Test Bank NOtes

Question 1

Effective interest method vs straight line

Answer 1

Straight line is incorrect and when compared anyway the interest expense is earlier years is lower than straight line so when you incorrectly use straight line method you end up with higher carrying amount bond and and since more interest expense is recorded understating net income and retained earnings

Question 2

How to calculate CV to be used when intangible asset becomes uses or withdrawn

Answer 2

If it was withdrawn from in a certain year you amortize the carrying value up to the previous year. Like if you’re amortizing for 10 years and you withdraw in year 4; then you decrease purchase amount by 3 years of amortization to come up with CV to charge against income

Question 3

For governmental accounting encumbrances when you order something and price ends up being more than encumbered

Answer 3

The encumbrance is reversed and replaced with the actual expenditure amount

Question 4

Recovery of assets held for sale

Answer 4

Recovery is only allowed when asset is held for sale, and price recovery can’t exceed the original carrying amount so if you record an estimated loss in year one and the next year you don’t sell and the value went up; then you bring the carrying back to the original value when you put it as held for sale.

Question 5

Gross lease receivable

Answer 5

Just multiply the lease payments by the lease term, don’t worry about present value shit

Question 6

How to solve Constant Dollar CPI questions

Answer 6

Divide the average CPI for the year in question by the CPI of the purchase date and multiply that rate by the amount being asked for

Question 7

Questions with constant dollar basis & change in estimate

Answer 7

Pay attention to these questions, remember change in estimates is prospective so they don’t count as a prior period adjustment

Question 8

Non cash dividends like property dividends in the statement of cash flows

Answer 8

They are noncash activities