FAR ④

Question 1

according to the FASB conceptual framework, the quality of the information that helps users forecast future outcomes is:
A. predictive value
B. neutrality
C. confirming value
D. representational faithfulness

Answer 1

[A]
A. forecast is predicting
B. neutrality is the depiction of financial information that is free from bias in selection or presentation.
C. confirming value provides feedback about evaluations previously made by users.
D. representational faithfulness means that financial information faithfully represents the reported economic phenomena.

Question 2

As of Dec 15, Y3, the company had dividends in arrears of $200,000 on its cumulative PS. Dividends for Y3 of $100,00 have not yet been declared. The board of directors plans to declare cash dividends on its preferred and common stock on Jan 16, Y4. The company paid an annual bonus to its CEO based on the company’s annual profits. The bonus for Y3 was $50,000, and it will be paid on Feb 10, Y4. what amount should the company report as current liabilities on its balance sheet on Dec 31, Y3?

Answer 2

[50,000]

Question 3

Z purchased a call option on Sep 30, Y1,　to buy 20,000 shares of XYZ company shares over the next 45 days at an exercise price of $19.5. the call premium paid by Z is $0.75 per share. assuming that over the next three consecutive 15-day intervals XYZ stock trades for the following maximum price what s the earliest period that Z would consider exercising its call option?
period 1 (Day 1-15): $19.5
Period 2 (Day 16-30): $20.25
period 1 (Day 31-45): $20.45

Answer 3

Period 2
because the call option is “in the money” and the stock price exceeds the exercise price in period 2, Z may consider exercising the call option in period 2. if this were to occur at the maximum stock price in period 2, the company would sale $0 profit on the call option.

exercised call: stock price($20.25)-exercise price($19.5)×20,000 shares = 15,000

call premium paid: call premium 0.75×20,000 shares = 15,000

Question 4

if the payment of employee’s compensation for future absences is probable, the amount can be reasonably estimated, and the obligation relates to rights that accumulate, the compensation should be:
A. Accrued of attributable to employee’s services whether already rendered or not.
B. Accured of attributable to employee’s service already rendered.

Answer 4

[B]
employees’ compensation for future absences should be accrued if:
1. the employees’ right to receive compensation is attributable to services already rendered.
2. the liability related to vested or accumulated rights.
3. payment is probable
4. the amount can be reasonable estimated.

Question 5

which of the following statements regarding the reporting options for other comprehensive income is true?
A. companies that report net income and comprehensive income on a single statement must ensure that the earnings per share calculation include both net income and other comprehensive income.
B. if the two-statement method for reporting comprehensive income is used, companies have the choice of reporting each line net of tax or before related taxes, with one amount shown for the aggregate income tax expense or benefit related to the total of all comprehensive income items.
C. when companies choose to report their comprehensive income as part of the statement of changes in stockholder’s equity, this is shown under the retained earnings column.
D. if the single statement method of reporting comprehensive income is used the comprehensive income items cannot be reported net of tax, and instead the tax related to all comprehensive items must be included on one line.

Answer 5

[B]
regardless of the method used, companies can choose to report other comprehensive income items net of tax or before related taxes, with one amount shown for the aggregate.

Question 6

equipment originally purchased for 325.
sell for 208, carrying value 195, a fair value of 202.
1.when the transfer takes place a financing liability equal to:
2.#JE

Answer 6

1.[6]
2.
dr: cash 208
dr: A/D-equipment 130
cr: equip 325
cr: financing liability 6
cr: gain on equipment sale(plug) 7

Question 7

G loans O $200,000 with a 10% simple interest note payable in ten years, interest on the note is payable annually and the principal is due at the end of the term. on Jan 1, Y3, O has yet to pay any interest and approaches G in the hope if renegotiating the terms. G agrees, forgives the interest on the note accrued to date, and reduces the interest to 8%.

eight years present value 8% 0.54 10% 0.467
eight years present value of an annuity 8% 5.767 10% 5.335
ten years present value 8% 0.463 10% 0.386
ten years present value of an annuity 8% 6.710 10% 6.145

Answer 7

de: note receivable 240,000
de: bad debt expense 61,240
cr: note receivable 200,000
cr: accrued interest receivable 40,000
cr: valuation allowance 61,240

Question 8

P paid 32,000 in cash to acquire a 66% interest. S asset fair value of 60,000, and liability fair value is 26,000.
Assuming the acquirer is a domestic company adhering to US GAAP, what is the amount of goodwill?

Answer 8

14,484

US GAAP = full goodwill method

partial goodwill method =9,560

Question 9

under the current generally accepted accounting principles, which approach is used to determine income tax expense?
A. asset and liability approach
B. period expense approach

Answer 9

[A]
B is response relates to an income statement-based approach to expense.

Question 10

which is correct regarding callable bonds?
A. an issuer is more likely to call a bond when interest rates move lower.
B. bondholder will typically require a lower rate of return for callable bonds,

Answer 10

[A]
when interest rates move lower, it becomes more attractive for the borrower to refinance the debt at a lower rate because a callable bond provides an early redemption option to the issuer, it is more likely to call a bond as rates move lower(in the hopes of reissuing debt at low rates)

Question 11

which is false related to the effect of donated stock from a shareholder to the company ?
A. total shareholder’s equity is reduced.
B. the number of shares outstanding declines.
C. donated stock is recorded at FV.
D. the book value per common share is higher.

