FAR ⑪

Question 1

HTF　bond,
FV> amortized cost > present value

should an impairment be recorded?
why?

Answer 1

record a loss because the amortized cost is above the present value.
HTM compare with the present value but not FV, because it won’t be sold before maturity, no need to consider the FV.

Question 2

where in the financial statement should a company disclose information about its concentration of credit risk?
1. supplementary information to the financial statement
2. the notes to the financial statements

Answer 2

[2]

Question 3

interest paid on a discount bond in a given period is:
1. equals to interest expense less the amortization of the discount

2. equal to interest expense plus the amortization of the discount

Answer 3

[1]
face value bond 1000, 5% rate, issued 990, 6%rate.

dr: interest expense 59.4
cr: discount amortization 9.4
cr: interest payment 50(interest paid in cash)

Question 4

issued 500 of its 10% ,$1,000 bonds at 105. bond issuance cost $15,000.
bond liability?

Answer 4

[510,000]

dr: cash 510,000
cr: premium 10,000
cr: bond liability 500,000

issuance cost should be decrease directly from bond liability. and the bond liability should show in a combined amount, so should be 510,000

Question 5

lent 10,000 to a supplier in exchange for a non interest-bearing note due in three years and a contract to purchase a fixed amount of merchandise from the supplier at a 10% discount from prevailing market prices over ther next three years. the market rate for a note of this type is 10%.
#JE

Answer 5

PV factor= 1/ (1+rate) ^n=0.75

PV of 10,000= 7,500
fair value of purchase commitment=10,000-7,500=2,500

dr:notes receivable 10,000
dr: deferred charge 2,500
cr: cash 10,000
cr: discount on note receivable 2,500

Question 6

a company issued bonds with detachable common stock warrants. the issued price exceeded the sum of the warrant’S fair value and face value of the bonds, the fair valur of the bonds cannot not be determined. what value should be assigned to the wattants?
1. the proportion of the proceeds that the warrant’s fair value bears to the face value of the bond.
2. the fair value of the warrants

Answer 6

[2]
first, 1 mention the proportion of proceed, is not right in this case.

issued price> warrents FV+ face value of bonds

the warrants have a fair value and the portion of the issuance price assignable to the warrants is based on that fair value
注意看清楚不是warrant的FV不清楚，而是bond的FV不清楚。

Question 7

bond future cost 710,000
asset retirement PV 530,555, acrreation rate 6%
the asset will be depreciated straight-line over 5 years

1.Y1 acrretion expense:
2.total accretion expense:
3.accumulated depreciation expense:
4.net asset retirement cost:
5. Asset retirement obligation

Answer 7

1. acrretion expense = PV × acrrestion rate=31,833
2. total acretion expense= future cost- PV(total depreciation cost) =179,445
3. accumulated depreciation expense = depreciation cost/ 5
4. net asset retirement cost= 530,555- accumulate depreciation=424,444
5. ARO= 530,555+31,833

ARC應該看作是一種資產，所以要減去每年的折舊，會隨著時間逐漸變少，
ARO應看作是負債，會逐漸增加，因為accretion expense增值費用的產生

Question 8

debt to EBITDA ration

Answer 8

=Interest-bearing liabilities(有息負債, like loan payable and bonds payable)
➗
income before depreciation(amortization), interest, tax

Question 9

gains from remeasurement a foreign susidiary’s financial statements from the local currency, which is not the functional currency, into the parent company’s currency should be reported:
1. a component of comprehensive income
2. as part of continuing operations

Answer 9

[2]
if an entity’s book is not in functional currency, remeasurement is requied.

remesurement is to net income

translation is to OCI.

Question 10

what derivative instruments essentially provides downside protection?

