FAR ③

Question 1

X communications, manufacturer of smart cellular phones, had to write down the value of its unsold smartphone inventory by 20,000. X has to decrease the price of its smartphone due to sudden unexpected competition from a new company, leading to a drop in its profit and the inventory write-down. how should X account for the 20,000 loss in its quarterly multistep income statement?
A. income from continuing operations-normal treatment.
B. income from continuing operations -unusual or infrequent items section.

Answer 1

[B]
A would be correct if the loss was not material or not unusual.
如果損失不是重大的或不尋常的，A 將是正確的。

Question 2

in single step income statement, the section titled revenues consisted of the following :
□net sales revenue 187,000
□results from discontinued operations: 12,000
□interest revenue 10,200
□gain on sale of government 4,700
———————————-
□total revenues 213,900

Answer 2

[201,900]
187,000+10,200+4,700=201,900

the various amounts from discontinued operations should be included in discontinue operation, not revenue.

Question 3

on Aug 1,Y 1,C corp.’s $500.000, one year, non interest-bearing note due July 31, Y2, was discounted at H bank at 10.8%. V used the straight-line method of amortizing bond discount. what amount should V report for notes payable in its Dec 31, Y1, balance sheet?

Answer 3

500,000
-54000(500,000×10,8%×12/12)
=446,000
+22,500(54,000×5/12)
=468,500

Question 4

what amount should W show as gain from foreign currency transactions for Y1?
1. purchase of a vehicle directly from a foreign manufacture for 5,000 less than fair value,
2. sale of merchandise on credit for 100,000 euros when the spot rate was 1.01. the spot rate at the end of the year is 0.98. the payment for this sale will be made in Y2.

Answer 4

[loss3000]
1 is not a foreign currency transaction.

Question 5

X owns 1,500 of 10,000 outstanding shares of the CS of ABC Corp. the stock was originally purchased on Jan 1, Y1 for $5 per share. during the year, ABC stock paid dividends in the amount of $10,000/ at the Dec 31, Y1, the stock is value at $3 per share.
which is not correct?
A. a credit to Dividend revenue in the amount of $1,500
B. a credit to investment in ABC Corp. in the amount of 1,500

Answer 5

[B]
因為持股數量佔總數的15%，還達不到equity method 的標準，所以B是錯的。

Question 6

at the end of its first year of operations, G reported a deferred tax asset. will reversal of current temporary differences result in taxable or deductible amounts , and did G have a Y1 profit or loss for tax purposes?
1.taxable or deductible amounts: deductible / taxable
2. taxable status of Y 1 operations: profit / loss

Answer 6

1.taxable or deductible amounts: deductible
2. taxable status of Y 1 operations: profit

the reversal of the current temporary differences will result in the future deductible amount because a deferred tax asset represents future tax savings. these tax savings will be seized in the form of the future tax deductions that will reduce the amount of future taxes owed.

Question 7

the lower of cost or market
+profit margin of 30%

historical cost 15
replacement cost 17
estimated cost to dispose 5
selling price 30

Answer 7

[15]
NRV=30-5=25
NRV-profit =25-9=16
replacement cost 17
↓
①market=17
②cost = 15
↓
lower of cost or market= 15

Question 8

which is not subject to the application of inter period income tax allocation?
A. operating income
B. discontinued operations

Answer 8

[A]
GAAP does nor required intraperiod income tax allocation to operating income. only select items on the income statement are shown net of income tax, and operating income is not one of them.

Question 9

issued 2,000 of its $1,000,8% ten-year bonds dated July 1, Y1 on Sep 1, Yi at a time when the market paid 9% for bonds of similar risk. the bond was quoted 94 and paid interest quarterly on Sep 30 and Dec 31. what were the total proceeds of the bond issue at the time of sale?

Answer 9

[1906,667]
bond proceed after discount=1,880,000
interest paid per quarter=2,000,000×8%/4=40,000
months expired on the quarter =40,000×2/3=26,667

total proceed= 1,880,000+26,667=1906,667

Question 10

a company provides compensatory stock options to its eligible employees. which is true if 30% of the stock options issued by the company expire?
A. common stock is debited to reflect the stock not issued to employees.
B. APIC expired stock option is credited to reflected the expired options.
C. no journal entry is required by the company.
D. compensation expense is credited for the expired options.

Answer 10

[B]
in order to account for the expired options, the APIC stock options account is debited and the APIC expired stock options account is credited.

Question 11

a company used the completed contract method to account for a long term construction. revenue is recognized when recorded progress billings:
are collect: yes/no
exceed recorded costs: yes/no

Answer 11

no-no
percentage contract=when job is completed

percentage of completion=
1.engineering estimates of completion

2.or costs incurred to date vs total estimated costs

Question 12

a firm may capitalize interest on assets under which of the following scenarios?
A. when borrowed funds are received on the related construction loan.
B. for special order goods held for sale to customers.

Answer 12

[B]
although a firm may not capitalized interest on its ordinary inventory production, it can capitalized interest on special order goods on hand for sale to customers.

A is incorrect. the recipe of borrowed funds does not mean that the firm can begin capitalizing interest. instead, the firm may capitalize interest during the construction period when expenditures are bing accumulated to construct the qualifying asset.

