main Flashcards
(409 cards)
1
Q
CASH INCOME TO ACCRUAL INCOME
A
SAME ASSET, FLIP LIA
2
Q
realized gross profit
A
(cash received - interest portion ) * gross profit %
3
Q
where does NCI appear on FS
A
in the owner equity section
4
Q
book value per share
A
common equity / # of common share ousta ;;;; if preff is non-cumu, the equity of preff is the liquidation value, subtract this from total equity to get common stock equity; if preff is cumu, liquidation value of pref is its par value plus premium plus div in arear OR liquidation value + div in arrear
5
Q
asset turnover ratio
A
Net sales ÷ Total assets
6
Q
profit margin %
A
NI / sales
7
Q
% return on asset
A
net income / avg total asset
8
Q
transfer from Available for sale to held to maturiry
A
amount recognized in OCI are not reversed. they are amortized into earnings same way as premium or discount
9
Q
transfer from held to maturity to available for sale
A
Any unrealized gains or losses that were previously unrecognized are recognized in OCI
10
Q
if ratio is less than 1, wut cause the increase in the ratio
A
transaction that result increase in denominator and numerator will improve da ratio
11
Q
remeasurement ( sub operate in Local curr, but functional curr is US), wut rate to use?
A
non monetary items BS items and related rev, exp (COGS, depreciation, amortization) use HISTORICAL rate - Round Neo Refused Eyeless HamMonetary and curr items (Allow, rent) use curr rate
12
Q
fair value hedge
A
This hedge is a foreign currency fair value hedge because it hedges a foreign currency exposure of an unrecognized firm commitment whose cash flows are fixed
13
Q
average number of days in the operating cycle
A
Average days’ sales in inventories + Average days’ sales in accounts receivable
14
Q
effective portion of a cash flow hedge of a forecasted transaction
A
is included in accumulated OCI (an equity account to which periodic OCI is closed) until periods in which the forecasted transaction affects earnings.
15
Q
intrinsic value of an option
A
The intrinsic value of an option is the difference between the market value of the underlying and the exercise price of the option. The amount paid for the option is not relevant
16
Q
A gain on a foreign currency receivable and a loss on a foreign currency payable resullt when ?
A
A gain on a foreign currency receivable and a loss on a foreign currency payable result when the dollar weakens.
17
Q
translation , wut rate to use ?
A
Assets and liabilities are translated at the exchange rate at the balance sheet daterevenues, expenses, gains, and losses are usually translated at average rates for the periodSHE is historical rateTasty Cops Ate Hooks
18
Q
expressing all financial statement items as a percentage of base-year amounts is called
A
horizontal common size
19
Q
price to earning ratio
A
the market price divided by basic earnings per share.
20
Q
cash paid to interest expense ?
A
same as indirect CF , flip asset, same lia
21
Q
AR turnover
A
net credit sale (after subtract allowance) / avg AR
22
Q
foward contract
A
use da future rate at transaction date vs future rate at year end
23
Q
avg day sale in inventory
A
365 / inventory turnover
24
Q
time interest earned ratio
A
earning b4 interest and tax / interest expense
25
cash flow hedge ( effective and ineffective)
effective, recog in OCI first, then reclass to earning when done,ineffective, recog in earning immediately
26
Equal increases in the numerator and denominator of a fraction that exceeds one
decrease da fraction
27
cash flow hedge
a hedge of the foreign currency exposure of a forecasted transaction
28
A receivable or payable stated in a foreign currency
should be recorded at the current exchange rate and then adjusted to the current exchange rate at each balance sheet date
29
a gain or loss on a foreign currency transaction that hedges a net investment in a foreign entity
the translation loss and the transaction gain should be reported in accumulated other comprehensive income.
30
Journal entry to record subscription for no par common stock with stated value
Dr. Cr.Stock subscriptions receivable XXX Common stock subscribed (for shares subscribed x stated value per share) XX Additional paid-in capital X
31
entry to eliminate valuation allowance for tax
Valuation allowance 1,200 Tax expense/benefit - deferred 1,200
32
purchase 3 month treasury bill, wut is it on CF?
it is cash equivalent and has no effect on CF
33
collection of overdue AR from a customer, CF?
operating
34
proceeds from a note payable
financing
35
collection from a note receivvable from a related party
investing cf
36
a monthly payment to finance the note
are repayment of debt obligation, financing CF
37
bond redemption amount , CF ?
financing
38
amortization of bond discount entry , and effect on CF
dr interest exp, cr dis its a noncash item that reduce incomeadd back to operating CFif its a premium, subtracct it
39
collection from customer equal? on CF
sale minus increase in gross AR , ( flip asset, same lia , same as accrual to cash NI)
40
interest expense to cash paid for interest ?
interest exp plus increase discount amortization , let say dis count amortization increase by 500, add this ; unamortize discount will decreae by 500, subtract thisinterest exp minus decrease in unamortize discount
41
cash paid for selling exp ?
same asset, flip lia, selling expense - depreciation allocated to selling expense
42
cash paid to supplier ?
since cash paid for interest to interest = same as indirect = flip asset, same liathis one is = same asset, flip lia
43
increase in Investment in Videogold, Inc., stock, all of which was acquired in the previous year, carried on the equity basis , CF ?
subtract from operating
44
Accumulated depreciation, caused by major repair to projection equipment
should not be expense as it benefit more than one period, non expense , no effect on CF
45
premium on bond payable ? CF?
subtract from operating CF , if there is a decrease on premium, u add it back
46
Deferred income tax liability , CF?
treat it just like lia , on operating
47
If an entity uses the indirect method to present its statement of cash flows, wut to report in supplemental disclosure ?
disclose interest and income tax paid
48
nonmonetary exchanges be recorded based on fair value wen
if fair value is determinable, unless the exchange transaction lacks commercial substanceThe nonmonetary exchange of assets is measured at the fair value of the new truck received because the fair value of the truck given up is not available. The gain or loss on the exchange is the difference between the fair value of the truck received of $5,000 and the total carrying amount of the assets given up of $5,000 [($10,000 – $7,000) carrying amount of old truck + $2,000 cash paid]. Accordingly, no gain or loss is recognized on this nonmonetary exchange.
49
depreciation expense in CF when knowing AD?
ending AD - AD sold + begin AD = depreAD sold = cost - carry value
50
payments to acquire debt instruments of other entities (other than cash equivalents and debt instruments acquired specifically for resale)
investing
51
not be reported in disclosures related to the statement of cash flows is
item that does not affect recognized assets or liabilities ;;;;;;;;;;;;A stock dividend declared during the year.
52
conversion of debt to equity . CF ?
disclosure
53
Nontrade notes payable increase, CF ?
not an operating item
54
find COGS in CF ?
get COGS + same asset, flip lia , in inventory and trade APsince cash paid to interest is flip asset, same lia
55
inventory loss recognize in interim
ASB ASC 270-10-45-6 provides that inventory losses from market declines should be recognized in the interim period in which the decline occurs. If these losses are recovered in a later period a gain should be recognized in that period but these gains “should not exceed previously recognized losses.”In regard to the situation described in the question, the dollar amount of inventory would decrease by the amount of price decline in the first quarter and increase by the same amount in the third quarter.
56
available for sale, cost 50k, sold for 48k, previous unrealized loss of 5k in OCI, final effect?
2k loss in net income, 5k reversal out of OCI , will be gain of 5k in OCI, comprehensive income will be 3k gain
57
how to report note receivable that are customary trade term?
report them at face amount
58
period to amortize the intangible asset (copy right)
the useful life of an intangible as the period over which the asset is expected to contribute to future cash flows
59
defer gross profit
#NAME?
60
received proceeds from insurance from death of officer, wut amount to recog?
the proceeds minus cash surrender value
61
how to recog legal and consultant cost when issuing stock?
expense
62
how to recog registration and issuance cost when issuing stocK?
debit AIPC
63
how to find G/L when u settle ARO?
dont compare the inital ARO vs the settlementgotta find the Expected cash flow adjusted for inflation and market risk , then compare this to settlement to find g/l
64
when u see incentive stock option on a dilutive EPS question, wut to do ?
check to see if excercise price > market price, IGNOREif excercise price < market price, add the diff to EPS denominator, diff is calculated based on the ( # stock * excercise price) / market price,if Jan-Mar = 15k, April-May 14k, weighted = 15*3/12 , 14*2/12
65
adjuting entry for when there is a gain for future contract
Dr option , Cr unrealized gain
66
both trade stuffs, have commercial sub, received cash as well, wut to do ?
The cash received by Vey is taken into consideration in determining the fair value of the equipment surrendered, but is not taken into consideration in determining the fair value of the equipment received
67
Noting that interest rates are declining, Blue Township opted to retire an existing, callable general obligation bond and replace it with a new bond issue with lower interest. A $4,000,000, 5% bond originally issued at par value with 15 years remaining was retired for $4,100,000. A new $4,000,000, 2%, 30-year bond was issued. The new bond issue was sold at 104 and printing, legal, and administrative costs for the transactions amounted to $5,000. On the government-wide financial statements, this refunding would result in:
This “current” refunding used the proceeds of the new debt to repay the old debt in its entirety. For current refundings reported in the government-wide statements, GASB D20.108 states that the difference between the reacquisition price of the old debt and the net carrying amount of the new be amortized over the shorter of the remaining life of the old debt or the life of the new debt, and debt issue costs be deferred. Cash flows for the refunding included outflows of $100,000 for call premium and $5,000 for issuance costs to be amortized over the remaining life of the old bonds, and a $160,000 premium on the new bonds to be amortized for the life of the new bonds. Therefore, for the 15-year remaining life of the retired bond, the difference between the reacquisition price of the old debt and the carrying value of the new debt is being amortized as a component of interest.
