FAR 12

Question 1

The market price of a bond issued at a premium is equal to the present value of its principal amount:

Answer 1

An the present value of all future interest payments, at the market (effective) interest rate.

Question 2

Borrower: How do you record initial j/e for acquiring a bond at a premium?

Answer 2

Dr. Cash
Cr. Premium on bonds payable
Cr. Bonds Payable

Question 3

How do you record the entry for the first interest payment on a bond?

Answer 3

Dr. Bond interest expense (for payable)

Cr. Cash

Question 4

Borrower: How do you record initial j/e for acquiring a bond at a discount?

Answer 4

Dr. Cash
Dr. Discount on bonds payable
Cr. Bonds payable

Question 5

How do you calculate the income statement component of effective interest rate method?

Answer 5

Income Stateemnt

Net Carry Value x Effective interest rate = Interest expense

Question 6

How do you calculate the balance sheet component of effective interest rate method?

Answer 6

B/S

Bond Prince x Coupon Rate = Interest Paid

Question 7

What is the J/E to record bond amortization for the borrower?

Answer 7

Dr. Bond Interest Expense
Dr. Premium on bonds payable
Cr. Cash

Question 8

What is the J/E to record bond amortization for the Investor (Lender)?

Answer 8

Dr. Cash
Cr. Investment in bonds
Cr. Bond interest revenue

Question 9

If you incorrectly used straight line method instead of effective interest method to amortize discount, how would it affect year 1 and the last year?

Answer 9

Overstated in year 1

No effect at the end of the term.

Question 10

How are gains or losses on fixed assets (including involuntary conversions) recognized?

Answer 10

During the period incurred based on recorded amount (NBV) plus any costs associated with the transactions.

Question 11

Under US GAAP, in preparing consolidated financial statements of a U.S. parent company with a foreign subsidiary, the foreign subsidiary’s functional currency is the currency:

Answer 11

Of the environment in which the subsidiary primarily generates and expends cash.

Question 12

The research costs associated with an internally developed asset will always be?

Answer 12

Expensed.

Question 13

During a period of inflation, holding a monetary liability would result in a?

Answer 13

Purchasing power gain.

Question 14

Is gain or loss recognized under GAAP book value method at the time bonds are converted to common stock?

Answer 14

No.

Question 15

The use of the market value method recognizes gain or loss?

Answer 15

Yes. but it is not GAAP.

Question 16

How do you calculate the bonds book value?

Answer 16

Face value less the unamortized discount.

Question 17

Discount or premium on the sale of bons is included in the carrying value of the bonds on the?

Answer 17

Balance sheet.

Question 18

The amount of bonds payable recorded should be?

Answer 18

Recorded net. The amount issued at face value less stock warrant amount

Question 19

What statements are required to be presented for special-purpose governments engaged inly in business type activities (such as utilities)

Answer 19

The financial statements required for enterprise funds, including MD&A and RSI.

Question 20

The debt service fund is part of?

Answer 20

The governmental fund.

Question 21

How do you record the JE for budgeted amounts?

Answer 21

Dr. Estimated rev cont.
Dr. Est other financing sources.
Dr. Budgetary control (negative)
Cr. Appropriations control
Cr. Estimated other financing uses.
Cr. Budgetary control (positive)

Question 22

When a snowplow pruchased by a governmental unit is received, it should be recorded in the general fund as an?

Answer 22

Expenditure.
Dr. Expenditures
Cr. Vouchars Payable

Question 23

It is inappropriate to record depreciation expense in?

Answer 23

Governmental funds. It does not reflect the use of financial resources.

Question 24

Fixed assets donated to a governmental unit should be recorded?

Answer 24

At estimated fair value when received.

Question 25

How can a church pool its investments?

Answer 25

It may pool all investments, but must equitably allocated realized and unrealized gains and losses among net asset classifications as appropriate.

Question 26

What is included in noncapital financing activities?

Answer 26

Cash receipts from grants or subsidies, property taxes

Question 27

In preparing a city reconciliation of the statement of revenues, expenditures and changes in fund balances to the government wide statement of activities, what should be subtrated from changes in fund balance?

Answer 27

Book value of capital assets sold during the year.

Question 28

What activities should be excluded when governmental fund financial statements are converted to government wide financial statements?

Answer 28

Fiduciary activities.

Question 29

What are examples of non capital financing activities?

Answer 29

Cash receipts from grants or subsidies, property taxes etc.

Question 30

The reporting of a governmental unit is determined by whether it can stand alone by it SELF based on the following organizational characteristics:

Answer 30

Separately
Elected governing body
Legally Separate Entity
Financially independent status.

Question 31

How do you reconcile cash flows from operating activities?

Answer 31

Operating income
Less: Increases in current assets other than cash
Plus: Increases in current liabilities (net of change in revolving debt)
Plus: Depreciation
=Total

Question 32

Donations of medicines are included as other operating revenue at?

Answer 32

Fair value of the medicine, since the medicine constitutes part of the ongoing major operation of the hospital.