = $36,000, i.e. current tax benefit of
$36,000.
The remaining $50,000 loss can be carried forward to future years. Therefore, a future
income tax asset of $50,000 x 40% = $20,000 would be recorded. A future income tax
liability of $40,000 x 40% = $16,000 would result from the taxable temporary difference
in accounts receivable. The net result is as follows:
Future tax liability from taxable temporary difference
Future tax asset due to loss carryforward
Net future tax asset
$16,000
(20,000)
$ (4,000)
The increase in the asset equals the future income tax benefit of $4,000.
Choice b) – Assumes all of the current taxable loss is a current tax benefit of $140,000 x
.4 = $56,000. Future tax expense = $40,000 x .4 = $16,000.
Choice c) – Assumes all of the current taxable loss is a future tax asset of $140,000 x .4
= $56,000 and that the temporary difference is a future tax liability of
$40,000 x .4 = $16,000. Therefore, the net tax benefit is $56,000 - $16,000 =
$40,000.
Choice d) – Reverses direction of temporary difference: Year 6 loss for tax purposes =
$100,000 - $40,000 = $60,000. Therefore, loss carryback = $60,000 and
current tax benefit = $60,000 x .4 = $24,000. Future tax benefit = $40,000 x
.4 = $16,000.
Choice e) – Assumes the future tax benefit from loss carryforward is not recognized in
the financial statements. Current tax benefit = $90,000 x .4 = $36,000.
Future tax expense = $40,000 x .4 = $16,000.
94.
Answer: b.
When a foreign currency transaction gives rise to a receivable or a payable, a change in
the exchange rate between the functional currency and the currency in which the
transaction is denominated is a foreign currency transaction gain or loss that should be
included as a component of income from continuing operations in the period in which the
exchange rate changes. The transaction was recorded at $1.50 per British pound. At
December 31, Year 10, the exchange rate had risen to $1.55, so Company X should
recognize a loss of $5,000 [i.e. ($1.55 - $1.50) x £100,000] in Year 10. The Year 11
recognized loss is $2,000 [i.e. ($1.57 - $1.55) x £100,000].
95.
Answer: e.
Quick ratio = (Cash + Marketable securities + Receivables)/Current liabilities
= ($87 + $40 + $180)/$455 = 0.67
Choice a) – Uses total assets in numerator: $1,379/$455 = 3.03
Choice b) – Uses total liabilities in the denominator: $307/$695 = 0.44
Choice c) – Current ratio: ($87 + $40 + $180 + $432)/$455 = 1.62
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71
Choice d) – Uses total assets and total liabilities: $1,379/$695 = 1.98
96.
Answer: b.
Inventory turnover = 365 days/(cost of goods sold/average inventory)
= 365/{$1,080/[($432 + $366)/2]} = 365/($1,080/$399) = 135 days
Choice a) –
Choice c) –
Choice d) –
Choice e) –
97.
Answer: a.
Times interest earned = Income before interest & taxes ÷ Interest
= ($44 + $29 + $19)/$19 = 4.8 times
Choice b) –
Choice c) –
Choice d) –
Choice e) –
98.
72
Uses common shares only: $695/$500 = 1.39
Uses long-term debt: ($695 - $455)/$684 = 0.35
Uses total assets instead of equity: $695/$1,379 = 0.50
Uses retained earnings only: $695/$184 = 3.78
Answer: a.
The interest expense is based on the issue price ($922,783) and the effective interest
rate (10% per year) rather than the face value ($1,000,000) and the coupon rate (8% per
year). The interest expense for the first six months = $922,783 x 10% x ½ year
= $46,139.
Choice b) –
Choice c) –
Choice d) –
Choice e) –
100.
Uses gross margin: ($1,800 - $1,080)/$19 = 37.9 times.
Uses net income: $44/$19 = 2.3 times
Uses long term liabilities: $320/$19 = 16.8 times
Use net income before interest but after taxes: ($44 + $19)/19 = 3.3 times
Answer: b.
Total debt-to-equity ratio = Total liabilities/Total shareholders’ equity
= $695/($500 + $184) = $695/$684 = 1.02
Choice a) –
Choice c) –
Choice d) –
Choice e) –
99.
