FAR 1

Question 1

interest costs related to construction projects

Answer 1

capitalized based on weighted average
ex:
4/1  $500,000    x5% = $2,083
5/1  $800,000    x5% = $3,333
6/1  $1,500,000  x5% = $6,250

                                = $11,666

Question 2

how do find a corporation’s long term debt when bonds are issued with detachable stock warrants

Answer 2

subtract the stock warrants from the amount of bonds to find the corporation’s long term debt
ex:
$4,000,000 bonds at 101 $4,040,000
200,000 warrants at $1 FV (200,000)
LTD allocated to bonds = $3,840,000

Question 3

Government funds measurement focus

Answer 3

current financial resources

Question 4

management and general expenses incurred by a community foundation should be reported as

Answer 4

supporting services in a statement of activity

Question 5

when an entity has significant influence over another entity, how should they account for it

Answer 5

using the equity method

Question 6

under US GAAP, if an entity is not a going concern, how should the financial statements be prepared

Answer 6

liquidation basis

Question 7

current ratio =

Answer 7

current assets / current liabilities

Question 8

earnings per share =

Answer 8

(net income - preferred dividends) / weighted average of outstanding shares

Question 9

when should liabilities of a sub be included in the consolidated financial statements

Answer 9

when they are 50% or more owned by a parent company

Question 10

how should held-to-maturity investments be reported

Answer 10

at amortized cost

Question 11

effective tax rate =

Answer 11

income tax expense / pretax expense

Question 12

R&D expenses include, but are not limited to,

Answer 12

• personnel costs

- design/testing/construction

Question 13

compensation costs should be

Answer 13

expensed over the service period

Question 14

temporary differences that decrease a future taxable income are considered to be

Answer 14

noncurrent assets

Question 15

for an overfunded pension plan, amortization of net gains would

Answer 15

increase retained earnings

Question 16

financial statements are considered available to be issued when

Answer 16

• they are in a format that complies with GAAP

- all approvals for issuance have been obtained

Question 17

the present value factor used to find the value of a finance lease includes the

Answer 17

implicit rate
ex:
annual lease payment
x PV of implicit rate
-----------------------------
lease liability before payment
- lease payment
------------------------------
= lease liability

Question 18

demonstrates how a not-for-profit organization’s resources are used in providing various programs and services

Answer 18

statement of activities

Question 19

what does it mean if a budgetary control balance (open purchase order) exceeds encumbrance balance (purchase order outstanding)

Answer 19

an error must have been made

Question 20

under the modified approach, how are infrastructure expenditures reported

Answer 20

as expenses, except for outlays that result in additions or improvements, which would be capitalized

Question 21

required disclosures on the statement of cash flows

Answer 21

1. major classes of gross cash receipts and gross payments made
2. amount of income taxes paid
3. reconciliation of net income to net cash flow from operations

Question 22

when parent-subsidiary relationships exist, consolidated financial statements are prepared in recognition of the accounting concept of

Answer 22

economic entity

Question 23

when assets are transferred in a troubled debt restructuring

Answer 23

• gains/losses = difference between debt and FV of asset transferred
• carrying amount of liability liquidated = liability

liability
- FV real estate transferred
—————————————-
= gain/loss

Question 24

software costs

Answer 24

• coding costs after technological feasibility has been established
• testing costs after technological feasibility has been established
• costs of producing product masters for training materials

Question 25

on government entity statement of cash flows, how are cash flows from capital financing activities reported?

Answer 25

separately from cash flows from non-capital financing activities

Question 26

general fund resource revenues include

Answer 26

• property taxes
• licenses and permits
• intergovernmental revenues

Question 27

under periodic inventory, if ending inventory is overstated, retained earnings is

Answer 27

overstated

Question 28

how are gains and losses on treasury stock recorded on the income statement

Answer 28

treasury stock is never recorded on the income statement

Question 29

stock repurchase plan:

for every $1 withheld from employee wages for purchase of Wall’s common stock, Wall contributes $2

Answer 29

employee withholdings $350,000
wall contributes $2 x $2
wall’s CY expense before payroll = $700,000

Question 30

under IFRS, how should a going concern be accounted for/prepared

Answer 30

under IFRS there are no specifications on how a company should account for/method of accounting to be used for a company that is not considered to be a going concern

Question 31

to qualify as a finance lease under US GAAP

Answer 31

• ownership transfers at the end of the lease
• written purchase option lessee is reasonably certain to exercise
• PV of minimum lease payment = FV of the asset
• lease term = 75% or more of the useful life of the asset
• asset has no alternate use to lessor

Question 32

uncollectible accounts

Answer 32

BASE:
Beg balance         260,000
Add (9mx2%)       +180,000
Subtract WOs      (325,000)
End balance        =115,000

Question 33

60/40 partnership earnings example

Answer 33

red white total

earnings 80,000
salary allow. 55,000 45,000 (100,000)
net earn to dist. = (20,000)
x60% x40%
distribution (12,000) (8,000)

                              =43,000    =37,000

Question 34

bonds issued at discount of 98 with a maturity value of 50,000

Answer 34

journal entry:

cash (50,000 x 98%) 49,000
discount on bonds payable 1,000
bonds payable 50,000

Question 35

general fund budget: appropriations & budgetary control

Answer 35

journal entry:

estimated revenues 100,000
appropriations 80,000
budgetary control 20,000