FAR CPA NOTES Part 2 Flashcards
asset must be classified as held for sale
Those rules include: an active program to find a buyer is in place, the price is reasonable, the property is immediately available, and the sale is expected in one year. If all of these rules are met, the asset is reported at the lower of its book value or net realizable value.
What is the measurement focus found in the fund-based financial statements of a state or local government
All current financial resources for governmental funds and all economic resources for proprietary funds
What is governmental funds reporting
The governmental funds report public service activities such as the police department and focus on the source, use, and amount of current financial resources
How are changes in fair value handled
For a security being held until maturity or for an available for sale security, that means that the investment is reported in the same manner as a trading security. Changes in fair value are recognized immediately within the computation of net income.
how are depreciation expenses & gain on sales handled in operativing activities of cash flows
Depreciation is not a cash flow and is not reported. The gain on the sale of the bus is a capital (and related financing) activity and is reported in that category. Neither qualifies as a cash flow from an operating activity.
How is held for sale reported on the balance sheet
it should be reported on the company’s balance sheet at the lower of book value or net realizable value.
Units of production method
The units of production method is a straight-line method but it is based on some type of output rather than on years.
Calculation
net of the projected benefit obligation at the end of the year and the plan assets
Calculating gain/loss
When an asset (or group of assets) that is viewed as a discontinued operation is sold, the related operating income for the period as well as the gain or loss on the sale are grouped together and reported at the bottom of the current year income statement
Effects in changes to accounts payable
One mechanical method to arrive at the proper answer is to envision the change the operational asset or liability in a debit-credit format. An increase in accounts payable requires a credit. The opposite effect (a debit) is appropriate for the Cash account. A debit to cash is an increase; thus, difference is added to net income.
