FAR 18 Flashcards
2
FASB ASC 958-605-25-2 provides that “contributions received shall be recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received.” FASB ASC 958-605-25-16 provides that contributions of services “shall be recognized if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.”
Topic 275 of the FASB’s Accounting Standards Codification is entitled “Risks and Uncertainties.” In discussing the disclosure required by this section, what element is identified as important in determining the matters that are significant to a specific entity?
Selectivity
Tanker Oil Co., a developmental stage enterprise, incurred the following costs during its first year of operations:
Legal fees for incorporation and other related matters $55,000
Underwriters’ fees for initial stock offering 40,000
Exploration costs and purchases of mineral rights 60,000
Tanker had no revenue during its first year of operation. What amount may Tanker capitalize as organizational costs?
Of the expenditures listed, only the $55,000 of legal fees would be capitalized as organization costs. The underwriters’ fees are stock offering costs, not organization costs, and are accounted for either as (1) an offset to the issue proceeds or (2) as a separate deferred charge that is amortized over a reasonable period. The exploration costs and purchases of mineral rights are considered ordinary operating costs.
Which of the following statements correctly describes the proper accounting for nonmonetary exchanges that are deemed to have commercial substance?
It recognizes gains and losses immediately.
A company issued rights to its existing shareholders without consideration. The rights allowed the recipients to purchase unissued common stock for an amount in excess of par value. When the rights are issued, which of the following accounts will be increased?
Neither common stock or APIC: The issuance of rights was “without consideration” so no asset can be debited. This issuance should be recorded as a memo entry only. If, and when, the recipients exercise their rights at a later date, cash would be increased as well as common stock and additional paid-in capital. For now, however, none of the accounts would be increased.
Which of the following activities should be excluded when governmental fund financial statements are converted to government-wide financial statements?
Fiduciary activities
The revenues control account of a governmental unit is increased when:
property taxes are recorded.
Contribution revenues and assets or expenses should be reported for donated services if:
special skills are required to perform the service,
the individual providing the service has those special skills, and
the organization would have to buy the services if they were not donated.
Journal entry to record reacquisition of 30,000 shares at $16 per share using the cost method:
Treasury Shares 480,000
Cash 480,000
Journal entry to record sale of treasury shares (30,000 shares at $12 per share):
Dr. Cr. Cash 360,000 Paid-in Capital 100,000 Retained Earnings 20,000 Treasury Shares 480,000
Which of the following accounts should Moon City close at the end of its fiscal year?
Expenditures
A municipality that uses modified accrual and encumbrance accounting would use the general fund to account for:
property tax revenues.
Interest cost included in the net pension cost recognized by an employer sponsoring a defined benefit pension plan represents the:
increase in the projected benefit obligation due to the passage of time
Current receivables acquired as a result of customary trade terms are normally reported at their
Face value.
Lys City records a compensated absences liability as a general government liability. The salary rate used to calculate the liability should normally be the rate in effect:
At the balance sheet date