68
Noting that interest rates are declining, Blue Township opted to retire an existing, callable general obligation bond and replace it with a new bond issue with lower interest. A $4,000,000, 5% bond originally issued at par value with 15 years remaining was retired for $4,100,000. A new $4,000,000, 2%, 30-year bond was issued. The new bond issue was sold at 104 and printing, legal, and administrative costs for the transactions amounted to $5,000. On the government-wide financial statements, this refunding would result in
$4,000,000 liability due at maturity in 30 years plus a $105,000 contra liability to be amortized as a component of interest over 15 years, and a $160,000 additional liability to be amortized as a component of interest over 30 years.
69
how to recog unconditional promise for NFP ?
record unconditional promises to give as contributions revenue when the promise is made at net realizable value, or net of any allowance for uncollectible pledgesbasically recog it in period received at fair value
70
wut increase net asset of a NFP ?
Investments are initially recorded at fair value if received as a contribution or gift. Unrealized gains on investments carried at fair value also increase net assets. As the investments themselves were an unrestricted gift, the unrealized gain would increase net assets without donor restrictions. Investment income includes dividends that increase net assets without donor restrictions unless there are donor stipulations.
71
Which of the following disclosures should prospective financial statements include
accounting policies + significant assumptions
72
pledge AR for a loan to A
A will retain control of receivable and continue to collect the receivable and applies the collection to the loan balance
73
how to find the cash proceed when issued the bond ?
present value of face @ effective rate + present value of ordinary annuity of payment(stated) @ effective rate
74
bond with stated rate less than effective rate, cash payment vs interest expense ?
cash will be less than interest expenseInterest expense is Carrying amount × Effective interest rate.Cash payment amount is Face amount × Stated interest rate.In this example, the stated rate is less than the effective rate, so the cash payment is less than the interest expense.
75
payroll tax lia vs pay roll tax epx
payroll tax lia = withheld amt + employee FICA + employer FICApayroll tax exp = just the employer FICA
76
compensation stock option plan, process of recog
the additional paid-in capital—stock options account should be reduced at the excercise daterecog exp over service period, Dr compen exp, Cr APIC stock option (increase)when stock excercise, Dr cash (amt employee pay), Dr APIC stock option (reduce it), Cr CS par, CR APIC plug
77
a large accelerated filer must file its Form 10-Q with the U.S. Securities and Exchange Commission within how many days
40 days
78
how G/L from discontinue ops reported ? wut about in interim period ?
The gain or loss from the disposal should be reported separately net of income tax effectssame thing for interrim period, not at year end
79
what account does a CITY close at year end ?
expenditure cuzz its a nominal (operating statement) account used in periodically measuring outflows of financial resourceBS accounts do not close at year end
80
government fund balance sheet include wut ?
a separate column for each major governmental fund and a column with aggregated information for all other (nonmajor) governmental funds as well as a total column for all governmental funds.
81
basic financial statement of governmetns
government-wide statement of net position,government-wide statement of activities,governmental funds balance sheet,governmental funds statement of revenues, expenditures, and change in fund balances,proprietary funds statement of net position,proprietary funds statement of revenues, expenses, and changes in fund net position,proprietary funds statement of cash flows,fiduciary funds statement of net position,fiduciary funds statement of changes in fiduciary net position, andnotes to financial statements.
82
lifo retail method
adjust ending retail inventory back to normal price = divided by 1.10 if 10% price increaseget the ( retail inventory layer from above, *cost retail ratio*1.10 ) + beginning cost inventory
83
what 10Q include
The Form 10-Q contains financial statements, a discussion from the management, and a list of “material events” that have occurred with the company.
84
cash, cash equivalent? cash in bond sinking fund, posted date check, petty cash?
bond sinking fund = not cashposted date check = not cash, its receivablepetty cash = cash
85
what is factoring receivable ?
Factoring arrangements are a means of discounting accounts receivable on a nonrecourse, notification basis. Accounts receivable are sold outright, usually to a transferee (the factor) that assumes the full risk of collection, without recourse to the transferor in the event of a loss. Debtors are directed to send payments to the transferee. Red Co. will have its cash immediately upon the sale, whereas the other methods may accelerate the receipt of cash but will not result in a great deal of cash being received immediately.
86
what is depreciable base /
Depreciable base is Purchase price - Salvage value:
87
When a company is bought, ? goodwill?
purchase cost of stock - Less 30% of identifiable assets (30% of $600,000)
88
requires that debt issuance costs be presented in the
this is debt issue cost, not equity issuance cost : presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts; the recognition and measurement guidance for debt issuance costs were not affected by the amendments. Amortization of debt issuance costs also shall be reported as interest expense; issue costs will no longer be reported in the balance sheet as deferred charges.
89
right dividend distribution, then issuer redempted them since no right has been excercise, entry ? effect
initial : memo onlyredem = Dr RE , Cr Cash ;;; reduce SHE
90
owns 2,000 shares of Arlo, Inc.'s, 20,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock and 1,000 shares (2%) of Arlo's common stock, Declared and paid 240k for preff in year 2, what is div income ?
since this is culumlative: year 1 = 120 year 2 = 120(120+120)*0.1 = 24k
91
net periodic pension cost
service + interst cost - Expected return on plan assets + Amortization of prior service costs +- Amortization of unrecognized (gain) loss + Amortization of unrecognized transition obligation
92
$5,000,000 face value 10-year convertible bonds outstanding on January 1. The bonds were issued four years ago at a discount that is being amortized in the amount of $20,000 per year. The stated rate of interest on the bonds is 9%, and the bonds were issued to yield 10%. Each $1,000 bond is convertible into 20 shares of Chan's common stock;;;; find interest exp (net of tax) for DEPS numberator
Interest: Cash ($5,000,000 x .09) $450,000 Discount amortization +20,000------------------------------------------------------ Tax ($470,000 x .25) (117,500)
93
option contract to purchase share at specific price + option cost, but did not excercise it until next year, effect at Dec 31?
still recog G/L in earning# share * intial price + option costless # share * end of yer price + option cost
94
reversal of impairment loss of intangible asset, goodwill and long-lived asset?
is prohibitedlong lived asset held for sale, can be restoredA gain should be recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized for a write-down to fair value less cost to sell.
95
On January 1, 20X1, Bay Co. acquired a land lease for a 21-year period with no option to renew. The lease required Bay to construct a building in lieu of rent. The building, completed on January 1, 20X2, at a cost of $840,000, will be depreciated using the straight-line method. At the end of the lease, the building's estimated market value will be $420,000, carry value of building at yr 2?
building is classified as leashold improvement, will be depreciate less of lease term OR life ,840/20 - 840 = 798 CARRY AMOUNT AT YR 2
96
Technological feasibility is established when
completion of a detailed program design or completion of a working model.
97
reconcile govern fund to govern WIDE?
ADD Capital asset purchases and payments of long-term debt principalADD internal service fund assets and liabilities SUBTRACT book value of capital assets sold
98
contribution revenue ?
restricted reg when promised or receivedconditional promise r not reve until conditions r met (upon completion of a building, 70% complete)exchange transaction ( $1500 received for subscriptions to a monthly child care magazine with a fair market value to subscribers of $1,000) , contri rev is reduced by fair value of consideration , only 500 is contri rev
99
conversion of debt to equity , CF?
disclosed as supplemental information
100
Merchandise out on consignment at sales price, including 40% markup on selling price , wut inventory account should be reduced ?
reduce this extra 40% mark up , get the # * 0.4
101
investment in equity securities are recog on bs at ? unrelized G/L recog in ?
at fair value at BSunrealized G/L recog in earnings
102
equity method, stock dividend vs cash dividend ?
cash dividend = reduce carry amount of investment stock dividend = as memorandum entry reducing the unit cost of all guard stock owned
103
dividend in arrear, ? report where ?
dividend in arrears is not accrued lia until actually declared ( div from cumulative preferred stock)report as disclosure on FS
104
disclosure about postretirement benefit and cost of providing those benefit
disclose the trend accumulated post-retirement benefit obligation
105
future contract to purchase 50 swiss francs, wut rate to use at year end ?
use the future 30 day rate at year end vs the contract price rate
106
operating lease interest payment, let say lease term is 5 years, payments r 56 months, entered lease agreement on Jun 1
payment * 56 monthsthen divided by 60 monthsthen * 7 months since June
107
escheat property held report where in goverment fund ?
in private purpose trust fund when principal and income are reportedin agency fund when the fund is held for another government
108
wut format does enterprise fund use to report CF operating activities ?
direct method
109
minimum requirement for general purpose external financial statements of govern?
MD&A, government-wide and fund financial statements with the notes to the financial statements, and RSI other than MD&A in addition to CAFR), which includes information additional to the basic general-purpose financial statements.
110
when not to use blending unit
Because only two of the seven school board seats are occupied by council members, the governing body of the school board is not “substantially the same” as the city council.
111
the amount of intergovernmental receivables reported by the general fund at the close of the fiscal year
The receivable would equal the difference between the amount of the advance and the revenues of $400,000 (the amount spent on qualifying expenditures).reve less advance received = intergovernmental receivable
112
how should interest on debt be reported on governent wide FS ?
Interest that clearly derives from borrowing that is essential to support a program should be reported as a direct expense of that program, interest that does not qualify as a direct expense should be reported as a separate line. The two types of interest should not be combined. Interest is reported as a component of other functions or a separate line, but not at the bottom of the statement. Although interest on long-term debt is usually an indirect expense, it should be reported as a separate line and not allocated.
113
which statements r required for NFP ?
