FAR Final Review

Question 1

Current Ratio Formula

Answer 1

Current Assets / Current Liabilities

Question 2

Quick Ratio Formula

Answer 2

(Current Assets - Inventory - Prepaids) / Current Liabilities

Question 3

Debt to Equity Formula

Answer 3

Total Liabilities / Stockholder’s equity

Question 4

Diluted EPS

Answer 4

Income available to common shareholders + interest on conversion of bonds (net of tax) / weighted average number of common shares, assuming all dilutive securities are converted to common stock

Question 5

If a segment does not meet the 10% limit, it is not separately disclosed unless all reportable combined sales to unaffiliated customers is less than…

Answer 5

75% of the total company sales revenue made to outsiders.

Question 6

In reporting segments, if the 75% limit is not achieved…

Answer 6

Additional segments must be disclosed until 75% of external revenue is segmented.

Question 7

Prices are generally rising, thus:

LIFO =

FIFO =

Answer 7

LIFO = Lowest ending inventory / Lowest net income

FIFO = Highest ending inventory / Highest net income

Question 8

Weighted Average Cost Per Unit

Answer 8

Cost of goods available for sale / Number of units available for sale

Question 9

Price Index formula for Dollar Value LIFO

Answer 9

Ending Inventory at current year dollar / Ending inventory at base year dollar

Question 10

Sum of Year Digits

Answer 10

Remaining Life / Sum of the digits for the number of years of asset life

The denominator can also be calculated as n(n+1)/2

Question 11

Does the following belong on the Income Statement or Other Comprehensive Income Statement (OCI)

Trading Securities

Available for Sale (AFS) Securities

Answer 11

Trading Securities - IS

Available for Sale (AFS) Securities - OCI

Question 12

If the sum of the undiscounted future cash flows was greater than the current value, would you need to calculate the impairment loss? Less than current value?

Answer 12

If positive, no. If negative, yes.

Fair Value - Current Value

Question 13

Acronym for consolidating workpaper eliminating journal entries

CAR
IN
BIG

Answer 13

Common Stock
APIC - Subsidiary
RE - Subsidiary

Investment in subsidiary
Noncontrolling interest

Balance sheet adjusted to FV
Identifiable intangible asset FV
Goodwill

Question 14

Fair Value Adjustment for Goodwill

Answer 14

FV of subsidiary - FV of subsidiary’s net assets

Question 15

Acronym for common derivatives:

OFFS

Answer 15

Options, forward contracts, futures, swaps

Question 16

Which of the following about derivatives are correct:

I. A derivative must have 1 or more underlying or one or more notional amounts, require little or no net investment, and permit or require a net settlement

II. Derivatives are always reported on the balance sheet as assets at FV

III. If a derivative is speculative (no hedge designation), then changes in FV are reported in OCI

IV. If a derivative is used as a fair value hedge, then changes in fair value are reported in OCI

Answer 16

III Only

Question 17

How would a county calculate their budgetary control related to encumbrances?

Answer 17

Budgetary control [Purchase Order] - Order received = Budgetary control

Question 18

What is the proper reporting structure for government wide statement of net positions?
(Formula

Answer 18

(Assets + Deferred outflows of resources) - (Liabilities + Deferred inflows of resources) = Net position