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General Daily Review > General Review of Theory > Flashcards

General Review of Theory Flashcards

1
Q

Financial liability Formula

A

Sales price- Fair Value

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2
Q

Encumbrance account of a governmental unit is debited when?

A

Purchase order is approved

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3
Q

Non-Capital Financing activities Include?

A

1- Borrowing for non capital purposes
2- Cash Receipts from grants or subsidies
3- Property Taxes
4- Internal Transfers

Exp- Gary’s water & sewer funds transferred funds to subsidize on going operations of the Township’s General Fund

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4
Q

Discount resulting from the determination of a note payable’s present value should be reported on the balance as a ?

A

Direct reduction from the face amount of the note

Explan- The discount on a note payable should be reported on the balance sheet as a direct reduction from the face amount of the note.

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5
Q

Primary Difference between the purchase method of accounting for inventory & the consumption method of accounting for inventory is that the purchase Method?

A

Initially Records additions to inventory as expenditures.

Explan- Purchase Methods initially record additions to inventory as expenditures then establishes inventory balances & non-spendable fund balance amounts based on that physical counts & valuations at year end

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6
Q

What should not be considered to determine whether an accrual is appropriate prior to an issuance of a company’s financial statement about threatened litigation?

A

The period in which the threatened litigation became know to management

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7
Q

At what amount should partnerships record Land & Inventory assets?

A

Market Value!

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8
Q

When “Reasonably Possible” is used in a lawsuit that would result what on the financial statement?

A

We would disclose but not accrue
- If it said probable then we would accrue and disclose
-If it said Remote we would not disclose or accrue

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9
Q

What amount should be reported as appropriated retained earnings in a given year on the balance sheet?

A

The amount to be reported as appropriated retained earnings in a given year should be the specific amount “ Appropriated xxx amount of retained earnings”

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10
Q

Appropriate Journal entry prepared for government wide financial statements when recording a lease that transfers ownership?
In other words

A

Debit- Capital Asset
Credit- Capital outlay Expenditure
Debit- Other Financing Sources
Credit- Lease Liability

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11
Q

2 required financial statements of a defined contribution retirement plan?

A

Statement of net assets available for benefits of the plan
Statement of changes in net assets available for benefits

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12
Q

Cumulative effect of a change in accounting estimate should be shown separately?

A

NO, It should not be recorded separately on any financial statement as it is handled prospectively

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13
Q

Do not forget to deduct the first annual lease payment when calculating the lease liability to date

A

Remember

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14
Q

In the financial statements employee benefit pension plans and trusts, are reported at their

A

Fair Value

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15
Q

Discrete Presentation

A

SELF TEST- Meets the test of legally separate entity. However, if it is financially dependent upon another institution then it should be reported as the following

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16
Q

GASB 34 RULE : Government wide financial statements prepared in accordance with the provisions will include:

A

1- Governmental Wide financial statements prepared using accrual basis accounting
2- Fund Financial Statements,
3- Notes to the financial statements
4- Required supplementary information that include a letter titled “ management’s discussion & analysis
5- Budget versus actual comparisons including display of the originally adopted budget and the changes that resulted in the final amendment

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17
Q

Government: when anticipation notes are issued at face value and and the proceeds are placed into its Capital project fund. What account should be credited if they are unable to refinance ?

2- what if they are able to finance ?

A

1- Bond anticipation notes payable
2- Other financing sources control

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18
Q

GASB recommends the governmental fund budgets be prepared using the

A

Modified Accrual approach

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19
Q

Equity portfolio being valued in an organizations year end financial statements should be valued when?

A

They should be values using their fair value at date of the financial statements.

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20
Q

Debt service transactions of a special assessment issue for the which the government is not obligated in any any manner should be reported in the ?

A

Custodial fund, rather than a debt service fund to reflect that the government duties are limited to collecting and remitting funds

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21
Q

Leasehold improvements should be amortized

A

Over the period of expected benefit

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22
Q

Fund Balances of governmental funds reconciles to the net position of the governmental activities column of the government-wide financial statement using the ?

