FAR 21 Flashcards
1
Q
The effective interest rate for a loan restructured in a troubled debt restructuring is based on:
A
the original contractual rate.
2
Q
How do you record donated fixed assets?
A
When an asset is received from a governmental entity, no income is recognized, and the offsetting credit is to an owners’ equity account, “Additional Paid-In Capital: Donated Assets.”
Assets donated by entities other than governmental units are included in revenue in the period of receipt.
If several dissimilar assets are purchased for a lump sum, the total amount paid should be allocated to each individual asset on the basis of its relative fair value.
3
Q
Which of the following ratios useful in assessing the liquidity position of a company?
A
Defensive-interval ratio-The defensive-interval ratio is a measure of time the company can survive (continue to pay operating expenses in cash) using only the quick assets (cash, marketable securities, and net accounts receivable). Thus, it is computed by dividing total quick assets by average daily cash expenditures. This is a liquidity measure, as it assesses how long a company can continue to keep up with its debts.
4
Q
What is the par value method?
A
The par value method is a method for accounting for the purchase and resale of treasury stock that uses the two-transaction view: as (1) the purchase and retirement and (2) the subsequent reissuance of the shares. The par value method uses a contra-capital stock account: for purchases, it reduces capital stock, contributed capital, and/or retained earnings; for resale, it increases capital stock and contributed capital. The par value method has the same effect on total stockholders’ equity as the cost method but apportions the amount to the component equity accounts.
5
Q
How to calculate the PV of a notes receivable?
A
Maturity amount x Present value factor If the note matures within the current 1-year accounting period, record at original note value.
6
Q
Which of the following should be disclosed by a company providing health care benefits to its retirees?
A
The assumed health care cost trend rate used to measure the expected cost of benefits to its retirees
The accumulated postretirement benefit obligation
7
Q
what is not a comprehensive basis of accounting other than generally accepted accounting principles?
A
Basis of accounting used by an entity to comply with the financial reporting requirements of a lending institution
8
Q
Under the LIFO method
A
the last goods in are treated as the first ones included in cost of goods sold.
9
Q
The perpetual method of LIFO treats units sold as
A
coming from the last units acquired prior to that sale.
10
Q
When using the periodic method, the inventory is not valued until
A
the end of the period
11
Q
The term “tax position” as used in FASB ASC 740-10-20 refers to ?
A
A.
A decision not to file a tax return
B.
An allocation or a shift of income between jurisdictions
C.
The characterization of income or a decision to exclude reporting taxable income in a tax return
12
Q
Final year income for the percentage of completion method would be calculated as:
A
Total contract revenue XXX
Less actual total costs - XX
—-
Total income from contract XX
Less income previously recognized - X
—-
Income recognized in final year
13
Q
A building suffered uninsured fire damage. The damaged portion of the building was refurbished with higher quality materials. The cost and related accumulated depreciation of the damaged portion are identifiable. To account for these events, the owner should:
A
capitalize the cost of refurbishing and record a loss in the current period equal to the carrying amount of the damaged portion of the building.
14
Q
What is a liquidating dividend?
A
The liquidating dividend is that portion of the cash dividend that exceeds the balance in retained earnings because other equity accounts must be debited.
15
Q
What does common stock outstanding mean?
A
Outstanding refers to the number of shares of capital stock that have been issued and are currently owned by stockholders. Treasury stock is not considered to be “outstanding” since it is owned by the issuing corporation, not by outside shareholders. Outstanding is an important aspect of earnings per share calculations.
The number of bonds that have been issued and are currently owned by bondholders and accounts receivable that have not been collected are both examples of outstanding numbers.
16
Q
What is the JE to record issuance of stock?
A
Cash
C/S Par
APIC
17
Q
What is the JE to record buy back (for more than par) and retirement of stock
A
Common stock Par
APIC
Cash
APIC retired stock
18
Q
When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of Mill’s interest exceeded Mill’s capital balance. Under the bonus method, the excess:
A
Decreases the capital balances of the other partners.
19
Q
FASB ASC 505-50-15-2 establishes a fair value approach for stock-based employee compensation plans. The fair value methodology is also extended to cover issuance of:
A
Equity instruments for good and services.
