8/13 Flashcards
On Dec 31, yr 1 Largo had 750,000 note payable due July 31, yr 2. Largo planned to refinance the note by issuing LT bonds. On Jan, yr 2 Largo prepaid 250,000 toward a 1,500,000 bond competed Feb, yr 2. On March 3, yr 2 Largo issued its yr 1 FS.
What amount of the note payable should Largo include in the current liab. section of its Dec 31 BS?
250,000
Short term debt is reclassified as LT to the extent of post refinancing. 250,000 was paid prior to the refinancing.
Gearty Corp loans Olinto Corp 200,000 with a 10% simple interest payable in 10 years. Interest and note are due at the end of the term. On Jan yr 3 Olinto has yet to pay any interest and wants to renegotiate the terms. Gearty agrees to forgive the interest on the note and reduce the interest to 8%.
What should Gearty record as a result of the restructuring?
Loan Amount 200,000 x PV of $1 at 10% for 8 years .467 = 93,400
Total interest payments 200,000 x reduced rate 8% = 16,000
16,000 x PV of annuity 10% 8 years 5.335 = 85,360
93,400+85,360 = 178,760 - BV of note 240,000 = 61,240
Dr old Note 240,000 Dr bad debt 61,240 Cr new note 200,000 Cr Accrued int 40,000 Cr Valuation allowance 61,240
Which of the following characteristics of service efforts and accomplishments is most difficult to report for a governmental entity?
- relevance
- comparability
- timeliness
- consistency
Relevance
logical relationship between needs and purpose is difficult to establish in reporting.
Cougar build a warehouse during years 2 and 3. Made the following payments
Jan 1, yr 2 130,000; Apr 1, yr 2 240,000; Oct 1, yr 2 200,000; Jan 15, yr 3 350,000
Borrowed 300,000 at 12% jan 1, yr 2 construction note
100,000 at 10% Jan 1 yr 2, interest due Dec 31
300,000 at 7% Jan 1, yr 2, interest due Dec 31
What is the weighted average accumulated expenditures for yr 2
Interest incurred for all borrowings yr 2
Avoidable interest yr 2
Interest capitalized yr 2
interest expense yr 2
WA - 130x3months + 370x6 months + 570x3months = 4320/12 = 360,000
Interest incurred = 300x.12 + 100x.1 + 300x.07 = 67,000 total
Avoidable - int. on construction note 36,000
WA 360,000 - 300,000 const note funds = 60,000
WA int on other borrowings (10,000+21,000)/(100,000+300,000) = .0775
60,000 x .0775 = 4650 + 36,000 = 40,650 avoidable
Interest capitalized is lesser of avoidable and total = 40,650
Int exp = 67,000 - 40,650 = 26,350
Capital outlay expenditures are reported by the general fund.
FS Classification
Governmental fund expenditures are classified by character
include current expenditures for capital outlay, debt service and intergov
Public safety expenditures reported by General Fund
FS classification
Current operating expenditures are reported by Function.
Example line items - general, public safety, culture and rec, etc
Salaries and wages reported in enterprise fund
FS classification
Object
Proprietary fund expenses are classified by object. meaning their GL account title
A company maintains a defined benefit pension plan. The company’s net periodic pension cost for the year would be reported on
- the income statement
- the defined benefit pension plan’s statement of changes in net asset available for benefits
The income statement
in year 2 there is a 2 for 1 stock split. the year 1 EPS
Needs to be adjusted for the split.
Thresholds for large accelerated filer, accelerated filer, small
Outstanding common equity more than 700 mil large accelerated
700 - 75 accelerated
below 75 small, also below revenue of 100 mil
Which of the following is not required in the budgetary comparison schedule presented by state and local gov
- actual inflows, outflows and balances stated on a budgetary basis
- final appropriated budget
- original budget
- variance between final and actual
variances between final and actual
According to FASB conceptual framework, completeness is an ingredient of
Relevance / Faithful Representation
Faithful Representation
completeness, neutrality and freedom from errors
Form 10Q deadlines
Large accelerated and accelerated 40 days
others 45 days
Form 10k deadlines
Large accelerated 60 days
accelerated 75 days
others 90 days
Harbor acquired interest in I-Bar in exchange for 15,000 cash and equipment with a BV of 60,000 and FV of 50,000. What is the result of this transaction
Gain or Loss = FMV 50,000 - BV 60,000 = gain or loss (10,000)
Basis = BV 60,000 - Loss 10,000 + Cash Paid 15,000 = 65,000
Vik Auto exchanged goods, held for sale, with equal values. Each will use the other’s goods go promote the own products. The retail price Vik gave up is less than the retail price received. What profit should Vik recognize for the nonmonetary exchange?
Profit equal to the difference between FV received and BV given.
