Far 12

Question 1

What is the J/E for a NFP that is financially interrelated with its beneficiary organization when receiving receipts? What is the effect on the financial statements?

Answer 1

Dr Interest in Net Assets XXX
Cr Interest in beneficiary organization Net Assets (Statement of activities) XXX

When having financial interest in recipient organization, recognize change in interest of recipient organization on statement of activities.

Question 2

When a NFP receives money from a donor for a specific intended use how is it recorded? As a contribution with donor restrictions or a liability?

Answer 2

As a liability since it is for the benefit of a specific beneficiary and no variance power exists related to how the NFP can use the contribution.

Not as a contribution with donor restrictions b/c no variance power exists over the resources, so it would not be classified as a contribution

Question 3

What is the most important objective of financial reporting by NFP’s and state and local governments?

Answer 3

Accountability, to show the accountability of each organization for stewardship and resources in their care.

Question 4

Who are the three primary user groups of external financial reports of a state Government?

Answer 4

Citizens, citizen groups, legislative/oversights groups such as advocate groups within the state and investors/creditors.

Question 5

What demonstrates inter-period equity as a financial objective of a governmental unit?

Answer 5

A balanced budget demonstrates inter-period equity. A Significant part of accountability of the governmental entity.

Helps external users determine if current year revenues are sufficient to pay for current services provided and whether or not future taxpayers will have to inherit burdens for services previously provided.

Residual equity transfers is a distractor

Question 6

What characteristic of service efforts is most difficult for a governmental entity to report?

Answer 6

Relevance, difficulty showing a logical relationship with the needs for its purpose.

Question 7

What is the purpose of the GASB 34 requiring governments to present separate fund financial statements for governmental and proprietary funds

Answer 7

Separate fund F/S should be presented for proprietary and governmental funds to REPORT ADDITIONAL AND DETAILED INFO about the primary government

Question 8

What measurement and basis of accounting does governmental accounting use?

What measurement and basis of accounting does Proprietary and Fiduciary funds use?

Answer 8

Governmental accounting uses current financial resources measurement focus and modified accrual basis of accounting’

Measures flow of current financial resources and resulting financial position

Proprietary and Fiduciary funds use economic resources measurement focus and accrual basis of accounting

Question 9

What are the 3 governmental funds? GRSPP What type of accounting and measurement is used?

Answer 9

G - General fund

R - special Revenue fund

S - debt Service fund

P - capital Projects fund

P - Permanent fund

Uses current financial resources measurement focus

modified accrual basis of accounting

Question 10

What are the two funds in Proprietary funds? SE What type of accounting and measurement is used?

Answer 10

S - Internal service funds

E - Enterprise funds

Uses full accrual accounting

Economic Resources Measurement Focus

Question 11

What are Fiduciary funds? CIP POE What type of accounting and measurement is used?

Answer 11

C - Custodial

I - Investment Trust

P - Private Purpose Trust

POE - Pension and Other Employee benefit trust

Uses full accrual accounting

Economic resources measurement focus

Question 12

How does modified accrual basis of accounting recognize revenue?

How does accrual basis of accounting measure revenue?

Answer 12

Modified accrual basis of accounting recognizes revenue in the accounting period in which the revenue becomes available and measurable

Accrual basis of accounting recognizes revenue in accounting period in which the revenue is earned.

Question 13

What is the J/E when appropriations are greater than estimated Revenues at the beginning of the year for governmental accounting?

Answer 13

Dr Estimated Revenues $5,000,000
Dr Budgetary Control. $1,000,000
Cr Appropriations Control. $6,000,000

Question 14

What is the J/E when Expenditures and Encumbrances are less than appropriations at the end of the year?

Answer 14

Dr Appropriations Control $6,000,000
Cr Estimated Revenues $5,000,000
Cr Budgetary Control. $1,000,000

Question 15

How does the purchase method accounting for inventory different than the consumption method of accounting when recording inventory?

Answer 15

Purchase method initially records additions to inventory as an expenditures

Question 16

What kind of fund is supported by user fees?

Answer 16

Enterprise fund

Question 17

What is the original J/E for a Proprietary fund recording leased asset that it will acquire at the end of the lease?

Answer 17

Dr Lease Receivable XXX
Cr Deferred inflows of resources XXX

Question 18

What is the J/E for a municipality (proprietary fund) record a lease use ROUA? The Lessee

Answer 18

Other than a short term lease (greater than 12 months)

Dr Right-of-use Asset
Cr Lease Liability

Question 19

What is the rule for leases other than short-term leases and contracts that transfer ownership?

Answer 19

Recognized as ROU Assets with related debt for net present value of lease payments

Increase Lessees Asset and Liability amount

Question 20

What is the J/E for leases other than short-term leases and contracts that transfer ownership for fee-supported convention center fund?

Answer 20

Enterprise funds are SUPPORTED BY USER FEES

Dr ROU Asset
Cr Lease Liability

Question 21

Modified accrual accounting for revenue recognition would recognize revenue within 60 days subsequent to the fiscal year end.

Question 22

what is the difference between future contracts and forward contracts?

Answer 22

Future contracts are standardized, have notional amounts, established by a clearing house

Forward contracts are primarily negotiated between the parties, do not have notional amounts

Question 23

A change from the individual item approach to the aggregate approach by applying lower of FIFO cost or market to inventories is what kind of cumulative effect and change on the F/S?

Answer 23

Change in accounting principle - Retrospective adjustment on the R/E with separate disclosure is required

Question 24

Where are foreign transaction gains and losses recorded?

Answer 24

Income Statement

Question 25

What date is retained Earnings decreased by when a company declares a cash divined?

Answer 25

Date of Declaration

Question 26

How do you calculate Most advantageous market?

Answer 26

Price paid - Transaction cost

Do not look at by all suppliers

Question 27

What is included in the total payments for a note? What reduces the liability of a note?

Answer 27

Principal + Interest

Just the principal, so subtract interest out and take the difference against the remaining amount

Question 28

Do NFP’s record deprecation expense on fixed assets? Where is it reported?

Answer 28

Yes, on the statement of activities

Question 29

For debt restructuring what is the equation used to calculate gain or loss on the restructuring of payable’s?

Answer 29

Liability (Carrying amount owed)
- Fair value of asset
=Gain or loss

Question 30

For Operating $ flows for an Enterprise fund starting with Operating Income, what is the calculation?

Answer 30

Operating income - (increase in CA) + (Increase in CL) + Depreciation expense

Gain on disposal of assets is excluded as well as revolving debt