20
Q
Which of the following is an objective of a rabbi trust?
A
Companies arrange various types of deferred compensation. The most common is referred to as a rabbi trust. A grantor trust is set up to fund compensation for a group of managers or executives. The goal is to provide a benefit that is not taxable to the recipients until some later date when they actually receive compensation. To qualify for no current taxation, the trust agreement must explicitly state that the assets of the trust are available to satisfy the claims of general creditors in the event of bankruptcy of the employer.
21
Q
Cash collection is a critical event for income recognition in:
A
both the cost recovery method and the installment method.
22
Q
A disadvantage of the periodic inventory system is that
A
cost of goods sold amount used for financial reporting purposes includes both the cost of inventory sold and inventory shortages.
23
Q
How do you calculate periodic inventory COGS?
A
Cost of goods sold as the difference between cost of goods available for sale and ending inventory. This system does not maintain records indicating what the amount of ending inventory should be. It simply requires a company to determine what the amount of ending inventory is at period end.
24
Q
what is a direct financining lease?
A
As its name implies, a direct-financing lease is basically the coupling of a sale and financing transaction. In this case, the lessor removes the leased asset from its books and replaces it with a receivable from the lessee. The only income recognized by the lessor is the interest received. The implied rate is taken by calculating IRR of the asset; cash inflow is equal to lease payments and cash outflow is equal to the book value of the lease asset.
25
What is a sales type lease?
A sales-type lease is accounted for like a direct-financing lease, except that profit on a sale is recognized upon inception of the lease, in addition to the interest income recognized during the lease term. The gross profit recognized at the inception of the lease is the PV of all lease payments minus the cost of the leased asset.
26
A lease is recorded as a sales-type lease by the lessor. The difference between the gross investment in the lease and the sum of the present values of the two components of the gross investment (the net receivable) should be:
e
27
Rig Co. sold its factory at a gain, and simultaneously leased it back for 10 years. The factory’s remaining economic life is 20 years. The lease was reported as an operating lease. At the time of sale, Rig should report the gain as:
When a sale of property is made and a gain is realized on the sale, if the seller immediately leases the property back from the new owner, that is generally justification for deferring recognition of the gain on the sale. The deferred gain on the sale is generally accounted for as a deferred revenue, a deferred credit, recognized in later periods.
28
Accounting for a capital lease (Lessor)
Record a receivable and remove the asset from its balance sheet.
Record dealers' profit at lease inception for a sales-type lease.
Record rental payment received, allocated between interest revenue and a reduction to the receivable, at each payment date.
29
e
When an asset may have sustained a loss in value, due to circumstances occurring by the end of the year, it must be tested for impairment. Under IFRS, the test for and measure of an impairment loss is the excess of carrying value above recoverable amount. The recoverable amount is the higher of the value in use (present value of discounted future cash flows) or net realizable value (sales proceeds less cost to sell). The recoverable amount here is the value in use of $440,000, which is larger than the net realizable value of $450,000 - $16,000, or $434,000. Thus, a $60,000 impairment loss is recognized.
30
e
When a sale of property is made and a gain is realized on the sale, if the seller immediately leases the property back from the new owner, that is sometimes a justification for deferring recognition of the gain on the sale. If the lease is for a term that is a small fraction of the asset’s remaining useful life, then the gain is usually not deferred at all.
31
Regarding stock-based compensation, FASB ASC 718-10-30-10 requires that the total amount of compensation cost recognized in a stock-based employee compensation award be based on the total number of instruments that:
eventually vest.
32
Davis Tire Co. has a deferred compensation plan for several key employees. Each employee's plan contains an agreement not to compete and has a different set of benefits. How should Davis Co. account for this plan?
The plan should be accounted for as a current expense and accrued liability each year of an employee's service life.
33
FASB ASC 505-50-15-2 establishes a fair value approach for stock-based employee compensation plans. The fair value methodology is also extended to cover issuance of:
equity instruments of goods and services.
34
Assuming constant inventory quantities, which of the following inventory costing methods will produce a lower inventory turnover ratio in an inflationary economy?