Question 13

net profit margin=?

Answer 13

net income/net sales

Question 14

times interest earned?

Answer 14

=income before interest expense and taxes/
interest expenses

Question 15

the following is the stockholders’ equity section of H’s balance sheet on Dec31:
□CS $10 par, 100,000 shares authorized, 50,000 shares issued of which 5,000 have been required, and are held in treasury $500,000
□APIC of CS 1,100,000
□RE 800,000
——————————————————-
subtotal 2,400,000
less TS (200,000)
——————————————————-
total stockholders’ equity 2,200,000

H has an insignificant amount of convertible securities, stock warrants, and stock options. what is the Book value per share of common stock?

Answer 15

[49]
Book value per share of common stock=CS holders’ equity/CS outstanding

Question 16

On July 1, Y1, R obtain life insurance for a 3-year period at an annual premium of $72,000 payable on July 1 of each year, the first premium payment was made July 1, Y1. on Oct 1, Y1 Roxt paid $24,000 for real estate taxes to cover the period ending Sep 30, y2. This prepayment was made to obtain a discount. In its Dec 31, Y1, balance sheet, R should report prepaid expenses of :

Answer 16

[54,000]
7/1/Y 1 payment: 7/1/Y1-6/30/Y2:72
10/1/Y1 payment: 10/1/Y1-9/30/Y2:24
12/31/Y1 amortize: 7/1-12/31:(36)
12/31/Y1 amortize: 10/1-12/31:(6)

72+24-36-6=54

Question 17

major fund 判斷方法

Answer 17

必須要滿足10%和5%標準
10%=自己所屬類型的10%，例如governmental fund 就要在該項目中超過10%，enterprise fund也一樣
5%= combined governmental and enterprise的5%，也就是governmental+enterprise

Question 18

The Barter Nursing Home, a private not-for-profit organization, received the following services.以下情況會如何影響revenue？
barter received volunteer services to build an addition to the Nursing Home. the addition included work by a skilled carpenter valued at $13,000 and work of general laborers valued at $12,000.

Answer 18

[25,000]

Barter’s revenues would include the value of the skilled carpenter since it passes the SOME test and the carpenter “enhanced a physical asset.” It would also include the unskilled labor associated with the project since the labor “enhanced a physical asset.” Barter would recognize $25,000 in revenue ($13,000 + $12,000).

Question 19

which of the following items, if the dilutive and if other conditions are met, would enter into the determination of the weighted average shares outstanding to be used in the basic earning per shares calculation?
1.stock options
2.contingent shares

Answer 19

[2]

Question 20

which of the following transaction qualify as a discontinued operation?
A.planned and approved sale of a segment.
B. disposal of part of a line of business.

Answer 20

[A]

Question 21

unrealized holding gains/loss would be included in earnings for which of the following debt securities?
trading: yes/no
held-to-maturity: yes/no

Answer 21

yes-no

Question 22

FV is higher than PV based on expected future cash flows.
the amortized cost is between the fair and present values. and all values are higher than the bond’s original cost to the company.
A. not record a loss because fair value is above the amortized cost.
B. record a loss because amortized cost is above the present value

Answer 22

[B]

Question 23

which is correct statement when accounting for compensatory stock option/plan?
A. compensation expense is allocated over the employee’s service period
B. the expiration of an employee stock option requires the reversal of compensation expense.

Answer 23

[A]
B is incorrect. when employee stock options expired there is no impact on compensation expense; instead, there is a reclassification of the remaining balance in the APIC options account.

Question 24

the company contributed 250,000 in cash to Youth and educational programs.
the company also gave $140,000 to health and human service organization, of which $80,000 was contributed by employees through payroll deductions. in addition, consistent with the company’s commitment to the environment, the company spent $100,000 to redesign production packaging.

what amount of the above should be included in income statement as charitable contributions expense?

Answer 24

310,000=250,000+(140,000-80,000)

Question 25

finance lease.
Y3 revenue recognized:
rent/interest
Y3 amount recognized compared to Y2: the same/ smaller

Answer 25

interest; smaller

Question 26

which is required financial statement for an investment trust fund?
A. statement of revenues, expenses, and changes in fiduciary net position
B. statement of changes in fiduciary net position.

Answer 26

[B]
for an investment trust fund, the required financial statements are
1.a statement of fiduciary net position(balance sheet) and
2.a statement of changes in fiduciary net position(income statement)

Question 27

W a holder of a $1,000 P bond, collected the interest due on Mar 31, and then sold the bond to S doe $975. on the date, P a 75% owner of S, has a 1,075 carrying amount for this bond. what was the effect of S’ purchase of P’s bond on the retain earnings and non-controlling interest amount report on consolidated balance sheet?
A. retained earnings 100 increase, non-controlling interest $0
B.retained earnings $0, non-controlling interest $25,000 increase

Answer 27

[A]
dr: bond premium 75
dr: bond payable 1,000
cr: bond investment 975
cr: retain earnings 100

non-controlling interest is only adjusted of the bond were originally issued by the subsidiary and , as a result, a portion of the gain must be allocated to the non-controlling interest.