A

CANS MNEMONIC
C-Capital Asset
A-Accumulated Depreciation ( deduct)
N- Non current liabilities ( Deduct )
R- Revenue( for any sales tax levied)
S- Internal service fund

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23
Q

FORM 8-K

A

Is not a periodic sec form filing as it reports major corporate events

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24
Q

Stockholders equity rule: If the reacquisition price is:

A

A) Less than original issue price, the “gain” is credited to APIC
B) More than original issue price, the “loss” is debited to retain earnings

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25
Q

The fair value of equipment is measured using the ?

A

Market Approach, Income Approach & Cost Approach

You Can not use the Net Realizable value approach for impairment testing of equipment

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25
Q

The fair value of equipment is measured using the ?

A

Market Approach, Income Approach & Cost Approach

You Can not use the Net Realizable value approach for impairment testing of equipment

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26
Q

Program Services are?

A

Activities for which the organization is chartered

Example a Golf country club
-Paying for assistant golf professionals
-Upscale linens & restaurant supplies

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27
Q

Support services are ?

A

Include everything not classified as program services. Including fund raising, administration & membership development.
Example a Golf country club
-Membership development for staff
- Promotional brochures

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28
Q

Amount to be capitalized for a finance lease is the?

A

Present value of minimum lease payment

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29
Q

If two organizations are not financially interrelated, How would a trust recognize asset donation with restriction?

A

Would be recognized as an asset with donor restrictions ( a beneficial interest) and as a contribution with donor restrictions

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30
Q

In calculation goodwill for a consolidated Financial Statement under the acquisition method

A

1- Find the Fair value of the acquisition
( Purchase Price / percentage you acquired )
2- BV of assets ( Assets- Liabilities)

3= Fair value of acquisition - BV

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31
Q

Non controlling interest under U.S GAAP? Calculation steps

A

1- Non-controlling interest = FV Of acquisition * non-controlling interest %
2- NCI % * Acquisition comp Net income
3- NCI % * Acquisition Comp Dividend

4= Non controlling interest
+ NCI Net income portion
- NCI Dividend
= Ending non-controlling interest

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32
Q

When x amount of deferred tax asset will not be realized in the future,
Under US GAAP we should?

A

Increase this period’s income tax expense by the x amount

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33
Q

In calculation of the retirement obligation expense where an accretion rate is present

A

1- Calculate the Depreciation expense
2- Calculate the accretion expense
( Accretion rate * ARO COST )

3- ( Add Depreciation Expense + Accretion Expense )

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34
Q

When recording budgetary accounts in its governmental funds at the beginning of the fiscal year, a municipal government would?

A

Credit Appropriations account

JE - DR- Estimated REV CONTROL
DR- Budgetary Control( if deficit)
CR- Appropriations control
CR- Budgetary Control ( if surplus )

35
Q

Subsequent events that provide information about conditions that occurred after the balance sheet date & did not exist at the balance sheet date are

A

Non recognized subsequent events. This type of subsequent event is not recognized in the finance statements but it is disclosed in the notes to the financial statements

36
Q

When an investment in debt securities exceeds its amortized cost, How should each of the following debt securities be reported at the end fo the year?

A

Classified as Held to maturity - Amortized Cost
Classified as Available for sale - Fair Value

37
Q

Types of agreement which represents a split-interest arrangement?

A

A charitable remainder trust

Explanation- Split Interest agreements represent donor contributions of trusts or other arrangements under which the NFP organization receives benefits that are shared with other beneficiaries

38
Q

Calculating unassigned fund balance?

A

Difference between assets and liabilities minus any fund balance subject to constraints

Example General fund has total assets of 100, including inventory of 15. General fund liabilities totaled $65.
Unassigned fund balance = 100-65= 35
35-15 (constraint example inventory )= 20

39
Q

In a NFP SCF, Cash donations without donor restriction increases ?

A

Operating Activities

40
Q

In NFP SCF, Cash contribution with donor restrictions with specific requirements relative to the acquisition of property increases?

A

Financing activities

41
Q

What characteristic of service efforts & accomplishments is the most difficult to report for a governmental entity?

