FAR 2

Question 1

When would an impairment loss be recognized under US GAAP?

Answer 1

When the CV exceeds the FV and if that carrying amount is not recoverable (the FV would be recoverable, but the difference would not be). The impairment loss recognized is the difference between the CV and FV

Question 2

If a company is issuing dividends, when would the dividends become a liability to the company?

Answer 2

The date the company declares them

Question 3

Basic EPS

Answer 3

Weighted avg # of shares outstanding

How to get denominator: (1,500,000 shares were outstanding for 4 months and 2,000,000 shares were outstanding for 8 months (1,500,000 × 4/12 + 2,000,000 × 8/12 = 1,833,333))

Question 4

Allowance method
Direct method
(writing off AR)

Answer 4

Allowance: DR Allowance for doubtful accounts
CR AR
Direct: DR Bad debt expense
CR AR

Question 5

Non profits record donations at:

Answer 5

Fair value, not at the cost to the donor

Question 6

What is the primary purpose of the statement of activities of a nongovernmental not-for- profit organization?

Answer 6

To report the change in net assets for the period

Question 7

How should the acquirer recognize a bargain purchase in a business acquisition?

Answer 7

As a gain in earnings at the acquisition date

Question 8

Capitalized lease criteria:

Answer 8

O- Ownership is transferred at end of lease
W- Written bargain purchase option
N- 90 % of the leased property FV < or equal to PV of leased payments
S- 75 % or more of asset economic life is being committed in lease term

Last 2 are substance over form.. if you pay a lot for the lease, or have it for a long time, treat it like its yours!

Question 9

Program services vs support services for NFP organizations

Answer 9

Program- relate to the mission or service delivery objectives of the organization
Support- relate to costs that indirectly support the organizations mission