FAR Deck 1

Question 1

What are components of other comprehensive income?

Answer 1

-Unrealized gains or loss on available for sale investments
-foreign currency translation adjustments
-Certain unrecognized gains and losses on pension benefits
-Certain gains and losses on derivatives.


Question 2

Two primary qualitative characteristics of financial reporting?

Answer 2

Faithful Representation
-completely neutral and free from error

Relevance
-predict and confirmatory your material value

Question 3

Four Enhancing Characteristics

Answer 3

Comparability
Verifiability
Timeliness
Understandability

Question 4

Three main aspects of GAAP

Answer 4

Recognition
Measurement
Disclosure

Question 5

Equation for COGS

Answer 5

Beginning Inventory + Purchases - Ending Inventory = COGS

Question 6

Gross Margin

Answer 6

Gross Profit/Net Sales

Question 7

Profit Margin

Answer 7

Net Income/Net Sales

Question 8

Earnings per Share

Answer 8

Net Income/ Weight average # of shares outstanding

Question 9

A/R Turnover

Answer 9

Credit Sales/ Avg. A/R

Question 10

Inventory Turnover

Answer 10

COGS/ Avg. Inventory

Question 11

Days Sales in Inventory

Answer 11

365/Inventory Turnover

(Inventory Turnover = COGS/ Avg. Inventory)

Question 12

Historical cost Inventory

Answer 12

You can principle of historical cost, requires assets as well as liabilities, to be recorded, and carried on the book at cost 

Question 13

Historical cost Inventory

Answer 13

You can principle of historical cost, requires assets as well as liabilities, to be recorded, and carried on the book at cost 

Question 14

Are governmental, financial reporting should provide information to assist…

Answer 14

1. Making social and political decisions.
2. Assessing whether current US citizens receive services, but shifted part of the payment burden to future years citizens.

Question 15

When there is a change to the generally accepted accounting principles

Answer 15

Accounting standards update

Question 16

Explain modified accrual method

Answer 16

When revenue is measurable and available for instance, when a government levy’s taxes, they don’t automatically recognize revenue because they have not collected on the taxes so they will only recognize revenue when they can measure how much they are collecting and see how much is actually available

Question 17

Primary objective of financial reporting

Answer 17

To provide information that is useful for economic decision making

Question 18

According to the fast, be conceptual framework, the process of reporting an item in the financial statements of an entity is…

Answer 18

Recognition

Question 19

GASB’s  primary goal for the SEA concepts is…

Answer 19

Provide fundamental reporting characteristics to help prepare is develop consistent reporting

Question 20

Accumulated Benefit Obligation

Answer 20

The actuarial present value of benefits, whether vested or non-vested attributed by the pension benefit formula to employee services rendered before a specific date, and based on employee services in compensation, prior to that date

Question 21

If individual component units or consolidated, uncombined, governmental statements, the data, for the individual units must be presented in which of the following?

Answer 21

Notes to the financial statements, or in the combining statements

Question 22

At the commencement date of an operating lease, a lessor should…

Answer 22

Defer initial direct cost

Question 23

For state and local governmental units, generally accepted principles require that encumbrances outstanding at year end be reported as…

Answer 23

Reservations of fund balance

Question 24

If no profit and loss, sharing an arrangement specified in the partnership agreement, the revised uniform partnership act requires?

Answer 24

Profit and loss should be shared equally

Question 25

What accounting bases does GASB recommend that governmental fun budget be prepared?

Answer 25

Modified accrual basis of accounting

Question 26

GASB Concepts Statement No. 4?

Answer 26

Must provide present service capacity and be controlled by the government

Question 27

According to GASB concepts, statement number to measures of service accomplishments focus on?

Answer 27

Outputs and Outcomes

Question 28

Which of the following describes GASB’s role for improving communications ( as described in statement No. 3) in governmental external financial reporting?

