Progress Test 1

Question 1

Building being actively marketed for sale will be valued at?

Answer 1

lower of book value or NRV

Question 2

US GAAP, substantial doubt about an entities ability to continue as a going concern, indicate that it is probable the entity will not be able to meet its obligations as they come due within one year of….?

Answer 2

date the financial statements are issued

Question 3

“Bonus” method, is the capital account always credited for the amount of the investment?

Answer 3

No, the credit to new partners account is calculated so that the new partner will receive the proper ownership % based on the “BALANCE in total capital accounts” that controls the calculation.

Incoming partners capital is based on their % of the partnership total NBV after their contribution

Question 4

inventory turnover ratio?

Answer 4

cogs / avg inventory

Question 5

how are excavation costs treated? building or land?

Answer 5

building

Question 6

Percentage of completion

How to figure CA or CL?

Answer 6

excess of accumulated costs + estimated earnings / billings

if numerator is higher than CA, if lower than CL

Question 7

Partnerships

New partners capital account under the “Bonus” method?
Existing capital balances total 80k
New partner contribution FV of 15k
New partner capital interest received 20%

Answer 7

1. Find total of new partnership capital balances = 95k
2. Times new partners capital % (95 x 20%) = 19,000
   this is the new partners capital balance.
3. The 4k difference gets allocated to existing partners capital based on P&L sharing ratio.

Question 8

Equity method - effect of Undervalued asset amortization. Does it affect investors investment income?

Answer 8

Yes

JE
Dr. Equity revenue I/S
Cr. Investment acct B/S

Question 9

Avoidable interest calc?

total expenditures 250k during the year spent uniformly.
interest rate on specific borrowing 10%

Answer 9

avg accumulated expenditures x interest rate
125k x 10% = 12.5k

capitalize the lower amount of total actual interest cost and avoidable interest

Question 10

Revenues in a single step income statement include?

Answer 10

Sales, interest and gains.

Discontinued operations amounts are included elsewhere

Question 11

Change in accounting principle shown where?

Answer 11

separate catagory in RE, not in component of net income

Question 12

All deferred tax liabilities are classified as?

Answer 12

Noncurrent

Question 13

All deferred tax liabilities are classified as?

Answer 13

Noncurrent

Question 14

Transaction that has commercial substance, what amount to report investment at?

Answer 14

fair value of the asset surrendered or received whichever is more evident

Question 15

employer’s obligation for post retirement benefits must be fully accrued?

Answer 15

by the date the employee is fully eligible for the benefits. begin when employee is hired through the eligiblity date (Vesting)

Question 16

How to recognize a bargain purchase in a “business acquisition”?

Answer 16

gain in earnings at the acquisition date. not asking about a lease here, need to read the question carefully

Question 17

Remeasurement method, how to treat b/s items?

Answer 17

use historical rates for nonmonetary items, like inventory. otherwise follow the general rule using the “current” spot rate

for i/s items, non b/s items use weighted average, for balance sheet related items use “historical rate”, like depr/PPE, COGS/Inventory, Amortization, bonds

Question 18

Translation method/ current rate method

Answer 18

For i/s items use “weighted average”

For b/s items use current/spot rate except for c/s and apic use historical rate

Question 19

lease depreciation, what term to depreciate over, longer or shorter, and when?

Answer 19

use the “lesser” if no bargain purchase, or lessee takes ownership

Question 20

Stock options, diluted EPS, what is the calc for additional c/s added to denominator?

Answer 20

cash received by corp / diluted “repurchase price”

shares x exercise = cash rec’d
then take cash received / “avg” market price