General Review of Theory Flashcards
Financial liability Formula
Sales price- Fair Value
Encumbrance account of a governmental unit is debited when?
Purchase order is approved
Non-Capital Financing activities Include?
1- Borrowing for non capital purposes
2- Cash Receipts from grants or subsidies
3- Property Taxes
4- Internal Transfers
Exp- Gary’s water & sewer funds transferred funds to subsidize on going operations of the Township’s General Fund
Discount resulting from the determination of a note payable’s present value should be reported on the balance as a ?
Direct reduction from the face amount of the note
Explan- The discount on a note payable should be reported on the balance sheet as a direct reduction from the face amount of the note.
Primary Difference between the purchase method of accounting for inventory & the consumption method of accounting for inventory is that the purchase Method?
Initially Records additions to inventory as expenditures.
Explan- Purchase Methods initially record additions to inventory as expenditures then establishes inventory balances & non-spendable fund balance amounts based on that physical counts & valuations at year end
What should not be considered to determine whether an accrual is appropriate prior to an issuance of a company’s financial statement about threatened litigation?
The period in which the threatened litigation became know to management
At what amount should partnerships record Land & Inventory assets?
Market Value!
When “Reasonably Possible” is used in a lawsuit that would result what on the financial statement?
We would disclose but not accrue
- If it said probable then we would accrue and disclose
-If it said Remote we would not disclose or accrue
What amount should be reported as appropriated retained earnings in a given year on the balance sheet?
The amount to be reported as appropriated retained earnings in a given year should be the specific amount “ Appropriated xxx amount of retained earnings”
Appropriate Journal entry prepared for government wide financial statements when recording a lease that transfers ownership?
In other words
Debit- Capital Asset
Credit- Capital outlay Expenditure
Debit- Other Financing Sources
Credit- Lease Liability
2 required financial statements of a defined contribution retirement plan?
Statement of net assets available for benefits of the plan
Statement of changes in net assets available for benefits
Cumulative effect of a change in accounting estimate should be shown separately?
NO, It should not be recorded separately on any financial statement as it is handled prospectively
Do not forget to deduct the first annual lease payment when calculating the lease liability to date
Remember
In the financial statements employee benefit pension plans and trusts, are reported at their
Fair Value
Discrete Presentation
SELF TEST- Meets the test of legally separate entity. However, if it is financially dependent upon another institution then it should be reported as the following
GASB 34 RULE : Government wide financial statements prepared in accordance with the provisions will include:
1- Governmental Wide financial statements prepared using accrual basis accounting
2- Fund Financial Statements,
3- Notes to the financial statements
4- Required supplementary information that include a letter titled “ management’s discussion & analysis
5- Budget versus actual comparisons including display of the originally adopted budget and the changes that resulted in the final amendment
Government: when anticipation notes are issued at face value and and the proceeds are placed into its Capital project fund. What account should be credited if they are unable to refinance ?
2- what if they are able to finance ?
1- Bond anticipation notes payable
2- Other financing sources control
GASB recommends the governmental fund budgets be prepared using the
Modified Accrual approach
Equity portfolio being valued in an organizations year end financial statements should be valued when?
They should be values using their fair value at date of the financial statements.
Debt service transactions of a special assessment issue for the which the government is not obligated in any any manner should be reported in the ?
Custodial fund, rather than a debt service fund to reflect that the government duties are limited to collecting and remitting funds
Leasehold improvements should be amortized
Over the period of expected benefit
Fund Balances of governmental funds reconciles to the net position of the governmental activities column of the government-wide financial statement using the ?
CANS MNEMONIC
C-Capital Asset
A-Accumulated Depreciation ( deduct)
N- Non current liabilities ( Deduct )
R- Revenue( for any sales tax levied)
S- Internal service fund
FORM 8-K
Is not a periodic sec form filing as it reports major corporate events
Stockholders equity rule: If the reacquisition price is:
A) Less than original issue price, the “gain” is credited to APIC
B) More than original issue price, the “loss” is debited to retain earnings
The fair value of equipment is measured using the ?
Market Approach, Income Approach & Cost Approach
You Can not use the Net Realizable value approach for impairment testing of equipment
The fair value of equipment is measured using the ?
Market Approach, Income Approach & Cost Approach
You Can not use the Net Realizable value approach for impairment testing of equipment
Program Services are?
Activities for which the organization is chartered
Example a Golf country club
-Paying for assistant golf professionals
-Upscale linens & restaurant supplies
Support services are ?
Include everything not classified as program services. Including fund raising, administration & membership development.
Example a Golf country club
-Membership development for staff
- Promotional brochures
Amount to be capitalized for a finance lease is the?
Present value of minimum lease payment
If two organizations are not financially interrelated, How would a trust recognize asset donation with restriction?
Would be recognized as an asset with donor restrictions ( a beneficial interest) and as a contribution with donor restrictions
In calculation goodwill for a consolidated Financial Statement under the acquisition method
1- Find the Fair value of the acquisition
( Purchase Price / percentage you acquired )
2- BV of assets ( Assets- Liabilities)
3= Fair value of acquisition - BV
Non controlling interest under U.S GAAP? Calculation steps
1- Non-controlling interest = FV Of acquisition * non-controlling interest %
2- NCI % * Acquisition comp Net income
3- NCI % * Acquisition Comp Dividend
4= Non controlling interest
+ NCI Net income portion
- NCI Dividend
= Ending non-controlling interest
When x amount of deferred tax asset will not be realized in the future,
Under US GAAP we should?
Increase this period’s income tax expense by the x amount
In calculation of the retirement obligation expense where an accretion rate is present
1- Calculate the Depreciation expense
2- Calculate the accretion expense
( Accretion rate * ARO COST )
3- ( Add Depreciation Expense + Accretion Expense )