The basic financial statements for a not-for-profit entity are statement of financial position (like a balance sheet), statement of activities, statement of cash flows, and for voluntary health and welfare entities, a statement of functional expensesAssets, liabilities, and net assets on financial position
114
The financial reporting framework for small- and medium-sized entities has been developed by the
AICPA
115
what is monetary asset ?
r items whose amounts are fixed in term of number of dollarsex: demadn bank deposit, net long term receivables
116
issue cost and debt insurance in government fund ?
expense all
117
statement of net assets available for benefits of the plan must include
total asset, total lia, net asset reflecting all investments at fair value, net asset available for benfits
118
interest income on a loan ?
the interset income reflects the effective interst rate applied to the net proceeds received. this is an application of the effective interst method
119
applying dollar value LIFO
work on EV of base yr cost first , then subtract BE of base yr cost to find the layer, then multiple this layer with the index to get the new LIFO layer, then get base yer + this layer
120
The excess of proceeds over cost of treasury stock sold , effect ?
credit to APIC
121
numberator for basic EPS ? when there is convertible pref share and convertible bond ?
you still add the converted preff and converted bons to weighted C/Spreff div is not deducted from NI in basic EPSwhen cumu preff stock is not convertible to CS, DO NOT add these to find weight outstaing CS
122
gain on debt restructure?
watch out, recognizes a gain or loss on the transfer of assetsrecognizes a gain on the restructuring of a debtEven though a total gain of $75,000 is recognized on the income statement, the portion attributable to the restructuring is $50,000.
123
collection of a note receivable , where on CF?
investing
124
when debt r paid with stock and property and cash, effect on SHE ?
diff of FV of stock/property+cash and carry value of debt, go to RE , which increase equity and stocks issued also add to equityincrease in SHE = gain on restructuring ( this to go RE) + increase in C/S + increase in APIC
125
own 5% interest in King, then King declared $6000 liquidating div , what reprot as dividend income ?
0 since liquidating dividend is not income, but rather a return of investment to owners.
126
what amounts of subsequent years' lease payments should be disclosed
each of the next 5 year, and TOTAL aggregated including these 5 years100k each yr for 5 year and 900k in total
127
NFP received contribution that is restricted to long term purpose like construction , report where on CF?
financing activities
128
A nonmonetary exchange is generally measured based
A nonmonetary exchange is generally measured based on the fair market value of the assets exchanged. If the exchange lacks commercial substance, the asset is measured at its book value before the exchange.
129
A company using the composite depreciation method for its fleet of trucks, cars, and campers retired one of its trucks and received cash from a salvage company. The net carrying amount of these composite asset accounts would be decreased by the
cash proceeds received
130
which item is nonmonetary ?
Monetary assets are cash or items whose amounts are fixed in terms of numbers of dollars. All of the assets are monetary assets except for accumulated depreciation.
131
declared 30% stock dividend ?, effeect on SHE ?
SHE not changedstock div just reclass RE as contributed capital
132
IFRS, impairment loss
compare carry amount vs recoverablerecoverable = greater of value in use (present value of discounted CF) or net realizable value (sale proceed less cost to sell)
133
sale type lease , profit ?
present value of lease payment - carry value of leased property
134
the statistical section of CAFR ?
is not part of the basic financial statement
135
when to accrue for vacation pay ?
as long as the right is vest OR at least accumulate ( carry over to the next period)
136
Purchasing power gain or loss is computed by r
Purchasing power gain or loss is computed by restating monetary assets and liabilities in units of constant purchasing power. Rising prices would cause liabilities to be paid with less valuable dollars, so equity investment in unconsolidated subsidiaries, warranty obligations, and wages payable would result in a purchasing power gain. Receipt of less valuable dollars from refundable deposits would result in a purchasing power loss.
137
chosen to apply the revaluation model to valuing this equipment , in IFRS,
When the carrying value of the assets differs materially from the fair value of the assets, a revaluation must occur, with any increase being included in asset revaluation surplus, an equity account, like other comprehensive income, and a decrease being accounted for as an other loss included in income from operation
138
interest capitalization, if weight avg expenditure = 625k, contruction loan 500k at 12%, other debt is 10%, 800k ?
500k*0.12 = 60k add (625-500)*0.1 other rate = 10.5
139
term bonds ?
are schedule to be outstanding for a fixed period of time
140
where to report NCI in IS ?
FASB ASC 810-10-45-19 requires that the consolidated amounts of these items (revenues, expenses, gains, losses, net income or loss, and other comprehensive income) be reported on the income statement. The amount of consolidated net income attributable to the parent and to the noncontrolling interest must be clearly identified and presented on the face of the consolidated statement of income.
141
purchased merchandise for 300,000 British pounds from a vendor in London on November 30, 20X1. Payment in British pounds was due on January 30, 20X2.
11/30/X1 12/31/X1 ---------- ----------Spot-rate $1.65 $1.62
142
IFRS difference for CF?
bank overdrafts are presented as operating activities for IFRS and financing activities in U.S. GAAP,interest and dividends received are presented as operating or investing activities for IFRS and only as operating activities in U.S. GAAP, andthe most recent two years (i.e., comparative periods) must be presented.
143
wut to do with other inventory method, other than LIFO or retail inventory method ? wut inventory method does IFRS use ?
use the lower of cost or NRV
| IFRS also use lower of cost or NRV,
144
interest capitalization if obtained 300k loan 10% interest to finance contruction, Jan 1 purchased land for 120k, Sep 1 progress payment to contractor 150k, interest cap at Dec 31?
(120k*12/12 + 150k*4/12)*0.08 = 17k
145
operating loss carry forward & valuation allowance
In 20X1, Larkin should recognize a noncurrent deferred tax asset and the related noncurrent deferred tax benefit of $4,000 ($10,000 NOL × 40% tax rate). However, Larkin also must recognize a $1,200 valuation allowance in 20X1. Thus, in 20X1 Larkin should recognize a net tax expense (benefit) of $(4,000) + $1,200 = $(2,800). Note that the recognition of the valuation allowance reduces the net tax benefit recognized in 20X1. The decision in 20X2 that the valuation allowance is no longer necessary means that the valuation allowance should be eliminated, as shown in the following entry in 20X2: Valuation allowance 1,200 Tax expense/benefit - deferred 1,200Therefore, tax expense (benefit) in 20X2 has a credit balance of $(1,200), indicating a deferred tax benefit. This $(1,200) tax benefit recognized in 20X2 is the change in deferred tax expense/benefit arising from changed circumstances causing a change in judgment as to the amount of valuation.
146
how to calculate NCI ? if purchased 75% Kid, Kid has asset 180k, lia 60k , C/S 50, RE 70k?
Noncontrolling holding x Net assets of Kidd = (1.00 - 0.75) x ($50,000 + $70,000) = 0.25 x $120,000 = $30,000
147
how to report dividend paid in consolidated statemetn? Peace is parent, Surge is sub
Only dividends paid to Peace shareholders will be reported as dividends paid. Dividends paid to Peace by Surge will be eliminated in consolidation. Dividends paid to shareholders other than Peace will be reported as an adjustment to the noncontrolling interest account.
148
The diluting effect of options and warrants and their equivalents is reflected in diluted EPS by application of the treasury stock method, which assumes that
proceeds from exercise are used to purchase common stock at the average market price.
149
A mandatorily redeemable financial instrument, such as mandatorily redeemable preferred stock, must be classified as a liability unless
unless the redemption is required to occur only upon the liquidation or termination of the reporting entity.
150
annual amortization of computer software ?
greater of Sales for 20X2 were 30% of expected total sales of the software or Straight line
151
combining fund statements are ?
part of comprehensive financial report, but not part of the basic financial statement
152
Assuming no outstanding encumbrances at year-end and a budgetary entry not using a separate budgetary fund balance account, closing entries for which of the following situations would increase the unassigned fund balance at year-end
appropriation exceed actual expenditure
153
general fund defer tax reve to rev for curr year?
begin recei - begin defer rev - begin AD = prior year revcurr year rev = receipt - prior yer rev + end recei
154
In preparing combined financial statements for a governmental entity, interfund receivables and payables should be
reported as amounts due to and due from other funds
155
The University of Tulsa, a private institution, is required to report under the standards of which of the following bodies
FASB
156
APIC when doing TS at par method ? wut to do when initially and after issues TS
let say initially, issued share at $15,with 10 par, 5 credit to APIClater, purchase TS at 20, Dr Ts 10 par, Dr TS AT 5 only cuzz u only have 5, C cash 20, the remaining is debit RE 5
157
An entity with preferred stock that has a preference in involuntary liquidation “considerably” in excess of par shall
disclose the liquidation preference in the equity section of the statement of financial position.
158
subsequent events
If the events that gave rise to litigation had taken place before the balance sheet date and that litigation is settled, after the balance sheet date but before the financial statements are issued or are available to be issued, for an amount different from the liability recorded in the accounts, then the settlement amount should be considered in estimating the amount of liability recognized in the financial statements at the balance sheet date.
159
does lease get test for impairment ?
capital leaseLong-lived assets of lessors subject to operating leasesLong-term prepaid assets.Proved oil and gas properties that are being accounted for using the successful-efforts method of accounting
160
Expenditures of a governmental unit for insurance extending over more than one accounting period
GASB 1600.127.b states: “Expenditures for insurance and similar services (prepaid items) extending over more than one accounting period NEED NOT be allocated between or among accounting periods, but MAY be accounted for as expenditures of the period of acquisition.”
161
general fund defer rev
Deferred RevenuesEnding receivable $600,000Less collections June 30 through August 30 (125,000)Less ending allowance for doubtful accounts (60,000) ---------
162
total amount of interest revenue one earns on a note is
The total amount of interest revenue one earns on a note is related to the total payments but also to the present value of the note, with the discount recognized here initially.The total amount to be received on this note is 5 years multiplied by $5,009, as specified, for a total of $25,045. Interest is generally the amount returned over and above the amount originally recognized, which was $19,485 originally. Thus, the total interest revenue is $25,045 − $19,485, or $5,560.
163
in accounting for a long-term construction contract, assuming revenue is recognized over time, the progress billings on contracts account is a:
The current asset account maintaining an inventory value for the costs and profits recognized so far on the contract has a contra account of progress billings, lowering its carrying value. If the billings exceed the construction in process, then a current liability can exist instead.
164
The effect of a material transaction that is infrequent in occurrence but not unusual in nature should be
shall be reported as a separate component of income from continuing operations.