Answer 10

[purchase of a put option]

because a put option gives the holder the right to sell an asset at a predetermined strike price, it provides downside protection in the event the price of the asset dalls below the strike price.

purchase of a call option?
by purchasing a call option at a predetermined price, the buyer has the upside if the price of the asset increases above the strike price, but no downside protection

Question 11

4-year operating lease. pay 30,000 every 6 months. the annual interest rate of 4.35%
dr: ROU asset 218,116
cr: lease liability 218,116
when the first lease payment is made on June 30, Y1.
#JE

Answer 11

dr: lease expense 30,000
cr: cash 30,000
dr: lease liability 25,256
cr: ROU asset 25,256
*operating lease has no interest expense
—————————————————-
finance lease, the #JE will be:
dr: interest expense 4,744
dr: lease liability 25,256
cr: cash

dr: ROU amortization expense 54,529
cr: ROU accum.Amort 54,529

Question 12

remeasurement method vs tranlate method
1. appied when:
2. use current/ historical/ weight rate?
3. difference go to?

Answer 12

remeasurement method
1. convert local/foreign currency to functional currency
2. monetary(easily change in to cash: A/R, long-term debt) in current rate
non monetary(inventory, fixed asset, and things relate to it like COGS, depreciation) in historical rate
CS should in the rate it issued.(historical)
3. difference go to net income

translate method
1. functional and reporting not the same
2. asset and liability in current rate
CS should in the rate it issued( historical)
all income statement in weighted average rate
3. difference go to comprehensive income

Question 13

JE

lessor: sales-type lease
lessee: finance type lease

the lessor of sale type lease:
PV: 172,894, Carrying value 165,000
monthly payment: 1,730
implicit rate:3.75%
$2,000 in commissions and $1,125 in legal and recording fees

the lessee of financing type lease:
PV: 106,586
monthly payment: 1,975
implicit rate:4.25%
$1,230 in commissions and $550 in legal fees
# JE

Answer 13

sale type lease:
initial journal entry
dr: lease receivable 172,894
cr: fixed asset 165,000
cr: gain 7,894
dr: direct cost 3,125
cr: cash 3,125

first payment
dr: cash 1,730
cr: interest income 540
cr: lease receivable 1,190

the lessee of financing type lease:
initial entry
dr: ROU asset 108,366
cr: cash 1,178
cr: lease liability 106,586

first payment
dr: lease expense 378
dr: lease liability 1,597
cr: cash 1975

Question 14

12/31, Y1 E Corp. reported 1,750 of appropriate retained earnings for the construction of a new office building, which was completed in Y2 at a total cost of $1500.
In Y2, E appropriated $1,200 of retained earnings for the construction of a new plant. also, $2,000 of cash was restricted for the retirement of bonds due in Y3.
In Y2 BS, E should report what amount of appropriated retained earnings?

Answer 14

[1,200]
$1,200 appropriated retained earnings at Dec31, Y2(for the construction of a new plant only). when the purpose of the appropriation has been achieved, it should be restored to inappropriate retained earnings.

Question 15

the statement of changes in accumulated plan benefits shows the impact of every factor that caused a change in a plan’s actuarial present value of plan benefits, include:
1.
2.
3.

Answer 15

1. changes in actuarial assumptions 精算假設
2. the effect of plan amendments 計畫修正案的影響
3. the amount of benefits paid to beneficiaries 支付給受益人的金額

the effect of appropriations of the plan’s investment on the plan’s actuarial present value of plan benefits

Question 16

what amount should be used as the numerator in the fraction used to compute diluted earnings per share assuming that the bonds are dilutive securities?

1. net income 600,000
   2.$5,000,000 bond, amortized in the amount of $20,000 per year.
   stated rate of interest 9%, yield interest 10%. each bond is convertible into 20 shares of CS.
2. income tax rate 25%

Answer 16

numerator in calculation = net income+ interest of dilutive securities(net of tax)
=600,000+[(5,000,000×0.09)+20,000]×0.75=952,500

Question 17

attorney accepted 5,000 shares of 10 par value CS for legal services with a fair value of $60,000.
#JE

Answer 17

dr: legal service 60,000
cr: CS 50,000
cr: APIC 10,000

Question 18

can employee under a noncompensatory plan extend their initial option exercise period?