Uses sales and beginning inventory = 365/[$1,800/$366] = 74 days
Uses sales instead of COGS = 365/[$1,800/$399] = 81 days
Use beginning inventory = 365/[$1,080/$366] = 124 days
Use gross margin instead of COGS = 365/[($1,800 - $1,080)/$399]
= 202 days
Uses face value and coupon rate: $1,000,000 x 8% x ½ year = $40,000
Uses coupon rate: $922,783 x 8% x ½ year = $36,911
Uses the face value: $1,000,000 x 10% x ½ year = $50,000
Uses interest paid plus amortization of discount on a straight-line basis:
($1,000,000 x 8% x ½ year) + [($1,000,000 - $922,783) ÷ 10]
= $40,000 + $7,722 = $47,722
Answer: a.
Section 1701.05 of the CICA Handbook states that segment cash flow need not be
disclosed.
CMA Canada
101.
Answer: b.
Funds for special projects or events are put aside in a special or reserve fund.
Choice a) – Operating revenues and expenses are recorded in the general fund.
Choice c) – Resources intended for use for capital improvements or the acquisition of
new fixed assets are recorded in the capital fund.
Choice d) – Funds held in trust for third parties are recorded in a fiduciary fund.
Choice e) – Donated funds where the principal cannot be touched are held in an
endowment fund.
Cross-Competency
102.
Answer: e.
Using the high-low method:
Variable cost per unit = ($680,000 - $600,000)/(100,000 - 80,000) = $4
Contribution margin per unit = $10 - $4 = $6
Choice a) – Uses direct materials and direct labour only: $10.00 - $2.50 = $7.50
Choice b) – Equals the variable cost of $4
Choice c) – Incorrect calculation of variable costs: VC = $2.50 + [($350,000/80,000) ($380,000/100,000)] = $3.075; CM = $10.00 - $3.075 = $6.925
Choice d) – Uses unit cost at 100,000 units, excluding amortization: VC = ($150,000 +
$100,000 + $380,000)/100,000 = $6.30; CM = $10.00 - $6.30 = $3.70
103.
Answer: a.
CCA tax shield =
Choice b) –
Choice c) –
Choice d) –
Choice e) –
CMA Canada
($210,000 − $120,000) x .3 x .4 ⎛ 2 + .1 ⎞
⎜⎜
⎟⎟ = $25,773
.1 + .3
⎝ 2(1 + .1) ⎠
Neglects the half year rule.
Uses book value of $180,000 for proceeds from old machine.
Uses UCC of old machine of $195,500 for proceeds from old machine.
Uses tax rate of .4 instead of the CCA rate of .3 in the denominator.
73
104.
Answer: e.
Horizontal analysis indicates that the company contribution margin in Year 10 is 106% of
the contribution margin in Year 8 while the net operating income in Year 10 is 110% of
the net operating income in Year 8. Therefore, choice a) is false because the net
operating income is increasing at greater rate than contribution margin for the company.
Trend analysis indicates that Company A’s share of the e-book usage market has
increased from 4.8% in Year 8, to 5.7% in Year 9 and 6.7% in Year 10. Therefore,
choice b) is true.
The following table shows the e-book segment as a proportion of the company:
Year 8
Year 9
Year 10
Total sales
8.0%
10.0%
13.0%
Contribution margin
9.8%
14.2%
19.8%
Net operating income
7.8%
15.0%
26.9%
The e-book segment is contributing more as a percentage of the total company results in
sales, contribution margin and net operating income each year. Therefore, choice c) is
true.
Since choice b) and choice c) are both true, choice e) is the correct answer. Choice d) is
not correct because choice a) is false.
105.
Answer: d.
Expanding e-book usage emphasizes the economic component (choice a), the
environmental component (choice b) by reducing paper usage but not the social
component (choice c). Therefore, choice d) is correct and choice e) is not.
End of Solutions
74
CMA Canada
Supplement of Formulae and Present Value Tables
1.