165
if asking Lower of cost or market when there r two inventory items, ?
get original cost of bothget R of bothget NRV of bothget NRVprofit of boththen compore
166
investor purchased 1000 shares of LVC C/S at 80 per share ( purchase of stock right).On September 26, 20X1, Evan received 1,000 stock rights to purchase an additional 1,000 shares at $90 per share. The stock rights had an expiration date of February 1, 20X2. On September 30, 20X1, LVC's common stock had a market value, ex-rights, of $95 per share and the stock rights had a market value of $5 each. What amount should Evan report on its September 30, 20X1, balance sheet for investment in stock rights?The investor receiving stock rights
Cost of shares acquired = 1,000 x $80 = $80,000Cost allocated to stock rights = $80,000 ($5 / ($95 + $5)) = $80,000 ($5 / $100) = $4,000
167
On March 1, 20X0, Fine Co. borrowed $10,000 and signed a 2-year note bearing interest at 12% per annum compounded annually. Interest is payable in full at maturity on February 28, 20X2. What amount should Fine report as a LIA FOR ACCRUED INTEREST on December 31, 20X1
Accrued interest on December 31, 20X1: For 20X0: $10,000 x .12 x (10/12) = $1,000 For 20X1: ($10,000 + $1,000) x .12 = 1,320 ------ Total $2,320
168
wut to remember about accrued interest on a bond ? especially bond proceeds received
do not pay attention to semi or anual,just get the bond face * rate * months,let say bond issued on April, bought at July, 3/12 months
169
Bank loan (current portion $100,000) 3,500,000The bank loan of $3,500,000 was in violation of the loan agreement. The creditor had not waived the rights for the loan
the whole 3.5 mil is curr lia
170
A company issued rights to its existing shareholders without consideration
memo entry onlydebit asset only when the rights r excercised , Dr cash, Cr c/s Cr apic
171
The effect of the change on the deferred tax asset or liability at , when ?the year of change or the subsequent year ?
The effect of the change on the deferred tax asset or liability at the beginning of the year of change should be included in income from continuing operations for the period that includes the enactment date.
172
book basis is higher than tax basis ? DTA or DTL?
since tax basis is more, tax more this year, tax less nex year ==> DTA
173
Under IFRS, which of the following measurements is allowed to estimate and report the liability for the cost of settling a lawsuit
the best number in the range must be chosen to accrue. The chosen amount must always be discounted to present value
174
the following items that are not eligible for the fair value election
An investment in a subsidiary that the entity is required to consolidateAn interest in a variable interest entity that the entity is required to consolidateEmployers' and plans' obligations (or assets representing net overfunded positions) for pension benefits, other postretirement benefits (including health care and life insurance benefits), postemployment benefits, employee stock option and stock purchase plans, and other forms of deferred compensation arrangements, as defined in [FASB ASC] Topics 420; 710; 712; 715; 718; and 960.Financial assets and financial liabilities recognized under leases as defined in [FASB ASC] Subtopic 840-10 (This exception does not apply to a guarantee of a third-party lease obligation or a contingent obligation arising from a cancelled lease.)Deposit liabilities, withdrawable on demand, of banks, savings and loan associations, credit unions, and other similar depository institutionsFinancial instruments that are, in whole or in part, classified by the issuer as a component of shareholder's equity (including “temporary equity”). An example is a convertible debt security with a noncontingent beneficial conversion feature.
175
wut require to disclose fair value hedge
The amount of net gain or loss recognized in earnings when a hedged firm commitment no longer qualifies as a fair value hedge
176
wut require to disclose cash flow hedge
The net amount of gains or losses A description of the transactions or other events that will result in the reclassification into earnings of gains and losses that are reported in accumulated other comprehensive incomeThe estimated net amount of the existing gains or losses at the reporting date that is expected to be reclassified into earnings within the next 12 months
177
reportable segment,
“10% or more of the combined revenue, not the consolidated amount
178
Cash receipts from grants and subsidies to decrease operating deficits should be classified in which of the following sections of the statement of cash flows for governmental not-for-profit entities
Noncapital financing
179
KNOW begin, ending equipment , begin ending AD, purchased new equip, , carry value of sold equip, find depreciation exp ?
In the context of this problem accumulated depreciation is affected by the asset disposal when the carrying value of the asset sold is written off and by depreciation expense for the current period. These two items account for the net increase of $25,000 ($153,000 - $128,000) in the credit balance of the accumulated depreciation account.The debit change in accumulated depreciation caused by the asset disposal needs to be determined from the facts provided. The equipment account had a beginning balance of $344,000. The $50,000 purchase of new equipment would cause this balance to increase to $394,000. However, the ending balance was $379,000. The only other transaction affecting the equipment account was the disposal of a piece of equipment. Therefore, the original cost of the disposed equipment was $15,000 ($394,000 - $379,000). Since the disposed equipment had a cost of $15,000 and a carrying value of $9,000 (carrying value = cost - accumulated depreciation), the accumulated depreciation associated with the disposed equipment was $6,000 ($9,000 = $15,000 - accumulated depreciation).The beginning credit balance in the accumulated depreciation control account was $128,000. It would have been decreased (debited) for the $6,000 of accumulated depreciation related to the disposed equipment. That would leave a credit balance of $122,000. However, the ending balance was a credit of $153,000. Depreciation expense for the period would also change (increase or credit) the balance of accumulated depreciation. Since the ending balance was $153,000, and the balance without the effect of depreciation expense was $122,000, the depreciation expense must have been $31,000 ($153,000 - $122,000).
180
purchase of common stock, CF ?
investing CF
181
how many day to file for 10K and 10Q ?
Annual 10-K reports are due within 75 days for fiscal years for accelerated filers as defined in 17 CFR 240.12b-2. The requirement is 90 days for other filerThe deadline for filing quarterly reports (10-Q) is 40 days for accelerated filers.include a quarterly and end of preceding fiscal year
182
What is the effective interest rate for the debenture bonds
get interest expense given / carry amount of bond
183
entry for issuance of convertible pref stock ? wut go to APIC initiallly, wut go to APIC after converted ?
Summary journal entry to record 20X1 issuance of convertible preferred stock:dr Cash (5,000 x $110) $550,000 Cr Convertible preferred stock (5,000 x $100) $500,000 Cr Additional paid-in capital preferred ($550,000 - $500,000) 50,000Summary journal entry to record 12/31/X2 conversion of preferred shares: Dr Convertible preferred stock $500,000Dr Additional paid-in capital preferred 50,000 Cr Common stock (5,000 x 3 x $25) $375,000 Cr Additional paid-in capital common ($550,000 - $375,000) 175,000
184
What is the present value of all future retirement payments attributed by the pension benefit formula to employee services rendered prior to that date and based on current and past compensation levels?
Accumulated benefit obligationAccumulated benefit obligation is based upon prior compensation. Project benefit obligation is based on future compensation.
185
Shares outstanding at 1/1 100,000Stock dividend at 3/31 24,000Stock issuance at 6/30 5,000effect on basic EPS ?
(100+24)* 12+5*6/12
186
Any fair value measurement should assume that the transaction to sell the asset or transfer the liability occurs in which market
principle marketIf there is no principal market for that type of asset or liability, the entity should use the most advantageous market for that asset or liability
187
foreign exchange contract for speculative purposes by purchasing 50,000 deutsche marks for delivery in 60 days, wut rate to use to find G/L ?
On September 1, 20X1 (initial), the 60-day forward rate is used while the rate used on September 30, 20X1, is the 30-day rate
188
if a change in the provisions of a capital lease gives rise to a new agreement classified as an operating lease
the transaction shall be accounted for under the sale-leaseback requirements.”
189
State and local governments have various sources of revenue. When revenues are received from charges to users for services provided, these revenues are classified a
program rev
190
Blue City has a major garage facility used by the Public Works department to maintain the streets and roads equipment. The garage was built 10 years ago and was expected to meet the city's needs for 30 years. The City has been updating its equipment fleet and unexpectedly discovered that the service bays are no longer adequate for many of the new vehicles, which are much larger. The sudden obsolescence of the building has been evaluated as a significant, unusual, and infrequent occurrence that resulted from actions within management control. The impairment would be reported on the statement of activities as
A temporary impairment does not require expense recognition and would not be reported. As an unusual and infrequent occurrence, this expense would not be included with the other operating expenses of the program (Public Works). Both extraordinary and special items are defined as unusual and infrequent in nature. However, special items are significant transactions under management's control. The acquisition of the new equipment that suddenly caused the obsolescence of the existing building resulted from management action. Both extraordinary items and special items are reported separately at the bottom of the statement of activities.
191
A promise to contribute $500,000 in 20X2 from a supporter who has made similar contributions in prior periods , what is this in NFP ?
restricted rev cuzz it will not be collected until subsequent year
192
A major exception to the general rule of expenditure accrual for governmental units relates to unmatured
the expenditure rules will not apply to the principal or to the interest on debt as specified by the GASB
193
how to report note receivable at Dec 30 x1, requiring 10 annual payment of 10k, ?
Since one of the 10 payments had been collected on December 31, 20X1, the carrying amount of the note receivable would be the present value of a nine year annuity of $10,000 discounted at 8%.
194
so you have defer income tax lia and defer income tax asset, how to report them on BS ?
you net them out, and report 1 amount
195
The Dunstown County general fund received a notice of a federal grant award for an expenditure-driven (reimbursement) grant in the amount of $1,000,000. Included with the notice was an advance of $250,000. During the year, the County incurred $400,000 of qualifying eligible grant expenditures, and no additional money had been received from the grantor.What would be the amount of deferred revenues reported at the end of the year by the general fund?
Resources provided before that period of qualifying activity should be recognized as deferred revenues. Since the amount of qualifying expenditures exceeded the amount of the advance, there would be no deferred revenues reported at year-end.
196
IFRS, intangible asset , internal generated goodwill ?
internally generated goodwill shall not be recognized as an asset
197
On August 1, 20X1, Vann Corp.'s $500,000, 1-year, noninterest-bearing note due July 31, 20X2, was discounted at Homestead Bank at 10.8%. Vann uses the straight-line method of amortizing discount. What amount should Vann report for notes payable in its December 31, 20X1, balance sheet?
