FAR Custom Flashcards
Instead of the usual cash dividend, Evie Corp. declared and distributed a property dividend from its overstocked merchandise. The excess of the merchandise’s carrying amount over its market value should be:
A transfer of a nonmonetary asset to a stockholder or to another entity in a nonreciprocal transfer should be recorded at the FMV of the asset transferred, and a gain or loss should be recognized on the disposition.
Since the FMV of the merchandise was less than its carrying amount, Evie Corp. should report the resulting loss as a reduction in income.
Slate Co. and Talse Co. exchanged similar plots of land with fair values in excess of carrying amounts. In addition, Slate received cash from Talse to compensate for the difference in land values. Assuming that the exchange does not meet the criteria for commercial substance, Slate should recognize:
The exchange does not meet the criteria for commercial substance. Therefore, the exchange should be accounted for based on the recorded amounts of the assets surrendered, except that Slate, as the recipient of cash, must recognize “partial” gain. The gain to be recognized by Slate is an amount determined by the ratio of cash received to fair value of the total consideration received. The “partial” gain would be computed by multiplying this ratio times the total implied gain, which is the difference between the carrying amount and the fair value of the land surrendered.
At the inception of a capital lease, the guaranteed residual value should be:
The guaranteed residual value should be added to (i.e., included) minimum lease payments at present value.
Any fair value measurement should assume that the transaction to sell the asset or transfer the liability occurs in which market?
Any fair value measurement should assume that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability.
If there is no principal market for that type of asset or liability, the entity should use the most advantageous market for that asset or liability.
Regulation S-X disclosure requirements of the Securities and Exchange Commission (SEC) concern:
Regulation S-X governs the reporting of financial statements, including notes and schedules. Both interim and annual statements are covered by Regulation S-X.
The principal benefit of a single set of global financial reporting standards is:
The principal advantage of a single set of global financial reporting standards is that multinationals do not have to reconcile their statements to the local financial reporting framework. Foreign investment is thereby made much easier, and the cost of capital is lowered.
Under GASB, what are program revenues?
Program revenues consist of charges for services and program-specific grants and contributions.
All taxes, even those levied for a specific purpose, are general revenues.
Cost of land include:
Purchase price
Cost incidental to the acquisition, such as legal fees, commission, title insurance.
Cost for preparing land for use, such as clearing, grading, filling, and land improvements with indefinite life.
Improvements with finite life should be amortized over useful life in a separate account. Demolition of a building is included in land cost. However, excavating a foundation for a new building is included in the cost of the new building.
Capitalized cost for a new machine would include:
All costs of acquiring, transporting, testing, and installing of machine up until the time that machine is placed into use.
The G/L from a contingent liability is treated as what?
Income from continuing operations.
What is the treatment for a building that is no longer used for operations and actively marketed for sale?
It ceased to be depreciated and reclassified as held for sale. The carrying amount should be historical cost minus any accumulated depreciation.
How is the statement of cash flow presented for governmental entities?
They Should present a statement of cash flow for proprietary funds using the direct method of presenting cash flow from operating activities.
How are cash paid for trading securities classified?
As operating activity on the cash flow statement.
How are cash received from a loan principle classified?
As income from investing activity. The interest would be classified as income from operating activity.
Which enacted rate do you use for deferred tax asset or liability?
You use the future enacted rate. It has been deferred out to the future. Never discount to PV.
