Complicated Journal Entries Flashcards
In a capital lease, the asset is taken off the books of the lessor, and depreciation if recorded by the lessee. TF
True
What is the difference between a direct financing and a sales-type lease?
If the entry balances with a gain or a loss, it is a sales type lease. if not it is a direct financing lease.
How do you compute the gain on a Sales Type Lease?
PV of Lease Payments - CV of the Asset given up
When issuing a bond at a premium, is ‘premium on bonds payable’ credited or debited?
Credited
When recording a payment on a bond payable, what would the journal entry look like?
dr. Interest Expense
dr. Bonds Payable
cr. Cash
Bond carrying amount is added to / subtracted by which amount using the effective interest method?
Cash Paid - Interest expense = Amount to modify CV
Bond Issuance costs are recorded as what?
A reduction of the liability (similar to a discount)
Which journal transactions have multiple methods?
Convertible bonds, construction contracts, treasury stock acquisitions and sales, stock dividends, and partner admissions
In convertible bond issuance, is the value of the conversion feature allocated in the total proceeds? YN
No.
dr. Cash
cr. Bonds Payable
Dealing with convertible bonds, what is the key difference between the Book Value and Market Methods upon conversion?
BV method accounts for the converted stock at par with the remainder accounted for as APIC. *No gain or loss on BV method.
MV method accounts for the converted stock at par, the difference between par value and the market value going into “Contributed Capital”, and the Plug between the debits and credits being the G/L.
How many different ways are there to account for bonds with detachable warrants?
One
When bonds with detachable warrants are issued, how is the issuance recorded?
Dr. Cash received
Dr./Cr. Discount or Premium (Plug)
Cr. Detachable Warrants (allocated)
Cr. Bonds Payable (face amount)
The Discount or Premium is the difference between the face amount of the bonds payable and the amount allocated to the bonds in the issuance.
When detachable warrants are exercised what are the effects?
dr. Cash for the value of the warrants x the exercise price
dr. Detachable stock warrants for the previous allocated amount
cr. Common Stock at par
cr. Contributed Capital (plug)
Dealing with construction contracts, what is the key similarities between the Percentage of Completion and Completed Contract methods?
- The initial journal entry sequence is identical
What is the initial entry in both the percentage of completion and completed contract methods?
dr. CIP (cost incurred in Y1)
cr. Materials
dr. AR
cr. Billings
dr. Cash collections
cr. AR
To recognize period profit under the percentage of completion method 3 accounts are used what are they?
dr. CIP (computed as Yx profit - profit previously recognized)
dr. Construction Expenses (given)
cr. Construction Revenue (plug)
Completed contract using ? accounts in its closing entry, while percentage of completion uses?
4 accounts, 2 accounts
With the percentage of completion closing entry what happens?
dr. Billings (for the total contract price, given)
cr. CIP (plug)
With the completed contract closing entry what happens?
dr. Billings (for the total contract price, given)
dr. Construction Expenses (given)
cr. CIP (given = same as construction expenses)
cr. Construction Revenue (same as billings)
What is the differences between acquiring treasury stock using the cost method vs. using the par value method?
Cost method, records treasury stock at cost paid for it.
Par value method, records treasury stock at par with the remainder accounted for as APIC - T/S
Sales at a loss and sales at a gain are treated the same under the cost method of accouting for T/S? TF
False, if the sale at a loss dips below what was paid for it the excess comes out of Retained Earnings (After APIC is exhausted).
The re issuance of T/S at a loss under the cost method looks like…
dr. Cash
dr. APIC T/S
dr. Retained Earnings (if at a loss and APIC is exhausted)
cr. T/S
*This is the ONLY treasury stock entry where Retained Earnings MAY come into play.
Par Value T/S re issues under gain and loss situations involve the same accounts? TF
True.
dr. Cash
dr. /cr. APIC T/S
cr. T/S
When accounting for a stock dividend what determines how its recorded?
Whether it is large (>20%) or small (normal >20%)
Issuance of small stock dividends record a debit to retained earnings using the par value of the stock. TF
False, Market Value
dr. Retained earnings (%div * mkt val)
cr. C/S (%div * par value)
cr. Contributed Capital (plug)
Issuance of large stock dividends record the debit to retained earnings using the par value of the stock. TF
True
dr. RE (%div * par value)
cr. C/S (plug)
Retained earnings is debited when stock dividends are issued. TF
True
In a normal stock dividend issuance, retained earnings is debited for the fair market value of the stock issued. TF
True
In a large stock dividend, retained earnings is debited for the market value of the stock issued. TF
False, par value
When a stock option is granted what is the entry?
dr. Deferred compensation
cr. APIC - Stock Options (FMV at date of grant)
*if FMV unavailable, use intrinsic value (Stock price - Exercise Price)
ONLY two accounts are credited during a business consolidation. What art they?