Answer 18

no. under a noncompensatory stock option/purchase plan, the time period to exercise the option is limited to a reasonable period without a further option to extend the initial exercise period

Question 19

earnings per share disclose is required for
1. companies who have made a filing with the SEC in preparation for a sale of public securities.
2. investment companies

Answer 19

[1]
EPS disclosures are required for all companies with publicly traded CS or potential CS including:
stock option, stock warrants, convertible securities, contingent stock agreement

Question 20

EPS is 1.29, tax rate is 30% which securities would be dilutive?
1. 6%, $100 par cumulative convertible PS, issued at par, with each preferred convertible into 4 shares of CS
2. 7% convertible bond, issued at par, with each $1,000 convertible into 40 shares of CS

Answer 20

point: DEPS<EPS1.29

1. if PS convert into CS, the numerator of PS interest will not need to paid, but CS increase 4. 6/4=1.5>1.29 anti dilutive
2. if bond convert, the numerator should add interest net of tax
   =1000×0.07×0.7=49
   49÷40=1.225<1.29 dilutive

Question 21

Suppose that the Sample Company board of directors declares a property dividend to be paid as 20,000 shares of XYZ Company stock. The investment has a cost of $10,000 but is worth $50,000 at the date of declaration.
#jE

Answer 21

dr: investment in XYZ 40,000
cr: gain on disposal 40,000
dr: retained earnings 50,000
cr: dividends payable 50,000

成本只有10K，但是卻支付了50K的欠款，所以有盈餘。

Question 22

Jan 1 ,Y1 issued 10,000 shares of restricted stock with FV of 20
Jan 1 ,Y2 issued 20,000 shares of restricted stock with FV of 25
the shares vest at the end of 4-year period. what amount should be compensation expense for the 12-month period end Dec 31,Y2?

Answer 22

[175,000]
Y1:200,000/4=50,000
Y2:500,000/4=125,000
50,000+125,000=175,000
即使是第二年發行的，也按照4年計算compensation expensive

Question 23

total income since incorporation 420
total cash dividend paid 130
the total value of property dividends distributed 30
excess of proceeds over the cost of TS sold accounted for using the cost method. 110

retained earnings?

Answer 23

[260]
excess of proceeds over the cost of TS sold will not effect retained earnings. assume the TS purchase for 1,000 for cash and 200 balance exist in APIC-TS.
the JE would be
dr: cash 600
dr: APIC-PS 200
dr: RE 200
cr: TS 1,000

the net impact to stockholder’s equity is an increase of 600

Question 24

capital expenditures of $35 are made for equipment used in day to day operations
which cash flow in the direct method?

Answer 24

CFI

Question 25

dividend for $64 are received from a stock classified as available for sale
which cash flow in the direct method?

Answer 25

CFO

Question 26

a gain of $82 is booked on the sale of an asset
which cash flow in the direct method?

Answer 26

non-cash event
While an asset purchase and a subsequent asset sale will have cash impacts, the gain itself is a non-cash event with no cash impact.q

Question 27

depreciation and amortization expense totaling $50 is booked
which cash flow in the direct method?

Answer 27

non-cash event
Depreciation and amortization are accounting entries with no actual cash impact.

Question 28

purchase a trading security which it classified as non-current
which cash flow in the direct method?

Answer 28

CFI
A trading security purchase, if classified as non-current, will be a CFI outflow.

Question 29

dividends of $12 are paid on company stock
which cash flow in the direct method?

Answer 29

CFF

Question 30

compensation expense JE
options were exercised JE
record expiration of the stock options JE

Answer 30

dr: compensation expense- stock option
cr: APIC-stock option
———————-
dr: cash
dr: APIC-stock option
cr: CS
cr: APIC
———————-
dr: APIC-stock option
cr: APIC-expired stock option

Question 31

JE

On June 5, Year 2, Quonset declared a property dividend of inventory. The inventory had a $65,000 carrying value and a $55,000 fair market value.