Answer 28

The boards independence supports government, credibility incomparability among governments’ financial statements

Question 29

Discontinued Operations

Answer 29

The component of an entity that has been disposed of, or has been classified as held for sale is reported as a discontinued operations item that should be classified separately and the income statement, net of taxes after income (loss) from continuing operations

Question 30

Life Insurance Premium and Expense

Answer 30

The purchase of life insurance of an officer can be a form of investment when it builds up cash value (cash, surrender value). Cash surrender value is the amount of an insurance company pays to the policyholder in the event the policy is surrendered before maturity. The portion of the premium that increases the cash value is accumulated as a noncurrent asset on the balance sheet and the rest of the premium is recognized as life insurance premium.

CSV 1/1 - 87,000
CSV 12/31 - 108,000
=increase of 21,000

Annual premium expense - 40,000

40,000-21,000 = 19,00 life Insurance expense

Question 31

Comprehensive Income excludes…

Answer 31

Comprehensive income include all items of the income, statement and changes in equity during a period, except those resulting from investment by owners, distributions to owners (dividends paid to stockholders)

Question 32

When acquiring treasury stock, what decreases 

Answer 32

Total Stock holders, equity decreases by the cost of the treasury shares, regardless of the method used to account for the treasury stock. The book value for a common chair is computed by dividing total stockholders equity, applicable to common stock by the number of common shares, outstanding

Question 33

The par value method of accounting for treasury stock differs from the cost method in that

Answer 33

It will versus the original entry to issue the common stock with any difference between carrying value and purchase price adjusted through paid in capital, and or returned earnings in treats, a subsequent reinsurance, like a new issuance of common stock

Question 34

Cash flow from financing activities include issuing debt or equity. Examples?

Answer 34

-proceeds from issuing or payments for retiring bonds
-Issuance or re-acquisition of stock or treasury stock
-Borrowing or repaying of loan
-Dividends paid to shareholders
Bank overdrafts which are excluded from cash

Question 35

Notes to the financial statements for a government entity should include:

Answer 35

1. Summary of accounting
2. Description of reporting entity.
3. Disclosures of cash in investments, capital, assets, long-term debt, pensions, commitments, and contingencies.
4. Information on exceeding the budget at the legal level of control.
5. Disclosure of individual funds with deficit fun balances.
6. Risk related to deposit and investments.
7. Description of the government wide statements.
8. Policy for capitalizing fixed assets, and estimating useful lives.
9. Send me information for enterprise funds.
10. Policy for recording infrastructures.
11. Disclosures about capital asset impairment.

Question 36

Required disclosures in a summary of significant accounting policies:

Answer 36

1. The basis of consolidation.
2. Depreciation methods.
3. Amortization of intangible assets excluding Goodwill.
4. Inventory pricing.
5. Recognition of profit on long-term construction type contracts.
6. Recognition of revenue from franchising and leasing operations.

Question 37

Inventory Evaluation

Answer 37

Ceiling = net realizable value = selling price - cost of disposal

Floor = Net realizable value - Normal Profit Margin

Replacement cost

Question 38

During periods of inflation, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system, under which of the following inventory valuation methods

Answer 38

FIFO - YES
LIFO - NO

Under FIFO cost flow method, a perpetual system would result in the same dollar amount of ending inventory as a periodic inventory system. Under the LIFO cost flow method, however, a perpetual system would generally not result in the same dollar amount of ending inventory as a periodic inventory system.

Question 39

During periods of inflation, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system, under which of the following inventory valuation methods

Answer 39

FIFO - under the FIFO cost flow method, perpetual system, result in the same dollar amount of ending inventory as a periodic inventory system. Under the LIFO COSTFLOW METHOD, HOWEVER, A PERPETUAL SYSTEM WOULD GENERALLY NOT RESULT IN THE SAME DOLLAR AMOUNT OF ENDING INVENTORY.

Question 40

Cash to Accrual basis of accounting

Answer 40

Add increases in current assets
Subtract decreases in current assets
Add decreases in current liabilities
Subtract increases in current liabilities