Eagle and Folk are partners with capital balances of 45,000 and 25,000. They agree to admit Robb. After assets are revalued Robb will have a 25% interest for 30,000. What amount should be recorded as a bonus to the original partners?
5,000
45,000+25,000+30,000=100,000 x 25% = 25,000
Robb’s capital account will be 25,000 but paid 30,000. 5,000 will become bonus to other partners
Northstar acquired a trademark for 600,000. The trademark has a remaining life of five years, but can be renewed every 10 years for a nominal fee. Northstar expects to renew the trademark indefinitely. What amount of amortization expense should Northstar record for the trademark in the current year?
0
Because the trademark is expected to be renewed indefinitely, there will be no amortization.
The city of Orange collects refundable deposits in its water and sewer fund. Once a customer discontinues and final bills are satisfied, deposits are refunded to the customer. Occasionally deposits are abandoned. The city holds the monies for a period then transmits them to the state or uses them for a purposes directed by the state. The city would likely account for these abandoned funds in the:
Private purpose fund
Private purpose trust fund is designated for trust arrangements which principal and income benefit specific individuals, private organizations, or other governments.
What are level 3 inputs for valuation of asset FV
Unobservable inputs reflecting judgment about the assumptions a market participant would use
Campbell Corp exchanged delivery trucks with Highway Corp. Campbell’s truck cost 23,000 with 20,000 acc. depr. and FV 5,000. Highway’s truck cost 23,500 with acc. depr 19,900 and FV 5,700. Campbell paid Highway 700. The transaction lacks commercial substance. What amount is the new book value for the truck Campbell received?
3700
Dr Acc. Depr 20,000
Cr Old Truck 23,000
Cr Cash 700,
Dr New Truck 3700 (plug)
when a transaction lacks commercial substance, only recognize a gain if it received boot/cash.
In the fact pattern there is a gain of 2,000 (23,000BV-20,000AD-5,000 FV). However not recognized as no boot/cash paid.
What is the primary objective of accounting for income taxes?
Recognize the amount of deferred tax liabilities and assets reported for future tax consequences.
West acquired 60% of East’s outstanding common stock. West paid 800,000. West plans to relocate East, which is expected to cost between 100,000 to 300,000. The PV of the relocation cost is 240,000. What is West’s acquisition cost?
800,000
Relocation costs do not include a measure. Not clearly evident.
Dodd Co’s debt securities at Dec 31 included AFS securities with a basis of 24,000 and FV of 30,000. Dodd’s income tax rate was 20%. What amount of unrealized gain or loss should Dodd recognize on its income statement?
0
Unrealized gains on AFS securities are recorded in OCI. The entire unrealized gain, 6,000, will go in OCI.
No amount reflected on the IS
In preparing Chase City’s reconciliation of the statement of revenues, expenditures and changes in fund balance to the gov wide statement of activities, which of the following should be subtracted from changes in fund balance?
- payment of long term debt principal
- capital asset purchases
- internal service fund increase in net position
- BV of capital assets sold during year
BV of capital assets sold during year.
CPAS RIDES
\+Capital outlay expenditures \+Principal payments -Asset deposals -Sources - other financing \+Rev. recognized but unavailable -Interest expense -Depreciation expense \+Service fund net rev
A company uses the accrual method of accounting started the fiscal year with assets of 600 and liabilities of 400. During the fiscal year credit sales of 250, of which 8 remained uncollected. Incurred 90, of which 72 was paid in cash. A stock dividend of 10 was declared and issued. What is the year end equity balance?
360
BB 200
Rev+250
Exp -90
EB 360
The stock dividend does not change equity.
The rate to translate all assets and liabilities from the functional currency to the reporting currency is
The current rate in effect at the balance sheet date.
At July 1, Alto split its common stock 5 for 1 when the FV was $100 per share. Alto had 10,000 of $10 par CS issued. After the split the par value of the stock:
Would be reduced to 2
10,000 outstanding x $10 = 100,000 value of par
10,000 x 5 = 50,000 new shares outstanding
100,000/50,000=$2 new value par per share
CPAS RIDES
Changes in gov fund balance \+Capital Outlay Expenditures \+Principal payments -assets sold -Sources - other financing \+Revenue - unavailable -Interest Exp -Depreciation \+Service fund
IT - or Interfund/ Transfers
On its Dec 31, Yr 2 BS, Shin Co had income taxes payable of 13,000 and a deferred tax asset of 20,000 before determining for a valuation account. Shin had reported a deferred tax asset of 15,000 at Dec 31, yr 1. No estimated payments were made during yr 2. At Dec 31, yr 2 shin decided that 10% of the deferred tax asset would not be realized. In its yr 2 income statement what amount should Shin report as a total income tax expense?
10,000
Temporary difference 20,000 - allowance 2,000 (10%) = 18,000
18,000 - BB 15,000 = 3000
Since no estimated payments assume taxes payable = 13,000 - 3,000 = 10,000
