FAR Deck 3

Question 1

Gross Margin = Gross Profit (Net Sales - COGS) / __________

Answer 1

NET SALES

Question 2

Profit Margin = Net Income / _________ _______

Answer 2

NET SALES

Question 3

If a division has been identified as “the lowest level of identifiable cash flows” (the division with the least cash flows), then you may want to test for impairment. The first step in the impairment test is the “recoverability test”, in which you compare the sum of the undiscounted cash flows to the _______ _______. If the cash flows are less than the _______ ________, then you would need to calculate an impairment loss.

Answer 3

CARRYING VALUE (2)

Question 4

The fair value measurement is an __________ by __________ basis, NOT an entity-level basis.

Answer 4

INSTRUMENT BY INSTRUMENT

Question 5

The following are the reporting requirements for _____-______ ________:
1. Employer’s obligation is based on work already performed by the employee.
2. Ogligation relates to rights that vest or accumulate
3. Payment of compensation is probable
4. Amount can be reasonably estimated

Answer 5

POST-EMPLOYMENT BENEFITS

Question 6

Where are Concentrations of credit risk required to be disclosed?

Answer 6

NOTES TO THE FINANCIAL STATEMENTS

Question 7

True or False: Interest on an inventory loan affects the inventory account.

Answer 7

FALSE! Interest happens periodically, it’s not something that gets added to inventory every time it comes around.

Question 8

True or False: Long Term Debt/Liabilities and their interest NEVER come out of the Capital Projects Fund.

Answer 8

TRUE, even if the debt is to pay for the Capital Project, it would be a part of the Debt Service Fund

Question 9

True or False: For government wide financial statements, they must be present all current AND non current liabilities.

Answer 9

TRUE

Question 10

Recognizing the amount of deferred tax liabilities and deferred tax assets for future tax consequences is the primary objective of accounting for ______ ________

Answer 10

INCOME TAXES

Question 11

When it comes to figuring out which segments are reportable as operating segments, do you figure out if they have 10% of all revenue (including from unaffiliated sales and intersegment sales) BEFORE or AFTER consolidation?

Answer 11

BEFORE

Question 12

Book Value per Common Share = (Total Stocker Holders Equity - Preferred Equity) / Common Shares ____________

Answer 12

OUTSTANDING

Question 13

To calculate income tax expense at an interim date (per quarter for example), you take the Estimated Effective Tax Rate, multiply it by the total income year to date (for example, for the first two quarters), then subtract the tax expense that had already been ________

Answer 13

BOOKED/RECORDED

Question 14

If a problem is asking you to figure out cash from operating activities, and it give you NET INCOME, it’s probably asking you to use the ________ _______

Answer 14

INDIRECT METHOD

Question 15

True or False: Contribution Revenue for a not-for-profit is only the NONRECIPROCAL portion of the contribution.

Answer 15

TRUE

Question 16

Is a depreciation-related deferred tax liability a current or a noncurrent liability?

Answer 16

NONCURRENT

Question 17

When a parent sells an asset to a subsidiary, in consolidation, cost and depreciation should be accounted for as if ________

Answer 17

THE SALE HAD NOT OCCURRED

Question 18

Dividends decrease retained earnings by their ______ ________ value

Answer 18

FAIR MARKET

Question 19

When a stock dividend is issued, don’t forget it increases common stock and decreases _______ ________

Answer 19

RETAINED EARNINGS

Question 20

Reacquisition and retirement of bonds, as well as a loss from the abandonment of equipment are apparently part of _____________ operations

Answer 20

CONTINUING

Question 21

How to calculate year-end balance for present value of accumulated plan benefits”
Beginning balance
+ (-) Favorable (Unfavorable) Plan Amendments
+ (-) Favorable (Unfavorable) Changes in actuarial assumptions
+ Accumulated Benefits
(-) Benefits Paid out
= Year-End balance

Question 22

For Sum of Years digits depreciation, if it asks for ACCUMULATED depreciation, then you multiply the original cost - salvage value by the total years that have _________ (Example, instead of Cost * 1/15 if we were on the last year of 5, you would multiply Cost by 14/15)

Answer 22

PASSED

Question 23

Estimated future gross revenue - estimated future cost to dispose of software = _________

Answer 23

ESTIMATED FUTURE FAIR VALUE (use this to calculate an impairment loss if necassary)

Question 24

If a service contract is performed evenly throughout the year, then you only recognize ________ of the current year service year revenue

Answer 24

HALF, 50%

Question 25

Don’t forget that adjustments for prior year errors are NOT included in Net Income, they are reflected in _______ _________

Answer 25

RETAINED EARNINGS

Question 26

When a non-controlling investor (30% ownership) gains control as a parent (purchased an additional 45% so now at 75%), this is called a step acquisition.
You would first take the Fair Value of the now Subsidiary as of the acquisition date (for example $2,250,000) and multiply it by the ownership right BEFORE the acquisition (so use 30% instead of 75%). So $2,250,000 * 30% = $675,000. This is the Fair Value.
NEXT, you would take the Investment account total right BEFORE the acquisition and adjust it to the fair value you JUST calculated. So, if the investment account was originally at $421,000 right before the acquisition, you would have to adjust it UP to the $675,000 (675-421 = 254)
The $254,000 adjustment UP would be a ________ (if it had to be adjusted down it would be a ________)

Answer 26

GAIN, LOSS

Question 27

If a company doesn’t have significant influence over another company (ownership of less than 20%), then you use the ______ _______ method. Net Income when you have this time of ownership is NOT revenue, but dividend income IS.

Answer 27

FAIR VALUE

Question 28

________ is used in governmental accounting when a component unit is so intertwined with the primary government that it is in substance the same as the primary government.

Answer 28

BLENDED

Question 29

True or False: A foreign exchange transaction gain or loss DOES affect Net Income.

Answer 29

TRUE, because it affects income from continuing operations, which is the line RIGHT before Net Income

Question 30

True or False: Amortization of premium on bonds payable reduces both interest expense and carrying value

Answer 30

TRUE