FIFO
In an inflationary period, rising prices will cause LIFO cost of goods sold to be highest (from recent purchases) and LIFO ending inventory to be lowest (earliest purchases). FIFO will give opposite results, with a lowest cost of goods sold (from earliest purchases) and highest ending inventory (from recent purchases). Average costing will be in the middle of the other two on both measures.
35
inventory turnover
cogs/avg inventory
36
What is perpetual inventory system?
It measures the physical quantities in inventory under which the units received (manufactured) and issued (sold) are recorded continuously during the accounting period.
37
What is the periodic inventory system?
The periodic inventory system is a method of measuring the physical quantities in inventory under which the units (and costs) are determined at the end of the accounting period based on a physical count.
38
How do you calculate a deferred tax asset?
Deferred tax assets are measured by the total temporary differences multiplied by the tax rates in effect when the tax differences unwind.
39
The transfer of a security between categories of investments shall be accounted for at fair value. At the date of the transfer, the security's unrealized holding gain or loss shall be accounted for as follows:
For a security transferred FROM the trading category, the unrealized holding gain or loss at the date of the transfer will have already been recognized in earnings and shall not be reversed.
For a security transferred INTO the trading category, the unrealized holding gain or loss at the date of the transfer shall be recognized in earnings immediately.
40
e
When a debt that is due within the next 12 months is refinanced (repaid with the proceeds of a long-term debt) after the balance sheet date, but prior to balance sheet issuance, the debt that was due within 12 months can be classified as a noncurrent liability, as long as the refinance was intended by management as of the balance sheet date. A disclosure of the details is required in the footnotes to the balance sheet.
41
Composite life system is a depreciation method that applies a composite rate of depreciation to a heterogeneous group of assets, such as all the assets in a plant. The composite depreciation rate is based on a weighted-average of the various lives of the assets in the group. It is based on the total carrying amount of the group regardless of the age of each individual asset in the group. No gain or loss is recognized on the disposal or retirement of an individual asset in the group.
The computation is composite depreciation expense = the composite depreciation rate × the group total carrying amount.
When applying group or composite depreciation methods, when one sells an asset, the cost of the asset is removed, and the accumulated depreciation is assumed to be equal to the difference between cash received and cost. When the asset cost and this accumulated depreciation amount are both removed, the carrying amount of the asset accounts is decreased by the cash proceeds exactly.
42
How do you record a N/R that matures less than one year?
Record note rec at face amount if matures less than one year.
43
What is the preferred dividend earned ratio?
This particular ratio is the relationship to earnings available to pay preferred stock dividends, net income, divided by the preferred stock dividends total.
44
What is the capitalized interest criteria?
For qualifying assets being constructed for an entity's own use, FASB ASC 835-20-30-2 requires interest cost to be capitalized equal to the less of (a) the avoidable interest (based on the weighted-average amount of accumulated expenditures), or (b) the actual interest cost incurred.
45
Under the installment sales method, the gross profit on sales is?
deferred and recognized as cash is actually collected. The gross profit percentage is the realized gain divided by the contract price. This gross profit percentage is multiplied by any cash received to determine the gain to be included in net income.
46
Warranty of title is a warranty provided by the seller that the:
title is good,
transfer is rightful, and
goods are delivered free of any security interest or lien.
47
Cash and cash equivalent
3 months
48
e
When a right to return is allowed, sales revenue is often deferred until the right of return lapses unless all six required conditions are met sooner than that. In this case, the second requirement to recognize the revenue is not yet met—the buyer has to have paid the seller, or the buyer is required to pay the seller, and that obligation is not contingent on the buyer’s resale of the item.
49
An entity that exerts significant influence over another company in which it owns stock must use
the equity method to account for its investment. Under this method, dividends received from an investee reduce the carrying amount of the investment but are not included in the income of the investor.
50
In assessing the more-likely-than-not criterion as required by FASB ASC 740-10-25-7, which of the following is required?
The tax position must be based on its technical merits and not on whether or not the taxing authority is likely to examine that tax position.
51
Which of the following situations is the most likely cause of the decline in the bonds' market value?
Increased interest rates.
52
When convertible debt is issued under IFRS rules, the value of the bonds alone is
treated as a liability on the corporation's books, measured just as normal debt is, the present value with a reasonable discount rate, of the amounts to be paid.