Determine the discount amount (the amount of interest on the note). The face amount of the note less the discount is the initial proceeds, the initial carrying value of the note. The discount is interest, accrued equally (straight-line) over 12 months, and added to the carrying value of the note for the five months to the end of the year.
198
APIC in TS for cost method
Using the cost method of accounting, additional paid in capital from treasury stock is credited when treasury stock is reissued at excess.There was only one treasury stock reissuance so there is no additional paid in capital transaction to be made. Therefore, under the cost method Glean would record the loss (decrease or debit) to retained earnings and there would be no effect on additional paid-in capital.
199
IFRS impairment loss
under IFRS, after an impairment loss has been recognized, if facts change and the estimated value of the asset has increased, the impairment loss can be considered recovered and, to the extent of the recovered loss, the impairment can be undone. Here, the building has recovered some of the loss and can be written back up to the current estimated value in use of $550,000.
200
Nonmonetary exchanges are generally recorded at fair value.
Value of property exchanged $50,000Original cost -- 20,000 -------Gain on exchange $30,000
201
Encumbrances outstanding at year-end represent:
Encumbrance accounting is a method of budgetary control for governmental funds, including the general fund. Encumbrances do not represent expenditures as they are a memorandum of commitments that will eventually lead to expenditures. They do not represent liabilities as the goods and services are yet to be delivered. Governmental intent to commit resources for specific uses in the future is indicated by an assignment of fund balance.
202
On October 1, Year 2, Park Co. purchased 200 of the $1,000 face amount, 10% bonds of Ott, Inc., for $220,000, including accrued interest of $5,000. The bonds, which mature on January 1, Year 9, pay interest semiannually on January 1 and July 1. Park used the straight-line method of amortization and appropriately recorded the bonds as a long-term investment. On Park’s December 31, Year 3, balance sheet, the bonds should be reported at:
Since the purchase price was $220,000 and it included the accrued interest of $5,000, the price for the bonds was $215,000 ($220,000 – $5,000). The bonds were thus sold at a premium of $15,000 (the price of $215,000 less the face of $200,000, computed as 200 × $1,000). Applying straight-line, the premium will be amortized equally over the months remaining in the bond’s term.The bond was bought on October 1 of Year 2, and will mature on January 1 of Year 9. That is a remaining term to maturity of 75 months (3 months of Year 2 and all of Years 3, 4, 5, 6, 7, and 8 ((6 × 12) + 3 = 75 months)). The total premium of $15,000 divided equally by 75 months is $200 per month.
203
interperiod equity
Financial reporting should provide information to determine whether current-year revenues were sufficient to pay for current-year services.
204
cash payment in bond is also called wut ?
interest payable
205
In each periodic entry as cash surrender value increases
In each periodic entry as cash surrender value increases, insurance expense decreases.
206
as deferred income tax expense
The temporary difference generated in the year is the noncurrent part of the tax expense.
207
How would a municipality that uses modified accrual and encumbrance accounting record the transaction of short-term financing received from a bank, secured by the city's taxing power?
Credit tax anticipation notes payable
208
Encumbrances would not appear in which fund
Enterprise
209
Pine City owned a vacant plot of land zoned for industrial use. Pine gave this land to Medi Corp. solely as an incentive for Medi to build a factory on the site. The land had a fair value of $300,000 at the date of the gift. This nonmonetary transaction should be reported by Medi as
Only additional paid-in capital is an acceptable way to account for this donated land
210
20X0 $ 300,00020X1 (700,000)20X2 1,200,000In its 20X2 income statement, what amount should Mobe report as total income tax expense?
20X1 loss after carryback to 20X0: = ($700,000) - $300,000 = ($400,000)20X2 income after carryforward of remainder of 20X1 loss: = $1,200,000 - $400,000 = $800,00020X2 income tax expense: = ($800,000 x 0.30) = $240,000
211
In the government-wide financial statements, what is the correct revenue classification of fines and forfeitures?
charges for services``
212
grant to other organization is wut in NFP ?
expense
213
This is a nonmonetary transaction without commercial substanc
full gain is not recognized yet, but is instead deferred. Some cash is received, though, so some gain is recognized$30,000 cash out of a market value of the exchange of $150,000 is 20% of the transaction being in cash, so 20% of the gain is recognized now.Zaro’s gain is $150,000 – $126,000, or $24,000, and 20% of $24,000 is $4,800, the gain recognized now.
214
when to use blending ?
Blending of financial results is allowed as the public school system and the city are not separate legal entities. The city is responsible for the finances of the school system (the school board has no authority to levy taxes or issue bonds).Discrete presentation is for affiliated entities whose resources are entirely for the benefit of the primary government. The school system does not operate for the sole benefit of the town
215
G./ L on bond retirement?
When a bond is retired, the principal, unamortized premium or discount, and any bond issue costs that were incurred and recorded as an asset (i.e., as a deferred charge) must be written off, reducing any gain that may be recognized on the retirement. The journal entry to write off the above bond is as follows:
216
A company issues $1,500,000 of par bonds at 98 on January 1, year 1, with a maturity date of December 31, year 30. Bond issue costs are $90,000, and the stated interest rate of the bonds is 6%. Interest is paid semiannually on January 1 and July 1. Ten years after the issue date, the entire issue was called at 102 and canceled. The company uses the straight-line method of amortization for bond discounts and issue costs, and the result of this method is not materially different from the effective interest method. The company should classify what amount as the loss on extinguishment of debt at the time the bonds are called
Bonds Payable (face) 1,500,000 Loss on Bond Extinguishment (plug) 110,000 Bond Discount ($30,000 × 20/30) 20,000 Bond Issue Costs ($90,000 × 20/30) 60,000 Cash ($1,500,000 × 1.02) 1,530,000
217
The lower of cost or market rule for inventories may be applied to total inventory, to groups of similar items, or to each item. Which application generally results in the lowest inventory amount
Separately to each item
218
equity method, own 40%, find income from investment ?
income of investment * % own + amortize the portion that fair value of investment is greater than carry amt Under the equity method, Puff should report 40% of the $150,000 income of Straw, or $60,000. Because Straw's equipment has a fair market value exceeding its carrying value, Puff should amortize the difference over the equipment's 5-year life. Puff should record 40% of $100,000 ($40,000) as equipment subject to amortization (depreciation). Straight-line amortization of $40,000 over five years yields an expense of $8,000. Puff has income of $60,000 less $8,000, or $52,000 for 20X1.
219
On June 19, Don Co., a U.S. company, sold and delivered merchandise on a 30-day account to Cologne GmbH, a German corporation, for 200,000 euros. On July 19, Cologne paid Don in full. Relevant currency exchange rates were: June 19 July 19 ------- -------Spot rate $ .988 $ .99530-day forward rate .990 1.000
The receivable should initially be recorded at the spot rate on the date of the transaction.
220
Birdlovers, a not-for-profit community foundation, incurred $5,000 in management and general expenses in 20X1. In Birdlovers statement of activities for the year ended December 31, 20X1, the $5,000
Management and general expenses are reported in a separate functional classification from program expenses. They are shown as expenses and not as an offset to revenues. All expenses in the statement of activities are classified as changes in net assets without donor restrictions.
221
net rental income in operating lease for lessor ? when there is real estate broker fee, depreciation, insurance and property tax expense
The revenue under the lease is the $50,000 each year, and the expenses include the depreciation and the property tax for the year.The broker’s fee ($15,000) should be amortized equally based over the 10 years of the lease, or $1,500 a year.
222
transition obligation period period to amortize ?
if its under 20 year, use 20 immediately in net income of the period of change as the effect of a change in accounting principle and on a delayed basis as a component of net periodic postretirement benefit cost
223
In financial statements prepared on an income-tax basis, how should the nondeductible portion of expenses, such as meals and entertainment, be reported?
Included in the expense category in the determination of income
224
Perk, Inc., issued $500,000, 10% bonds to yield 8%. Bond issuance costs were $10,000. How should Perk calculate the net proceeds to be received from the issuance?
Discount the bonds at the market rate of interest and deduct bond issuance costs.
225
interest expense of convertible bond for dilutive EPS ?
interest = (cash + discount amortization ) * 1- tax ratecash = face * stated
226
The letter of transmittal and the statistical section are classified as:
The letter of transmittal and the statistical section required for a CAFR and GFOA's certificate are neither basic statements nor required supplemental information
227
If determining the actual historical cost of general infrastructure assets is not practical because of inadequate records, public institutions reporting as special-purpose governments should report
should report the estimated historical cost for major general infrastructure assets.
228
can NFP pool all their investments /
may pool all investments, but must allocate realized and unrealized gains and losses considering donor restrictions, board policy, and relevant legislation
229
the note was discounted , find interest reve ?
find annual payment = face / annuity of stated ratefind present value of note = annual payment * annuity yied rateinterest rev = (annual payment * # yr ) - present value of note
230
bond issue cost ?
bond issue cost = debt issue cost = a direct deduction from the carrying amount of the related debt liability,
231
how Write-off of obsolete inventory affect COGS ?
Beginning inventory $ 90,000 Purchases 124,000 Goods available for sale $214,000 Write-off of obsolete inventory (34,000) Ending inventory (30,000) Cost of goods sold $150,000
232
how An increase in warranty obligations affect DTA or DTL ?
An increase in warranty obligations means one is pushing forward the paying of the expense in cash (which allows the deduction), and this would lower taxes in the future, not add to the future liabilities.
233
current asset of NFP ?
only the income from endowment that going to be spent next year.Since the principal of the endowment is now in security investments (which are not current assets)
234
How should this change in the decommissioning liability be recognized under IFRS
The change in the liability is recognized in profit or loss
235
bond carry amount when interest is payable semi ?
u calculate it a second time , treat it like a 2nd year, 1st is 6 month, 2nd is another 6 month
236
Preferred stock, $10 par, 4% cumulative, 25,000 shares issued and outstanding $ 250,000Common stock, $5 par, 200,000 shares issued and outstanding 1,000,000 , net income 500k, find basic EPS ?Ute paid no preferred dividends during 20X1 and paid $16,000 in preferred dividends during 20X2
The $16,000 dividends paid in 20X2 included only the $10,000 (i.e., 25,000 × $10 × .04) preferred dividend requirement for 20X2. Dividends in arrears should have been included in the previous year's computation of earnings per share.