Question 28

P owned shares in R. P declared and distributed a property dividend of R share then their FV exceeded the carrying amount. as a consequence of the dividend declaration and distribution, the accounting effects would be:
dividend recorded at:cost/FV
RE: increase/decrease

Answer 28

FV-decrease
use FMV of asset to reduce retained earnings when property dividend is declared. the cost of asset will be adjusted to FMV (difference treated as ‘gain or loss on disposal of asset’ ) when a property dividend is declared. RE is reduced for both cash and property dividends.

Question 29

S employs a full-time staff of 10 people at an annual cost of 150. in addition, two volunteers work as part-time secretaries replacing last year’s full-time secretary who earned 10.
services performed by other volunteers for special events had an estimated value of 15.
what amount should S report for salary and wage expenses related to the above items?

Answer 29

160

Question 30

after speaking to the company’s sale manager, a customer placed a large order. the customer has no immediate need for the products, so the customer asked the company to wait 60 days before delivering the products. in this case, the company should recognize revenue for the sale when the order is:
A. Packed and ready for shipment
B. delivered to the customer
C. verified as in stock by the company
D. placed by the customer.

Answer 30

[B]
delivery to the customer ensures that control of the inventory is transferred to the customer, and as a result, the company has satisfied the performance obligation and can record revenue.

Question 31

W manufactures equipment that is sold or leased. on Dec 31, Y1 W leased equipment to B for a five-year period ending Dec 31, Y6, at which date ownership of the leased asset will be transferred to B. equal payments under the lease are 22,000 and are due on Dec 31 of each year. the first payment was made on Dec 31, Y1. collectibility of the remaining lease payments is reasonably assured. and W has no material cost uncertainties. the normal sales price of the equipment is 77,000. and the cost is 60,000. the dor year ended Dec 31, year 1, what amount of income should W realize from the lease transaction?

Answer 31

17,000
in a finance lease , the difference between the FV of the leased asset and its cost at inception is recognized as a gain or loss.

Question 32

W, a U.S company, is concerned that fluctions in a foreign currency could severely affect the profitability of a major sale to a foreign customer. which type of exchange rate would be the most important rate used if W were to enter into a hedging transaction to minimize the risk of currency function?
A.historical rate
B. forward rate

Answer 32

[B]
the forward exchange rate is the exchange rate existing at the present time for exchanging two currencies at a specified future date. W would purchase a forward exchange contract to minimize the risk of currency fluctuation and lock in a rate for a specific future date.

Question 33

on Apr 1, Y1 purchased $200,000 face value, 9% U.S Treasure Noted for $198,500, including accused interest of $4,500/ the notes Mature July 1 Y2, and pay interest semiannually on Jan 1 and July 1. Saxe uses the straight-line method of amortization. the noted were sold on Dec 1 Y1 for 206,500. including accused interest of $7,500. on Oct 31, Y1 balance sheet, the carrying amount of this investment should be :

Answer 33

196,800

purchase price:198500-4500=194,000
face value=200,000
discount=6,000
monthly amortization=600/15=400
4/1-10/31=400×7=2800
carrying amount =194,000+2,800=196,800

Question 34

Identify the location of each report, transaction, data element, or reporting objective described in the table below in the financial statements of a local government that complies with GASB 34 by clicking in the associated cells and selecting from the option list provided.

road and bridge assets reported using the modified approach
financial statement location:
1. consolidated with business-type activities in the government-wide financial statements
2. required supplementary information

Answer 34

[Required supplementary information]

Infrastructure reporting under the modified approach will be displayed as required supplementary information.

Question 35

approved purchase orders were issued for supplies
1. debit expenditures control
2. debit encumbrance control

Answer 35

[2]
Debit encumbrances control
When approved purchase orders are issued, they are recognized in the budgetary accounting system in order to encumber the funds (to put aside funds for that specific use). The appropriate entry is as follows:

DR Encumbrance control
CR Budgetary control

Question 36

order suppliers were received and invoices were approved
1. debit expenditure control
2. credit appropriations control

Answer 36

[1]
Debit expenditures control
When supplies are received that had previously been ordered through a purchase order, the encumbrance entry is reversed and the cost of supplies is recognized as a liability through the following series of entries:

DR Budgetary control
CR Encumbrance control
DR Expenditures control
CR Vouchers payable

Question 37

general fund salaries and wages were incurred
1. deferred inflows of resources
2. debit expenditures control

Answer 37

[2]
General fund salaries and wages are recognized as expenditures of the period incurred. The appropriate entry is as follows:

DR Expenditures control
CR Vouchers payable

Question 38

revenues were earned from a previously awarded grant
1. debit deferred inflows of revenue
2. credit interfund revenues

Answer 38

[1]
Debit deferred inflows of resources
Inflows from a grant are not recognized as revenue until the expenditures for the intended purpose of the grant are incurred. Thus when revenue from a previously awarded grant is earned, the entry would be as follows:

DR Deferred inflows of resources
CR Grant revenues

Question 39

appropriations recorded on adoption of budget
1. debit encumbrances control
2. credit appropriations control

Answer 39

[2]
When adopted, a budget is a binding legal document. Thus, the budget is recorded in the accounting system of the municipality using the following journal entry:

DR Estimated revenues
CR Appropriation control

Question 40

P acquired 100% of S.
P’s inventory 210
S’s inventory book value 70, estimated fair value 75

consolidated statement?

