General Review Flashcards
Under U.S. GAAP how should a company treat the impairment of goodwill with respect to other asset groups?
The other asset groups should be tested for impairment FIRST before goodwill is tested.
How are board-designated funds classified in NFP accounting?
As contributions without donor restrictions.
How is the cumulative effect of a change in accounting principle determined?
As of the beginning of the year of change in comparative financial statements.
How should stock compensation costs be recognized?
As expense over the service period.
When are financial statements considered “issued”?
When the statements are in form and format that comply with GAAP and that the statements have been widely distributed to financial statement users.
How should an AFS debt security that is determined to be impaired because of an other than temporary decline in fair value below cost be accounted for?
The asset must be written down to the lower fair value by recording a credit loss that is recognized on the income statement.
Do undervalued asset amortization affect an investor’s investment income under the equity method?
YES
Calculate the current portion of income tax expense.
Taxable income multiplied by applicable tax rate.
A company’s net periodic pension cost is reported where?
The company’s income statement NOT Statement of Changes in Net Assets Available for Benefits.
How should depreciation expense be recorded for a nongovernmental not-for-profit organization?
It should be included as a decrease in net assets without donor restrictions. This follows GAAP
How is maintaining a donor list categorized in functional expenses?
As a fundraising expense.
What is the criteria for determining a major fund.
Aggregate revenues/expenditures AND aggregate assets or liabilities (10 percent, and 5 percent tests).
Are sales taxes collected by merchants in a city accrued as revenue in the general fund? Why?
No, because sales tax does not fit the “measurable” requirement. They would be recognized when received.
How should a capital lease for equipment be reported in a government-wide statement of net assets?
General capital asset
How are stock dividends treated in calculated basic earnings per share?
As if they happened at the beginning of the year!!!
Is inventory included in current ratio?
YES! This is a current asset.
If a problem gives you beginning and ending allowance accounts, and a company uses the aging accounts receivable to value allowance, which amount should you use?
Use the aging of A/R. The beginning and ending balances are distractors.
What amount should be used as a contingent liability for a note discounted with recourse?
The maturity value (entire note amount) since it is with recourse.
What is the difference between asset disposals in governmental fund financial statements and government-wide financial statements?
Book value of property sold. Proceeds less gain (Proceeds less (BV - Accum. depr))
How is a deferred tax liability treated on the statement of cash flows? Operating or indirect method?
Operating cash inflow for both operating and indirect methods.
In consolidation accounting, where is the non-controlling interest portion recognized in the balance sheet?
The equity section. NOT assets and liabilities.
How should shipping costs incurred by a consignor on transfer of goods to a consignee be treated?
Inventory cost to CONSIGNOR
How should an SEC filer report its subsequent event evaluation
No disclosure is necessary since they are an SEC filer.
If hail damage is a common occurrence (frequent), how should it be reported in financial statements?
Hail damage loss recorded in continuing ops, with NO separate disclosure.
If ending inventory is understated, what affect does that have on retained earnings, if any?
Retained earnings is understated, because it implies that COGS would be overstated, thus reducing net income and subsequently retained earnings.
How are bond issuance costs treated in respect to the net carrying amount of bond liability?
Bond issuance costs are deducted from the from the face amount of bond after premium/discount has been accounted for.
What type of bond issuance costs are amortized over the outstanding term of bonds?
Promotion costs, engraving and printing, underwriter’s commissions.
If a bond is issued with detachable warrants, how is shareholder’s equity increased?
Number of warrants issued times the market value of warrants
Where should basis of consolidation be reported in the financial statements?
Summary of significant accounting policies
A collection of a previously written-off accounts receivable would have what affect?
Increase to allowance account