Investment, and Minority Interest
When accounting for a business consolidation what is the acronym to remember?
CAR IN BIG
Debit
C- Common Stock
A- APIC C/S
R- Retained earnings
Credit
I- Investment
N- NCI or Minority Interest
Debit
B- Balance Sheet Adj
I- Inventory
G- Goodwill
Name the two methods of admitting a partner.
Bonus method, and goodwill method
To determine the total bonus to allocate in the admission of a partner under the bonus method, what do you do?
New partners contribution - new partners capital = Total bonus to the existing partners. Bonus is then allocated.
To determine the total goodwill to allocate in the admission of a partner under the goodwill method, what do you do?
New partners contribution / the new partners % = The implied value of the partnership
Implied value of the partnership - Total existing capital (including new contribution)
= Total goodwill to be allocated
In recording a governments budget, what is the key account debited?
Estimated Revenues and Control
In recording a governments budget, what the key account credited?
Approriations
When recording revenue via taxes to be received during the year, what would the journal entry look like?
dr. Taxes Receivable
cr. Allowance for Uncollectibles
cr. Deferred Revs (Non current portion)
cr. Revenues Control (current portion)
When ordering goods and services in a government what journal entries take place?
Put the encumbrance on…
dr. Encumbrances Control
cr. Budgetary Fund Balance
When receiving goods and services ordered by a government, what journal entries take place?
Two parts, 1. Remove the encumbrance, 2. record the liability
dr. Budgetary Fund Balance
cr. Encumbrances Control
dr. Expenditures Control
cr. Vouchers Payable
When closing an encumbrance account what journal entries take place?
We are removing all encumbrances and putting whatever has not been used during the year back into the general fund.
dr. Budgetary Fund balance (leftover)
cr. Encumbrances (leftover)
dr. Unassigned fund balance (same value as first JE)
cr. Fund Balance - Assigned or Committed
Reciprocal interfund transfers deal with what?
Governments buying goods or services from enterprise funds and transferring money.
Reciprocal interfund transfers use the terms “other financing uses” and “other financing sources” in their journal entries. TF
False. Expenditures and Revenues
Interfund transactions deal with what?
Government funds transferring money to other government funds.
Interfund transfers use the terms “other financing uses” and “other financing sources” in their journal entries. TF
True
In non monetary exchanges with commercial substance, the new asset received is recorded at FV. TF
True. FV that is given OR FV of asset given +/- cash paid.
In non monetary exchanges without commercial substance, a loss situation is when…
The FMV of the asset given
In a non monetary exchange without commercial substance loss situation the value of the new asset received is computed how?
Implied FV of old asset +/- any cash received
In a non monetary exchange without commercial substance loss situation the value of asset given is computed how?
It is credited at cost.
If FV of an acquired asset is not determinable in a NME is not determinable what is the treatment used to recognize the asset?
FV of asset given up +/- cash paid or received.
A NME loss occurs when…
BV of asset giver up is greater than its fair value. All losses recognized in full and record the acquired asset at FV regardless of whether there is commercial substance or not.
What is the treatment for a NME commercial substance gain?
Recognize in full, and record the acquired asset at FV.
When there is no cash received on an non commercial substance NME transaction and a gain is apparent (FV of asset given > BV), how is the new asset recognized?
BV of asset given + cash paid.
*No gain is recognized on non monetary NMES except for when cash is recieved
If there is no commercial substance on an NME and cash IS received, record the asset received at FV - the unrecognized portion of the gain. TF
True
If there is no commercial substance on an NME and cash IS received (in excess of 25% of the value in proportion to the total consideration) what is the accounting treatment.
Recognize the gain in full and record like an ordinary commercial substance transaction.
How is Y1 CIP determined in a % of completion contract? Y2?
Costs incurred in Y1 / Total estimated costs = % of completion
% of completion x Total Estimated profit = Estimated Profit to date.
For Y2 onward…
Estimated profit to date - Profit previously recognized = Profit in current period
The re issuance of T/S at a gain under the cost method looks like…
dr. Cash (received)
cr. APIC - T/S (cost)
cr. T/S (leaving at original cost)