Answer 40

275=210+70-5

When an entity is acquired, the fair value of the subsidiary’s assets and liabilities is recorded on the parent’s books. According to the Valuation Letter provided, the fair value of Boof & Mortimer Holdings’ inventories is $75,000, not $70,000 as reported on the company’s balance sheet. The inventories balance reported in the 1/1/Year 4 DRAFT Combined Pre-consolidation Statement simply combined the $210,000 and $70,000 values reported as inventories on the individual company balance sheets in the Otisius Balance Sheet and Boof & Mortimer Balance Sheet. The inventories balance must be increased by $5,000 to properly reflect the adjustment in Boof & Mortimer Holdings’ inventories to fair value. See consolidation journal entry above.

Question 41

P acquired 100% of S.
[P]
Property, plant, and equipment 375,000
Less: Accumulated depreciation (98,000)

[S]
Property, plant, and equipment 150,000
Less: Accumulated depreciation (40,000)
※land book value 30,000, fair value 45,000

1. consolidated Property, plant, and equipment?
2. consolidated (less: accumulated depreciation)?

Answer 41

500,000=375,000+110,000+15,000
(98,000)=(138,000)+40,000

When an entity is acquired, the fair value of the subsidiary’s assets and liabilities is recorded on the parent’s books. For equipment and accumulated depreciation of the acquired entity to be presented properly in the consolidated balance sheet, the net book value (NBV) of the acquired PP&E of the subsidiary entity must be reflected in the statement. The subsidiary’s accumulated depreciation account must be zeroed out so that the parent’s fixed assets are effectively recorded at their acquisition costs. The entry is:

Account Name Debit Credit
Accumulated depreciation (subsidiary) $40,000
Property, plant, and equipment (subsidiary) $40,000

This journal entry records the net book value of Boof & Mortimer Holdings’ property, plant, and equipment on Otisius’ books, which is $110,000 ($150,000 cost less $40,000 accumulated depreciation). The consolidation entry for property, plant, and equipment totals ($25,000) as the decrease in the property, plant, and equipment account resulting from the above journal entry is partially offset by the $15,000 increase in the fair value of land, which is required based on the Valuation Letter. U.S. GAAP requires that identifiable assets be marked to fair value upon acquisition.

After reflecting the consolidation entry on the statement, the parent’s adjusted consolidated balances for equipment appear as:

Property, plant, and equipment $500,000
Accumulated depreciation (98,000)

The $500,000 property, plant, and equipment value is calculated as follows:

Otisius’ PP&E $375,000
Boof & Mortimer Holdings; PP&E net book value 110,000
Increase in fair value of land 15,000
Consolidated PP&E $500,000

Question 42

lower at issuance,
1. the initial carrying value of the bond
2.per prior interest expense
would have been higher

and amortization of the discount would be lower.

Answer 42

[lower at issuance, the initial carrying value of the bond would have been higher and amortization of the discount would be lower.]

Question 43

the coupon rate is fixed for the life of the bond, but if market rates increase in Y2,
1. the interest expense will be higher than projected
2. the market value of the bond will decline

Answer 43

[2]
Changes in market rates have no impact on the book value of bonds or interest expense. The market value will decline because higher interest rates in the marketplace will make a fixed coupon bond less attractive.

Question 44

on March 1, Y1, C issued at 103 plus accrued interest, two hundred of its 9%, $1,000 bonds. the bonds are dated Jan1, Y1 and mature on Jan 1 Y11. interest is payable semiannually on Jan 1 and July 1. C paid bond issuance costs of $10,000.
net cash receipt from the bond issuance?

Answer 44

[19,000]
206,000
+accrued interest 3,000
-bond issuance cost (10,000)
_________________________________________
199,000

dr: cash 199,000
dr: bond issuance costs and premium 6,000
cr: bonds payable 200,000
cr: bonds interest payable 3,000

Question 45

the Town is preparing the work paper entries to adjust its governmental fund financial statement balances for use in government-wide financial statements.
dr: net position, governmental activities
cr: ?

Answer 45

non-current debt

non-current debt existing at the beginning of a fiscal period would not be displayed in governmental funds. a workpaper entry to establish beginning balances for non-current debt would be a debit to net position and credit to non-current debt.

Question 46

when the coverability of a building’s carrying amount is determined to be impaired, the building’s fair value is best measured as:
A. the selling price less transaction costs to complete the sale for this type of building in its principal market.
B. price that would be received for this type of building based on observable inputs in its principal market.

Answer 46

[B]
A is incorrect because transaction costs are not considered in the determination of fair value.

Question 47

which of the following common derivative instruments effectively represents a contingent agreement?
A. stock put option
B. equity swap

Answer 47

[A]
a stock put option is effectively a contingent agreement because the buyer has the option but not the obligation to execute the terms of the put option contract. when the put option is in the money m the buyer will most likely exercise the put option, but when the put option is at the money or out of the money, the buyer would most likely not exercise the put option. it should be noted that the current market price of the stock versus the put option buyer’s exercise price will ultimately determine whether this contingent agreement is executed.