Answer 11

[A]
will no change the total shareholder’s equity on the balance sheet.

Question 12

the Tourist Development fund transfers money to the Road and Bridge Debt Service fund in a budgeted transaction. Indicate the accounting in the fund financial statements.
transaction type: Reciprocal/ Non-reciprocal
method of presentation: Eliminated/Revenue/Transfer

Answer 12

Non-reciprocal | Transfer
The monies transferred by the Tourist Development fund to meet debt service requirements that are fully anticipated by the budget represent a non-reciprocal transaction (the Tourist Development fund will never get the money back) and would be accounted for as a transfer in the fund financial statements.

Question 13

the Tourist Development Fund transfers meney to the Road and Bridge Debt Service Fund in a budgeted transaction. Indicate the accounting in the government-wide financial statements.

transaction type: Reciprocal/ Non-reciprocal
method of presentation: Eliminated/Revenue/Transfer

Answer 13

Non-reciprocal | Eliminated
The monies transferred between governmental funds (the Tourist Development Fund and Debt Service Fund) would be within the same category (governmental activities) in the government-wide financial statements. The transaction is still non-reciprocal, but it would be eliminated in the government-wide financial statements to avoid grossing up activity.

Question 14

the veicle maintenance internal service fund receives payments from the general for repairs fone to police cars. indicate the accounting in the internal service fund’s financial statement.

transaction type: Reciprocal/ Non-reciprocal
method of presentation: Eliminated/Revenue/Transfer

Answer 14

Reciprocal | Revenue
Charges made by an internal service fund are reciprocal (the internal service fund expects to be paid in exchange for services) and would be accounted for as revenue in the fund financial statements.

Question 15

the general fund pays bond inssuance costs in advance of receipt of bond proceeds to expedite closing. the capital projects fund later repays the cost previously defrayed by the general fund.

transaction type: Reciprocal/ Non-reciprocal
method of presentation: Eliminated/Revenue/Transfer

Answer 15

Non-Reciprocal | Eliminated
The General Fund paid costs on behalf of another fund and was reimbursed. The expenditures should have been accounted for in the capital projects fund. The reimbursement transaction is non-reciprocal (the general fund expects the money back) but the reimbursement will net to zero. It will be eliminated and not be displayed on the financial statements.

Question 16

the calculation of the capital interest amount by an entity for a period is:
A. limited to a maximum of the actual interest cost incurred during the period
B. determined by the amount borrowed during the construction period.

Answer 16

[A]
the total capitalized interest amount recognized may not exceed the total interest costs actually incurred by the entity during the stipulated period.
確認的利息資本化總額不得超過在規定期間內實際發生的利息費用總額。

Question 17

time interest earned

Answer 17

income before interest expense and taxes/ interest expense

Question 18

M was organized to consolidate the resources of L and S in a business combination accounted for by the acquisition method. M issued 31,000 shares of its $10 par voting stock with a fair value of $15 per share, in exchange for all the outstanding capital stock of L and S.
what is the balance in M’s APIC account immediately after the business combination?

Answer 18

[155,000]
dr:investment in sub 465,000
cr: CS 310,000
cr: APIC 155,000

Question 19

which would be reported as an investing activity in a company’s statement of cash flows.
A. Collection of proceeds from a note payable.
B. Collection of a note receivable from a related party

Answer 19

[B]
B is correct. Loans to other entities and the consequent collection of the loans are reflected in the investing activity section of the cash flow statement.

A is incorrect. Notes payable fall under financing activities in the statement of cash flows.

Question 20

Under US GAAP, is the cumulative effect of an inventory pricing change on prior years earnings reported on the financial statements for
LIFO to weighted average: yes/no
weighted average to LIFO: yes/no

Answer 20

yes-no
the calculative effect of a change in accounting principle is now reported as an adjustment to beginning retained earnings when it is considered practicable to calculate the cumulative effect. under USGAAP, when making a change to LIFO, it is generally considered impracticable to calculate the cumulative effect of the change( in most cases, data on the historical LIFO layers is not available). in a change to LIFO, the beginning inventory dollar amount becomes the first LIFO layer. NO cumulative effect adjustment is made. the change is accounted for prospectively.

Question 21

N City reported a $25,000 net income in the fund balances for total governmental funds. N also reports an increase in net position for the following funds:
Motor pool internal service fund 9,00
Water enterprise fund 12,000
employee pension fund 7,000

Answer 21

[34,000]
Capital outlay
Principal payments on debt
Asset disposals
Sources uses financing
Revenue accrual
Interest expense
Depreciation expense
Internal Service fund net income

Question 22

on June 30 of the current year, H issued at 99, one thousand of its 8%, $1,000 bond. H uses USGAAP. the bonds were issued through an underwriter to whom H paid bond issuance costs of $35,000. On June 30 of the current year, H should report the bond liability at:

Answer 22

955,000=990,000-35,000
Discount or premium on the sale of bonds as well as the bond costs are included in the carrying value of the bonds on the balance sheet.

Question 23

assuming that no direct costs are involed, what are the components of the lease receivable for a lessor involved in a direct-financing lease?
A. the minimum lease payments less residual value.
B. the minimum lease payments plus residual value.