A

Relevance
Explain- Relevance means that the information must bear logical relationship with the needs for its purpose

42
Q

For NFPs, Marketable equity securities should be reported at?

A

Fair value with gains & losses reported in the statement of activities

43
Q

Fund which accounts for the accumulation of resources for and the payment of general long-term debt principal and interest ?

A

Debt service fund

Example, a special tax levy exclusively restricted for debt repayment would most appropriately be accounted for in a debt service fund

44
Q

Required financial statement for an investment trust fund is?

A

1- A statement of fiduciary net position
(balance sheet)
2- A statement of changes in fiduciary net position ( income statement)

Remember investment trust fund falls under fiduciary so it would be appropriate to have the name in their funds statements

45
Q

Required financial statement for an investment trust fund is?

A

1- A statement of fiduciary net position
(balance sheet)
2- A statement of changes in fiduciary net position ( income statement)

Remember investment trust fund falls under fiduciary so it would be appropriate to have the name in their funds statements

46
Q

When funds are designated by the internal board in an organization, they are?

A

Not reported at donor with restrictions…. They are reported as net assets without donor restriction

47
Q

NFP SCF : Operating activities

A

1- Includes applicable agency transaction
2- Include receipts of resources without donor restriction designated by the governing body to be used for long-lived assets.

48
Q

NFP SCF- Investing activities

A

1- Include proceeds from the sale of works of art or purchases of works of art.
2- Include investment in equipment
3- Include proceeds from the sale of assets that were received in prior periods and whose sale proceeds were donor -restricted to investment in equipment

49
Q

NFP SCF- Financing Activities

A

1- Includes cash received with donor imposed restrictions limiting its use to purchases of long term assets or annuity agreements.
- Disbursements of these donor-restricted contributions for either investments or the purpose for which they were intended are classified as investing activities.

2- Other type Financing activities
- Include receipts and disbursements associated with borrowing & receipts of dividends and interest that is donor-restricted to reinvestment

50
Q

Prescribed format for the presentation of financial position of a governmental fund adheres to ?

A

Assets & deferred outflows of resources = Liabilities & deferred inflows of resources plus fund balance

51
Q

When reporting a grant, and a specific percentage is used out of the total amount disbursed

A

Only report the percentage used and classify it as operating grant

52
Q

Debt service funds

A

Debt service funds would not display any activity under named accounts such as
1) Debt proceeds
2) Principal Expenditures
3) Interest Revenue
4) Tourist Development Revenue

53
Q

What do special revenue funds account for ?

A

Special revenue funds account for the proceeds of specific revenue sources (other than debt service or for major capital projects ) that are legally restricted or committed to expenditures for specific purposes.

54
Q

Governmental fund financial statements revenue

A

Are recognized when measurable and available. Revenues are accrued when earned. But also collected (generally) within 60 days of year end for recognition in governmental fund financial statements

55
Q

When special assessment debt is to be repaid from general resources of the government. The debt should be recorded as ? And where?

A

Long term liabilities in the governmental activities column of the government wide financial statement

56
Q

Value of services rendered are only recognized SOMe. Services must meet the three criteria

A

S- specialized skill that is
O- otherwise needed that can be
M-measured
Easily

57
Q

Government side financial statements focus the reader on?

A

1 operational accountability

58
Q

All of the following are associated cost of exit & disposal activities

A

Cost to relocate employees, Benefits related to involuntary employee termination, costs to terminate contract that is not a direct finance lease.

Cost not associated to exit & disposal activities:
Cost to associated with retiring a fixed asset is not considered an exit or disposal cost

59
Q

How would the purchase of treasury stock affect the following?