53
When software costs are capitalized, yearly amortization of these costs is based on the
the greater of the ratio of current sales to expected total sales or the straight-line method over the useful life of the asset (four years).
54
Governmental financial reporting should provide information to assist users in which situation?
Making social and political decisions
| Assessing whether current-year citizens received services but shifted part of the payment burden to future-year citizens
55
Neutrality is part of
faithful representation.
56
An overfunded single-employer defined benefit postretirement plan should be recognized in a classified statement of financial position as a:
non current asset.
57
how do you calculate an additional pension liability?
the amount by which the net periodic pension cost exceeds the contribution.
58
Davis Tire Co. has a deferred compensation plan for several key employees. Each employee's plan contains an agreement not to compete and has a different set of benefits. How should Davis Co. account for this plan?
The plan should be accounted for as a current expense and accrued liability each year of an employee's service life
A deferred compensation plan which is not the equivalent of a pension plan should be reported in accordance with FASB ASC 710-10-25-11. Davis Co. would accrue a liability of not less than the present value of the estimated future payments.
59
How do you record sales of GOOD on credit?
Dr. A/R
Cr. Revenue
Dr. Cogs
Cr. Inventory
60
should depreciation expense be included in nfp statement of activities?
Yes, as an element of expense.
61
Estimates of price-level changes for specific inventories are required for which of the following inventory methods?
Dollar-value LIFO starts with a base-year layer valued at base-year prices. As subsequent year layers are added, these inventory layers are valued using the specific inventory prices in effect for the year in which the layer is added. Thus, estimates of price-level changes (price indexes) for specific inventories are required in applying dollar-value LIFO.
62
what is the quick ratio?
CA+AR+Marketable Sec. / current liabilities
63
How do you calculate the net patient service revenues?
Nongovernmental not-for-profit hospitals deduct charity services, bad debt, contractual adjustments, and policy discounts from gross patient service revenues to determine net patient service revenues.
64
How do you calculate the dollar value lifo index?
Inventory at current-year cost / Inventory at base-year cost
65
What are the required financials for a non profit entity?
statement of financial position (like a balance sheet), statement of activities, statement of cash flows, and for voluntary health and welfare entities, a statement of functional expenses.
66
How do you calculate dollar value lifo?
hen applying dollar-value LIFO (last in, first out), one must first compute the ending inventory total using base-year prices, to tell how much the total inventory (at base-year prices) has increased or decreased. If this is an increase, then add the increase amount (multiplied by the year’s price level) to the beginning inventory total.
67
Accounting for operating leases by the lessor involves the following:
Record rent revenue on each payment date (or unearned rent revenue recognized systematically each accounting period).
Record executory expenses as incurred.
Record normal depreciation on the asset.
68
Accounting for operating leases by the lessee involves the following:
Record rent expense on each payment date (or prepaid rent expenses systematically each accounting period).
No asset, liability, depreciation, or executory costs are recorded.
69
Which of the following should be disclosed by a company providing health care benefits to its retirees?
The assumed health care cost trend rate used to measure the expected cost of benefits to its retirees
The accumulated postretirement benefit obligation
70
Fundraising activities include
publicizing and conducting fundraising campaigns, maintaining donor lists, conducting special fundraising events, preparing and distributing fundraising manuals and other materials, and other activities involved with soliciting contributions. Membership development activities are separate from fundraising activities when members receive significant benefits. The presence of member benefits is indicated by the brochure.
71
A nongovernmental not-for-profit entity's STATEMENT OF ACTIVITIES is similar to which of the following for-profit financial statements?
Income statement
72
During periods of inflation, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system under which of the following inventory valuation methods?
FIFO yes
LIFO no
Under the FIFO inventory method, the ending inventory would consist of the last units purchased under both the perpetual and periodic inventory systems. Under the LIFO inventory method, the periodic inventory system would include in ending inventory the earliest units (beginning inventory and early purchases). Under LIFO, the perpetual inventory system would have expensed some of the beginning inventory and early purchases when sales were made early in the year.
73
Are good HELD on consignment included in inventory?
No
74
Are goods OUT ON consignment included in inventory?
Yes. (Less mark up on price)
75
During periods of rising prices, when the FIFO inventory method is used, a perpetual inventory system results in an ending inventory cost that is:
The same as periodic. The only difference is that the units sold are removed immediately under the perpetual approach but only at the end of the period under the periodic approach.
