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Gleim FAR > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

When can cash be considered non current?

A

its use is restricted to such purposes as payments to sinking funds.

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2
Q

In order to be classified as a cash equivalent, what is the max amount of time an instrument can have until maturity?

A

3 months or less.

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3
Q

When is the decision whether to elect the Fair Value Option made?

A

irrevocably at an election date (unless a new election date occurs)

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4
Q

Can you use the Fair value option on Leases?

A

No

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5
Q

List the 3 classifications of equity securities

A
  1. Held to maturity
  2. Trading
  3. Available for Sale
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6
Q

Define Held-to-Maturity Securities

A

the holder has both the positive intent and the ability to hold the security until its maturity date.

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7
Q

Held-to-maturity securities are reported at?

A

amortized cost

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8
Q

Held-to-maturity securities are reported on the balance sheet

A

net of any unamortized premium or discount

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9
Q

Held-to-maturity securities are reported on the income statement

A

Realized gains and losses and interest income (including amortization of premium or discount) are included in earnings.

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10
Q

Trading securities are reported at?

A

Fair Value

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11
Q

Trading securities are reported on the income statement at?

A

Unrealized holding gains and losses

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12
Q

What category are held to maturity securities cash flows reported

A

As investing activities

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13
Q

What category are held to trading securities cash flows reported

A

As operating activities

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14
Q

When is the equity method used to value a security?

A

when the investor has significant influence and has not elected the FVO

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15
Q

Is good will amortized in the equity method?

A

No but it is test for impairment.

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16
Q

How is good will handled by a private company?

A

goodwill recognized must be amortized on a straight-line basis over 10 years

17
Q

Under the equity method Dividends from the investee are treated as

A

as a return of an investment. They decrease the investment balance but have no effect on the investor’s income

18
Q

What is the range of percentage of ownership for required use of the equity method?

A

20% to 50%

19
Q

Where is the cash surrender value of life insurance policies on key executives reported?

A

Non current asset portion of the balance sheet.

20
Q

How is the premium on the cash surrender value of life insurance policies on key executives

A

The annual premium is allocated between expense and the cash surrender value.

21
Q

Life insurance expense is equal to?

A

the excess of the premiums paid over the increase in cash surrender value and dividends received

22
Q

If the bond’s stated rate is greater than the current market rate,

A

the purchase price is higher than the face amount and the bond is purchased at a premium.

23
Q

If the bond’s stated rate is less than the current market rate

A

the purchase price is lower than the face amount and the bond is purchased at a discount.

24
Q

Investments in bonds are reported

A

i.e., amortized cost,

25
Q

From trading to any category.

A

Amounts already recognized in earnings are not reversed.

26
Q

To trading from any category

A

Amounts not already recognized in earnings are recognized in earnings.

27
Q

To available-for-sale from held-to-maturity.

A

Amounts are recognized in OCI.

28
Q

To held-to-maturity from available-for-sale.

A

Amounts recognized in OCI are not reversed but are amortized in the same way as a premium or discount.

29
Q

bank rec Common additions to book balance

A
  1. Interest earned
  2. Deposits collected
  3. Errors
30
Q

bank rec Common subtactions to book balance

A
  1. Service charges
  2. NSF checks
  3. Errors
31
Q

Purchase price of a bond

A
  1. face amount X present value factor at market rate
    Plus
  2. Dividends received X present value factor at market rate.
32
Q

how to calculate bond discount or premium

A

Face amount of bond minus purchase price of bond.

33
Q

how to calculate interest revenue booked

A

Purchase price of bond X market interest rate.

34
Q

how to calculate the amount of discount or premium amortized using the effective rate.

A

(face X stated rate)- (price paid X market rate)

35
Q

how do you calculate interest received on a bond

A

coupon times stated rate

36
Q

What kind of fiduciary fund can a government report?

A

Private-purpose trust funds.

37
Q

Which fiduciary fund type may be expendable or non expendable?

A

Private-purpose trust fund.

38
Q

Agencey fund equation?

A

Assets + deferred outflows = Liabilities + Deferred inflows

39
Q

What are the fiduciary financial statements?

A
  1. Statement of fiduciary net position

2. Statement of changes in fiduciary net position

Gleim FAR (20 decks)

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