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Mid-Term 1 EXAMINATION Summer 2013 DURATION: 2 HOURS Department Name & Course Number: BUSI 3001A Course Instructor(s) : Maurice, Jacques
AUTHORIZED MEMORADA

No. of Students:

NonProgrammable Calculator Allowed
Students MUST count the number of pages in this examination question paper before beginning to write, and report any discrepancy to a proctor. This question paper has 4 pages.

This examination question paper

MAY

be taken from the examination room. no In addition to this question paper, students require: an examination booklet yes

a Scantron Sheet

yes

no

There are 40 marks available on this exam This exam comprises of 3 questions and has 4 pages.

2 Question 1 (30 marks) (90 minutes)

On January 1, 20x1, Pastel Corporation acquired 70% of the outstanding common shares of Summer Company for $84,000 cash. On that date, Summer had $35,000 of common shares outstanding and $25,000 of retained earnings. On January 1, 20x1, the book values of each of Summer’s identifiable assets and liabilities were equal to their fair values except for a patent with 10 years remaining which had a fair value of $30,000 and a book value of zero. The following are the separate entity financial statements of Pastel and Summer as at December 31, 20x6: Balance Sheets December 31, 20x6 Pastel Assets Cash Accounts receivable Inventory Investment in Summer Equipment Accumulated depreciation Liabilities and shareholders’ equity Accounts payable Long-term debt Common shares Retained earnings $ 120,000 90,000 250,000 84,000 456,000 (230,000) $ 770,000 $ 230,000 10,000 200,000 270,000 $ 770,000 Summer $ 80,000 95,000 140,000 — 290,000 (140,000) $ 465,000 $ 180,000 160,000 35,000 90,000 $ 465,000

Income Statements and Statements of Retained Earnings year ended December 31, 20x6 Pastel Total revenues $771,000 Cost of goods sold (500,000) Gain on sale of