Far2 Flashcards
How is a lease payment calculated when the lease payments are due at the beginning of the period?
You divide the FAIR VALUE of the leased equipment by the ANNUITY DUE rate.
What is the journal entry at the inception of a capital lease and the payments are due at the beginning of each period?
DR: Leased asset for its fair value amountCR: Lease Liability for plug amountCR: Cash for the payment amount
How do you calculate the interest expense at the end of the year on a capital lease with payments at the beginning of the period? What is the journal entry?
You multiply the remaining lease liability amount by the interest capitilization rate.DR: Interest expenseCR: Lease liability
How does the LESSOR in a capital lease determine the amount of Lease Receivable?
Multiply the payment by the number of payments.
What is the journal entry by the LESSOR for a capital lease with payments at the beginning of each period?
DR: Lease receivableDR: Cash for the payment amountDR: COGS for the book value amountCR: Unearned interest for the lease rec amount MINUS the BVCR: Equipment for BV amountCR: Sales for the FV amount
Working capital formula
current assets - current liabilities
Acid test formula
(cash + net receivables) / current liabilities
Acc Rec turnover formula
Sales / avg net receivables
Inventory turnover
COGS / avg inventory
Avg collection period for acc receivable?
Net credit sales / avg net acc receivable…. then you divide 365 by that number
What financial statements are required for the Governmental funds?
1)Balance sheet and 2) Statement of revenues, expenditures, and changes in fund balance
What statements are required for the Proprietary funds?
1)Statement of Net Postition2)Statement of revenues, expenditures, and changes in net position3)Statement of cash flows
What statements are required for the fiduciary funds?
1)Statement of net position2)Statement of changes in fiduciary net positiion
Which fund type does the government-wide financials EXCLUDE that are included on the CAFR?
Fiduciary funds.
What are the 3 sections of the CAFR?
1) Introductory2) Financial3) Statistical
If an investment in 30% of another company is accounted for using the fair value method, what is recognized as net income from the investment?
Cash dividends received and increases in the fair value of the investment are recognized in net income from the investment. The portion of the company’s net income is NOT recognized in net income from the investment.
A contest prize expense is the present value of the?
Total cost incurred. If the prize is an annual $50,000 payment for 20 years and the company takes out an annuity of $418,250 after making the initial $50,000 payment, the contest prize expense in the current year is $468,250.
The ending balance of the asset retirement obligation should be the:
Beginning balance + the DISCOUNTED cash flow estimate of the new asset + accretion expense - the amount paid during the year.
The debt service fund records cash transfers from the general fund as what, and cash payments as what?
Operating transfers and Expenditures.
During a period of inflation, would a perpetual inventory system result in the same dollar amount of ending inventory as a periodic inventory system under FIFO and LIFO?
Yes with FIFO, No with LIFO. The perpetual system would be calculating COGS based on the latest goods acquired prior to each sale versus all the latest goods acquired during the period under a periodic system.
Does a NOL carryforward directly reduce taxes or taxable income?
Taxable income. If the NOL is 40,000 and taxable income is 60,000, then it reduces taxable income down to 20,000, which is then multiplied by the tax rate.
During a business combination, can the acquisition date be before, on, or after the closing date?
It can be any of the 3.
For state or local governments, encumbrances outstanding at year end should be reported as:
Assigned or committed fund balance.
What does income and dividends from a sub do to the investment account under the equity method?
Income increases the investment, and dividends reduce the investment account.
What is the focus of proprietary funds?
Income determination. Proprietary funds use accrual accounting and they are similar in reporting to private businesses.
What is the entry in the General Fund to record equipment purchased with a capital lease?
DR: ExpendituresCR: Other financing sourcesThe general fund doesn’t record fixed assets. The general fund fixed asset account group would record the acquired equipment.
What are funds classified as that can only be used for a specific purpose because of restraints imposed by formal action of the government’s highest level of decision making authority?
According to GASB Statement No. 54, amounts that can only be used for a specific purpose, because of constraints imposed by formal action of the government’s highest level of decision-making authority, should be reported as Committed Fund Balance. The Restricted Fund Balance classification should be used when constraints are placed on the use of resources are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation.
What is the process for recording collection of accounts that had been written off?
First you debit accounts receivable and credit allowance for doubtful accounts to restore the amounts that had been written off. Then you debit cash for the amount collected, and you credit accounts receivable to take them off the books since they’ve been collected.
In the general fund, what 3 accounts are affected when property taxes are levied?
Revenue control is credited, property taxes receivable is credited, and allowance for uncollectible taxes is credited. Bad Debt Expense is ONLY an accrual accounting concept, and IS NOT used in modified accrual accounting.
When the direct method for LCM is used, what is the journal entry to write down inventory?
DR: Cost of goods soldCR: Inventory
When using the allowance method under LCM, what is the JE to write down inventory?
DR: Holding lossCR: Allowance for LCM