CAPITAL STRUCTURE
a)
After-Tax Marginal Cost of Debt:
(1− T)I
kb = k(1− T) or
F
where k = interest rate
T = corporate tax rate
I = annual interest payment on debt
F = face value of debt
b)
Cost of Preferred Shares:
kp =
Dp
NPp
where
c)
Dp = stated annual dividend payment on shares
NPp = net proceeds on preferred share issue
Cost of Common Equity:
i)
Cost of Common Shares (Capitalization of Dividends with Constant
Growth Rate):
ke =
D1
+g
NPe
where
ii)
D1 = dividend expected for period 1
NPe = net proceeds on common share issue
g
= annual long-term dividend growth rate
Cost of Retained Earnings:
kre = re =
D1
+g
Pe
where Pe
re
iii)
= market price of a share
= expected return on common equity
Capital Asset Pricing Model:
(
Rj = Rf + β j Rm − Rf
where
CMA Canada
Rj
Rf
Rm
βj
)
= expected rate of return on security j
= risk-free rate
= expected return for the market portfolio
= beta coefficient for security j (measure of
systematic risk)
75
d)
Weighted Average Cost of Capital:
⎛ E⎞
⎛ P⎞
⎛ B⎞
k = ⎜ ⎟ kb + ⎜ ⎟ kp + ⎜ ⎟ ke
⎝ V⎠
⎝ V⎠
⎝ V⎠
where
2.
B
P
E
V
= amount of debt outstanding
= amount of preferred shares outstanding
= amount of common equity outstanding
= B + P + E = total value of firm
PRESENT VALUE OF TAX SHIELD FOR AMORTIZABLE ASSETS
a)
Present Value of Total Tax Shield from CCA for a New Asset
Present Value =
b)
Ctd ⎛ 2 + k ⎞ CdT ⎛ 1 + 0.5k ⎞
⎜
⎟=
⎜
⎟
(d + k ) ⎜⎝ 2 (1 + k ) ⎟⎠ (d + k ) ⎝ 1 + k ⎠
Present Value of Total Tax Shield from CCA for an Asset that is Not Newly
Acquired
⎛ dT ⎞
Present Value = UCC ⎜
⎟
⎝d +k ⎠
c)
Present Value of Total Tax Shield Lost From Salvage
Present Value =
Sn
Sn ⎛ dT ⎞
⎛ dT ⎞
⎟ or
⎟, depending on cash
n ⎜
n −1 ⎜
(1 + k ) ⎝ d + k ⎠ (1 + k ) ⎝ d + k ⎠
flow assumptions
Notation for above formulae:
C
= net initial investment
UCC = undepreciated capital cost of asset
Sn
= salvage value of asset realized at end of year n
T
= corporate tax rate
k
= discount rate or time value of money
d
= maximum rate of capital cost allowance
n
= total life of investment
76
CMA Canada
Present Value Tables
Table 1
Present Value of One Dollar Due at the End of n Years
P=
n
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1%
0.990
.980
.971
.961
.951
.942
.933
.923
.914
.905
.896
.887
.879
.870
.861
.853
.844
.836
.828
.820
.811
.803
.795
.788
.780
CMA Canada
2%
3%
0.980 0.971
.961
.943
.942
.915
.924
.888
.906
.863
.888
.837
.871
.813
.853
.789
.837
.766
.820
.744
.804
.722
.788
.701
.773
.681
.758
.661
.743
.642
.728
.623
.714
.605
.700
.587
.686
.570
.673
.554
.660
.538
.647
.522
.634
.507
.622
.492
.610
.478
4%
0.962
.925
.889
.855
.822
.790
.760
.731
.703
.676
.650
.625
.601
.577
.555
.534
.513
.494
.475
.456
.439
.422
.406
.390
.375
1
(1+ i) n
5%
6%
0.952 0.943
.907
.890
.864
.840
.823
.792
.784
.747
.746
.705
.711
.665
.677
.627
.645
.592
.614
.558
.585
.527
.557
.497
.530
.469
.505
.442
.481
.417
.458
.394
.436
.371
.416
.350
.396
.331
