FAR Deck 4

Question 1

True or False: A call option must be used.

Answer 1

FALSE, that’s why it’s called a call OPTION

Question 2

Using the Direct Method for the Statement of Cash Flows, to calculate the Cash Received from Customers = Revenues + (-) A/R Decrease(A/R Increase) + (-) Unearned Revenue Increase (Decrease)

Question 3

For a defined benefit pension plan, don’t forget that INVESTMENTS PURCHASED represent a _________ to/from net assets available.

Answer 3

SUBTRACTION

Question 4

All deferred tax assets and deferred tax liabilities are reported as _____-________

Answer 4

NON-CURRENT

Question 5

Memory Aid for remembering what you ADD to and SUBTRACT from the government-wide financial statements when reconciling government funds to government-wide:
C
A
N
S

Answer 5

+ Capital Assets
- Accumulated Depreciation
- Non-current liabilities
+ Service (internal SERVICE fund) net position

Question 6

With troubled debt restructuring, to figure out the GAIN ON RESTRUCTURING, you take the Debt that was canceled, and subtract the FMV of the _______ ________

Answer 6

ASSET EXCHANGED

Question 7

With troubled debt restructuring, to figure out the GAIN ON DISPOSAL/EXCHANGE, you take the FMV of asset exchanged less the Net Book Value of ______ _________

Answer 7

ASSET EXCHANGED

Question 8

True or False: The Effective tax income rate should reflect anticipated foreign tax rates and available tax planning alternatives

Answer 8

TRUE

Question 9

How to calculate Net Proceeds from discounting a note at a bank:
Face of Note 500,000
* Interest rate of note * years 8% * 1year
= 40,000
Maturity Value of Note = 500,000 + 40,000 or 540,000
* Discount by bank 10% * Time note held that year (1/2 year for example)
= (27000) This was 540,000 * 5%
Proceeds from bank 513,000

Question 10

Cash equivalents are only cash equivalents if ORIGINAL maturity is less than _____ days, not if it is due in ______ days with an ORIGINAL maturity of greater than ______ days

Answer 10

90

Question 11

True or false: Fair Value can be used to determine the amount of ANY impairment loss

Answer 11

TRUE

Question 12

For Long Lived Assets, it seems like Held for Disposal is the same thing as ____-___-____

Answer 12

HELD-FOR-SALE

Question 13

When a company is making machinery for its own use, then interest incurred during construction is _______, and interest incurred after construction is an interest _______

Answer 13

CAPITALIZED, EXPENSE

Question 14

When a company is making machinery to SELL, interest incurred during construction is ________, and the interest incurred after construction is an interest ________

Answer 14

EXPENSED, EXPENSE

Question 15

When a company exercises control over another company (parent over subsidiary), they CAN use equity method for internal use, but they are REQUIRED to use ________ externally

Answer 15

CONSOLIDATION

Question 16

When you are trying to figure out the earnings from a subsidiary as the parent, first, you need to figure out what the total earnings were for the subsidiary:
Beginning Retained Earnings
Income/Earnings UNKNOWN
-Dividend Paid
Ending Retained Earnings
If you ADD the dividends to Ending R/E and SUBTRACT the Beginning R/E, this gives you the total Subsidiary EARNINGS
Then, as the parent, you just multiply the earnings by your ownership percentage
Example: Total Earnings = 20,000 Ownership = 80%, so Subsidiary Earnings for parent is 16,000

Question 17

Any costs during an acquisition BESIDES registration costs and issuance costs of equity securities are _________ in the period incurred

Answer 17

EXPENSED

Question 18

For a Note, if you are trying to figure out the annual payments (principal and interest combined), then you take the Face Value of the note, and you ________ it by the present value factor for the NOTE, not the present value factor of the discount or premium. This will give you the annual payments, and you can multiply that by the number of years for the note to find the TOTAL ending amount of the payments.

Answer 18

DIVIDED

Question 19

Once you have figured out the annual payments for a note, you can take the annual payment and ________ it by the present value factor of the DISCOUNT to get the discounted present value of the note

Answer 19

MULTIPLY

Question 20

True or False: Sinking Fund requirements are NOT included as a current maturity of long-term debt.

Answer 20

TRUE

Question 21

For a government, an Operating Grant is a ___________ financing activity

Answer 21

NONCAPITAL

Question 22

DON’T FORGET, the Bond Issue Price is equal to the PV of the maturity value and the interest payment annuity together. EXAMPLE
$1000 bond, what is the issue price if for a 10 year period?
Present Value of 1 for 10 Periods (using Yield Rate) 1000 * .422 = 422
PV of an ordinary annuity of 1 for 10 1000*6%(Stated) = 60 * 6.418 = 385
Total Issue Price for each 1000 bond = 807

Question 23

Do Property Dividends reduce Retained Earnings?

Answer 23

YES, they still reduce retained earnings

Question 24

The journal entry when a governmental fund pays interest is:
DR Interest Expenditure
CR _______
This entry REDUCES FUND BALANCE

Answer 24

CASH

Question 25

When converting from cash to accrual, don’t forget that an INCREASE in AR means an increase in Net Income. A decrease in Prepaid Expenses means you paid more expenses in the CURRENT year than for future years so that DECREASES net income. And a decrease in liabilities means you have fewer liabilities to pay, so this is a(n) ________ to net income.

Answer 25

INCREASE

Question 26

For financial instruments (such as hedging instruments) disclosure about the Concentration of Credit Risk is REQUIRED. Is disclosure about market risks required?

Answer 26

NO, but it is ENCOURAGED

Question 27

Earnings per share for income from continuing operations and for net income must be presented on the ______ of the public company’s income statement

Answer 27

FACE

Question 28

For a government, the purpose of presenting separate fund financial statements for its governmental and proprietary funds is to report _______ and _________ information about the primary government

Answer 28

ADDITIONAL, DETAILED

Question 29

What are the three criteria for recognizing liability for a disposal plan?
1. An ___________ event has occured
2. The even results in a present obligation to transfer assets or to provide services in the future.
3. The entity can’t get out of the obligation

Answer 29

OBLIGATING

Question 30

Foreign Currency Translation means that the subsidiary’s local currency is the same as it’s functional currency. This is reported as ______ _______ _______

Answer 30

OTHER COMPREHENSIVE INCOME

Question 31

Foreign Currency Remeasurement means that the subsidiary’s local currency is NOT the same as it’s functional currency. This is reported in the consolidated _______ ________

Answer 31

INCOME STATEMENT