Answer 31

dr: retained earnings 55,000
dr: loss on inventory 10,000
cr: inventory 65,000

Question 32

the revenue control account of a government unit is increased when:
1. the budget is recorded
2. property taxes are recorded
3. the encumbrance account is decreased
4. appropriations are recorded

Answer 32

[2]

1.
dr: estimated revenues
cr: appropriation
cr: budgetary control
———————————–
2.
dr: property tax receivable
cr: allowance of uncollectible property tax
cr: revenues
————————————
3.

dr: budgetary control
cr: encumbrance
————————————
4.
dr: estimated control
cr: appropriations

Question 33

when a non-profir organization combines fund-raising efforts with educational material or program services, the total combined costs incurred are:
1. reported as program services expenses
2. reported as fundraising costs
3. allocated between fund-raising and program services expenses using an appropriate allocation basis

Answer 33

[3]
an allocation, using an appropriate allocation basis, must be made between the fund-raising activities and educational materials or program services where the costs are combined.

Question 34

a non-governmental non-for -profit organization, received a $150 gift with the stipulation that the funds be used to buy beds. in which net asset class should report the contribution?
1. endowment
2. with donor restriction

Answer 34

[2]
there is no endowment classification for net assets

Question 35

in the preparation of the statement of activities for a nongovernmental not-for-profit organization, all expenses are reported as decreases in which of the following net asset classes?
1. net asset with donor restrictions
2. board-designed endowment funds
3. net assets without donor restrictions
4. board-designed net asset(for future expenditures)

Answer 35

[3]
expenses are reported as decreases in net assets without donor restrictions, no expenses are recorded to reduce net assets with donor restrictions. the focus of a not-for-profit organization’s financial statement is the entity taken as a whole. fund accounting is not used. the use of net assets with do not restrictions for their intended purposed is not displayed as an expenditure of net assets with donor restrictions. satisfaction of donor restrictions that are temporary in nature are affected by reclassifications of net assets released from restrictions to net assets without donor restrictions and used for the central mission of the not-for-profit organization.

Question 36

cash received from a contributor as a good faith advance on a promise to contribute matching funds

which cash flow?

Answer 36

CFO.
Cash received with matching conditions attached should be deferred. (deferred revenue = liability)
Deferred items (CLAD) should be classified as cash flows from operations.

Question 37

interest earned on endowment
which cash flow?

Answer 37

CFO.Interest earnings would be accounted for in the Statement of Activity as an increase in Net Assets in the appropriate category defined by the original bequest. Increases in Net Assets of this character are similar to elements of net income accounted for as cash flows from operating activities in the Statement of Cash Flows in a commercial application.
利息收入被視作淨資產增加，而淨資產增加會影響經營活動資金。

Question 38

the city elects to establish a supplies inventory for its copier at the beginning of the year and adopts the purchased method.
copier supplies total 5,000 were purchased, and 3,000 were used, 2,000 remained at inventory.
1. #JE of supplies inventory
2.#JE of supplies expense

Answer 38

dr: inventory 2,000
cr: fund balance-nonspendable 2,000

dr: expenditure 5,000
cr: cash 5,000

Question 39

the city entied into a 10-year lease. an annual payment of 10,000. the discount rate for PV is 6.1446. ownership of the copiers does not transfer to the city at the end of the lease.
1. #JE execution of the lease
2. #JE first payment
3. amortization on the lease

Answer 39

1. dr: capital outlay 61146
   cr: other financing sources 61,446

2.
dr: debt service expenditure-principal 6,145
dr: debt service expenditure-interest 3,855
cr: cash 10,000

3. no entry

Question 40

the special revenue fund transferred funds to the debt service fund

financial statement?

Answer 40

other financing sources and uses.
Transfers between governmental funds are classified as “other financing sources and uses.”

Question 41

how many types of net asset classification?