Question 48

W took advantage of market conditions to refund debt. this was the fifth refunding operation carried out by W within the last four years, the excess of the carrying amount of the old debt over the amount paid to extinguish it should be reported as a:
A. part of continuing operations
B. separate item, net of income taxes.

Answer 48

[A]

Question 49

with regard to a fair value hedge, hedge effectiveness is a measure of the extent to which the :
A. hedge transaction offsets the exposure to changes in the hedged item’s fair value.
B. hedge transaction results in eliminating changes in fair value of the hedged item.

Answer 49

A. a fair value hedge is a hedge of the exposure to changes in the fair value of a recognized asset that are attributable to a particular risk. when a hedge is effective, the change in the value of the derivative offsets the change in the value of a hedged item. for an instrument to qualify for hedge accounting, the hedge must be considered highly effective at offsetting the specified risk during the period the hedge is designated.

Question 50

lease for 3 years and the economic life of the equipment is 4 years. the lease contains a written purchase option which the lessee intends to exercise. over how many years should the lessee depreciate the leased equipment?

Answer 50

4

Question 51

a company completes construction of a $400 million offshore oil platform and places it into service on Jan 1. state law required that the platform be dismantled and removed at the end of its useful life, which is estimated to be ten years. the company estimated that the cost of dismantling the platform will be 20 million. the discounted value of the liability is 9 million using the company’s credit-adjusted, risk-free rate. the company has already capitalized the $400 million construction cost of the platform. what amounts should the company record as liability and expense when the asset is placed into service?
liability=
expense=

Answer 51

liability=9,000,000
expense=0

no expense will be recorded over the life of the asset, which will include the expense related to the ARO.

Question 52

during Y 1, W purchased 2,000 shares of H common stock for 31,500. the market value of this investment was 29,500 at Dec 31, Y1. W sold all of the H common stock for $14 per share on Dec 15, Y2, incurring $1400 in brokerage commissions and taxes. on the salem W should report a realized loss on its income statement of :

Answer 52

2,900

Question 53

when the total consideration for a contract with multiple embedded obligations reflects a discount, the most appropriate way to assign that discount is to:
A assign it equally across all obligations.
B. allocated it proportionally to all obligations within the contract.

Answer 53

B.

Question 53

when the total consideration for a contract with multiple embedded obligations reflects a discount, the most appropriate way to assign that discount is to:
A assign it equally across all obligations.
B. allocated it proportionally to all obligations within the contract.

Answer 53

B.

Question 54

when the equity method is used to account for investments in common stock, which of the following affects the investor’s reported investment income?
undervalued asset amortization related to purchase: yes-no
cash dividends from investee: yes-no

Answer 54

yes-no

for undervalued asset amortization:
equity revenue(I/s)
investment acct(B?S)

cash dividends received will only affect the balance sheet investment account.
cash (B/S)
investment acct (B/S)

Question 55

a new building cost 60,000,000. the building will be initially financed with 30% internal equity (9% cost of equity) with the remainder from a $30,000,000 construction loan(three annual $10,000,000 payments plus interest at 6%) and its general debt facilities (8% weight average interest rate). assuming the company incurred average accumulated expenses of $54,000,000 pertaining to the building construction during the year and had actual borrowing costs of $2,440,000, what amount of capitalized interest cost would be recognized by the company at year-end?

Answer 55

[2,280,000]
the scenario above indicates that internal equity of $18,000,000 initially will be used to finance the construction, with the remaining $42,000,000 financed with debt borrowings.
Because the company incurred $54,000,000 in average accumulated expenses to construct the building during the year, $36,000,000 the borrowed funds were used including $30,000,000 from the construction loan and 60,000 000 from the general debt facilities with capitalized interest as follows.
30,000,000×6％＝18,000,000
6,000,000×8%=480,000

Question 56

a state government had the following activities:
1. state-operated lottery $10,000,000
2. state-operated hospital $3,000,000
which of the above activities should be most likely accounted for in an enterprise fund?

Answer 56

both

Question 57

the guidance included in FASB ASC 958, financial statements of Not-for-profit organizations, focus on:
A. distinctions between the current fund and non-current fund presentations.
B. basic information for the organization as a whole.

Answer 57

[B]

Question 58

ABC company enters into a foreign currency fair value hedge to hedge its exposure to pesos from several transactions completed in Mexico. during the year, the company had a $17,000 loss from the foreign currency fair value hedge along with a $12,000 gain on the underlying hedged currency. assuming that the derivative transaction will be fully settled the following year, how would the above derivative transaction activity be recorded on ABS company’s financial statement in the current year?
A. 12,000 gain in current earnings and 17,000 loss in other comprehensive income
B. 5,000 net loss in current earnings,

Answer 58

[B]

Question 59

for an AFS security transferred into the trading category, the portion of the unrealized holding gain or loss at the date of the transfer that has not been previously recognized in earnings shall be:
A, recognized in earnings immediately
B. deferred and recognized when the security is sold

Answer 59

[A]
trading securities reflect all realized and unrealized gains and losses in earnings. A security that is classified as available for sale would have unrealized gains or losses reflected in other comprehensive income, but once it is transferred into the trading category those unrealized amounts will need to be recognized in earnings.