.377
.312
.359
.294
.342
.278
.326
.262
.310
.247
.295
.233
7%
0.935
.873
.816
.763
.713
.666
.623
.582
.544
.508
.475
.444
.415
.388
.362
.339
.317
.296
.277
.258
.242
.226
.211
.197
.184
8%
0.926
.857
.794
.735
.681
.630
.583
.540
.500
.463
.429
.397
.368
.340
.315
.292
.270
.250
.232
.215
.199
.184
.170
.158
.146
9%
0.917
.842
.772
.708
.650
.596
.547
.502
.460
.422
.388
.356
.326
.299
.275
.252
.231
.212
.194
.178
.164
.150
.138
.126
.116
10%
0.909
.826
.751
.683
.621
.564
.513
.467
.424
.386
.350
.319
.290
.263
.239
.218
.198
.180
.164
.149
.135
.123
.112
.102
.092
77
Table 1 (cont’d)
P=
n
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
78
11%
0.901
.812
.731
.659
.593
.535
.482
.434
.391
.352
.317
.286
.258
.232
.209
.188
.170
.153
.138
.124
.112
.101
.091
.082
.074
12%
13%
0.893 0.885
.797
.783
.712
.693
.636
.613
.567
.543
.507
.480
.452
.425
.404
.376
.361
.333
.322
.295
.287
.261
.257
.231
.229
.204
.205
.181
.183
.160
.163
.142
.146
.125
.130
.111
.116
.098
.104
.087
.093
.077
.083
.068
.074
.060
.066
.053
.059
.047
14%
0.877
.769
.675
.592
.519
.456
.400
.351
.308
.270
.237
.208
.182
.160
.140
.123
.108
.095
.083
.073
.064
.056
.049
.043
.038
1
(1+ i) n
15%
16%
0.870 0.862
.756
.743
.658
.641
.572
.552
.497
.476
.432
.410
.376
.354
.327
.305
.284
.263
.247
.227
.215
.195
.187
.168
.163
.145
.141
.125
.123
.108
.107
.093
.093
.080
.081
.069
.070
.060
.061
.051
.053
.044
.046
.038
.040
.033
.035
.028
.030
.024
17%
0.855
.731
.624
.534
.456
.390
.333
.285
.243
.208
.178
.152
.130
.111
.095
.081
.069
.059
.051
.043
.037
.032
.027
.023
.020
18%
19%
20%
0.847 0.840 0.833
.718
.706
.694
.609
.593
.579
.516
.499
.482
.437
.419
.402
.370
.352
.335
.314
.296
.279
.266
.249
.233
.225
.209
.194
.191
.176
.162
.162
.148
.135
.137
.124
.112
.116
.104
.093
.099
.088
.078
.084
.074
.065
.071
.062
.054
.060
.052
.045
.051
.044
.038
.043
.037
.031
.037
.031
.026
.031
.026
.022
.026
.022
.018
.022
.018
.015
.019
.015
.013
.016
.013
.010
CMA Canada
Table 1 (cont’d)
P=
n
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
21%
22%
0.826 0.820
.683
.672
.564
.551
.467
.451
.386
.370
.319
.303
.263
.249
.218
.204
.180
.167
.149
.137
.123
.112
.102
.092
.084
.075
.069
.062
.057
.051
.047
.042
.039
.034
.032
.028
.027
.023
.022
.019
.018
.015
.015
.013
.012
.010
.010
.008
.009
.007
CMA Canada
23%
24%
0.813 0.806
.661
.650
.537
.524
.437
.423
.355
.341
.289
.275
.235
.222
.191
.179
.155
.144
.126
.116
.103
.094
.083
.076
.068
.061
.055
.049
.045
.040
.036
.032
.030
.026
.024
.021
.020
.017
.016
.014
.013
.011
.011
.009
.009
.007
.007
.006
.006
.005
1
(1+ i) n
25%
26%
27%
0.800 0.794 0.787
.640
.630
.620
.512
.500
.488
.410
.397
.384
.328
.315
.303
.262
.250
.238
.210
.198
.188
.168
.157
.148
.134
.125
.116
.107
.099
.092
.086
.079
.072
.069
.062
.057
.055
.050
.045
.044
.039
.035
.035
.031
.028
.028
.025
.022
.023
.020
.017
.018
.016
.014
.014
.012
.011
.012
