FAR

Question 1

A transaction that is unusual in nature of infrequent in occurrence should be reported as a(an):

Answer 1

Items of income or loss that are either unusual OR infrequent are not extraordinary. These items should be reported as part of income from continuing operations and not net of taxes.

Question 2

Which characteristics of accounting information primarily allows users of financial statements to generate predictions about an organization?

Answer 2

Relevance - financial information is relevant if it is capable of making a difference in the decisions made by users and has predictive and/or confirming value. Reliability refers to as faithful rep requires completeness, neutrality and freedom from error. Timeliness is an enhancing qualitative characteristic and means that info is available to users in time to be capable of influencing their decisions. Neutrality is a component of faithful rep.

Question 3

A company that is a large accelerated filler must file its Form 10-Q with the US securities and Exchange Commission within how many days after the end of the period?

Answer 3

40 days for large corp and 45 days for small corp after the first 3 quarters of each fiscal year.

Question 4

Development costs of a new product ideas are a direct expense.

Answer 4

Legal fees incurred to apply for a patent and to successfully defend the patent rights are capitalized as an asset.

Question 5

Research & development is usually expensed except for materials, equipment, or facilities that have alternate future uses that are cap and depr over their useful lives.

Answer 5

The equipment purchased for current projects only must be exp as research & dev cost. Only equipment purchased for current & future projects will be cap and depr.

Question 6

How to record AR for for its sale?

Answer 6

A trans denominated in a foreign currency is recorded at the spot rate on the date of the trans.

Question 7

2 year bond $1m face value and $1,020,000 fv paid $900k

Answer 7

Bond investments are classified as trading sec because the bonds are hold to be sold in the near future (3 months) and reported at FV on BS.

Question 8

Lower of cost or market method

Answer 8

Cost
replacement cost
net realizable value <–Market
net realizable value less normal profit margin

Question 9

IFRS inventory valuation

Answer 9

IFRS requires inventory to be reported at the lower of cost or net realizable value

Question 10

Construction period interest is capitalized based on the weighted average of accum construction exp.

Answer 10

Interest rate paid on borrowing specifically for asset construction is used first determined the amount of interest cost capitalized. Only interest related to construction is cap.

Question 11

Impairment loss is the amount where the carrying amount exceeds the FV of the asset.

Answer 11

If sum of undiscounted expected future CF is < the carrying value, an impairment loss needs to be recognized.

Question 12

Bonds - what type of bonds mature in installments

Answer 12

Serial bonds; debenetures are unsecure bonds; term bonds are bonds that have a single fixed maturity date; variable rate bonds have interest rate that change

Question 13

Bond JE

Answer 13

Dr. Bond payable $775,000
Cr. Unamortized discount $23,000
Cr. Common stock - par value $450,000
Cr. APIC $302,000

Question 14

The funded status of a defined benefit pension plan should be reported in….

Answer 14

The statement of financial position. Stmt of fin position is also known as the bs. Funded status is the FV less the projected benefit obligation.

Question 15

Stock dividend in stock issuance

Answer 15

treated as though it occurred at the beginning of the year

Question 16

Government Funds (GSP-CD)

Answer 16

Modified basis of accounting
General Fund - operating fund
Special Revenue Fund - specific purpose street repair
Permanent Fund - only earnings can be used to fund program
Capital Project Fund - used to acquire & build facilities
Debt Service Fund - repayment of LT debt & related interest
Balance statement
Statement of revenues, expenditures, and changes in fund balance

Question 17

Proprietary Funds (IE)

Answer 17

Internal Service Fund - serves the needs of other gov. funds
Enterprise Fund - provides goods or services to external users
Statement of Net Assets
Statement of revenue, expenses, and changes in net assets
Statement of Cash Flows

Question 18

Fiduciary Funds (A PIP)

Answer 18

Agency Fund - gov acts as an agent or custodian
Pension Trust Fund - gov is a trustee for a pension
Investment Trust Fund - gov is a trustee over a series of investment
Private Purpose Fund - trust that benefits various individuals and entities
balance sheet
Statement of revenue, expenditures & changes in fund balance

Question 19

Fiduciary Fund Balance Types

Answer 19

Restricted - restricted by contributor (strict)
Committed - restricted by gov (less strict b/c they can undo the restriction)
Assigned - intended to be used for a purpose
Unassigned - available to be spent
Nonspendable - isn’t in a spendable state (inventory)

Question 20

Gov-wide financial statement

Answer 20

statement of net position & stmt of activities
prepared on an accrual basis
focus is on economic measurement
purpose is to provide operational accountability

Question 21

Statement of Net Position

Answer 21

Assets - ordered by liquidity
Deferred outflows of resources - future use of net assets
Liabilities - ordered by liquidity
Deferred inflows of resources - future increase of net assets
Restricted net assets
Unrestricted net assets
Capital Asset - net of debt

Question 22

Personal financial statement

Answer 22

Only two are required
Statement of financial position
Statement of changes in net worth

Asset and liability - estimated at current value
Est taxes that would be paid if all assets were converted into cash and all liabilities were paid
Stmt of Financial condition
Assets - liabilities - est taxes on assets sold = net worth
Life insurance - only cash surrender value net of loans against policy
business interests that constitute a large percentage of total assets should be separated from other investments

Question 23

Interim reporting

Answer 23

Discrete view - interim period is a separate accounting period - not GAAP
Integral view - interim period is part of the annual period - GAAP
Temp decline in inventory not recognized but actual decline recognized
Discontinued Ops & Extraordinary items - fully recognized
Cum gains & losses - reported as if occurred in first quarter
Problem with interim reporting - income and exp doesn’t match

Question 24

Segment reporting - required by publicly traded companies

Answer 24

Revenue of segment is 10% or more of total
Profit is 10% or more of total
Segment asset is 10% or more of total
75% test - all seg rev must equal 75% of total external revenue
Disclosure requirement - if 10% or more of enterprise rev comes from one customer, the seg making sale must be disclosed

Question 25

Formation of a new partnership

Answer 25

contributed assets recorded at FV
liabilities assumed is valued at the PV of the remaining cash flows
Capital contribution - mortgage - contribution of value less the loans and loan not allocated to other partners

Question 26

Partnership - bonus method

Answer 26

if no goodwill is recorded then use bonus method
old partnership equity + new partner contribution = new partnership equity
new partnership equity x new partner % = new partner equity amount
dr. cash from new partner
cr. new partner capital
cr. old partner’s capital (bonus)

Question 27

partnership - good will

Answer 27

new contribution/new equity % = partnership value

implied value of partnership - capital accounts of all partners = goodwill to old partners