Question 60

the city sele-insures for potential liability risks arising from normal governmental operations. liability insurance for the city’s bus system is handled through an unrelated company. what type of fund would be appropriate for the amounts collected by the city for insurance premiums?
A, internal service fund
B. governmental fund

Answer 60

[A]
an internal service fund is an appropriate fund for a city that establishes a self-insurance program because city departments and funds are the exclusive users of the fund benefits.

Question 61

which of the statement is true regarding callable bonds?
A. the call price is often set at a discount to par
B. A callable bond provides an option for the bondholder.
C. bondholders will typically require a lower rate of return for callable bonds.
D. an issuer is more likely to call a bond when interest rates move lower.

Answer 61

[D]
A. the call price is often set a premium to par.
B. A callable bond provides an option for the issuer(not the bondholder), whereas a puttable bond provides an option to the bondholder.
C. because the issuer has the option of calling the bond, a bondholder will typically require a higher rate of return for callable bonds as a means of compensation for the risk that the bond is called early and then having to reinvest the cash proceeds at lower market interest rates.

Question 62

on Sep 30, P acquired 100% S through a stock acquisition on which P will issue 2 million shares(5 par)of stock. assuming the transaction is closed on Dec and the market price of P’s stock was $50 and $55 on Sep 30 and Dec 31.
#JE?

Answer 62

DR:investment in Subsidiary 110,000,000
CR:CS 10,000,000
CR:APIC 100,000,000

Question 63

checkbook balance 10,000
1. 4,000 check payable to R, postdated Jan3, and not included in the Dec 31 checkbook balance, in the collection of a sale made in Dec.
2. 1,000 check payable to R, deposited Dec 15 and included in the Dec 31checkbbok balance, but returned by the bank on Dec 30 stamped “NSF”. the check was redeposited on Jan 2, and cleared on Jan 9.
what amount should R report as cash in its Dec 31 balance sheet?

Answer 63

9,000=10,000-1,000
4,000 is correctly excluded from the chackbook.

Question 64

L country issued $5,000 of general obligation bonds at 101 to finance a capital project. the $50,000 premium was to be used for payment of principal and interest. this transaction should be accounted for in the:
A. capital projects funds, debt service funds and as assets and liabilities in the government-wide financial statements
B. debt service funds and the general long-term debt account group only.

Answer 64

[A]
account groups are no longer used,

Question 65

which should a company use to account for a contingent liability when the loss is probable but not reasonably estimated?
A. the liability should only be disclosed in the noted to the financial statements.
B. the liability should not be report.

Answer 65

[A]
if a reasonable range of the loss can not be estimated then a statement saying such must be included in the notes.

Question 66

which is generally associated with payables classified as accounts payable?
periodic payment of interest: yes/no
secured by collateral: yes/no

Answer 66

No-NO
a liability that requires the periodic payment of interest should be classified as an accrued liability or debt.
a liability that is secured by collateral should be classified as a loan payable.

Question 67

which is a common modification used to prepare modified cash basis financial statements?
A. recognizing revenues when earned.
B. capitalizing inventory

Answer 67

[B]
capitalizing inventory is a common modification made to cash basis financial statements.

Question 68

how should the gains and losses from changes in the fair value of the following types of foreign currency transaction hedges be reported in the financial statements?
fair value: current income/OCI
net income: current income/OCI

Answer 68

current income -OCI

Question 69

record an impairment loss
Held for use: yes/no
Held for disposal: yes/no

Answer 69

no-yes

Question 70

reportable segments
1. 10% of sales to unaffiliated customers
2. 10% of intersegment sales
3. 10% of total revenue

Answer 70

[3]

Question 71

P used the installment sale method to recognize revenue. Customers pay the installment notes in 24 equal monthly amounts, which include 12% interest. what is an installment note’s receivable balance six months after the sale?
A. the present value of the remaining monthly payments discounted at 12%/
B. less than 75% of the original sales price.

Answer 71

[A]
the present value of remaining monthly payments discounted at 12% equals the installment note receiveable balance at any time/
C is incorrect because the balance will be more than 75% of the loan balance.

Question 72

On July 1, Y7, D issue, at a premium, bonds with a due date of July 1, Y12.D incorrectly used the straight-line method instead of the effective interest method to amotized the premium. how were the following amounts affected by the error at June30, Y12?
bond carrying amount: overstate/understate/no affect
retained earnings: overstate/understate/no affect

Answer 72

bond carrying amount: no affect
retained earnings: no affect
the bonds have a maturity date of July 1, Y12.
On June 30, Y12, they will in effect be fully amortized and be reflected on the balance sheet at par(face) value. because there is no premium left to be amortized, and because the total amount to be amortized is the same regardless of the methodology used there will be no effect from this mistake reflected in the carrying amount or retained earnings.

Question 73

in the balance sheet of an NFP hospital, marketable equity securities should be reported at:
A. fair value with gains and losses reported in the statement of activities.
B. fair value with gains and losses reported as a component of net assets

Answer 73

[A]
gains and losses on investments are reported in the statement of activities as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor stipulations or law.

