Practice 4-5

Question 1

If you have lump sum payments and future payments, what amount should the expense this year be?

Answer 1

It should include the lump sum payments and the PV of the future payments

Question 2

How do you calculate the income tax using the excess of current values over tax bases?

Answer 2

Take the current value subtract the tax base, and multiply by the income tax rate

Question 3

Can revenues be recognized prior to the sale of the merchandise?

Answer 3

Yes, if the sale of the goods is at an assured price.

Question 4

Describe Proprietary Funds

Answer 4

focus on total economic resources, income determination, and cash flow presentation. Proprietary funds include internal service funds (which are considered governmental activities in the government-wide statements) and enterprise funds (which are considered business-type activities in the government-wide statements).

Question 5

Describe Internal Service Funds

Answer 5

report any activity that provides goods or services to other funds of the primary government on a cost-reimbursement basis. Examples might include print shops, motor pools, and self-insurance activities. Internal service funds may incidentally provide services to other governments on a cost-reimbursement basis.

Question 6

Describe Enterprise Funds

Answer 6

may be used to provide goods or services to external users for a fee. Enterprise funds must be used if (1) the activity is financed with debt that is secured solely by a pledge of the net revenues from fees and charges of that activity, or (2) laws or regulations require that the activity’s cost of providing services be recovered with fees and charges, rather than from taxes or similar revenues. Examples of enterprise funds would include water utilities, airports, and swimming pools.

Question 7

In interim financial reporting, income taxes effect rate should reflect?

Answer 7

Capital gains and foreign tax rates

Question 8

is there more than one acceptable method of recording noncontrolling interest in IFRS?

Answer 8

Yes, either fair value or the proportionate share of the value of net identifiable assets of the acquiree.

Question 9

Remeasuring a foreign subsidiary’s financial statements from the local currency to the functional currency (parent company’s currency) would be reported part of?

Answer 9

Continuing operations

Question 10

IFRS Permits finance costs (interest expense) to be reported in?

Answer 10

Operating or Financial Activities

Question 11

If you service an asset and use the FV Method to account for it, then the changes in FV are reported where?

Answer 11

In earnings for the period.

Question 12

Do serial bonds mature at the same date?

Answer 12

No

Question 13

What is a characteristic of a perfect hedge?

Answer 13

no future gain or loss

Question 14

How are the loan origination fees recognized (i.e. insurance, attorney fees, wages, etc.)

Answer 14

Deferred and Recognized over the life of the loan as an adjustment of yield (interest income)

Question 15

Does the employment contract affect the valuation of the net investment?

Answer 15

No, net investment is the original price paid.

Question 16

Enterprise-wide disclosures include disclosures about?

Answer 16

1. Geographic Areas
2. Major Customers
3. Products & Services

Question 17

ASC Topic 740 is built on a(n) _____ perspective.

Answer 17

Asset-Liability Perspective.

Question 18

So according to ASC Topic 740 determining periodic tax expense is based on the concept of…?

Answer 18

Recognition of assets and liabilities.

Question 19

How do you calculate Dollar-Value LIFO?

Answer 19

Cost at base-year prices x Price index

Question 20

How do you calculate Price Index?

Answer 20

EOY Cost / Base Year Cost

Question 21

Is it True that IFRS allows plant, property, and equipment to be written up or down?

Answer 21

YES.

Question 22

What valuation model should a company use to value its plant, property, and equipment while using IFRS?

Answer 22

The cost model or the revaluation model.

Question 23

ASC 270 specifies that ___ and ____ should be considered in estimating the effective tax rate for interim reporting.

Answer 23

foreign tax rates & capital gains

Question 24

What is the JE for the amortization of the discount.

Answer 24

Interest expense xxx
Discount on bonds payable xxx

*Recall that the discount on bonds payable account usually carries a debit balance that reduces the carrying value of the bonds.

Question 25

What is an exit activity?

Answer 25

includes (but is not limited to) restructurings which are programs that are planned and controlled by management, and materially changes either

1. The scope of a business undertaken by the

             company, or
 	2.	The manner in which that business is conducted

Examples include
a. Sale or termination of line of business
b. Closure of business activities at a particular
location
c. Relocation of business activities from one
location to another
d. Changes in management structure
e. Fundamental reorganization of the business

Question 26

When does a lessee capitalize a lease?

Answer 26

If a lease transfers ownership or contains a BPO these are 2 criteria for classifying a lease as a capital lease.

Question 27

When treasury stock is purchased for more than its par value, treasury stock is debited for the purchase price under which of the following methods?

Answer 27

Cost & Par Value Method

Question 28

Which of the following financial instruments is not considered a derivative financial instrument?

Answer 28

Bank certificates of deposit