John M. Olin School of Business
ACCOUNTING 3610 - FALL 2008
INTERMEDIATE FINANCIAL ACCOUNTING THEORY I

EXAM # 1 (100 Points)

There are a total of 100 points on this exam. There are five problems, and the total amount of points allocated to each problem is as follows:

Points Earned

Problem 1 – 20 Points _______

Problem 2 – 30 Points _______

Problem 3 – 25 Points _______

Problem 4 – 15 Points _______ Problem 5 – 10 Points _______

Total - 100 Points _______

Each problem is composed of multiple parts, and the points allocated to each part are indicated. The contribution of this exam to your final score for the class is equal to the percentage of points you earn on this exam multiplied by (25 less the sum of your score on Quiz 1).

You may use a non-programmable calculator. You may not use your textbook or notes. You have eighty-three minutes to complete the exam. Partial credit will be given, so be sure to provide support for you answers.

Please note that by taking this exam you agree to abide by the Olin School Honor Code, and may be subject to appropriate action for violation of any of its covenants. GOOD LUCK!

Name____________________________

Problem 1

(A) (5) Recently, some accountants have proposed new accounting standards for valuing Property, Plant and Equipment (PP&E). Currently, PP&E are valued at historical costs and then depreciated over their estimated useful lives. Rather than list PP&E at historical costs, the proposed standard would require companies to determine the fair value of their PP&E each year and adjust their balance sheets to reflect fair values for PP&E. As a consultant to the FASB, you are asked to draft a brief