Answer 23

[B]
the reason for this is because the lessor can also expect to collect this residual value from the lessee at the culmination of the lease.

Question 24

an accelerated filer that is required to file form 10-K.
what is the maximum number of days after the company’s fiscal year-end that the company has to file Form 10-K with the SEC?
A. 75 days
B. 60 days

Answer 24

[A]
large accelerate filters($700 million)-60days

Question 25

which of the following should be disclosed in the summary of significant account policies?
A. Depreciation expense
B. basis of profit recognition on long-term construction contracts.

Answer 25

[B]

Question 26

a 5 year, $1000,000 bond is issued at 95. two years later, the bond is redeemed for 103. at the time the bond is redeemed, the unamortized discount is $28,000 and the unamortized bond issuance costs are $15,000/ assuming that the issue follows USGAAP,
#JE?

Answer 26

dr: bonds payable 1,000,00
dr: loss on debt extinguishment 73,000
cr: cash 1,030,000
cr: discount on bond payable 28,000
cr: unamortized bond issuance cost 15,000

Question 27

On Dec 1 of the current year, C declared and issued a 6% stock dividend on its 100,000 shares of outstanding common stock. there was no other common stock activity during the year. what number of shares should C used in determining basic earnings per share for the current year?

Answer 27

[106,000]
stock dividend are trated as if they had occurred at the beginning of the fiscal year.

Question 28

earnings per shares disclosure is required for which of the following:
A. Companies who have made a filing with the SEC in preparation for a sale of public securities.
B. non-public companies

Answer 28

[A]
EPS disclosures are required for all companies with publicly traded common stock or potential common stock including:
1.stock options
2.stock warrants
3. convertible securities
4. contingent agreement

Question 29

on Feb 12, V purchased the copyright to a book for $15,000 and agreed to pay royalties equal to 10% of book sales, with a guranteed minimum royalty of $60,000. V had book sales of $800,000 during the year. in its year-end income statement, what amount should V report as royalty expense?
A. 95,000
B. 80,000

Answer 29

[B]
copy right should be recorded as an intangible asset.

Question 30

at the Dec, Year 1, Clear Lake Planning Board meeting, a citizen proposal for a new bandstand was approved and recommended to the full City Council. the City Council, which is the governing authority of the city, has indicated that it will finalize details and formally approve the proposal when it meets in Jan, Year 2. on Dec 31, Year 1, that should be the classification of the project cost in the general fund of Clear Lake?
A. restricted
B. assigned
C. committed

Answer 30

[B]
fund balance resources associated with assets the government intends to obligate but has not formally committed are assigned fund balances. the city has expressed an intent and expectation that the project will be done, but the project has not yet been formally approved by the city’s highest decision-making authority.

Question 31

Sample City has identify the non-major funds within its fund types/ in its financial report:
A. May include combining financial statements for non-major funds for each fund type in the supplementary information.
B. must include combining financial statements for non-major funds for each fund type in the basic financial statements.

Answer 31

[A]
reporting combining fund financial statements is optional.

Question 32

which of the following statements is correct regarding bond interest and amortization?
A. for a zero-coupon bond, interest expense will be equal to interest payable every period.
B. the closer the coupon rate is to the market rate at insurance, the lower the amount of amortization.

Answer 32

[B]
amortization over the life of the bond and the per period will be lower when the coupon rate of the bond is closer to the market rate of comparable bond at the time the bond is issued.

for a zero-coupon(deep discount) bond there are no interest payments . So interest expense each period is equal to the amortization of the discount each period.

Question 33

pension plan shows a beginning balance of 4,500 for the actuarial present value of accumulated plan benefits.
plan amendments totaled $350
changes in actuarial assumptions 140. both were favorable to employees.
benefits accumulated show a total of 220
180 in benefits were paid out to retirees.
the year-end balance for the present value of accumulated pain benefits will be equal to:

Answer 33

[5,030=4500+350+140+220-180

Question 34

a corporation recently issued 4 million of 10 million of 10-year, 3% bonds at 101. there were 200,000 detachable stock warrants included as part of the sale. each warrant allows the bondholder to purchase one share of no par common stock for $12 per share. on the date of issuance, the stock warrants has a fair value of $1 per warrant. by what amount did the corporation’s long-term debt increase as a result of this insurance?

Answer 34

3840,000=4,040,000-200,000

Question 35

during the current year L levied a property tax of $2,000,000, of which one percent is to be uncollectible. the following amounts were collected during the current year.
1. prior year taxes collected within the 60 days of the current year 50,000
2. prior year taxes collected between 60 days and 90 days into the current year 120,000
3. current year taxes collected in the current year 1800,000
4. current year taxes collected within the first 60 days of the subsequent year 80,000

what amount of property tax revenue should K report in its government-wide statement

Answer 35

[1980,000]
下の部分は必要ない

Question 36

On Nov 1, Y 1, D discounted with recourse at 10% a one-year, noninterest-bearing, $20,500 note receivable maturing on Jan 31, Y2. what amount of contingent liability for this note must D disclose in its financial statements for the year ended Dec 31, y1?
A. 20,000
B. 0
C. 20,500

Answer 36

[C]
the note is not discounted for footnote liability purposes because D is contingently liable for the full amount because it was sold with resources.