Answer 41

two.
With donor restrictions/Without donor restriction

donor restricted in perpetuity-endowment fund (not exist)
donor restricted -temporary in nature (not exist)

Question 42

received legal service from a practicing attorney estimated with a market value of $30,000
should it be recorded as revenue? how much?

Answer 42

yes. 30,000

Question 43

receive volunteer services to build an addition to the Nurse home. the addition included work by a skilled carpenter valued at $13,000 and the work of general laborers valued at $12,000
should it be recorded as revenue? how much?

Answer 43

yes. 25,000

Question 44

JE

general obligation bond were issued in par

Answer 44

dr: cash
cr: other financing sources

Question 45

JE

1. budgetary revenues 200
   budgetary expenses 180
2. amended budget for addition tax revenue of 15, which were appropriate for addition expenditures of 18
3. a purchase order was issued for 18
4. the capital project was completed at a total cost of 17.5
5. the budget was closed at the end of year

Answer 45

1.
dr: estimated revenue 200
cr: appropriations 180
cr: budgetary control 20

2.
dr: estimated revenues 15
dr: budgetary control 3
cr: appropriations 18

3. dr: encumbrance 18
   cr: budgetary control 18

Question 45

JE

・ budgetary revenues 200
budgetary expenses 180
・amended budget for addition tax revenue of 15, which were appropriate for additional expenditures of 18
・ a purchase order was issued for 18
・the capital project was completed at a total cost of 17.5
・the budget was closed at the end of year

1. record the adopted budget as appropriate.
2. record the amendment of the budget for additional revenues and expenditures.
3. recognize the issuance of the purchase order.
4. recognize the satisfaction of the purchase order within the budgetary accounts.
5. close the budget in effect at year-end as appropriate.

Answer 45

1.
dr: estimated revenue 200 (estimate inflows)
cr: appropriations 180(estimate outflows )
cr: budgetary control 20

in this case, estimate inflows > estimate outflows

2.
dr: estimated revenues 15
dr: budgetary control 3
cr: appropriations 18

3. dr: encumbrance 18
   cr: budgetary control 18
4. dr: budgetary control 18
   cr: encumbrance 18
5. dr: appropriations 198=180+18
   dr: budgetary 17
   cr: estimated revenues 215=200+15

Question 46

JE

ordered supplies were received and invoices were approved

Answer 46

dr: budgetary control
cr: encumbrance control
dr: expenditures control
cr: vouchers payable

Question 47

JE

short-term financing received from a bank secured by the city’s taxing power

Answer 47

Tax anticipation notes represent short-term financing secured by the city’s taxing authority. Cities use this type of financing when the timing of tax collections creates a cash flow issue. When the taxes are collected, the notes are then paid off.

DR Cash
CR Tax anticipation notes payable

Question 48

taxes collected and held by F country for a separate school district would be accounted for by which fund?
1. custodial
2. special revenue

Answer 48

[1]
the custodial fund is one government unit(country) acting a collection agent in fiduciary capacity for another governmental unit(school district)

special revenue funds account for the proceeds of specific revenue sources that are legally or earmarked to expenditures for specified purposes.

Question 49

the most restrictive classification of governmental fund balances listed below is titled:
1. reserved
2. committed
3. assigned
4. unassigned

Answer 49

[2]
committed funds are internally limited by formal action of the government’s highest level of decision-making authority

fund balances are classified, in order of level of constraint, as
nonspendable>restricted>
committed>
assigned> unassigned.
資金餘額按限製程度的順序分為不可支出、受限、已承諾、已分配和未分配。

Question 50

which of the following items would be reported by a custodial fund?
1. current assets and current liabilities
2. statement of cash flows
3. revenue and expenses
4. the fund balance

Answer 50

[1]
a custodial fund would report a statement of fiduciary net position, which would show the custodial fund’s current assets equaling current liabilities(and no fund balance)

Question 51

a state had general obligation bonds outstanding that required payment of interest on July 1 and Jan 1 of each year.
the fiscal year ended June 30. which account would decreased when the state paid the interest due July1?
1. interest payable
2. fund balance

Answer 51

[1]
under governmental fund accounting, interest payable is only recorded when interest is not paid on the due date. so it is not necessary to record interest payable on June 30

Question 52

which is right about enterprise fund?
1. the pricing policies of the activity establish fees and charges designed to earn a modest profit.
2. laws and regulations require that the cost of providing services be recovered through fees collected by the enterprise fund

Answer 52

[2]
the enterprise fund cannot earn a profit, its objective is to cover its operating costs by collecting fees for its services.