.010
.008
.009
.008
.007
.007
.006
.005
.006
.005
.004
.005
.004
.003
.004
.003
.003
28%
29%
0.781 0.775
.610
.601
.477
.466
.373
.361
.291
.280
.227
.217
.178
.168
.139
.130
.108
.101
.085
.078
.066
.061
.052
.047
.040
.037
.032
.028
.025
.022
.019
.017
.015
.013
.012
.010
.009
.008
.007
.006
.006
.005
.004
.004
.003
.003
.003
.002
.002
.002
30%
0.769
.592
.455
.350
.269
.207
.159
.123
.094
.073
.056
.043
.033
.025
.020
.015
.012
.009
.007
.005
.004
.003
.002
.002
.001
79
Table 1 (cont’d)
P=
n
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
80
31%
32%
0.763 0.758
.583
.574
.445
.435
.340
.329
.259
.250
.198
.189
.151
.143
.115
.108
.088
.082
.067
.062
.051
.047
.039
.036
.030
.027
.023
.021
.017
.016
.013
.012
.010
.009
.008
.007
.006
.005
.005
.004
.003
.003
.003
.002
.002
.002
.002
.001
.001
.001
33%
34%
0.752 0.746
.565
.557
.425
.416
.320
.310
.240
.231
.181
.173
.136
.129
.102
.096
.077
.072
.058
.054
.043
.040
.033
.030
.025
.022
.018
.017
.014
.012
.010
.009
.008
.007
.006
.005
.004
.004
.003
.003
.003
.002
.002
.002
.001
.001
.001
.001
.001
.001
1
(1+ i) n
35%
0.741
.549
.406
.301
.223
.165
.122
.091
.067
.050
.037
.027
.020
.015
.011
.008
.006
.005
.003
.002
.002
.001
.001
.001
.001
36%
0.735
.541
.398
.292
.215
.158
.116
.085
.063
.046
.034
.025
.018
.014
.010
.007
.005
.004
.003
.002
.002
.001
.001
.001
.001
37%
0.730
.533
.389
.284
.207
.151
.110
.081
.059
.043
.031
.023
.017
.012
.009
.006
.005
.003
.003
.002
.001
.001
.001
.001
.001
38%
0.725
.525
.381
.276
.200
.145
.105
.076
.055
.040
.029
.021
.015
.011
.008
.006
.004
.003
.002
.002
.001
.001
.001
.001
.001
39%
0.719
.518
.372
.268
.193
.139
.100
.072
.052
.037
.027
.019
.014
.010
.007
.005
.004
.003
.002
.001
.001
.001
.001
.001
.001
40%
0.714
.510
.364
.260
.186
.133
.095
.068
.048
.035
.025
.018
.013
.009
.006
.005
.003
.002
.002
.001
.001
.001
.001
.001
.001
CMA Canada
Table 2
Present Value of One Dollar Per Year — n Years at i%
⎛ 1 ⎞
⎟
1− ⎜
⎜ 1+ i n ⎟
) ⎠
⎝(
Pn =
i
n
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1%
0.990
1.970
2.941
3.902
4.854
5.796
6.728
7.652
8.566
9.471
10.368
11.255
12.134
13.004
13.865
14.718
15.562
16.398
17.226
18.046
18.857
19.661
20.456
21.244
22.023
CMA Canada
2%
0.980
1.942
2.884
3.808
4.713
5.601
6.472
7.325
8.162
8.983
9.787
10.575
11.348
12.106
12.849
13.578
14.292
14.992
15.678
16.351
17.011
17.658
18.292
18.914
19.523
3%
0.971
1.914
2.829
3.717
4.580
5.417
6.230
7.020
7.786
8.530
9.253
9.954
10.635
11.296
11.938
12.561
13.166
13.753
14.324
14.877
15.415
15.937
16.444
16.936
17.413
4%
0.962
1.886
2.775
3.630
4.452
5.242
6.002
6.733
7.435
8.111
8.760
9.385
9.986
10.563
11.118
11.652
12.166
12.659
13.134
13.590
14.029
14.451
14.857
15.247
15.622
5%
0.952
1.859
2.723
3.547
4.330
5.076
5.786
6.463
7.108
7.722
8.306
8.863
9.394
9.899
10.380
10.838
11.274
11.690
12.085
12.462
12.821
13.163
13.489
13.799
14.094
6%
0.943
1.833
2.673
3.465
4.212
