Chapter 5 Flashcards
When can cash be considered non current?
its use is restricted to such purposes as payments to sinking funds.
In order to be classified as a cash equivalent, what is the max amount of time an instrument can have until maturity?
3 months or less.
When is the decision whether to elect the Fair Value Option made?
irrevocably at an election date (unless a new election date occurs)
Can you use the Fair value option on Leases?
No
List the 3 classifications of equity securities
- Held to maturity
- Trading
- Available for Sale
Define Held-to-Maturity Securities
the holder has both the positive intent and the ability to hold the security until its maturity date.
Held-to-maturity securities are reported at?
amortized cost
Held-to-maturity securities are reported on the balance sheet
net of any unamortized premium or discount
Held-to-maturity securities are reported on the income statement
Realized gains and losses and interest income (including amortization of premium or discount) are included in earnings.
Trading securities are reported at?
Fair Value
Trading securities are reported on the income statement at?
Unrealized holding gains and losses
What category are held to maturity securities cash flows reported
As investing activities
What category are held to trading securities cash flows reported
As operating activities
When is the equity method used to value a security?
when the investor has significant influence and has not elected the FVO
Is good will amortized in the equity method?
No but it is test for impairment.
How is good will handled by a private company?
goodwill recognized must be amortized on a straight-line basis over 10 years
Under the equity method Dividends from the investee are treated as
as a return of an investment. They decrease the investment balance but have no effect on the investor’s income
What is the range of percentage of ownership for required use of the equity method?
20% to 50%
Where is the cash surrender value of life insurance policies on key executives reported?
Non current asset portion of the balance sheet.
How is the premium on the cash surrender value of life insurance policies on key executives
The annual premium is allocated between expense and the cash surrender value.
Life insurance expense is equal to?
the excess of the premiums paid over the increase in cash surrender value and dividends received
If the bond’s stated rate is greater than the current market rate,
the purchase price is higher than the face amount and the bond is purchased at a premium.
If the bond’s stated rate is less than the current market rate
the purchase price is lower than the face amount and the bond is purchased at a discount.
Investments in bonds are reported
i.e., amortized cost,
From trading to any category.
Amounts already recognized in earnings are not reversed.
To trading from any category
Amounts not already recognized in earnings are recognized in earnings.
To available-for-sale from held-to-maturity.
Amounts are recognized in OCI.
To held-to-maturity from available-for-sale.
Amounts recognized in OCI are not reversed but are amortized in the same way as a premium or discount.
bank rec Common additions to book balance
- Interest earned
- Deposits collected
- Errors
bank rec Common subtactions to book balance
- Service charges
- NSF checks
- Errors
Purchase price of a bond
- face amount X present value factor at market rate
Plus - Dividends received X present value factor at market rate.
how to calculate bond discount or premium
Face amount of bond minus purchase price of bond.
how to calculate interest revenue booked
Purchase price of bond X market interest rate.
how to calculate the amount of discount or premium amortized using the effective rate.
(face X stated rate)- (price paid X market rate)
how do you calculate interest received on a bond
coupon times stated rate
What kind of fiduciary fund can a government report?
Private-purpose trust funds.
Which fiduciary fund type may be expendable or non expendable?
Private-purpose trust fund.
Agencey fund equation?
Assets + deferred outflows = Liabilities + Deferred inflows
What are the fiduciary financial statements?
- Statement of fiduciary net position
2. Statement of changes in fiduciary net position
