General Review of Theory

Question 1

Financial liability Formula

Answer 1

Sales price- Fair Value

Question 2

Encumbrance account of a governmental unit is debited when?

Answer 2

Purchase order is approved

Question 3

Non-Capital Financing activities Include?

Answer 3

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

Question 4

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

Answer 4

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.

Question 5

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

Answer 5

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

Question 6

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?

Answer 6

The period in which the threatened litigation became know to management

Question 7

At what amount should partnerships record Land & Inventory assets?

Answer 7

Market Value!

Question 8

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

Answer 8

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

Question 9

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

Answer 9

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

Question 10

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

Answer 10

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

Question 11

2 required financial statements of a defined contribution retirement plan?

Answer 11

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

Question 12

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

Answer 12

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

Question 13

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

Answer 13

Remember

Question 14

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

Answer 14

Fair Value

Question 15

Discrete Presentation

Answer 15

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

Question 16

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

Answer 16

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

Question 17

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 ?

Answer 17

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

Question 18

GASB recommends the governmental fund budgets be prepared using the

Answer 18

Modified Accrual approach

Question 19

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

Answer 19

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

Question 20

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 ?

Answer 20

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

Question 21

Leasehold improvements should be amortized

Answer 21

Over the period of expected benefit

Question 22

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

Answer 22

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

Question 23

FORM 8-K

Answer 23

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

Question 24

Stockholders equity rule: If the reacquisition price is:

Answer 24

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

Question 25

The fair value of equipment is measured using the ?

Answer 25

Market Approach, Income Approach & Cost Approach You Can not use the Net Realizable value approach for impairment testing of equipment

Question 25

The fair value of equipment is measured using the ?

Answer 25

Market Approach, Income Approach & Cost Approach You Can not use the Net Realizable value approach for impairment testing of equipment

Question 26

Program Services are?

Answer 26

Activities for which the organization is chartered Example a Golf country club -Paying for assistant golf professionals -Upscale linens & restaurant supplies

Question 27

Support services are ?

Answer 27

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

Question 28

Amount to be capitalized for a finance lease is the?

Answer 28

Present value of minimum lease payment

Question 29

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

Answer 29

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

Question 30

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

Answer 30

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

Question 31

Non controlling interest under U.S GAAP? Calculation steps

Answer 31

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

Question 32

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

Answer 32

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

Question 33

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

Answer 33

1- Calculate the Depreciation expense 2- Calculate the accretion expense ( Accretion rate * ARO COST ) 3- ( Add Depreciation Expense + Accretion Expense )

Question 34

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

Answer 34

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

Question 35

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

Answer 35

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

Question 36

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?

Answer 36

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

Question 37

Types of agreement which represents a split-interest arrangement?

Answer 37

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

Question 38

Calculating unassigned fund balance?

Answer 38

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

Question 39

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

Answer 39

Operating Activities

Question 40

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

Answer 40

Financing activities

Question 41

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

Answer 41

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

Question 42

For NFPs, Marketable equity securities should be reported at?

Answer 42

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

Question 43

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

Answer 43

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

Question 44

Required financial statement for an investment trust fund is?

Answer 44

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

Question 45

Required financial statement for an investment trust fund is?

Answer 45

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

Question 46

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

Answer 46

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

Question 47

NFP SCF : Operating activities

Answer 47

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.

Question 48

NFP SCF- Investing activities

Answer 48

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

Question 49

NFP SCF- Financing Activities

Answer 49

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

Question 50

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

Answer 50

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

Question 51

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

Answer 51

Only report the percentage used and classify it as operating grant

Question 52

Debt service funds

Answer 52

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

Question 53

What do special revenue funds account for ?

Answer 53

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.

Question 54

Governmental fund financial statements revenue

Answer 54

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

Question 55

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

Answer 55

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

Question 56

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

Answer 56

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

Question 57

Government side financial statements focus the reader on?

Answer 57

1 operational accountability

Question 58

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

Answer 58

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

Question 59

How would the purchase of treasury stock affect the following?

Answer 59

Total Stockholder's equity = Decrease stockholders equity & the number of outstanding shares Earnings per share= Amount of earnings per share would increase

Question 60

Cost Approach Income Approach Market Approach Observable Inputs

Answer 60

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

Question 61

Lump sum purchase- Do not forget to allocate

Answer 61

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

Question 62

BASE MNEMONIC to be used for plugging amounts being asked

Answer 62

B- Beginning Balance Additions: Subtract: Ending Balance

Question 63

CPAS RIDE mnemonic

Answer 63

+ 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

Question 64

CANS Mnemonic

Answer 64

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

Question 65

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

Answer 65

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

Question 66

Income statement items are translated at the ?

Answer 66

Weighted Average exchange rate for the period under the translation method

Question 67

When a NFP capitalizes works of art & historical treasures

Answer 67

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

Question 68

Donated services should be booked as both ?

Answer 68

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.

Question 69

Inter-company sales is calculated as

Answer 69

Total Revenue- Consol Revenue

Question 70

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

Answer 70

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.

Question 71

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

Answer 71

Will debit budgetary control account

Question 72

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

Answer 72

Capitalize the Asset retirement cost at its undercounted cash flow value

Question 73

Income tax basis FS differ from those prepared under GAAP;

Answer 73

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

Question 74

Account for Goodwill?

Answer 74

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

Question 75

Compensation cost for restricted share plans

Answer 75

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

Question 76

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

Answer 76

Cash Receipts- Transfers Cash Payment- Expenditures

Question 77

Recognize a bargain purchase in a business acquisition

Answer 77

1- As a gain in earnings at the acquisition date

Question 78

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

Answer 78

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

Question 79

Acquisition cost where other relocations plans are listed or expected cost

Answer 79

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

Question 80

Other financing sources for a capital project fund infrastructure ?

Answer 80

1- Proceeds from debt issuance 2- Transfer from general fund Excluded Special assessment & fees -would be classified as revenues

Question 81

Dividends in arrears should be reported in the

Answer 81

Footnotes since they are not declared

Question 82

Most functional expense categories for a nongovernmental nfp organization?

Answer 82

Program Services & Support Services

Question 83

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

Answer 83

Any change in income tax rate for the specified year 3

Question 84

Effective tax rate should reflect anticipated

Answer 84

Foreign tax rates & available tax planning alternatives

Question 85

Budgetary control account of a governmental type fund increased when

Answer 85

PO is approved