Final Review

Question 1

How are discontinued operations that occur at mid-year initially reported?

Answer 1

Included in net income and disclosed in the notes to the interim financial statements

Question 2

An entity, upon initial recognition of an asset retirement obligation, should not take the following action.

Answer 2

Capitalize the asset retirement cost at its undiscounted cash flow value.

Question 3

For the purposes of consolidating financial interests, a majority voting interest is deemed to be

Answer 3

Greater than 50% of the directly or indirectly owned outstanding voting shares of another entity

Question 4

A company recently moved to a new building. The old building is being actively marketed for sale, and the company expects to complete the sale in four months. The building will not

Answer 4

be valued at historical costs. The building be actively marketed for sale will be valued at the lower of its book value or net realizable value (fair value less the costs to sell).

Question 5

Long Co. invested in marketable securities. At year-end, fair-value changes in this investment were included in Long’s other comprehensive income. How would Long classify this investment?

Answer 5

Available-for-sale securities.

Unrealized gains and losses from marking available-for-sale securities to fair value at the balance sheet date are treated as other comprehensive income items and bypass the income statement.

Question 6

Which U.S. GAAP inventory costing method would a company that wishes to maximize profits in a period of rising prices use?

Answer 6

FIFO.

Under FIFO, the first costs inventoried are the first costs transferred to costs of goods sold. In a period of rising prices, FIFO results in the lowest cost of goods sold and the highest net income.

Question 7

What inventory method requires estimates of price-level changes for specific inventories?

Answer 7

Dollar-value LIFO

Question 8

A corporation issuing stock should charge retained earnings for the market value of the shares issued in an:

Answer 8

10% stock Dividend

Rule:

1. Charge retained earnings for market value of shares issued for stock dividends of less than 20-25%
2. Use par value if more than 20-25% stock dividend
3. If between 20-25% use either par or FMV.

Question 9

A governmental entity, consists of a number of separate funds. What are the three generic categories?

Answer 9

• Governmental Funds
• Proprietary Funds
• Fiduciary Funds

Question 10

Governmental Fund Types include:

Answer 10

• General Fund
• Special Revenue Fund
• Debt Service Fund
• Capital Projects Funds
• Permanent Fund

GRSPP

Question 11

Proprietary funds should be accounted for using the:

Answer 11

Full accrual basis of accounting

Economic resources measurement focus

Question 12

Proprietary Fund Types include:

Answer 12

• Internal Service
• Enterprise Funds

SE

Question 13

Fiduciary funds should be accounted for using the:

Answer 13

Full accrual basis of accounting

Economic resources measurement focus

Question 14

Fiduciary Fund Types include:

Answer 14

• Pension Trust Funds
• Agency Trust Funds
• Private Purpose Trust Funds
• Investment Trust Funds

PAPI

Question 15

What are special revenue funds?

Answer 15

Account for revenues from specific taxes or other earmarked sources that (by law) are restricted or committed to finance particular activities of government

Question 16

What are debt service funds?

Answer 16

Account for the accumulation of resources and the payment of interest and principal on all “general obligation debt,” other than that serviced by enterprise funds or by special assessments in another fund. Resources of the fund are restricted, committed, or assigned to debt service expenditures.

Question 17

What are capital Project funds?

Answer 17

Account for resources restricted, committed, or assigned for acquisition or construction of major capital assets by governmental unit, except those projects financed by an enterprise fund.

Question 18

What are permanent funds?

Answer 18

Used to report resources that are legally restricted to the extent that income, and not principal, may be used for purposes supporting the reporting government’s programs.

Question 19

For Pension Benefits, formula to calculate Interest Costs?

Answer 19

Beginning of period PBO x Discount Rate

Question 20

Calculate Expected Return on Plan Assets

Answer 20

Beginning FV of Plan Assets x Expected Rate of Return on Plan Assets

Question 21

Journal entry to record accrued Pension Expense

Answer 21

DR Net Pension Cost

CR Pension Benefit Liability

Question 22

Calculate the fund status for Pension costs

Answer 22

Fair Value of Plan Assets - PBO

Question 23

How are Pension costs that are overfunded recorded?

Answer 23

Reported in total as a non-current asset

Question 24

How are Pension costs that are underfunded recorded?

Answer 24

Reported as a current liability, non current liability, or both. Reported as a current liability if the benefit obligation payable within the next 12 months exceeds the fair value of the plans assets.

Question 25

Prior Service costs and pension losses decrease the funded status of the pension plan in..?
What is the journal entry?

Answer 25

Period incurred.

DR Other Comprehensive Income
CR Pension Benefit Asset/Liability

Question 26

When prior services costs, pension losses, and any remaining transaction obligation are amortized, they are

Answer 26

Reclassed out of AOCI and recognized as a component of Pension Expense.

DR Net Periodic Pension Costs
CR Other Comprehensive Income