Question 37

during year 2, C experienced financial difficulties and is likely to default on a $1,000,000, 15%, 3-year note dated Jan 1, Year 1, payable to C Bank. On Dec 31, year 2 , the bank agree to settle the note and unpaid year 2 interest of $150,000 for $820,000 cash payable on Jan 31, year 3. what is the amount of gain, before income taxes, from the debt restructuring?

Answer 37

330,000=1,000,000+150,000-820,000

Question 38

On Dec 31, special insurance costs, incurred but unpaid, were not recorded. if these insurance costs were related to work-in-process, what is the effect of the omission on accrued liabilities and retained earnings in the Dec 31 balance sheet?
Accrued liability: understate/non-effect
retained earnings: understate/non-effect

Answer 38

understate-non effect

Question 39

goodwill should be tested for value impairment at which of the following levels under USGAAP?
A. each identifiable long-term asset
B. each reporting unit

Answer 39

[B]

Question 40

DTA:5,500
DTL: 2,900
DTA: 11,800
DTL: 4,300
on its balance sheet, will be reported as:
A. non-current DTA of $10,100
B. current DTA of $2,600 and a non-current DTA of $7,500

Answer 40

[A]
all net deferred tax assets and deferred tax liabilities are reported as non-current.

Question 41

Based on an evaluation of current conditions and future expectations, B determined that the decline in the fair value of a debt investment was below the amortized cost but above the present value of the principal and interest expected to be collected. the investment was classified as available-for-sale on B’s books. the controller would properly record the credit loss based on the CECL model under USCPA by including it in which of the following?
A. earning section of the income statement and writing down the cost basis to FV
B. earning section of the income statement, net of tax, and writing down the cost basis to FV.

Answer 41

[A]
using the current expected credit losses model, when an available-for-sale debt has an FV that is below amortized cost, the asset must be written down to the lower FV by recording a credit loss that is recorded on the income statement. Even though the fair value is above the present value of expected cash flows available-for-sale security can be sold at any time so the credit loss is limited to the difference between amortized cost and fair value.

Question 42

which is correct about goodwill amortization for financial statement purposes?
A. it is not amortized and not subject to an impairment test.
B. it is generally not amortized but subjects to an impairment test.

Answer 42

[B]

Question 43

the balance in the accumulated other comprehensive income account at the end of the current year is a debit balance. where in the financial statements should the balance be properly shown?
A. in the balance sheet as a reduction of equity.
B. as an expense net of tax between discontinued operations and net income.

Answer 43

[A]
the accumulated total of other comprehensive income is reported in the balance sheet as an item of equity following retained earnings.

Question 44

in preparing its interim financial statements, assuming that no changes in accounting principles were implemented, P Corporation would apply, generally accepted accounting principles:
A. projected for use in the current year.
B. used in the most recent annual report.

Answer 44

[B]
Generally accepted accounting principles that were used in the most recent annual report of an enterprise should be applied to interim financial statements of the current year unless a change in accounting principle is adopted in the current year.

Question 45

during year 1, C reported a profit on a partially completed construction contract as it performed on its performance obligations, which created an asset the customer controlled over time. By the end of year 2, C realized that it would incur an overall loss on the contract due to a substantial increase in the cost of materials. Consequently, in year 2, a loss equal to one-half of the year 1 profit was recognized. C reported the same amount of revenue recognized over time in year 1 for income tax purposes and had no other contracts. the Year 2 balance sheet should include a deferred tax:
asset: yes/no
liability: yes/no

Answer 45

no-yes
whenever income is recognized in the financial statement before it is reported as taxable income, a deferred tax liability should be reported. even through a loss was recognized in year 2, on a cumulative basis the financial statements have recognized income that has not yet been recognized for tax purposes. accordingly, a deferred liability will still exist at the end of year 2( however, will be less than the deferred liability reported at the end of year 1)

Question 46

a US company, imported goods for 50,000 euros on Dec 10, Year 1, and paid for them on Jan 10 year 2. the following exchange rates were applicable in Years 1 and 2:
Dec 10, Y1 0.79 euro
Dec 31, Y1 0.82 euro
Jan 10, Y2 0.75 euro
what approximate gain or loss will book on Jan 10, Year 2?

Answer 46

Dec 10, Y1 $1.27
Dec 31, Y1 $1.22
Jan 10, Y2 $1.33

Dec 10
dr: purchase 63,500
cr: A/P 63,500

Dec 31
dr: A/P 2,500
cr: foreign exchange transaction gain 2,500

Jan 10
dr: A/P 61,000
dr: forign exchange transaction loss 5,500
cr: cash 66,500

Question 47

P City uses the modified approach for reporting eligible infrastructure assets. in which of the following components of its basic financial statements, if any, would P report this information?
A. notes to the financial statements
B. statement of activities
C. letter of transmittal

Answer 47

[A]
as part of their generic disclosures, governments would report a description of the modified approach for reporting infrastructure, if used.作為其一般披露的一部分，政府將報告對報告基礎設施的修改方法的說明（如果使用的話）。
符合條件的基礎設施資產不會在活動報表中報告。 符合條件的基礎設施資產（實施 GASB 34 後增加的資產）將在政府範圍內的財務狀況表中報告，並在財務報表附註中完全披露。

Question 48

On Mar 2 Y1, F city issued 10-year general obligation bonds at face amount, with interest payable Mar 1 and Sep 1. the proceeds were to be used to finance the construction of a civic center over the period April 1 Y1 to Mar 31 Y2, during the fiscal year ended June 30, Y1, no resources had been provided to the debt service fund for the payment of principal and interest.
On June 30 Y1, F’s debt service fund should include interest payable on the general obligation bonds for:
A. 4months
B. 0months

Answer 48

[B]
the debt service fund which uses the modified accrual basis of accounting will accrual interest only when it is legally due, not at interim dates. the next interest due date is due Sep 1 Y1. this question asks for interest payable displayed in fund financial statements on Jun 30, Y1.

