FAR 14 Blake Cubria CPA

Question 1

What is the function of a special revenue fund?

Answer 1

Gov’t Fund

Amount received from specific revenue sources that is legally restricted to expenditure for a specific purpose.

Question 2

What is the exception of modified accrual accounting for Gov’t Funds?

Answer 2

Exception: How interest and principal is treated for L/T Debt, recorded when they become due and payable not when they accrue/incur and become measurable

Question 3

What is displayed after the “excess (deficiency) of revenue and expenditures” computation

Answer 3

Special items and other financing sources and uses are displayed after “excess (deficiency) of revenues over expenditures” on a Gov’t fund stmt of revenues, expenditures, and changes in fund balance.

Question 4

Does The statement of revenues, expenditures, and changes in fund balance accrue partial bond interest expense payable at its fiscal year end?

Answer 4

No, $0 interest expenditures would be accrued. Only recorded when payment occurs or bond matures.

recorded when LEGALLY PAYABLE PER BOND AGREEMENT

Question 5

What is the J/E in the Debt Service Fund for payment both principal and interest expenditure of a general Bond?

Answer 5

Dr Expenditure - Interest 5,000
Dr Expenditure - Principal 20,000
Cr Cash 25,000

Question 6

Does the Debt service fund accrue interest payable?

Answer 6

No, uses modified accrual basis of accounting. Only accrue interest when legally due and not at interim dates.

Question 7

What is the J/E in the debt service fund when paying off a lease that transfers ownership?

Answer 7

Dr Expenditures Control (principal + interest) 65,000
Cr Cash. 65,000

Question 8

What is the rule for every operating fund when debiting expenditures?

Answer 8

Almost every operating fund debits Expenditure Control and Credits Cash

Question 9

What is an extraordinary item in Gov’t Accounting?

Answer 9

an item or event that is BOTH unusual and infrequent in nature

Question 10

What is a special item in Gov’t accounting?

Answer 10

An event or item that is Unusual OR Infrequent in nature, and the event must be in the CONTROL OF MANAGEMENT

Ex: Sale of property by Gov’t or other SIGNIFICANT MGT DECISION

Question 11

What does other financing uses capture?

Answer 11

Transactions such as debt proceeds and transfers

Question 12

What is the function of a special revenue fund?

Answer 12

Uses special revenues from specific taxes to finance particular government activities

Question 13

When a obligation bond is issued at a premium or a discount and there is underwriter fees and debt issuance costs that incurred, what is the amount that should be reported as Other Financing sources?

Answer 13

Only the Face Amount and the Premium or discount.

The underwriters fee and debt issuance cost would be classified as a debt service expenditure - Debt related transactions are not shown on a net basis

Question 14

How are investments held in a Permanent Fund?

Answer 14

At Fair Value

Question 15

What is the function of a Permanent Fund?

Answer 15

Holds on to income based on donor restrictions from investments that is restricted and not expended.

Only earnings can be used for purposes to benefit the public, specific individuals, private organizations, or other Governments

Question 16

What are examples of other financing sources?

Answer 16

Proceeds from general obligation bond issuance & Transfers from the General Fund

Question 17

Is the Capital Projects fund closed out at year end? Where would the Construction In Progress be shown: Capital projects fund or the Gov’t Wide F/S?

Answer 17

Yes Capital projects fund is closed out at year end.

Construction in progress will be shown in the Gov’t wide F/S.

Question 18

What transaction would not decrease stockholders Equity? What is the J/E? Assume there is $200 balance in APIC T/S account.

Answer 18

The sale of Treasury Stock at Less than cost, since the net impact will still be positive as long as $ is received

Dr Cash 600
Dr APIC - T/S 200
Dr R/E 200
Cr Treasury Stock 1,000

Question 19

How do you calculate that at least 90% PV of minimum payments is made up of the FV of the asset for a finance lease at inception?

Answer 19

PV of Lease PMTS/FV of asset at inception = %

Question 20

What is the J/E for Employee stock purchase plan that includes Employee withholding and Employer Match?

Answer 20

Dr Liability for employee Withholdings
Dr Employee Stock Purchase Expense (company match)
Cr Treasury Stock
Cr APIC

Question 21

How do you treat bond issuance costs when recording Bond liability? ex: Sold $100,000 bond @ 95 and incurred $3,000 bond issuance cost.

What is the J/E?

Answer 21

YOU SUBTRACT BOND ISSUANCE COSTS: UNDERWRITER FEES

example: ($100,000 * .95) - $3,000 = $92,000

Dr Cash 92,000
Dr Discount 8,000
Cr Bond Payable 100,000

Question 22

What is a debenture bond?

Answer 22

Unsecured corporate bond

Question 23

What is a term bond?

Answer 23

Has a single fixed maturity date

Question 24

When calculating FICA for employer match, ignore Federal income taxes and FICA withheld amount. What is the calculation and how much should be deposited in the Payroll checking account to cover net payroll and related payroll taxes?

Answer 24

Employer FICA Tax = Gross wages x FICA rate = Employer amount

Employer amount + Gross wages = Deposit in payroll account for that week

Question 25

Where would a Tax benefit carry forward be reported in the year it decreases current taxes?

Answer 25

In income from continuing operations, since tax benefit reduced current year taxes payable from continuing operations

Question 26

What occurs when Tax Depreciation is less than Book Depreciation?

Answer 26

Deferred Tax Liability occurs, since amount will be taxable in the future

Question 27

when discounting a note what percentage is used? Market interest rate or discounted rate? What amount is received?

Answer 27

Use the discounted rate %. Amount received is how every many month is left before the note matures.

Ex: originally 8 months, and two months has passed, take Face Value * discount rate percentage = discount

Discount * (6/12) = Unamortized Discount

Question 28

What type of recognition occurs when changes in common stock (stock dividend and stock split) outstanding occurs after year end but before F/S are issued when computing Earning Per Share?

Answer 28

Retroactive recognition for all periods presented using new # of shares

Question 29

How do you treat prepaid rent when it increases when converting cash to accrual basis?

Answer 29

You add it!

Question 30

What is the 3 criteria that allow activities to be reported as an enterprise Fund? Only one needs to be satisfied.

Answer 30

1. The activity is financed with debt that is secured solely by a pledge of the net revenue from fees and charges
2. Laws and Regulations require that the cost of providing services be recovered through fees
3. The pricing policies of the activity establish fees and charges designed to recover costs

Question 31

What is the orientation of accounting and reporting for all proprietary funds?

Answer 31

Income determination