237
Gem City's internal service fund received $50,000 cash from the general fund that does not need to be repaid. This should be reported in Gem's internal service fund as a credit to:
internal service fund (proprieatary ) credit to transfergovernmental fund : other fiancning sources
238
is encumbrance a lia ?
Encumbrances resulting from the issuance of purchase orders or approval of contracts are not reported as liabilities since neither the goods nor services have been received. A liability is recorded on the books only when the goods/services are received. However, depending on the legal restrictions observed by the Community College, the encumbrances may be shown as committed or assigned fund balance. As a public institution, Community College engages in governmental and business-type activities and follows the full governmental model.
239
A not-for-profit entity receives $150 from a donor. The donor receives two tickets to a theater show and an acknowledgment in the theater program. The tickets have a fair market value of $100. What amount is recorded as contribution revenue?
The amount of contribution revenue recognized in an exchange transaction is reduced by the fair market value of the consideration given by the organization to the donor. The $150 received is reduced by the $100 fair market value of the theater tickets for total contribution revenue of $50.
240
accounting for a discounted note and computing the cash proceedsOn July 1, Year 1, Kay Corp. sold equipment to Mando Co. for $100,000. Kay accepted a 10% note receivable for the entire sales price. This note is payable in two equal installments of $50,000 plus accrued interest on December 31, Year 1 and Year 2. On July 1, Year 2, Kay discounted the note at a bank at an interest rate of 12%. Kay’s proceeds from the discounted note were
When accounting for a discounted note and computing the cash proceeds, one must first find the maturity value of the note, what will be received by the holder of the note when it comes due.By the time of the discounting, some of the principal has already been paid. Only the second installment, the final $50,000 principal plus interest, will be paid to the bank when due.At the end of December, Year 2, the $50,000 will be received by the bank along with 10% interest (since the principal will have been outstanding for a whole year). On December 31, Year 2, a total of $55,000 maturity value will be due:$50,000 + ($50,000 × 0.1) = $55,000The discounted proceeds will be based on this amount, the discount rate (0.12), and the discounting period (from July to December of Year 2, 6 months). The discount amount is thus:$55,000 × 0.12 × 6/12 = $3,300The cash proceeds are the maturity value less the discount:$55,000 – $3,300 = $51,700
241
On January 2, 20X1, Nori Mining Co. (lessee) entered into a 5-year lease for drilling equipment. Nori accounted for the acquisition as a capital lease for $240,000, which includes a $10,000 bargain purchase option. At the end of the lease, Nori expects to exercise the bargain purchase option. Nori estimates that the equipment's fair value will be $20,000 at the end of its 8-year life. Nori regularly uses straight-line depreciation on similar equipment. For the year ended December 31, 20X1, what amount should Nori recognize as depreciation expense on the leased asset?
When a bargain purchase option exists or ownership of the leased asset reverts to the lessee, depreciation should be computed over the useful life of the assets using estimated salvage value at the end of that life.” (In other cases, the lessee computes depreciation over the lease term using residual value at the end of the lease term.)since the acquisition cost already included bargain optiondepreciation = 240k - 20k ;; then divided by 8
242
When applying the retail inventory method, what go to what ?
When applying the retail inventory method, one must compute the total cost and total retail amounts for goods available for sale. Some items are only included in one of these totals, sales returns and markups only go into the retail column, and freight in only goes into the cost column. Purchase returns are an adjustment to both columns.
243
On January 1, year 1, a company capitalized $100,000 of costs for software that is to be sold. The company amortizes the software costs on a straight-line basis over five years. The carrying value of the software costs on January 1, year 3, was $60,000. As of December 31, year 3, the estimated future gross revenue to be generated from the sale of the software is $23,000, and the estimated future cost of disposing of the software is $8,000. What amount should the company expense related to the software costs for the year ended December 31, year 3
On January 1, year 1, a company capitalized $100,000 of costs for software that is to be sold. The company amortizes the software costs on a straight-line basis over five years. The carrying value of the software costs on January 1, year 3, was $60,000. As of December 31, year 3, the estimated future gross revenue to be generated from the sale of the software is $23,000, and the estimated future cost of disposing of the software is $8,000. What amount should the company expense related to the software costs for the year ended December 31, year 3
244
Costs in excess of billings on long term contract = ?
current asset
245
stock appreciation right measurement ?
Fair value of SARs at 12/31/X2 (30,000 x $8 fair value) $240,000Percentage to service period through 12/31/X2 2/3 -------Liability at 12/31/X2 $160,000 =======
246
how to report CS in acquisition ?
just the C/S portion of the parent
247
when an entity is classified as held for sale , in a discontinue operation, wut to do ?
when an entity is classified as held for sale, the unit must be written down to the fair value, so “a loss shall be recognized for any initial or subsequent write-down to fair value less cost to sell.”Wand's 20X1 loss from operations is $100,000 and the write-down to FMV is $25,000 and is reported in 20X1. The operating loss in 20X2 is $50,000, so Wand would report a $50,000 loss from discontinued operations before income taxes in 20X2.
248
each lease payment consist of what ?
In general, each lease payment would consist of two elements—interest expense on the amount owed during the preceding period and reduction in lease liability. In the case described, “interest expense” would be zero (because the time period December 31, 20X1, to December 31, 20X1, produces no interest charge) so all of the initial payment is attributed to reduction of lease liability.
249
a nonmonetary exchange should be based on
Generally, a nonmonetary exchange should be based on the fair values of the assets exchanged—resulting in the immediate recognition of a gain or loss.Exceptions to this treatment include the following:Fair value is not determinableExchange transaction to facilitate sales to customersExchange transaction that lacks commercial substanceUnder these exceptions, no gains or losses are recognized.
250
wut portion of lia report in govern WIDE and govern fund ?
The portion reported in the government-wide financial statements as governmental activities is a general long-term liability. The governmental funds, using the modified accrual method, report only the portion of the liability expected to be claimed by employees in the first 60 days of the new fiscal year.
251
On March 1, 20X0, Fine Co. borrowed $10,000 and signed a 2-year note bearing interest at 12% per annum compounded annually. Interest is payable in full at maturity on February 28, 20X2. What amount should Fine report as a liability for accrued interest on December 31, 20X1?
Accrued interest on December 31, 20X1: For 20X0: $10,000 x .12 x (10/12) = $1,000 For 20X1: ($10,000 + $1,000) x .12 = 1,320 ------ Total $2,320 ======
252
life insurance expense
annual premium less increase in cash surrender value
253
Tree City reported a $1,500 net increase in fund balance for governmental funds. During the year, Tree purchased general capital assets of $9,000 and recorded depreciation expense of $3,000. What amount should Tree report as the change in net position for governmental activities?
The reconciliation of the $1,500 increase in governmental fund balances (modified accrual basis) to the government-wide change in net position (full accrual basis) involves adding back the expenditure recorded in the governmental funds when the capital assets were purchased ( + $9,000) and subtracting the depreciation expense required with full accrual ( - $3,000).
254
A capital projects fund for a new city courthouse recorded a receivable of $300,000 for a state grant for which all eligibility requirements have been met and a $450,000 transfer from the general fund. What amount should be reported as revenue by the capital projects fund?
Transfers are other financing sources and are never recognized as revenues. If the receivable is associated with an unrestricted grant or with a restricted grant for which all eligibility requirements have been met, the state grant should be reported as revenues.
255
A city has a number of open purchases remaining at year-end. These purchase orders are represented in the general fund records as both Encumbrances (debit balance) and Fund balance—reserved for encumbrances (credit balance). Encumbrances outstanding at year-end represent:
Encumbrance accounting is a method of budgetary control for governmental funds, including the general fund. Encumbrances do not represent expenditures as they are a memorandum of commitments that will eventually lead to expenditures. They do not represent liabilities as the goods and services are yet to be delivered. Governmental intent to commit resources for specific uses in the future is indicated by an assignment of fund balance.
256
The times preferred dividend earned ratio is:
This particular ratio is the relationship to earnings available to pay preferred stock dividends, net income, divided by the preferred stock dividends total. Thus, here it is $480,000/$200,000, or 2.4 to 1.
257
encumbrance balance at year end ?
When Cliff City approved the purchase orders, the estimated amount is recorded in the (summary) journal entry: Encumbrances 5,000,000 Fund Balance--Reserved for Encumbrances 5,000,000When the portion of the purchase orders were filled, the entry was reversed for the estimated cost amount of the portion of the purchase orders filled: Fund Balance--Reserved for Encumbrances 4,500,000 Encumbrances 4,500,000The actual amount of expenditures may be more or less than the estimated amount and the amount paid may differ from the encumbered amount. However, that does not affect the encumbrance or the Fund Balance—Reserved for Encumbrances amounts. Therefore, the amount outstanding at June 30, 20X1, was $500,000. In the closing process, the outstanding Encumbrances and Fund Balance—Reserved for Encumbrances of $500,000 would be removed, and $500,000 of the post-closing Fund Balance would be displayed as “committed” or “assigned.”
258
nonspendable , commited
The portion of fund balance that reflects equity for amounts that cannot be spent because they are not in spendable form would be termed “nonspendable.” Both supplies inventory and prepaid expenses are not spendable. Committed fund balance would result from an action of the highest level of the government and assigned fund balance would reflect action by a government designee. Restrictions of fund balance would reflect specific purposes externally imposed by creditors, grantors, or enabling legislation.
259
All nonexchange transactions are classified as
as (1) derived tax revenues, (2) imposed nonexchange revenues, (3) voluntary nonexchange transactions, and (4) government-mandated nonexchange transactions. An example is receipt of income tax payments, derived tax revenues because they are assessments on exchange transactions. Another example is receipt of fines, imposed nonexchange revenues because they result from assessments on nongovernmental entities.