Question 49

the city of O routinely collects refundable reposit in its water and sewer fund. once a customer discontinues services and final bills are satisfied, deposits are refunded to the customer. Occasionally deposits are abandoned. the city is obligated to hole these monies for a statutory period and either transmit them to the state for deposition or use them for purposes directed by the state. the city would most likely account for these abandoned funds in the:
A. private purpose fund
B. enterprise fund
C. special fund
D. general fund

Answer 49

[A]
the private purpose trust fund is the designated fund for reporting all other trust arrangements under which principal and income are for the benefit of one of the following:
-specific individuals
-private organizations
-other governments

Question 50

the city has set up a fund to account for the construction of a new overpass that will serve the city’s citizens. no tolls will be issued for the used of the overpass and no special tax is being assessed to fund it.
A. fiduciary fund
B. governmental fund
C. property fund

Answer 50

[B]
capital project fund which is a governmental fund.

Question 51

the orientation of accounting and reporting for all proprietary funds of governmental units is:
A. flow of funds
B. project
C. program
D. income determination

Answer 51

[D]
accounting and reporting for proprietary funds is similar to accounting and reporting for a business enterprise. thus the full accrual basis is used and the measurement focus is on net income and capital maintenance.

Question 52

an entity, upon initial recognition of an asset retirement obligation, should not take which of the following actions?
A. capitalize the asset retirement cost at its undiscounted cash flow value.
B. capitalize the asset retirement cost by increasing the carrying amount of the related asset.

Answer 52

[A]
when an asset retirement obligation exists, the entity should record an asset retirement cost(ARC) which increases the carrying value of the long-lived asset as well as an asset retirement obligation, which is the liability recorded on the balance sheet related to the retirement. the amount recorded to both the asset and liability will be equal to the fair value of the asset retirement obligation(which is determined by discounting the future cash flows required). the ARC will be depreciated over the useful life of the related asset while the ARO will be accreted based on the relevant accretion rate.

Question 53

a business combination is accounted for as an acquisition. which of the following expenses related to the business combination should be included, in total, in the determination of the net income of the combined corporation for the period in which the expenses are incurred?
-fees of finder and consultants: yes/no
-registration fees for equity securities issued

Answer 53

yes-no
registration fees equity securities issued decrease APIC.

Question 54

cash basis expenses of 35,200

beg. prepaid expense 1,300
beg. accrued expense 1,650
end. prepaid expense 1,800
end. accrued expense 1,200

what amount of expenses should report on its book under the accrual basis?

Answer 54

34,250=35,200+1300-1800-1650+1200

Question 55

which should be considered part of one of the three primary user groups of the external financial reports of a state government?
A. advocate groups within the state
B. citizens of a neighboring state.
C. internal managers in the executive branch of the state government.
D. prepare of state government financial reports.

Answer 55

[A]
external financial reports are used by three primary users including citizens, legislative/oversight groups, and investors/creditors. Advocate groups within the state are logically associated with citizens, and citizen groups.

Question 56

a company sold its headquarters building at a gain and simultaneously leased back the building. the lease was reported as a finance lease under USGAAP.
at the time of sale, the sale-leaseback will be considered:
A. a failed sale
B. operating income

Answer 56

[A]
is the underlying lease in a sale-leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.

Question 57

a company whose stock is trading at $10 per share has 1,000 shares of $1 par common stock outstanding when he board of directors declares a 30% common stock dividend. which of the following adjustments should be made when recording the stock dividend?
A. retained earnings is debited for $300
B. common stock is debited for 3,000

Answer 57

[A]

[more than 20%-25%]
dr: retain earnings 300
cr: common stock to be distributed 300

[less than 20%-25%]
dr: retained earnings 3,000
cr: common stock to be distributed 300
cr: APIC 2700

Question 58

a company whose stock is trading at $10 per share has 1,000 shares of $1 par common stock outstanding when the board of directors declares a 30% common stock dividend. which of the following adjustments should be made when recording the stock dividend?
A. retained earnings is debited for $300
B. common stock is debited for 3,000

Answer 58

[A]

[more than 20%-25%]
dr: retain earnings 300
cr: common stock to be distributed 300

[less than 20%-25%]
dr: retained earnings 3,000
cr: common stock to be distributed 300
cr: APIC 2700

Question 59

on Mar 10, the East Company settled a transaction for the purchase of goods originally valued at 80,000 British pounds. the purchase was initiated on Jan 10, when the exchange rate was 1.6 per 1 pound. one month later, the exchange rate was 1.55 per pound.
if East booked a credit to cash of 120,000 upon settlement, it also must have booked a :
A. gain of 8,000
B. gain of 4,000

Answer 59

[A]
120,000/80,000=1.5
1.6-1.5=0.1

Question 60

net position JE#?

