FAR 20

Question 1

A private not-for-profit hospital’s performance indicator, which reports the results of operations, includes additional classifications. Which of the following normally would be included in the other operating revenues classification?

Answer 1

Revenues from educational programs. (Gifts and contributions would not be considered operating revenues.)

Question 2

Which of the following classifications is required for reporting of expenses by all not-for-profit entities?

Answer 2

Functional classification in the statement of activities or notes to the financial statements

Question 3

What type of non for profit entity must show functional classification in the statement of activities and natural classification in a matrix format in a separate document.

Answer 3

Only those not-for-profits that are voluntary health and welfare entities must augment the functional classification of expenses that appears in the statement of activities with a natural classification of expenses, displayed in a matrix format, that is shown in a separate document, a statement of functional expenses.

Question 4

What is the lower cost or market rule?

Answer 4

Market value is defined as replacement cost (what you could repurchase the inventory for), so long as replacement cost is less than net realizable value (what you can sell the item for) and above net realizable value minus a normal profit margin.

Question 5

The discount rate for the projected benefit obligation is generally based on

Answer 5

long-term debt interest rates

Question 6

cash contributions received from donors who have restricted the use to long-term purposes are reported as what in the cash flow?

Answer 6

financing activities

Question 7

Contribution revenues and assets or expenses should be reported for donated services if:

Answer 7

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.

Question 8

Wood Co.’s dividends on noncumulative preferred stock have been declared but not paid. Wood has not declared or paid dividends on its cumulative preferred stock in the current or the prior year and has reported a net loss in the current year. For the purpose of computing basic earnings per share, how should the income available to common stockholders be calculated?

Answer 8

The dividends on the noncumulative preferred stock and the current-year dividends on the cumulative preferred stock should be added to the net loss.

Question 9

Rate of return=

Answer 9

Net Income/Average Assets

Question 10

The expenditure element “salaries and wages” is an example of which type of classification?

Answer 10

Object

Question 11

Which of the following classifications is required for reporting of expenses by health and welfare not-for-profit entities?

Answer 11

Functional classification in the statement of activities and natural classification in a matrix format in a separate document

Question 12

Which of the following classifications is required for reporting of expenses by ALL not-for-profit entities?

Answer 12

Functional classification in the statement of activities or notes to the financial statements

Question 13

The FASB believes that, as a general policy, there is a maximum number of reportable segments about which information should be provided. What is the number?

Answer 13

10

Question 14

A stock dividend does not represent income to the investor. The only effect of a stock dividend is a change in the number of shares held and the carrying value per share; the total carrying value remains unchanged. Thus, only the cash dividend results in dividend income (based on 12,000 shares, the number after the stock dividend):

Answer 14

s

Question 15

FASB ASC 825-10-15-4 lists the following items that are eligible for the fair value election:

Answer 15

A recognized financial asset and financial liability, except any listed in the following paragraph
A firm commitment that would otherwise not be recognized at inception and that involves only financial instruments (An example is a forward purchase contract for a loan that is not readily convertible to cash. That commitment involves only financial instruments—a loan and cash—and would not otherwise be recognized because it is not a derivative instrument.)
A written loan commitment
The rights and obligations under an insurance contract that is not a financial instrument (because it requires or permits the insurer to provide goods or services rather than a cash settlement) but whose terms permit the insurer to settle by paying a third party to provide those goods or services
The rights and obligations under a warranty that is not a financial instrument (because it requires or permits the warrantor to provide goods or services rather than a cash settlement) but whose terms permit the warrantor to settle by paying a third party to provide those goods or services
A host financial instrument resulting from the separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument under [FASB ASC] 815-15-25-1, subject to the scope exceptions in paragraph 8. (An example of such a nonfinancial hybrid instrument is an instrument in which the value of the bifurcated embedded derivative is payable in cash, services, or merchandise but the debt host is payable only in cash.)

Question 16

The asset/liability method of accounting for income taxes requires that deferred income taxes be:

Answer 16

based on the tax rates currently enacted for the future periods in which the temporary differences are expected to reverse.

Question 17

If a premium on a bonds payable transaction is not amortized, what are the effects on interest expense and total stockholders’ equity?

Answer 17

Interest expense: overstated; Total stockholders’ equity: understated

Question 18

An entity is required to disclose:

Answer 18

A. a reconciliation of the numerators and denominators of the basic and diluted EPS computations.

B.
the effect given to preferred dividends in income available to common shareholders.

C.
securities that could be diluted in the future that were excluded from the current period’s diluted EPS because they were not dilutive.

Question 19

Southgate Co. paid the in-transit insurance premium for consignment goods shipped to Hendon Co., the consignee. In addition, Southgate advanced part of the commissions that will be due when Hendon sells the goods. Should Southgate include the in-transit insurance premium and the advanced commissions in inventory costs?

Answer 19

The insurance premium is a part of the cost of getting the consigned goods to the sale location. It is a legitimate cost of inventory and should be treated as such.

Question 20

Pine City owned a vacant plot of land zoned for industrial use. Pine gave this land to Medi Corp. solely as an incentive for Medi to build a factory on the site. The land had a fair value of $300,000 at the date of the gift. This nonmonetary transaction should be reported by Medi as:

Answer 20

additional paid-in capital.

Question 21

How would a municipality that uses modified accrual and encumbrance accounting record the condition of an excess of estimated inflows over estimated outflows?

Answer 21

Credit Budgetary fund balance.
Adoption of the operating budget is recorded by debiting appropriate budgetary accounts for estimated inflows (“estimated revenues”) and crediting the appropriate budgetary accounts for estimated and approved outflows (“appropriations”). “Budgetary fund balance” is debited or credited for the difference.

Question 22

The government-wide statement of activities should present direct operating expenses by

Answer 22

function

Question 23

Special and extraordinary items are reported separately at the bottom of

Answer 23

statement of activities

Question 24

Greenburg’s finance staff is preparing the statement of activities by checking classification of all expenses. The staff has been told that governments should report all expenses by function. They interpret this to mean that expenses that are required to be reported by function include:

direct operating expenses.
special and extraordinary expenses.
indirect operating expenses.

Answer 24

Direct operating expenses