76
The periodic inventory system is?
a method of measuring the physical quantities in inventory under which the units (and costs) are determined at the end of the accounting period based on a physical count.
77
How do you caclulate estimated ending inventory?
Beg inventory+Purchase-COGS
78
Fund Financial need what financial statements?
Balance Sheet
Statement of Revenues,
Expenditures, and Changes in Fund Balance
79
Proprietary funds need what financial statements?
Statements of Net Position
Statements of Revenues, Expenses, and Changes in Fund Net Position
Statement of Cash Flows
80
Fiduciary funds need what financial statements?
Statement of Fiduciary Net Position
| Statement of Changes in Fiduciary Net Position
81
When purchasing a bond, the present value of the bond's expected net future cash inflows discounted at the market rate of interest provides what information about the bond?
Price.
82
How do you calculate the effective interest ?
Effective interest = Carrying value of the bonds × Effective interest rate × Time period
83
DO you record a g/l for treasury stock transactions?
Treasury stock transactions are equity transactions and result in no gain or loss. Treasury stock transactions affect additional paid-in capital accounts and retained earnings.
84
What is a discount?
A discount is the excess of face value over the proceeds (cash paid) for a bond i.e., the borrower receives proceeds less than the face value
85
A discount results when?
A discount results when the stated interest rate is less than the effective (market) rate
86
A material loss should be presented separately as a component of income from continuing operations when it is:
not unusual in nature but infrequent in occurrence.
The indicated treatment provides for separate recognition of “unusual” or “infrequent” items which fall short of full-fledged extraordinary treatment.
87
An increase in the cash surrender value of a life insurance policy owned by a company would be recorded by:
Decrease annual insurance expense.
88
A note receivable bearing a reasonable interest rate is sold to a bank with recourse. At the date of the discounting transaction, the notes receivable discounted account should be:
increased by the face amount of the note.
89
What do you do in a refinancing situation?
After the date of an enterprise's balance sheet but before that balance sheet is issued, a long-term obligation or equity securities have been issued for the purpose of refinancing the short-term obligation on a long-term basis…
90
Marketable debt (other than those intended to be held until maturity) and marketable equity securities are reported at
fair value in the balance sheet. The exceptions are marketable debt securities that a company plans to hold to maturity (reported at amortized cost) and marketable equity securities that provide the company the ability to significantly influence the investee (equity method required) or to control the investee (consolidation required).
91
AVAILABLE FOR SALE securities are reported at fair value in the balance sheet, but changes in fair value are reported
as other comprehensive income.
92
TRADING SECURITIES are reported at fair value in the balance sheet, and changes in fair value are reported
in the income statement.
93
Accounting for HELD TO MATURITY securities does not report
does not report fair value in the balance sheet or fair value changes in the income statement.
94
Sinking funds are increased by
revenues earned and by additional investment
| Sinking funds are special-purpose investments, in the form of cash and/or securities.
95
The price-earnings is calculated by
stock price/earning per share
96
Because Jab Co. uses different methods to depreciate equipment for financial statement and income tax purposes, Jab has temporary differences that will reverse during the next year and add to taxable income. Deferred income taxes that are based on these temporary differences should be classified in Jab’s balance sheet as a:
Non current liability.
97
What risks are inherent in an interest rate swap agreement?
1) The risk of exchanging a lower interest rate for a higher interest rate
2) The risk of nonperformance by the counterparty to the agreement
98
When would a company use the installment sales method of revenue recognition?
When installment sales are material, and there is no reasonable basis for estimating collectibility
Under the installment sale method of recognizing revenue, recognition is deferred beyond the point of sale and is associated with the subsequent collection of payments. The rationale underlying the method is that the length of the installment contract and the nature of the contract itself impose uncertainty concerning collection such that dependable estimates of uncollectibles are not possible.
99
What is the installment method?
The installment method is a method of accounting enabling a taxpayer to spread the recognition of gain on the sale of property over the payment period. Under this procedure, the seller computes the gross profit percentage from the sale (i.e., the gain divided by the contract price) and applies it to each payment received to arrive at the gain to be recognized.