Answer 60

dr: net position
cr: non-current liability

Question 61

J city entered into a lease agreement representing a contract that transfers ownership for equipment during the year. how should the asset obtained through the lease be reported in J city’s government-wide statement of net position?
A. not reported
B. expenditure
C. other financing use
D. general capital asset

Answer 61

[D]
lease obligations representing contracts that transfer ownership associated with general governmental activities are recorded as assets and as a liability on full accrual government-wide financial statements. Government fund financial statements would record the asset financed by agreements of this type as an expenditure and the lease financing as other financing sources under modifies accrual accounting.

Question 62

on July 1 ,L sold goods in exchange for a $200,000, 8-month,nointerest-bearing note receivable. at the time of the sale, the note’s market rate of interest was 12%. what amount did L receive when it discounted the note at 10% on Sep 1?

Answer 62

[190,000]
face amount of note 200,000
bank discount: 10%×6/12=5%　（10,000）
proceeds from bank 190,000

Question 63

which of the following is reported as interest expense?
A. amortization of discount of a note
B. deferred compensation plan interest

Answer 63

[A]
when a discount on a bond or note is amortized, the discount amortization increases interest expense for the period.

Question 64

on Dec 30, H Crop paid $400000 cash and issued 80,000 shares of its $1 par value common stock to its unsecured creditors on a pro-rata basis pursuant to a reorganization plan under Chapter 11 of the bankruptcy statutes. H owned these unsecured creditors a total of $1200,000. H’s common stock was trading at $1.25 per share on Dec 30. ignoring income taxes, as a result of this transaction, H’s total stockholder’s equity had a net increase of:

Answer 64

[800,000]
face amount payable1200,000
-assets/equity transferred500,000
=gain on trouble debt restructuring 700,000
+80,00 shares of stock issued @1.25FMV 100,000
=increase in stockholder’s equity 800,000

Question 65

the City of S made contributions to the police pension fund during the year ended Dec 31, Y1. the contribution would be recorded in the general fund as:
A. expenditure
B. transfer out

Answer 65

[A]
the correct choice is expenditure. transactions between the fiduciary funds and governmental and proprietary funds are handled as if the fiduciary fund (in this case the pension fund) was administered by a separate trustee.

Question 66

a city water division generated 1.5 million in revenue. it reported expenses of 1 million, which included $200,000 paid to an internal service fund. the water division also transferred $50,000 to the general fund, what amount is the water division’s change in net position?

Answer 66

1500,000-1,000,000=500,000-50,000=450,000

Question 67

D city is accumulating financial resources that are legally restricted to payments of general long-term debt principal and interest maturing in future years. On Dec 31, Y1, $5,000,000 has been accumulated for principal payments and $300,000 has been accumulated for interest payments. these restricted funds should be accounted for in the:
debt service fund:
general fund:

Answer 67

debt service fund: 5,300,000
general fund:0

Question 68

Siaggas Animal Hospital, a large not-for-profit organization, has adopted an accounting policy that does not impose a time restriction on gifts of long-lived assets.
income from investments of $1,000,000 designated for the purchase of capital improvements which was not previously accrued is received.
-No change in net assets either with or without donor restrictions
- Increase in revenues, gains, and other support without donor restrictions
-Increase in revenues, gains, and other support without donor restrictions with a simultaneous increase in expense
-Increase in net assets with donor restrictions
- Increase in net assets with donor restrictions with possible additional endowment fund disclosures

Answer 68

Increase in revenues, gains, and other support without donor restrictions
The revenue is derived from investments, which are designated by the Board of Directors for a specific use (without donor restrictions assets), the revenue from these investments is also available for use at the Board’s discretion. Therefore, this transaction represents an increase in revenues, gains, and other support without donor restrictions.

Question 69

Siaggas Animal Hospital, a large not-for-profit organization, has adopted an accounting policy that does not impose a time restriction on gifts of long-lived assets.

funds provided by a benefactor for building expansion are used to purchase a building in the fiscal period following the period the funds were received.

-No change in net assets either with or without donor restrictions
- Increase in revenues, gains, and other support without donor restrictions
-Increase in revenues, gains, and other support without donor restrictions with a simultaneous increase in expense
-Increase in net assets with donor restrictions
- Increase in net assets with donor restrictions with possible additional endowment fund disclosures

Answer 69

Increase in revenues, gains, and other support without donor restrictions
When the funds received for the building expansion are used to acquire a building, the statement of activities reflects an increase in total revenues, gains, and other support without donor restrictions (satisfaction of building acquisition restriction) as well as a simultaneous decrease in net assets with donor restriction (net assets released from restriction). The building acquisition itself is a capital addition and would increase net assets without donor restrictions even as the funds are used.

Question 70

Siaggas Animal Hospital, a large not-for-profit organization, has adopted an accounting policy that does not impose a time restriction on gifts of long-lived assets.

the hospital received investment subject to the donor’s requirement

-No change in net assets either with or without donor restrictions
- Increase in revenues, gains, and other support without donor restrictions
-Increase in revenues, gains, and other support without donor restrictions with a simultaneous increase in expense
-Increase in net assets with donor restrictions
- Increase in net assets with donor restrictions with possible additional endowment fund disclosures

Question 71

Siaggas Animal Hospital, a large not-for-profit organization, has adopted an accounting policy that does not impose a time restriction on gifts of long-lived assets.