Question 74

account receivable turnover

Answer 74

net sales/account receivable

Question 75

for interim financial reporting, the computation of a company’s second-quarter provision for income taxes used an effective tax rate expected to be applicable for the full fiscal year. the effective tax rate should reflect the anticipated:
foreign tax rates: yes/no
available tax planning alternatives: yes/no

Answer 75

yes-yes
the effective income tax rates for operations for the full year should reflect anticipated foreign tax rates and available tax planning alternatives. in addition, the effect of other anticipated tax credits, capital gains rates, and foreign tax credits should be included.

Question 76

quick ratio

Answer 76

(current asset-inventory)/current liability

Question 77

an investor purchased a bond classified as a long-term investment between interest dates at a discount. at the purchase date, the carrying amount of the bond is more than the:
cash paid to seller: yes/no
face amount of bond: yes/no

Answer 77

no-no
the carrying value is less than the cash paid by the investor because accrued interest is included in the cash.

Question 78

which situation would require the seller recognize revenue over time rather than at a point in time?
A. benefits are received by the buyers as the seller performs.
B. rewards and risks of ownership remain with the seller.

Answer 78

[A]
when rewards and risks of ownership remain with the seller, revenue would not be recognized.

Question 79

how many shares of CS are outstanding?
Dec 31, Y1 CS 300
Jan 31 declared 10% stock dividend
June 30 purchase 100 shares
Aug 1 reissued 50 shares
Nov 30 delared 2 for 1 stock split

Answer 79

560=(300+30-100+50)×2
遇到最後一項才是分裂的時候，前部都不用算日期，直接乘以分裂數

Question 80

1/1 shares outstanding 20
4/1 2 for 1 stock split 20
7/1 shares issued 10

Answer 80

40×6/12+50×1/2=45

Question 81

which of the time is likely classified as an expenditure in the general fund?
A. pension benefits payments
B. lease principal payments for a lease other than a short-term lease and contract that transfers ownership.

Answer 81

[B]
A is incorrect.
★pension contribution payments would likely appear in the general fund as an expenditure.
★the payment of benefits themselves would be classified as deductions in a pension fund.

Question 82

On which defined benefit pension plan financial statement would a pension plan’s interest income be reported?
A. statement of changes in accumulated plan benefits
B. statement of changes in net assets available for benefits

Answer 82

[B]
the statement of changes in net assets available for benefits shows the causes of the changes of a pension plan’s assets, which would include the cause of increases such as investment income (including interest income), appreciation of plan assets, and employer contributions, as well as the cause of decreases such as benefits paid to beneficiaries and administrative.

Question 83

on Dec 31, a building owned by C was destroyed by fire. C paid $12 for removal and clean-up costs. the building had a book value of $250 and a fair value of $280 on Dec 31. what is the loss on this involuntary conversion?

Answer 83

=NBV+associated with the transaction=250+12=262

Question 84

which is interest expense?
A. interest incurred to finance software development for internal use.
B. pension cost interest
C. deferred compensation plan interest
D. amortization of discount of a note

Answer 84

[D]
A is incorrect because interest incurred to finance software developed for internal use id capitalized as a component of computer software development costs.

Question 85

JE to record the execution of the lease on Jan 1, Y1.

The city entered into a 10-year lease for office copiers in city hall at the beginning of the year with lease payments of $10,000 due annually at the end of each year. The agreement had an implicit interest rate of 10%. The discount rate for the present value of an annuity for 10 years at 10% is 6.1446 and the present value of $1 for 10 years is 0.3855. Ownership of the copiers does not transfer to the city at the end of the lease term.

Answer 85

dr: capital outlay 61,446
cr: other financing sources 61,446

dr: debt service expenditure-principal 3,855
dr: debt service expenditure6,145
cr: cash 10,000

no entry
Amortization is not recorded in the governmental fund financial statements. The current resources measurement focus used for governmental funds does not include recognition of non-current assets and, consequently, does not include any recognition of related amortization of a right-of-use asset as would be found in proprietary funds and government-wide financial statements.

Question 86

The city elects to establish a supplies inventory for its copier at the beginning of the year and adopts the purchases method. Copier supplies totaling $5,000 were purchased during the year, $3,000 of the supplies were used during the year, and $2,000 of copier supplies inventory remained at the end of the year.

1. prepare the journal entries to record supplies inventory.
2. prepare te journal entry to record copier supplies expenditures.

Answer 86

1. dr: inventory 2,000
   cr: fund balance-non spendable 2,000
2. dr: expenditures 5,000
   cr: cash 5,000

Question 87

On January 1, Year 1, Parent Company acquires a 100% interest in Subsidiary Company by issuing 100,000 shares of $10 par common stock. The market value of the stock at the date of issuance was $17.60 per share. The investment was accounted for internally using the cost method. During Year 1, Subsidiary Company reported net income of $400,000 and declared and paid $10,000 of dividends. Parent uses straight-line depreciation and estimates the remaining life of plant and equipment to be three years. Any excess over fair value is goodwill. Assume goodwill is determined to be impaired by $2,000 for the year. An intercompany receivable and payable of $30,000 was included on the respective financial statements of each company. The purchase is properly accounted for as an acquisition.