Question 53

internal service funds may be funded by
1.
2.
3.

Answer 53

1. lease agreement
2. transfer ownership
3. accepting advances from other funds which will be paid for from revenues received by the internal fund接受其他基金的預付款，這些預付款將從內部基金收到的收入中支付

Question 54

receipts from a special rax levy to retire and pay interest on general obligation bonds should be recorded in which fund?
1. debt service
2. special revenue

Answer 54

[1]
although receipts from a special tax levy would usually be accounted for in a special revenue fund, since the receipts are earmarked for interest payments on general obligation bonds, debt service fund is more appropriate.

Question 55

the only fund that should show a positive amount in its unassigned fund balance classification would be:

Answer 55

general fund

Question 56

general fund resources that are limited as to use by constraints imposed by law through constitutional or enabling legislation would be classified within the fund balance as:
1. nonspendable
2. assigned
3. committed
4. restricted

Answer 56

[4]
keyword is constitution憲法
only [restricted fund] is related with constitution
—————————————————-

assigned fund balances are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed.
—————————————————-
committed fund balances represent resources that can only be used for special purposed pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority.
—————————————————-
restricted fund balances represent resources whose use has been limited by external sources such as creditors, contributors, other governments, laws, constitute provisions, or enabling legislation.
—————————————————-

nonspendable>restricted>committed>assign>unassign

Question 57

do interfund transfers affect the results of operations in their fund financial statements in
1. governmental funds
2. proprietary fund

Answer 57

yes-yes
although these transfers are not recorded as revenue or expenditures, they do affect both fund’s expendable resources and therefore affect the results of operations for both funds.

Question 58

which fund was established by the highest internal governing authority?
1. restricted
2. committed
3. nonspendable
4. assigned

Answer 58

[2]
tricky question. the highest authority, not the highest constraint.

the restricted fund is established by the government’s highest decision-making authority
a nonspendable fund balance constraint is considered the highest order of constraint.

Question 59

which event should be included in a statment of cash flows for a governmental entity?
1. cash inflow from issuing bonds to finance city hall construction
2. cash outflow from a city utility representing payments in lieu of property taxes

Answer 59

[2]
容易因爲governmental 而選1.但是要留意1 是governmental fund，2是enterprise fund。
governmental fund計量重點是financial resource，所以沒有cash flow statement

Question 60

which will not impact the computation of net program expense classified by function on the government-wide statement of activities?
1. operating grants and contributions
2. capital grants and contributions
3. franchise taxes
4. charges for services

Answer 60

[3]
franchise fees are displayed after computation of net program revenues for all programs by function.
1,3,4 are arrive at net program(expense) revenue by function

Question 61

the statement of activities in the government-wide financial statements includes?
hint: GDB

Answer 61

separate columns for
1. governmental activities
2. business type activities
3. discretely presented component units離散呈現的組件單元

Question 62

basic financial statement if a city should include:
hint: GFN

Answer 62

government-wide financial statement
fund financial statements
notes to the financial statement

Question 63

JE

property tax revenues are measurable but not available?