-No change in net assets either with or without donor restrictions
- Increase in revenues, gains, and other support without donor restrictions
-Increase in revenues, gains, and other support without donor restrictions with a simultaneous increase in expense
-Increase in net assets with donor restrictions
- Increase in net assets with donor restrictions with possible additional endowment fund disclosures

Question 72

On Jan 1, Y3, a company changed its inventory costing method from LIFO to FIFO. the company’s Y3 financial statements contain comparative information for Y2. how should the company present the Y1 effect of the change in accounting principle in Y3 comparative financial statements?
A. as an adjustment to the beginning Y2 inventory balance with an offsetting adjustment to the beginning Y2 retained earnings.
B. as part of income continuing operations in the Y2 income statement.

Answer 72

[A]
if comparative financial statements are presented, the cumulative effect of a change in accounting principal has presented net of tax as an adjustment to beginning retained earnings in the statement of stockholder’s equity.

Question 73

j company purchased 1,000,000 of the 10-year term-to-maturity IBM bonds at par value. J intends to hold the bonds for approximately five years and then sell the bonds. the bonds are: appropriately classified in which of the following?
A.AFS
B. TS
C. HTM

Answer 73

[A]
the bonds are not for sale in the next 12 months so it is not trading securities. there is not intend by J to hold the bonds to maturity.

Question 74

1. cumulative foreign exchange translation loss: OCI/income statement
2. foreign exchange measurement gains and losses: OCI/income statement

Answer 74

1. OCI
2. income statement

Question 75

in preparing government-wide financial statements for a governmental entity, interfund receivables and payables between governmental and enterprise funds should be:
A. reported as amounts due to and due from other funds.
B. reported as internal balances.

Answer 75

[B]
when government-wide financial statements are prepared for a governmental entity, interfund received and payables that occur between funds categories as governmental activities and funds classified as business-type activities should be reported as internal balances and aligned so that they sum to zero on the financial statements. they are not eliminated from individual fund activities prior to the preparation of the government-wide financial statements.

Question 76

W city, which is legally obligated to maintain a debt service fund, issued the following general obligation bonds on July 1, Y1:
terms of bonds 10 years
face amount of $1,000,000
issued price 101
stated interest rate of 6%
interest is payable Jan 1 and July 1. what amount of bond premium should be amortized in W’s debt service fund for purposes of fund financial reporting for the year ended Dec 31, Y1?
A. 500
B. 0

Answer 76

[B]
since the measurement focus is sourcing and use of financial resources, bond premium/discount is not amortized in its governmental fund, including the debt service fund. the bond premium /discount is usually recorded in the fund receiving the proceeds. if the premium is to be used for debt service as is often the case, the premium is accounted for in the debt service fund.

Question 77

consolidated balance sheet
intercompany sales from P to S 應該調整那個部分？

Answer 77

revenues

Question 78

which of the following funds is required to provide a statement of cash flows?
A. internal service fund
B. pension trust fund
C. revenue fund

Answer 78

[A]
[internal service fund (a proprietary fund)]
1. a statement of net assets(balance sheet),
2. a statement of revenue of and expenses(income statement)
3. a statement of cash flows

[revenue fund/debt service]
1. fund balance statement= balance sheet
2. statement of revenues, expenditures and changes in fund balance = income statement

[pension trust fund]
1. a statement of fiduciary net asset= balance sheet
2. a statement of changes in fiduciary net asset= income statement

Question 79

marketable debt securities that the company has the intent and ability to hold to maturity. how should each of the following assets be reported at the end of the year?
1. long-term marketable debt securities: carrying amount/market value
2. short-term marketable debt securities: carrying amount/market value

Answer 79

carrying value-carrying value

Question 80

what amount should be recorded as bond issuance costs to be amortized over the term of the bonds under USGAAP?
promotion costs $20,000
engraving and printing $25,000
underwriters’ commissions $200,000

Answer 80

[245,000]
all cists associated with the issuance of bonds should be amortized over the ‘outstanding’ term of the bonds.

Question 81

quick ratio

Answer 81

[cash+cash equivalents+ marketable securities+ net receivables]/current liabilities

Question 82

sales price 2,800
estimated cost 1,600
costs incurred to date 400
billed to date 250
received in cash to date 190

PERCENTAGE OF COMPLETION METHOD
1. record cost incurred
2. record revenue
3. balance sheet at the end of Y1

Answer 82

1. dr: cosntruction in progress 400
   cr: cash 400
2. dr: construction expense 400
   dr: construction in progress(gross profit) 300
   cr: revenue 700
3. cosntruction in progress 700=400+300
   less: progress billings 250
   net construction in progress(current asset) 450

Question 83

[year 1]
sales price 2,800
estimated cost 1,600
costs incurred to date 400
billed to date 250
received in cash to date 190

[year 3]
sales price 2,800
estimated cost 2,000
costs incurred to date 2,000
billed to date 2,800
received in cash to date 2,800

COMPLETED CONTRACT METHOD (GAAP)
1.balance sheet at the end of Y1

Answer 83

1. current asset 150=construction in progress 400- process billings 250

Question 84

on Jan 2, Y1, N entered into a five-year lease for drilling equipment. N accounted for the acquisition as a finance lease for $240,000, which includes a $10,000 written purchase option. at the end of the lease, N expects to exercise the purchase option. N estimates that the equipment’s fair value will be $20,000 at the end of its eight-year life. N regularly uses straight-line depreciation on similar equipment. for the year ended Dec 31, Y1, what amount should N be recognized as depreciation expense on the leased asset?