1. Eliminate intercompany transactions associated with the income statement:
2. Eliminate intercompany transactions associated with the balance sheet, exclusive of investments:

Answer 87

1.
dr: dividend income from subsidiary 10,000
cr: dividends paid 10,000

2. dr: intercompany payable 30,000
   cr: intercompany receivable 30,000

Question 88

income tax-basis financial statements differ from those prepared under GAAP in that income tax-basis financial statements.
1. do not include nontaxable revenues and non-deductible expenses in determining income
2. include detailed information about current and deferred income tax liabilities.
3. contain no disclosures about capital and operating lease transactions.
4. recognize certain revenues and expenses in different reporting periods.

Answer 88

[4]
Choice “4” is correct. Income tax-basis financial statements recognize events when taxable income or deductible expenses are recognized on the entity’s tax return. Non-taxable income and non-deductible expenses are shown on the financial statement and included in the determination of income (and become M-1 adjustments to arrive at taxable income).

Question 89

Jan 1, D acquired 80% of S’s outstanding common stock for $120,000. During Y1, S paid 5,000 cash dividends to its stockholders.

S retain earnings:
1/1 Y1 36,000
12/31 Y1 51,000

D equity
Cs 50,000
APIC 80,250
RE 139,750

what amount of total stockhoder’s equity should be reported in D’s Dec 31, Y1, consolidated balance sheet?

Answer 89

Choice “3” is correct, $303,000 total consolidated stockholders’ equity. Dallas’ consolidated stockholders’ equity will be the parent company stockholders’ equity plus the noncontrolling interest on December 31, Year 1:

Common stock50,000
Additional paid-in capital80,250
Noncontrolling interest33,000
Retained earnings139,750
303,000

The December 31, Year 1 noncontrolling interest of $33,000 is calculated as follows:

Noncontrolling interest, 1/1,30,000*
+ NCI share of net income, 4,000**
- NCI share of dividends(1,000)= $5,000 × 20%
Noncontrolling interest, 12/31, 33,000

• The noncontrolling interest on 1/1 is calculated as follows:

$120,000 acquisition cost = FV of Style x 80%
FV of Style = $150,000
Noncontrolling interest = $150,000 × 20% = $30,000

** The noncontrolling shareholders’ share of Style’s net income is calculated as follows:

Style retained earnings, 1/1 36,000
+ Net income 20,000(plug)
- Dividends(5,000)
Style retained earnings, 12/31, 51,000
Noncontrolling share of Style’s net income = $20,000 × 20% = $4,000

Question 90

On Mar 1, R issued 1,000 shares of its $20 par value CS and 2,000 shares of its $20 par share convertible PS for a total of $80,000. at this date, R’s CS was selling for $36 per share, PS was for $27.
what amount of the proceeds should be allocated to convertible PS?

Answer 90

Common stock1000×36=$36,000
Preferred stock2000×27=54,000
Allocate to preferred: 54/90 x $80,000 = $48,000

Question 91

conditions are associated with pledges or receipts provided to a not-for-profit organization in the event that there is :
1. aright of return of contributed resources or release of the promisor from any obligation.
2. measurable performance-related barriers that exist relative to the promise or receipt.
3. measurable performance-related barriers or other barriers relative to the promise or receipt and a right of return of contributed resources or release of the promisor of any obligation.
4. donor restrictions and a right of return of contributed resources or release of the promisor from any obligation.

Answer 91

Choice “3” is correct. Conditions are defined as measurable performance-related barriers or other barriers. These barriers are relative to either a promise to give or a donation received that are further associated with the donorʹs right to require a return of the donation from the recipient or right to rescind the promise to give. Both the barrier and right of return must exist to represent a condition. The existence of conditions relative to donation preclude the recognition of revenue for not-for-profit organizations.

Choice “1” is incorrect. The proposed answer incorrectly identifies donorʹs right of return as the sole component of a condition associated with not-for-profit contributions. Conditions are defined as measurable performance-related barriers or other barriers. These barriers are relative to either a promise to give or a donation received that are further associated with the donorʹs right to require a return of the donation from the recipient or right to rescind the promise to give. Both the barrier and right of return must exist to represent a condition.

Choice “2” is incorrect. The proposed answer incorrectly identifies measurable performance-related barriers as the sole component of a condition associated with not-for-profit contributions. Conditions are defined as measurable performance-related barriers or other barriers. These barriers are relative to either a promise to give or a donation received that are further associated with the donorʹs right to require a return of the donation from the recipient or right to rescind the promise to give. Both the barrier and right of return must exist to represent a condition.

Choice “4” is incorrect. The proposed answer only identifies donorʹs right of return as the sole component of a condition associated with not-for-profit contributions. Conditions are defined as measurable performance-related barriers or other barriers. These barriers are relative to either a promise to give or a donation received that are further associated with the donorʹs right to require a return of the donation from the recipient or right to rescind the promise to give. Both the barrier and right of return must exist to represent a condition. The existence of conditions relative to donation preclude the recognition of revenue for not-for-profit organizations. The existence of a restriction would result in classification of the contribution as revenue with donor restrictions if the contribution were unconditional.