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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 childrens literacy. In which of the following
funds would CLC record the donation?
a) General fund.
b) Special (reserve) fund.
c) Capital fund.
d) Fiduciary fund.
e) Endowment fund.
Cross-Competency
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:
40 CMA Canada
Sample 2008 Entrance Examination
102. Assuming the company continues to use the old machine, what is the contribution
margin per unit of the product?
a) $7.50
b) $4.00
c) $6.925
d) $3.70
e) $6.00
103. (+) 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