Answer 84

[27,500]
when a lease is capitalized because of the transfer of title or written purchase option, depreciation is based on the life of the asset, not the lease. the cost includes the bargain purchase price. depreciation cannot be taken below the salvage value.
240,000-20,000
÷8

Question 85

-change from FIFO to the weighted average method of inventory valuation dr: 10,000
-prior service cost-pensions dr:35,000
-gain from the sale of available-for-sale securities cr:27,500
-loss from infrequent item dr:180,000
gain on foreign currency translations cr:11,500

what is the amount to be shown in B’s accumulated other comprehensive income at the end of Y2?

Answer 85

[23,500debit]
35,000-11,500

a change in accounting principle is shown as an adjustment to retained earnings at the beginning of the year. it is not an item of other comprehensive income.

prior service costs are included in other comprehensive income until recognized in a later period as a component of pension expense.

gains from the sale of available-for-sale securities are part of net income. only unrealized gains and losses from available

a loss from an infrequent item is a part of net income(income from continuing operations), not a component of other comprehensive income.

foreign currency translation adjustments are reported as items of other comprehensive income until the sale or liquidation of the investment in a foreign entity.

Question 86

5% stock dividend will effect APIC and retain earning ?

Answer 86

Assume ABC issues a stock dividend to common stockholders, resulting in a total issuance of 10,000 additional shares. Each share has a par value of $1 and a market price of $15. The total value of the shares, $150,000, is deducted from retained earnings. Of this amount, $10,000 is allocated to the common stock subaccount and the remaining $140,000 is allocated to additional paid-in capital.

dr: R/E 150,000
cr: cs 10,000
cr: APIC 140,000

Question 87

which statements defines a characteristic of the general fund?
A. the general fund uses accrual accounting.
B. the general fund always has the largest asset balance of all governmental funds.
C. the general fund is always classified as a major fund.

Answer 87

[C]

Question 88

which statements define a characteristic of the general fund?
A. the general fund uses accrual accounting.
B. the general fund always has the largest asset balance of all governmental funds.
C. the general fund is always classified as a major fund.

Answer 88

[C]

Question 89

E issued a 10-year, $1,000,000 bond at a discount price of $945,000. the company incurred costs of $25,000, which are amortized straight-line over 10 years, three years after issuance, the company redeemed the issue at 102. at the time the issue was redeemed, $12,500 of the discount has been amortized. under USGAAP, which is correct?
A. bond issuance cost $25,000
B. premium paid to retire of $20,000
C. discount of $55,000
D. amortization of the discount of $12,500

Answer 89

[B]
unamortized discount 42,500=55,000-12,500
unamortized bond issuance costs 17,500=25,000-3×2,500
premium paid to redeem 20,000

Question 90

on June 1, P sold merchandise with a list price of $5,000 to B on the account. P allowed trade discounts of 30% and 20%. credit terms were 2/15,n/40 and the sale was made FOB shipping point. P prepaid $200 of the delivery cost for B as accommodation. On June 12, P received from B a remittance in full payment amounting to:

Answer 90

[2,944]
5,000×0.7×0.8×0.98＝2,744
add loan of delivery cost 200
2944

Question 91

each of the following is a component of the changes in the net assets available for benefits of a defined benefit pension plan trust, except:
A. the net change in the actuarial present value of accumulated plan benefits.
B. contributions from the employer and participants.
C. the net change in fair value of each significant class of investments.
D. benefits paid to participants.

Answer 91

[A]
the statement f changes in net assets available for benefits shows the appreciation in the fair value of investments, any other investment income, investment expenses, contributions, benefits paid, and administrative expenses to arrive at the net increase or decrease in net assets available for benefits during the period. the change in the actuarial present value of accumulated plan benefits is shown on the statement of changes in accumulated plan benefits.

Question 92

when a CPA is applying the enhancing qualitative characteristics of useful financial information, it is important for the CPA to remember that:
A. cost is a secondary consideration when applying the enhancing qualitative characteristics.
B. applying the enhancing qualitative characteristics is an iterative process that does not follow a prescribed order.
C. enhancing qualitative characteristics could compensate for unfaithful representation.
D. each of the enhancing qualitative characteristics should be given equal priority.

Answer 92

[B]
A - the cost constraint is a primary consideration when applying these characteristics, as the benefits of reporting financial information must exceed the costs of obtaining and presenting the information.
C- the enhancing qualitative characteristics are not designed to compensate for the failure of fundamental characteristics like faithful representation.
D- while all four characteristics are importance, there will naturally be times when priorities are not equal.

Question 93

the following information pertains to the transfer of real estate pursuant to a trouble debt restructuring by K to M in full liquidation of K’s liability to M:
-carrying amount of liability liquidated $150,000
-carrying amount of real estate transferred 100,000
-the fair value of real estate transferred 90,00
what amount should L report as gain (loss) on the transfer of real estate?

Answer 93

[(10,000)]
when assets are transferred in a troubled debt restructuring, the asset is adjusted to fair value and a gain or loss is recorded.