260
The notes to the financial statements of a state or local government disclose information on the primary government’s
(1) governmental activities, (2) business-type activities, (3) major funds, and (4) nonmajor funds in the aggregate
261
nonspendable
Nonspendable fund balance includes amounts that either (1) are in a form (e.g., inventory, prepayments, or long-term loans) that is not spendable or (2) must be kept intact (e.g., the principal of a permanent fund). Accordingly, the unamortized amount of the prepayment of $6,000,000 [($18,000,000 ÷ 12 months) × 4 months (July to October)] is reported in nonspendable fund balance, not committed fund balance.
262
The statement of revenues, expenses, and changes in fund net position of proprietary funds reports wut ?
(1) operating revenues, expenses, and income (loss); (2) nonoperating revenues and expenses; (3) revenues from capital contributions and additions to endowments; (4) special and extraordinary items; (5) transfers; (6) change in net position; and (7) ending net position.
263
RSI other than MD&A is presented in a separate section of the CAFR.
It includes (1) schedules, (2) statistical data, (3) budgetary comparison schedules, and (4) other information that is an essential part of financial reporting. It should be presented with, but not as a part of, the basic financial statements of a governmental entity. Budgetary comparison schedules should include the original appropriated budget; final appropriated budget; and actual inflows, outflows, and balances. Combining statements are required to be included in the financial section of the CAFR when the primary government has more than one (1) nonmajor governmental or enterprise fund or (2) internal service or fiduciary fund. Combining statements also are included when the reporting entity has more than one nonmajor discretely presented component unit. Individual fund statements are required to be reported in the financial section of the CAFR when (1) the primary government has just one nonmajor fund of a given type or (2) prior-year or budgetary comparisons are not included in RSI. Fund financial statements for individual component units are necessary in the absence of separately issued financial statements of the individual component units.
264
net position in its government-wide financial statements =
assets + deferred outflows of resources - liabilities, and - deferred inflows of
265
available for sale , unrealized gain during years, then sold at last year, entryes? original cost is 20k, fair value at year end is 30k
Dr Cash $30,000 Dr Unrealized holding gain – OCI 10,000 Cr Available-for-sale securities $20,000 Cr Gain on sale of securities 10,000 Cr Securities fair value adjustment 10,000
266
categories of Debt sinking fund, capital lease, and goodwill ?
debt sinking fund = investment and fundcapital lease = Property, plant, and equipmentgoodwill = Intangible assets.
267
from sale revenue to find sale tax payable ?
sale reve / 1 + tax rate = (1)get (1) * tax rate
268
preff stock div in arrear
Preferred stock dividends for each year must be paid before common stock dividends may be paid. Cumulative preferred stock dividends in arrears must be caught up as well, prior to paying any dividends to common stock for the year.
269
sale type lease profit =
present value of lease payment less carry value of leased property
270
A note receivable bearing a reasonable interest rate is sold to a bank with recourse. At the date of the discounting transaction, the notes receivable discounted account should be:
A note sold with recourse is a promise to pay the financial institution if the maker dishonors the note. When receivables are sold with recourse, the entity has a contingent liability. A contingent liability is an obligation that has to be paid in the future. Therefore, the notes receivable discounted account must be increased by the face amount of the note.
271
Nonmonetary exchange - have commercial substance
use Fair value approach (use FV of wut u receive or FV of sacrificing, whichever is more evident)if paid cash, new asset = FV given up + cash paidif receive cash, new asset = FV onlyA gave up asset (book 6k, FV old 20k, pay cash 4k) ,,, A give up total of 24k ,, Dr new asset 24k, Cr old book 6k, Cr Cash 4k, Cr Gain 14kA gave up asset (book 6k, FV old 20k, received 4k cash) Dr cash 8k Cr old book 6k , Dr new 12k since it already got 8k as cash , Cr gain 14k A gave up (book 6k, FV old 1k) ,,, Dr new 1k, Cr old 6k, dr loss 5k Has commercial substance , old cost 100k, old AD 40k, receive new asset (FV) 120k, received cash 30k ;; Dr cash 30k, Dr new asset 120k, Dr AD 40k, Cr old 100k, Cr gain 90k
272
Has commercial substance , old cost 100k, old AD 40k, receive new asset (FV) 120k, received cash 30k
Dr cash 30k, Dr new asset 120k, Dr AD 40k, Cr old 100k, Cr gain 90k
273
when an exchange lack commerical substance ?
use book value approach ( record new at book value of old + plus any cash paid) , ignore gain, recog loss A gave book value 10k, FV 2k ? recog the loss, Dr New at FV 2k, Cr old 10k, Dr Loss 8kException, when u received cash more than 20% total consideration, Dr cash 30k, Dr new PLUG , Cr old 126k, Cr gain 4800total consideration = new FV 120k + cash 30 = 150k old book value 126 ,, gain of 24k, however 30/150=20% , 20% of 24k gain is recog
274
Debt ratio =Return on assets = Return on equity =
Debt ratio = Total liabilities ÷ Total assetsReturn on assets = Net income ÷ Total assetsReturn on equity = Net income ÷ Stockholders’ equity
275
What is the amortization for the right of way for land
The right of way for the land has no expiration date, or useful life. An intangible asset that has an indefinite life should not be amortized until its useful life is determined to no longer be indefinite.
276
Which collection is reported as an investing activity in statement of cash flows?A. A tax refund.B. A note receivable from a related party.C. An overdue account receivable from a customer.D. Proceeds from a note payable.
Collection of proceeds from a note payable is an incurrence of debt. It is reported as a financing activity.Collection of an overdue account receivable from a customer is not related to the financing or investing activities of the business. Thus, it is reported in the operating activities section.Investing activities include making and collecting loans. Whether the debtor is a related party affects disclosure requirements, not the classification of the cash inflowCollection of a tax refund is not related to the financing or investing activities of the business. Thus, it is reported in the operating activities.
277
nonmonetary exchange , Bensol Co. and Sable Co. exchanged similar trucks with fair values in excess of carrying amounts. In addition, Bensol paid Sable to compensate for the difference in fair values. The boot paid was less than 25% of the fair value of the exchange. If the exchange lacked commercial substance, Sable recognizes
The receipt of boot is considered a partial culmination of an earning process requiring recognition of a partial gain. A gain is realized because the carrying amount of Sable’s truck was less than its fair value, and the total consideration received apparently equaled the fair value. The recognized gain equals the realized gain times the ratio of boot to total consideration received. However, if the boot is 25% or more of the fair value of the exchange, both parties record the transaction as a monetary exchange at fair value, with gains and losses recognized in full.
278
entry to record issue of convertible preff stock ?
Brad recorded the issue of the convertible preferred stock with this entry:dr Cash (5,000 shares × $110 market value)$550,000 cr Preferred stock (5,000 shares × $100 par value)$500,000 cr Additional paid-in capital -- preferred (difference)50,000Brad recorded the conversion as follows:dr Preferred stock (balance)$500,000dr Additional paid-in capital -- preferred (balance)$50,000cr Common stock (5,000 shares × 3 × $25 par value)$375,000 cr Additional paid-in capital -- common (difference)175,000
279
At the inception of the futures contracts vs end of year ?
GAAP require that derivative instruments be recorded as assets and liabilities and measured at fair value. At the inception of the futures contracts, their fair value was $0 because the contracts were entered into at the futures price at that date. On March 31, the fair value of the futures contracts is equal to the change in the futures price between the inception price and the price on the balance sheet date. Given that the futures contracts created an obligation to deliver 5 million lb. (25,000 lb. × 200 contracts) of copper at $0.83/lb. and that the price had risen to $0.85/lb. at the date of the financial statements, Copper Monkey should record a loss and a liability of $100,000 [5 million lb. × ($0.83 – $0.85)].
280
State and local governments are required to prepare and publish a comprehensive annual financial report (CAFR
State and local governments are required to prepare and publish a comprehensive annual financial report (CAFR). As a minimum, the CAFR should include (1) an introductory section, (2) MD&A, (3) the basic financial statements, (4) required supplementary information in addition to the MD&A, (5) combining and individual fund statements, (6) schedules, (7) narrative explanations, and (8) a statistical section. The basic financial statements should include (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. Thus, the statistical section is not a part of the basic financial statements.
281
nonmentary exchange, with commerical substance
record at FV of asset given up
282
On December 30, Devlin Co. sold goods to Jensen Co. for $10,000, under an arrangement in which (1) Jensen has an unlimited right of return and (2) Jensen's obligation to pay Devlin is contingent upon Jensen's reselling the goods. Past experience has shown that Jensen ordinarily resells 60% of goods and returns the other 40%. What amount should Devlin include in sales revenue for this transaction on its December 31 income statement?
$0This arrangement is not substantially different from a consignment. Devlin does not meet the requirements for a sale until Jensen has sold the goods.
283
accretion expense =
fair value of liability x credit adjusted risk free rate
284
A not-for-profit voluntary health and welfare entity should report a contribution for the construction of a new building as cash flows from which of the following in the statement of cash flows
Financing activities
285
On December 31 of the previous year, Jason Company adopted the dollar-value LIFO retail inventory method. Inventory data are as follows: LIFO Cost Retail Inventory, 12/31 previous year $360,000 $500,000Inventory, 12/31 current year -- 660,000Increase in price level for current year 10%Cost to retail ratio for current year 70&Under the LIFO retail method, Jason’s inventory at December 31 of the current year should be:
When applying the dollar-value LIFO retail method, you need to (as in dollar-value LIFO) restate ending-year retail to base-year prices:$660,000 ÷ 1.10 (1 + 10% increase) = $600,000This is a $100,000 increase in the ending-year retail amount over the retail amount at the beginning of the year (in base-year prices).Now, determine the ending inventory using dollar-value LIFO retail directly, by adding to the beginning inventory of $360,000 the new layer of $100,000 multiplied by both the new layer’s cost-to-retail percentage and the new layer price level of 1.1:$360,000 + ($100,000 × 0.7 × 1.1) = $437,000
286
Non monetary exchange when to PLUG ?
