Far 3 Flashcards
In government accounting, a derivative instrument used for investment purposes reports a change in fair value how?
The change in fair calue is reported as investment revenue in the statement of activities.
When a company issues bonds at less than the issue price what is it called?
A discount.
When calculating Bonds payables interest how do you calcilate the interest expense (credit) and interest payable (debit)
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
What is the AR Turnover ratio?
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.
Sale of AR. What items do you need to subtract for the cash received?
AR
- holdback
-Fee Income
-Interest expense
= cash received
What is the difference between FV method and equity method on dividends received?
FV is recognized as income to the investor and the equity method the receipt of dividends reduces the carrying amount of the investment
WHat is included in other comprehensive income?
Gaines or losses in available for sale securities
Foreign Currency
Pension Plan amendment
What is the difference between the indirect and direct method of the statement of cashflows?
The direct method looks at just the cash that exchanges hands. The indirect method starts with Net INcome and then adds and ssubtracts cash
What are the three requirements for donated services to be considered donations?
(1) special skills that
(2) are provided by persons possessing those skills
(3) the services would normally have been purchased by the organization.
What is the income approach when evaluating the value of securities?
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
When determining which currency to use, what is the main factor in determining the US dollar and foreign currency?
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.
When is a future year liability considered current in government accounting?
If the due date is 60 days then the entity will accrue the revenue or liability as current.
What account is debited when dividends are declaired?
Retained earnings. That is because part of the net income is being used to pay investors.
In government accounting what do you call revenue and expenses?
Revenues are by source and expenses are by function
How do you calculate the fair value of multiple financial assets?
By determining the most adventagous market
When can goodwill be amortize?
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
What must be removed from shares when calculating earnings per share?
Preferred stock and treasury stock. It is only based on common stock.
What are items that are added back to Net Income in the statement of cashflows?
Depreciation, depletion, losses, amortization on bonds
What are items that are subtracted from the statement of cashflows?
Gains, decrease in unearned revenue, discount on bond investments and premium on bonds payable
Lessee will amortize the right of use at the short of……..
The useful life or lease term. Whichever is shorter.
How do you calculate the capitalized amount of a Bargain Purchase option lease?
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.
How do lessee and lessor handle their indirect costs such as legal fees?
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
In a business combination what value should assets and liabilities be measured at?
They should be converted to Fair Value. For bonds carrying value is the fair value.
What method are government entities required to use when reporting cashflows?
The direct method.
When purchasing a PPE how do you account for cash and loans in the statement of activity?
Cash is accounted for in the investing activities and the loan is in the financing activities
When calculating interest capitalized make sure to calculate interest by months
This is called the weighted average expeditures.
What is the difference between treasury stock Cost and Par Method?
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.
When treasury stock is acquired total stockholders equity decreases and when it is reissued
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.
How do you calculate warranty expense?
Time total sales by the cummulative percentage rates and minus the warranty expense to date.
When calculating Bonds payable what is the carrying value?
It is the Face value plus or minus the premium or discount.
How do you use the yeild rate and the stated rate in bonds payable?
The yield is used to calculate the interest expense and the stated rate is to determine the interest payable.
assets equal
liabilities plus equity