4.917
5.582
6.210
6.802
7.360
7.887
8.384
8.853
9.295
9.712
10.106
10.477
10.828
11.158
11.470
11.764
12.042
12.303
12.550
12.783
7%
0.935
1.808
2.624
3.387
4.100
4.767
5.389
5.971
6.515
7.024
7.499
7.943
8.358
8.745
9.108
9.447
9.763
10.059
10.336
10.594
10.836
11.061
11.272
11.469
11.654
8%
0.926
1.783
2.577
3.312
3.993
4.623
5.206
5.747
6.247
6.710
7.139
7.536
7.904
8.224
8.560
8.851
9.122
9.372
9.604
9.818
10.017
10.201
10.371
10.529
10.675
9%
0.917
1.759
2.531
3.240
3.890
4.486
5.033
5.535
5.995
6.418
6.805
7.161
7.487
7.786
8.061
8.313
8.544
8.756
8.950
9.129
9.292
9.442
9.580
9.707
9.823
10%
0.909
1.736
2.487
3.170
3.791
4.355
4.868
5.335
5.759
6.145
6.495
6.814
7.103
7.367
7.606
7.824
8.022
8.201
8.365
8.514
8.649
8.772
8.883
8.985
9.077
81
Table 2 (cont’d)
⎛ 1 ⎞
⎟
1− ⎜
⎜ 1+ i n ⎟
) ⎠
⎝(
Pn =
i
n
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
82
11%
0.901
1.713
2.444
3.102
3.696
4.231
4.712
5.146
5.537
5.889
6.207
6.492
6.750
6.982
7.191
7.379
7.549
7.702
7.839
7.963
8.075
8.176
8.266
8.348
8.422
12%
0.893
1.690
2.402
3.037
3.605
4.111
4.564
4.968
5.328
5.650
5.938
6.194
6.424
6.628
6.811
6.974
7.120
7.250
7.366
7.469
7.562
7.645
7.718
7.784
7.843
13%
0.885
1.668
2.361
2.975
3.517
3.998
4.423
4.799
5.132
5.426
5.687
5.918
6.122
6.303
6.462
6.604
6.729
6.840
6.938
7.025
7.102
7.170
7.230
7.283
7.330
14%
0.877
1.647
2.322
2.914
3.433
3.889
4.288
4.639
4.946
5.216
5.453
5.660
5.842
6.002
6.142
6.265
6.373
6.467
6.550
6.623
6.687
6.743
6.792
6.835
6.873
15%
0.870
1.626
2.283
2.855
3.352
3.785
4.160
4.487
4.772
5.019
5.234
5.421
5.583
5.725
5.847
5.954
6.047
6.128
6.198
6.259
6.313
6.359
6.399
6.434
6.464
16%
0.862
1.605
2.246
2.798
3.274
3.685
4.039
4.344
4.607
4.833
5.029
5.197
5.342
5.468
5.576
5.669
5.749
5.818
5.878
5.929
5.973
6.011
6.044
6.073
6.097
17%
0.855
1.585
2.210
2.743
3.199
3.589
3.922
4.207
4.451
4.659
4.836
4.988
5.118
5.229
5.324
5.405
5.475
5.534
5.585
5.628
5.665
5.696
5.723
5.747
5.766
18%
0.848
1.566
2.174
2.690
3.127
3.498
3.812
4.078
4.303
4.494
4.656
4.793
4.910
5.008
5.092
5.162
5.222
5.273
5.316
5.353
5.384
5.410
5.432
5.451
5.467
19%
0.840
1.547
2.140
2.639
3.058
3.410
3.706
3.954
4.163
4.339
4.487
4.611
4.715
4.802
4.876
4.938
4.990
5.033
5.070
5.101
5.127
5.149
5.167
5.182
5.195
20%
0.833
1.528
2.107
2.589
2.991
3.326
3.605
3.837
4.031
4.193
4.327
4.439
4.533
4.611
4.676
4.730
4.775
4.812
4.844
4.870
4.891
4.909
4.925
4.937
4.948
CMA Canada
Table 2 (cont’d)
⎛ 1 ⎞
⎟
1− ⎜
⎜ 1+ i n ⎟
) ⎠
⎝(
Pn =
i
n
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
21%
0.826
1.510
2.074
2.540
2.926
3.245
3.508
3.726
3.905
4.054
4.177
4.279
4.362
4.432
4.489
4.536
4.576
4.608
4.635
4.657
4.675
4.690
4.703
4.713
4.721
CMA Canada
22%
0.820
1.492
2.042
2.494
2.864
3.167
3.416
3.619
3.786
3.923
4.035
4.127
4.203
4.265
4.315
4.357
4.391
4.419
4.442
4.460
4.476
4.488
4.499
4.507
4.514
23%
0.813
1.474
2.011
2.448
2.804
3.092
3.327