100
Note section disclosures in the financial statements for pensions do not require inclusion of which of the following?
A detailed description of the plan, including employee groups covered
101
What do notes for pensions need to include?
The components of period pension costs
The amount of net prior service cost or credit in accumulated other comprehensive income
The company's best estimate of contributions expected to be paid into the plan in the next fiscal year
102
if a change in the provisions of a capital lease gives rise to a new agreement classified as an operating lease, the transaction shall be accounted for under the
sale leaseback requirements.
103
Could current cost financial statements report holding gains for goods sold during the period and holding gains on inventory at the end of the period?
Yes.
Holding gains may be realized or unrealized. Realized holding gains equal the difference between the current cost and the historical cost of assets sold or consumed during the period. Unrealized holding gains equal the difference between the current cost and the historical cost of assets still on hand at the end of the period.
Holding gains for cost of goods sold are realized. Holding gains for inventory on hand at the end of the period are unrealized.
104
How can you calculate the annual lease payment when you have fair value of lease?
FV of Equipment/present value factor
105
The market price of a bond issued at a premium is equal to the present value of its principal amount:
and the present value of all future interest payments, at the market (effective) interest rate.
106
Inventory turnover ratio
COGS/Average Inventory
107
How do you calculate ending inventory?
Beginning inventory+Purchases-COGS=Ending Inventory
108
Which inventory costing method would a company that wishes to maximize profits in a period of rising prices use?
FIFO
-Under the FIFO method, the amounts expensed as cost of goods sold are the oldest purchases. In a period of rising prices, the oldest purchases are the smallest amounts. A smaller cost of goods sold results in a larger gross profit.
109
Leasehold improvements are capitalized and amortized (as any fixed asset) over
Lesser of the useful life of the improvement or the remaining lease term.
(Beware of trick questions)
110
How should you calculate the net proceeds to be received from the issuance?
Discount the bonds at the market rate of interest and deduct bond issuance costs.
111
When bonds are issued at a discount
The carrying value is less than face value.
112
The retail inventory method includes which of the following in the calculation of both cost and retail amounts of goods available for sale?
Purchase returns
When applying the retail inventory method, one must compute the total cost and total retail amounts for goods available for sale. Some items are only included in one of these totals, sales returns and markups only go into the retail column, and freight in only goes into the cost column. Purchase returns are an adjustment to both columns
113
Capital leases with bargain purchase options and ownership at end of lease should be amortized over?
The economic life of the asset.
114
If net realizable value falls below cost, then inventory must be (IFRS)?
IFRS requires that inventories be valued at lower of cost or net realizable value. If net realizable value falls below cost, then inventory must be written down to net realizable value. If net realizable value increases back up above cost, then a recovery of the writedown must occur, and the inventory must be written back up to cost, which is now the lower of cost and net realizable value. Replacement cost is not used in this procedure.
115
How do you calculated effective interest for bonds?
((Face-Discount)*Market rate)-(Face*Stated rate)
116
Under the book value method the carrying value of the debt is
the carrying value of the debt (bonds) is removed and is replaced by stockholder equity in exactly the same total amount (i.e., the book value of the debt).
117
Special revenue funds are used to account for resources raised from
revenues that are either restricted or committed for expenditure for specific general government purposes other than capital outlay or debt service.
118
Which of the following activities should be excluded when governmental fund financial statements are converted to government-wide financial statements?
Fiduciary funds.
119
The government-wide statement of activities explains changes in:
Total net position.
120
The statement of net position reports the financial position of
Proprietary Funds
| Internal Service and Enterprise Fund
121
Capital projects funds, special revenue funds, and permanent funds are all types of governmental funds that report financial position on a
balance sheet
122
What is generally associated with the terms of convertible debt securities?
An interest rate that is lower than nonconvertible debt because the conversion has future economic value.
123
An unrestricted cash contribution should be reported in a nongovernmental not-for-profit entity's statement of cash flows as an inflow from:
Operating activities
124
Do Promotion costs, Engraving and printing, Underwriters’ commissions qualify as bond issuance costs?
Yes. Amortize over the term of the bond.
125
The lower of cost or market rule for inventories may be applied to total inventory, to groups of similar items, or to each item. Which application generally results in the lowest inventory amount?