A

Total Stockholder’s equity = Decrease stockholders equity & the number of outstanding shares

Earnings per share= Amount of earnings per share would increase

60
Q

Cost Approach
Income Approach
Market Approach
Observable Inputs

A

Cost Approach- Uses current replacement cost to measure fair value

Income Approach- Converts future amounts, including cash flows or earnings to a single discounted amount to measure fair value

Market Approach- Uses prices & other relevant information from identical or comparable market transactions to measure fair value

Observable inputs- Not a fair value measurement approach. Inputs other than quoted market values that directly or indirectly observable for the asset or liability

61
Q

Lump sum purchase- Do not forget to allocate

A

(1) FV of specific asset / Total assets fair value * Lump sum- Purchase price

62
Q

BASE MNEMONIC to be used for plugging amounts being asked

A

B- Beginning Balance
Additions:
Subtract:
Ending Balance

63
Q

CPAS RIDE mnemonic

A

+ C- Capital Outlay
+ P- Principal Payments
- A- - (Assets disposals)
- S- - ( Sources) ( debt proceeds)
+ R- + Revenue
- I- - (Interest Expense) ( accrued)
- D- - ( Depreciation Expense)
+ I- + Internal Service Fund net revenue
= Change in net position of governmental activities

64
Q

CANS Mnemonic

A

C- + Capital Asset
A- - ( Accumulated Depreciation)
N- - ( Non-current liabilities ( existing)
- Reduce deferred inflows
- Accrued interest payable
S - + Internal Service Fund net position
= Net position from governmental activities

65
Q

What would not have a separate earnings per share calculation & disclosure under U.S GAAP?

A

1- Extraordinary items of the period
2- Unrealized gains/losses on available for sale securities

66
Q

Income statement items are translated at the ?

A

Weighted Average exchange rate for the period under the translation method

67
Q

When a NFP capitalizes works of art & historical treasures

A

They will not recognize the contributed photos as assets and contribution revenue since they are subject to major uncertainties with regard to their value & have no alternative use

68
Q

Donated services should be booked as both ?

A

1- An expense
2- contribution revenue at fair value
As long as the services create/enhance a non-financial asset or require specialized skills that the provider possesses that would other wise have to be purchased.

69
Q

Inter-company sales is calculated as

A

Total Revenue- Consol Revenue

70
Q

If operating income includes no foreign exchange transaction gain or loss, then the transaction could of

A

Been denominated in U.S Dollars

Explanation- Foreign exchange transactions gains and losses are generally included in determining net income for the period in which exchange rates change.

71
Q

Upon receipt of an invoice previously encumbered estimated cost of supplies, a special revenue fund:

A

Will debit budgetary control account

72
Q

Upon initial recognition of an ARO, an entity should not take which of the following actions?

A

Capitalize the Asset retirement cost at its undercounted cash flow value

73
Q

Income tax basis FS differ from those prepared under GAAP;

A

Because they recognize certain revenues & expenses in different reporting periods.

74
Q

Account for Goodwill?

A

Fair value of the reporting unit is less than the carrying amount and report an impairment loss on goodwill in the IS.

75
Q

Compensation cost for restricted share plans

A

(Market Price of the share on date of grant * Number of restricted shares awarded)/ Vest period

76
Q

In debt service fund with a cash receipts and cash payments reported as

A

Cash Receipts- Transfers
Cash Payment- Expenditures

77
Q

Recognize a bargain purchase in a business acquisition

A

1- As a gain in earnings at the acquisition date

78
Q

Compensation for the condemnation exceeded the lands carrying amount. Net effect on the carrying amount of the forestland reported in the balance sheet?

A

Amount is increased by the excess of the replacement cost over the condemned land carrying amount

79
Q

Acquisition cost where other relocations plans are listed or expected cost

A

Acquisition cost of stock does not include any measure of the relocation costs associated with company headquarters

80
Q

Other financing sources for a capital project fund infrastructure ?

A

1- Proceeds from debt issuance
2- Transfer from general fund

Excluded
Special assessment & fees -would be classified as revenues

81
Q

Dividends in arrears should be reported in the

A

Footnotes since they are not declared

82
Q

Most functional expense categories for a nongovernmental nfp organization?

A

Program Services & Support Services

83
Q

What would affect current year income tax expense for yr 3?

A

Any change in income tax rate for the specified year 3

84
Q

Effective tax rate should reflect anticipated

A

Foreign tax rates & available tax planning alternatives

85
Q

Budgetary control account of a governmental type fund increased when

A

PO is approved

General Daily Review (2 decks)

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