3.518
3.673
3.799
3.902
3.985
4.053
4.108
4.153
4.189
4.219
4.243
4.263
4.279
4.292
4.302
4.311
4.318
4.323
24%
0.807
1.457
1.981
2.404
2.745
3.021
3.242
3.421
3.566
3.682
3.776
3.851
3.912
3.962
4.001
4.033
4.059
4.080
4.097
4.110
4.121
4.130
4.137
4.143
4.147
25%
0.800
1.440
1.952
2.362
2.689
2.951
3.161
3.329
3.463
3.571
3.656
3.725
3.780
3.824
3.859
3.887
3.910
3.928
3.942
3.954
3.963
3.971
3.976
3.981
3.985
26%
0.794
1.424
1.923
2.320
2.635
2.885
3.083
3.241
3.366
3.465
3.543
3.606
3.656
3.695
3.726
3.751
3.771
3.786
3.799
3.808
3.816
3.822
3.827
3.831
3.834
27%
0.787
1.407
1.896
2.280
2.583
2.821
3.009
3.156
3.273
3.364
3.437
3.493
3.538
3.573
3.601
3.623
3.640
3.654
3.664
3.673
3.679
3.684
3.689
3.692
3.694
28%
0.781
1.392
1.868
2.241
2.532
2.759
2.937
3.076
3.184
3.269
3.335
3.387
3.427
3.459
3.483
3.503
3.518
3.529
3.539
3.546
3.551
3.556
3.559
3.562
3.564
29%
0.775
1.376
1.842
2.203
2.483
2.700
2.868
2.999
3.100
3.178
3.239
3.286
3.322
3.351
3.373
3.390
3.403
3.413
3.421
3.427
3.432
3.436
3.438
3.441
3.442
30%
0.769
1.361
1.816
2.166
2.436
2.643
2.802
2.925
3.019
3.092
3.147
3.190
3.223
3.249
3.268
3.283
3.295
3.304
3.311
3.316
3.320
3.323
3.325
3.327
3.329
83
Table 2 (cont’d)
⎛ 1 ⎞
⎟
1− ⎜
⎜ 1+ i n ⎟
) ⎠
⎝(
Pn =
i
n
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
84
31%
0.763
1.346
1.791
2.131
2.390
2.588
2.739
2.854
2.942
3.009
3.060
3.100
3.129
3.152
3.170
3.183
3.193
3.201
3.207
3.211
3.215
3.217
3.219
3.221
3.222
32%
0.758
1.332
1.766
2.096
2.345
2.534
2.678
2.786
2.868
2.930
2.978
3.013
3.040
3.061
3.076
3.088
3.097
3.104
3.109
3.113
3.116
3.118
3.120
3.121
3.122
33%
0.752
1.317
1.742
2.062
2.302
2.483
2.619
2.721
2.798
2.855
2.899
2.931
2.956
2.974
2.988
2.999
3.007
3.012
3.017
3.020
3.023
3.025
3.026
3.027
3.028
34%
0.746
1.303
1.719
2.029
2.260
2.433
2.562
2.658
2.730
2.784
2.824
2.853
2.876
2.892
2.905
2.914
2.921
2.926
2.930
2.933
2.935
2.937
2.938
2.939
2.939
35%
0.741
1.289
1.696
1.997
2.220
2.385
2.508
2.598
2.665
2.715
2.752
2.779
2.799
2.814
2.826
2.834
2.840
2.844
2.848
2.850
2.852
2.853
2.854
2.855
2.856
36%
0.735
1.276
1.674
1.966
2.181
2.339
2.455
2.540
2.603
2.650
2.683
2.708
2.727
2.740
2.750
2.758
2.763
2.767
2.770
2.772
2.773
2.775
2.775
2.776
2.777
37%
0.730
1.263
1.652
1.936
2.143
2.294
2.404
2.485
2.544
2.587
2.618
2.641
2.658
2.670
2.679
2.685
2.690
2.693
2.696
2.698
2.699
2.700
2.701
2.701
2.702
38%
0.725
1.250
1.630
1.906
2.106
2.251
2.356
2.432
2.487
2.527
2.556
2.576
2.592
2.603
2.611
2.616
2.621
2.624
2.626
2.627
2.629
2.629
2.630
2.630
2.631
39%
0.719
1.237
1.609
1.877
2.070
2.209
2.308
2.380
2.432
2.469
2.496
2.515
2.529
2.539
2.546
2.551
2.555
2.557
2.559
2.561
2.562
2.562
2.563
2.563
2.563
40%
0.714
1.225
1.589
1.849
2.035
2.168
2.263
2.331
2.379
2.414
2.438
2.456
2.469
2.478
2.484
2.489
2.492
2.494
2.496
2.497
2.498
2.499
2.499
2.499
2.499
CMA Canada

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