Separately each item.
126
Jones Wholesalers stock a changing variety of products. Which inventory costing method will be most likely to give Jones the lowest ending inventory when its product lines are subject to specific price increases?
Dollar-value LIFO
127
When prices are rising, what method will have lower cost of inventory?
LIFO
128
Recipient governments would recognize an asset when
all eligibility requirements have been met or when resources are received, whichever is first.
129
What reduces additional paid in capital in business combination?
Registration and issuance costs reduce Additional Paid-in Capital:
130
Payments of dividends to stockholders is classified where in the cash flow?
Financing.
131
Interest payments are classified where in the cash flow?
Operating
132
Cash payments to acquire equity instruments is classified where in the cash flow?
investing.
133
The net assets aren't restricted if
it is not donor/grantor specified. If it is own management that is specifying, it is unrestricted.
134
For a troubled debt restructuring involving only a modification of terms, which of the following items specified by the new terms would be compared to the carrying amount of the debt to determine if the debtor should report a gain on restructuring?
The total future cash payments.
Debtor's gains are calculated based on undiscounted amounts. The total future cash payments, including interest, are used to compute the gain on troubled debt restructuring.
135
In determining basic earnings per share, cumulative preferred dividends
reduce the amount available for common shareholders.
136
Supporting services expenses are separated into two categories:
Management and general
| Fundraising
137
A lease is classified as a capital lease because it contains a bargain purchase option. Over what period of time should the lessee amortize the leased property?
The economic life of the asset.
138
Is there gross profit recognized by the lessor In a sales type lease?
there is an element of gross profit recognized by the lessor at the beginning of the lease, generally based on the difference between the sales price and the cost of the item to the lessor.
139
Generally, which inventory costing method approximates most closely the current cost for each of the following?
Cost of goods sold: LIFO; Ending inventory: FIFO
140
Pahn, a nongovernmental not-for-profit organization, received an unconditional promise to give $50,000. The donor stipulated that the donation must be used in the next fiscal year. Pahn received and spent the $50,000 in the next year. For the current fiscal year, what element of Pahn's statement of financial position will increase as a result of the unconditional promise to give?
Contribution receivable
141
Extraordinary items are
gains and losses that are both unusual in nature and infrequent in occurrence. These are reported separately on the income statement, immediately below the discontinued operations section, net of income tax effect.
142
Which of the following fund types of a government reports a statement of net position?
Proprietary funds.
143
In preparing Chase City's reconciliation of the statement of revenues, expenditures, and changes in fund balances to the government-wide statement of activities, which of the following items should be subtracted from changes in fund balances?
Book value of capital assets sold during the year.
144
Capital asset purchases and payments of long-term debt principal would be considered expenditure reductions of governmental fund balances and would be
added back
145
In preparing government-wide financial statements, internal service fund assets and liabilities would be added to those of
governmental activities (addition)
146
The combining fund statements are:
Part of the comprehensive report.
147
What is the primary purpose of the statement of activities of a nongovernmental not-for-profit organization?
To report a change in net assets for the period.
148
what is the statement of financial position?
Assets, liabilities and net assets
149
The three categories of net assets reported for nongovernmental not-for-profit entities are:
1) unrestricted net assets,
2) temporarily restricted (by donors or grantors) net assets
3) permanently restricted (by donors or grantors) net assets.
150
How should state appropriations to a state university choosing to report as engaged only in business-type activities be reported in its statement of revenues, expenses, and changes in net position?
Non operating revenues.
151
he noncurrent portion of general government capital leases are reported as a general long-term liability in the
Government wide statement of net position.
152
Goods or services are provided on a cost-reimbursement basis are what type of fund
internal service fund
153
What is statement of net position for non for profit?
Balance sheet
154
What is the statement of activities non for profit?
Operating statement (Change in net assets.)
155
Which of the following comprise functional expense categories for a nongovernmental not-for-profit entity?
Program services, management and general, and fundraising
156
Which of the following are included in a local government's government-wide financial statements?
Statement of net position and statement of activities
157
The market price of a bond issued at a premium is equal to the present value of its principal amount:
and the present value of all future interest payments, at the market (effective) interest rate.
