Far 3

Question 1

In government accounting, a derivative instrument used for investment purposes reports a change in fair value how?

Answer 1

The change in fair calue is reported as investment revenue in the statement of activities.

Question 2

When a company issues bonds at less than the issue price what is it called?

Answer 2

A discount.

Question 3

When calculating Bonds payables interest how do you calcilate the interest expense (credit) and interest payable (debit)

Answer 3

Interest expense is the PV of the bond X yield rate and interest payable is the issued rate X issued amount. The difference is the discount or the premium.

The difference is subtracted from the bond discount

Question 4

What is the AR Turnover ratio?

Answer 4

Net sales (sales on credit - returns-sales allowances) / average AR. If you need the AR turnover rate by days then you divide 365 by the ratio.

Question 5

Sale of AR. What items do you need to subtract for the cash received?

Answer 5

AR
- holdback
-Fee Income
-Interest expense
= cash received

Question 6

What is the difference between FV method and equity method on dividends received?

Answer 6

FV is recognized as income to the investor and the equity method the receipt of dividends reduces the carrying amount of the investment

Question 7

WHat is included in other comprehensive income?

Answer 7

Gaines or losses in available for sale securities
Foreign Currency
Pension Plan amendment

Question 8

What is the difference between the indirect and direct method of the statement of cashflows?

Answer 8

The direct method looks at just the cash that exchanges hands. The indirect method starts with Net INcome and then adds and ssubtracts cash

Question 9

What are the three requirements for donated services to be considered donations?

Answer 9

(1) special skills that
(2) are provided by persons possessing those skills
(3) the services would normally have been purchased by the organization.

Question 10

What is the income approach when evaluating the value of securities?

Answer 10

The income approach is valuing the securities at the present value of future income.

When the question uses the word matrix they are referring to like kind securities

Question 11

When determining which currency to use, what is the main factor in determining the US dollar and foreign currency?

Answer 11

The functional currency is to be the determination of which currency should be used. It doesn’t matter where the parent company is, if a majority of the bussiness is done in a foreign nation than use the foreign currency.

Question 12

When is a future year liability considered current in government accounting?

Answer 12

If the due date is 60 days then the entity will accrue the revenue or liability as current.

Question 13

What account is debited when dividends are declaired?

Answer 13

Retained earnings. That is because part of the net income is being used to pay investors.

Question 14

In government accounting what do you call revenue and expenses?

Answer 14

Revenues are by source and expenses are by function

Question 15

How do you calculate the fair value of multiple financial assets?

Answer 15

By determining the most adventagous market

Question 16

When can goodwill be amortize?

Answer 16

When a company chooses the private company alternative. Then they can amortize up to 10 years. Make sure to amortized the first year by months

Question 17

What must be removed from shares when calculating earnings per share?

Answer 17

Preferred stock and treasury stock. It is only based on common stock.

Question 18

What are items that are added back to Net Income in the statement of cashflows?

Answer 18

Depreciation, depletion, losses, amortization on bonds

Question 19

What are items that are subtracted from the statement of cashflows?

Answer 19

Gains, decrease in unearned revenue, discount on bond investments and premium on bonds payable

Question 20

Lessee will amortize the right of use at the short of……..

Answer 20

The useful life or lease term. Whichever is shorter.

Question 21

How do you calculate the capitalized amount of a Bargain Purchase option lease?

Answer 21

You calculate the present value of the lease payments as well as the present value of the bargain purchase price. This is the amount the lessee will capitalize.

Question 22

How do lessee and lessor handle their indirect costs such as legal fees?

Answer 22

Lessee: Includes the cost in the right of use asset but not in the liability.

Lessor: for a sales lease/finance lease expense at inception

For an operating lease defer the costs and amortize as expense of the lease period

Question 23

In a business combination what value should assets and liabilities be measured at?

Answer 23

They should be converted to Fair Value. For bonds carrying value is the fair value.

Question 24

What method are government entities required to use when reporting cashflows?

Answer 24

The direct method.

Question 25

When purchasing a PPE how do you account for cash and loans in the statement of activity?

Answer 25

Cash is accounted for in the investing activities and the loan is in the financing activities

Question 26

When calculating interest capitalized make sure to calculate interest by months

Answer 26

This is called the weighted average expeditures.

Question 27

What is the difference between treasury stock Cost and Par Method?

Answer 27

Cost method debits treasury stock at cost and Par method debits treasury stock at par. At reissuance the treasury stock is credited at cost or par.

Question 28

When treasury stock is acquired total stockholders equity decreases and when it is reissued

Answer 28

Total stock holders equity increases. Use FIFO with treasury stock when reissuing the stock. They can also use average cost where you find the average cost.

Question 29

How do you calculate warranty expense?

Answer 29

Time total sales by the cummulative percentage rates and minus the warranty expense to date.

Question 30

When calculating Bonds payable what is the carrying value?

Answer 30

It is the Face value plus or minus the premium or discount.

Question 31

How do you use the yeild rate and the stated rate in bonds payable?

Answer 31

The yield is used to calculate the interest expense and the stated rate is to determine the interest payable.

Question 32

assets equal

Answer 32

liabilities plus equity