Answer 63

dr: deferred inflows
cr: tax revenue

Question 64

which is required part of a local government’s MD&A as part of its financial statements?
1. present condensed financial information from the fund financial statement
2 present with other required supplementary information
3. compare current year results to the prior year with emphasis on the current year
4. should include an analysis for each fund

Answer 64

[3]
1. present condensed financial information from the government-wide financial statement
✖提供基金財務報表中的簡明財務信息
〇提供政府範圍內財務報表中的簡明財務信息

2. presented independently, with other supplementary information presented separately
   ✖提供其他所需的補充信息
   〇單獨列報，其他補充信息單獨列報

Question 65

L city reports a compensated absences liability in its government-wide financial statements. the salary rate used to calculate the liability should normally be the rate in effect:
1. at the balance sheet date
2. when the unpaid compensated absences were earned.

Answer 65

[1]
如果使用被賦予時的工價計算會造成債務低估。因爲工資通常都是在上升的。

Question 66

which would be found in the annual comprehensive report but not in the financial statement presentation required by GASB 34?
1. ten years of economic data
2. a brief and easy-to-read narrative analysis of the city’s financial activities.

Answer 66

[1]
GASB 34 required:
1. funding schedules for the city’s pension plan
2. a brief and easy-to-read narrative analysis of the city’s financial activities.
3. information about the condition of the city’s infrastructure

Question 67

governmental activities include what kind of fund?
business-type activities include what kind of fund?

Answer 67

governmental activities:
general
special revenue
debt service
permanent
internal service (so the governmental activities may be depreciation)

business-type fund= enterprise fund

Question 68

levies on affected property owners to install sidewalks
should be accounted for revenue fund?

Answer 68

no.it is accounted for in a capital project fund.

Question 69

asset turnover

Answer 69

net sale ÷average total assets

Question 70

consolidated balance
1. what was the amount of subsidiary payable to the parent for intercompany sales?

2. what was the amount of intercompany sales from the parent to the subsidiary?

Answer 70

1. A/R
2. revenue

Question 71

JE

On January 1, Year 3, Peterson sold equipment to Silver for $120,000. The equipment was originally purchased on January 1, Year 1, for $100,000. Peterson was depreciating the equipment over 10 years using straight-line depreciation. There was no salvage value. Silver decides to depreciate the equipment over eight years, also using straight-line depreciation with no salvage value. Assume all other appropriate year-end and income tax journal entries have been made.

Answer 71

dr: gain on sale 40,000( sales value-BV of P= 120-80=40)
cr: accumulated depreciation 15,000(subsidiary A/D)
cr: depreciation 5,000 (If p is different from S, follow P)
cr: equipment 20,000 (sales price-original price)

Question 72

Throughout Year 3, Peterson sold merchandise costing $30,000 to Silver at a price of $50,000. Silver sold 60% of the inventory by December 31, Year 3. Silver remitted payment to Peterson before year-end.
#JE

Answer 72

dr: Sales 50,000 ( price to S should eliminate)
cr: inventory 8,000 ※１
cr: COGS 42,000　※２

※1: ending inventory 40%
for P= 30k0.4=12
for S=50K0.4=20
difference =8,000

※2:COGS 60%
for P=30, all should be eliminated
for S=20*0.6=12, the additional part of 60%COGS should be eliminated
summary=30+12=42K

Question 73

during Y1, Big started a partnershio with V to build s power plant that Big will lease back from the partnership for 12,000 per year. Big contributed $20,000 to the partnership has has 20% of the voting rights. V contributed $5,000 and has 80% of the voting rights.

what method accounting should be used?
equity/ consolidate

Answer 73

The partnership is a variable interest entity for the following reasons:

1. The activities of the partnership are conducted on behalf of Big
2. Big’s voting rights are small in proportion to the focus of the partnership on Big, and
3. Big’s voting rights (20%) are out of line with Big’s variable interest in the partnership ($20,000,000 / $25,000,000 = 80%).
   Big is the primary beneficiary of the partnership/VIE and must consolidate the partnership/VIE.

雖然投票權只有20%，但是佔總體的80%，需要進行合并會計。

Question 74

which is generally associated with payables classified as accounts payable?
1. periodic payment of interest
2. secured by collateral

Answer 74

no-no