FAR Own Flashcards 6
What income tax rate do you use when computing the interim financial statements tax expense?
Income tax expense is estimated each quarter using the effective tax rate expected to apply to the entire year.
What is the realization concept?
Revenues and gains are realized when assets are exchanged for cash or claims to cash
Calculate the effective tax rate when not given
effective tax rate = income tax expense/pretax income
When do sick days and vacation days accrue?
Vacation pay is accrued if it vests or accumulates, sick pay is accrued only if it vests
Calculate the deferred tax expense
What is the justification for the method of determining periodic deferred tax expense?
=the CURRENT period temporary differences times the enacted future tax expense.
- recognition of the assets and liabilities
In an acquisition method business combination, how do you treat registration and issuance costs for common stock and other direct out of pocket costs (legal fees)?
The registration fees are a direct reduction to the value of the stock issued by reducing APIC. Direct out of pocket expenses are expensed immediately
How do you handle bond premium amortization and bond premium discount on the statement of cash flows?
Bond discount amortization is ADDED back to net income because it was originally subtracted to get to net income. Bond premium amortization is SUBTRACTED back to net income because it was originally added to get to net income
Separate fund financial statements are required in government accounting for?
Governmental and Proprietary funds in order to report additional and detailed information about the primary government
What determines the measurement focus of governmental funds?
Measurement focus for a governmental fund considers measurement of the flow of current financial resources (statement of financial position) as well as the resulting financial position (balance sheet)
What is a fund for purposes of governmental accounting?
A fund is a fiscal and accounting entity with self-balancing accounts recording cash and other financial resources together with all related liabilities and residual equity or balances, and changes therein.
How do you calculate compensated absence liability for purposes of the governmental wide financial statements?
Based on the pay or salary rates in effect as of the balance sheet date. The valuation is based on the number of hours employees are entitled to receive upon termination times the pay rate at the balance sheet date, at point in time.
What is the paramount objective of financial reporting for state and local governments?
ACCOUNTABILITY (Fiscal and operational): demonstrate the accountability of each organization for the stewardship of the resources in their care
What is a derived (non-exchange) tax revenue?
Taxes imposed on or derived from exchanged transactions such as commercial sales. example: Tax on hotel charges, taxes used to promote city tourism
What is imposed non-exchange revenue?
Taxes imposed on non-exchange transactions (Such as fines or property taxes)
What is a government mandated transaction?
A higher lever of government provides funds and mandates how a lower level of government can use them such as environmental cleanup
What is a voluntary non-exchange transaction?
Instances in which the government receives resources and does not provide equal value (Grants agreements) (basically contributions)
How do you record the issuance of a purchase order under modified accrual basis of accounting?
DR: Encumbrance
CR: Budgetary Control
What is the journal entry to record salaries and wages incurred during the month under modified accrual accounting?
DR: Expenditures - salaries and wages
CR: Salaries Payble
What is inter period equity and how is it demonstrated?
Inter period equity is demonstrated by a balanced budget and is a key part of accountability for governmental accounting. It helps users assess whether current revenues are great enough to pay for services that year
What is the journal entry when property taxes are levied and how does this effect the revenues control account?
DR: Property taxes receivable
CR: Allowance for uncollectible
CR: Revenue
The revenue control account is increased when property taxes are levied (recorded)
What type of account is estimated revenues and what is the journal entry associated with that?
Estimated revenues is a budgetary account and is debited when the budget is booked.
DR: Estimated Revenues
CR: Budgetary Control
What are expenditures?
Expenditures are decreases in net financial resources other than through inter-fund transfers. General Fixed Assets, such as land, building, and equipment, are purchased with general fund resources and should be recorded as expenditures in the general fund.
DR: Expenditures
CR: Vouchers Payable
What are encumbrances?
Record an encumbrance when resources are committed for future expenditures, not when goods and services are received
What compromises the two sources of governmental resources? (Revenue and other financing services)?
REVENUE: Taxes - income and sales tax - Taxes - property and real estate - Fines and penalties OFS: Debt proceeds (bonds and notes) Interfund transfers