With CS : plug in G/LWithout CS::: new asset = book value of asset given up + cash paid - cash receivedwithout CS: plug in NEW asset;; thats why u have to cal G/L first based on % of cash receivedif cash received is 25% or more , treat it as CS recorded at FV
287
governmental funds
general, special revenue, capital projects, debt service, and permanent
288
proprietary funds
enterprise funds and internal service funds
289
A component unit
legally separate organization for which the primary government is financially accountablefinancial accountability exists if the separate organization (1) is financially dependent on the primary government and (2) has a financial benefit or burden relationship with the primary government.
290
Imposed nonexchange revenues.
Property taxes and fines ,forfeitures represent
291
where general long term lia report in gover?
general long term lia report in the governmental activity column of G WIDE;ex; general long term liabilitylong term lia is not recog on govern FUND
292
short term lia report in gover?
short term lia report in both gover WIDE and FUNDex: tax anticipation note, utility bond ( in enterprise fund)
293
wut is debt service fund ?
A debt service fund is created specifically to account for resources restricted, committed, or assigned to expenditure for principal and interest.
294
budgetary fund balance entry?
Dr estimated rev (asset, debit) Cr appropriation (lia) , amt authorized to spent for the government
295
encumbrance? entry?
to record commitments to purchase goods or services Dr encumbrance , Cr encumbrance outstadning
296
wut entry when govern issue purchase order?
Dr encumbrance, Cr encumbrance outstandingwhen goods received, reverse encumbrance entry , then book Dr expenditure, Cr voucher payable
297
in gover WIDE, wut is special items
Special items are significant transactions or other events within the control of management that are either unusual or infrequent. They are reported separately after extraordinary items.
298
expenditure for principal and interest in government fund r recognized when?
recog only when these amount r due
299
Imposed nonexchange revenues other than from property taxes recog wen in acctg period?
recognized at the same time as the recognition of the assets unless time requirements apply`
300
where to report construction in progress?
not in capital project fund, report it in gov WIDE
301
wut is budgetary comparison schedule?
it is a required supplementary information,contain orginal, final budget and actual inflow, outflow
302
property tax entry in gover FUND ?
DR Property taxes receivable -- current $600,000 Cr Property tax revenue 575,000 Cr Allowance for uncollectible property taxes -- current25,000
303
wut RSI include? where it present
it present in Annual Financial ReportRSI include: schedule, STAT, budgetary comparison schedule, 4) other information that is an essential part of financial reporting
304
in govern,a fund is
basic accounting unit,used to ensure fiscal compliance
305
private purpose trust fund
is not a special revenue fund
306
how to report prepaid insurance in govern FUND ?
(1) the purchases method, in which an expenditure is reported when the policy is purchased (2) the consumption method, in which an expenditure is reported when the asset is consumed.
307
when to use discrete presentation ?
when it is legally separated entity AND have no financial benefit or burden relationship
308
wut is correct approach to note in Govern FS ?
notes r essential in presentation focus on primary govern : 1) govern acti 2) busines acti 3) major funds , 4) nonmajor funds in aggregated
309
wut is a component unit of a goverN?
component unit is a legally separated entity a component unit must be blended OR discretely present A blended component unit is in effect the same as the primary government. Thus, its balances and transactions are reported in a manner similar to those of the primary government. Discrete presentation involves reporting component unit information in columns and rows separate from the information of the primary government.
310
wut statements r required for special purpose govern that engaged only in business type activities (utility) ?
the basic financial statements and RSI include (1) MD&A, (2) enterprise (proprietary) fund statements (statement of net position; statement of revenues, expenses, and changes in fund net position; and statement of cash flows), (3) notes, and (4) RSI other than MD&A.
311
three primary user groups of the external financial reports of a state government
citizen, lawmakers, and advocate group
312
when resources r actually available and measurable to recog in govern FUND ?
when it available and measurable , it can also include previous year amt, cuzz these were not available back thensale tax collected but not remited ( as long as it is within 60 days)
313
when does defer inflow of resource increases ?
when govern has legally enforceable right to levytreat it as unearn rev, debit defer inflow , cre revenue when the period begin for which property taxes are levied
314
intergovernmental revenue ?
should be included in estimated revenue
315
how to report interfund transfer in proprietary fund statement of rev, exp and changes in fund net position ?
should be reported separately after nonoperating revenues and expenses
316
CAFR , comprehensive annual financial report
CAFR = Indiana Farm Soybean = Infor section, Financial, StatInfor = Lot Of Nutrient = Letter, Organization Chart, NamesFina = Many Green Field Never Brown = MD&A n audit report, Government wide, Fund statement, Note, Budgetary scheduleStat= Farmer Rev Decrease During Oct = Financial trend, Rev capacity, Debt capacity, Demographics, Operating Infor
statistical section is not part of the basic financial statement
317
Stat is not
not part of basic financial statement
318
estimated rev should be reported where
Reported on the modified accrual basis of accounting in a budgetary comparison schedule or statement.
319
RSI other than MD&A is presented where and included wut
presented after the notes to the basic financial statements in a separate section of the CAFR(1) schedules, (2) statistical data, (3) budgetary comparison schedules, and (4) other information that is an essential part of financial reportingnot part of basic FS of govern
320
MD&A of govern
MDnA is required RSI and precede basic FS
321
estimated transfer to debt service fund shown up on the budget, how does this affect budgetary balance?
Dr Estimated Rev, Cr Appropriation, Cr Estimated other financing uses , Cr budgetary fund bal
322
fund bal changes =
do not include appropriation acc
323
encumbrance at year end ? entry ?
Dr encumbrance outstanding, Cr encumbrancethen reclass portion to assigned fund bal or commited fund bal[debit unassigned fund balance, and credit fund balance -- committed (or assigned)
324
wut to do with outstanding encmbrance at year end ?
Outstanding encumbered amounts at year end are reclassified from unassigned fund balance to committed or assigned fund balance (as appropriate). If the constraint on the use of resources was imposed by the government’s highest decision maker, the amounts are reclassified as fund balance -- committed. Thus, encumbrances are never reported in the body of the statements. However, significant encumbrances are disclosed in the notes.
325
wut is da focus of major fundS?
focus on governmental and enterprise fundmajor if 10% governmental, 5% enterprise
326
bond anticipation note issued at face, and proceeds was placed in capital project fund, entry ?
Dr cash, cr bond anticipation note payablereport in capital project FUND, and gover WIDEreport ONLY in govern ACTIVITY column if (1) all legal steps have been taken to refinance the notes and (2) the intent is supported by an ability to consummate the refinancing on a long-term basis
327
using modified approach in govern,
no need to depreciate the asset
328
infrastructure asset in govern?
do not need to be depreciated
329
governmental activity column
general capital asset and general long term lialia: general oli bond, compensated absences, salaries payable
330
business type activity column
enterprise fund, internal fund report in govern ACTIVITY if they r mainly serve government
331
fiduciary fund in govrn WIDE ?
government WIDE does not report fiduciary fund
332
long-term liabilities are directly related to and expected to be paid from a proprietary fund, such as an enterprise fund, where to report ?
in the proprietary fund and govern WIDE NET POSITION,NOT ON GOVERN WIDE, cuzz these lia r specific fund lia
333
Reconciling the net increase in fund balance to the change in net position for governmental activities
requires adding $6,000 ($9,000 modified accrual basis expenditure – $3,000 accrual basis expense). The change in net position is $7,500 ($1,500 + $6,000 reconciling item).
334
reconciliation for fund balance / balance sheet
GALS BARE = GRASPP fund bal + asset (non curr) - lia (non curr) + service fund bal from Internal service
335
reconciliation for fund balance / income statement
GOES BARE = GRASPP change in fund balance - other financing sources + expenditure from capital outlay (net of depre) + service income from internal service revTo remember where the additions and subtractions go, I just think of the movie 21 Jump Street. The number 21 will tell me when to subtract. I subtract the 2nd item in GALS and the 1st item in GOES
336
a reconciliation for govern WIDE and fund statement report where
at the bottom of fund statements
337
net investment in capital asset
net position include = net investment , restricted net position , unrestricted net positioncapital asset only (no inventory) cost of truck - AD - outstanding debt related to truck
338
a defer outflow of resources from an enterprise fund is ?
is not lia, it is a consumption of net assets that applies to a future period, not a lia
339
internal service fund received an interfund transfer of 100k in cash from general fund, how to report this in proprietary fund ?
the final item b4 the change in statement of rev, expe and change in fund net positionfor governmental fund, it is a other financing use
340
FS for proprietary fund ?
emphasize of operating income, changes in net position, financial position and CF (direct CF is required)net position = [(assets + deferred outflows of resources) – (liabilities + deferred inflows of resources) = net position]
341
CF of proprietary fund ?
operatingnon cap and cap related financing (grants, tax receips, debt proceeds, cash received or paid to other fund)investing: making, collecting loan, acquiring and disposing debt and equity instruments, interest, dividends received as return on loans
342
public benefit corporation
proprietary fund
343
in proprietary fund, cash outlay for parking meter, depreciation of parking meter is ?
cash outlay for parking meter is NOT operating expense, it is capital and related financing activitydepreciation of parking = operating expense
344
enterprise fund received a unrestricted grant, wut is this ?
nonoperating rev
345
wut FS r required for fiduciary ?
statement of fiduciary net positionstatement of changes in fiduciary net position ( take out agency fund, total addition, total decution and change in net position)
346
wut FS is required for gover FUND ?
statement of rev, expenditure and changes in fund balances
347
a defined contribution pension plan must report
include class of employee coveredemployer , employee obligation to contribute
348
reconciliation of the statement of revenues, expenditures, and changes in fund balances to the government-wide statement of activities
add capital asset purchasedadd payment of long term debt principaladd internal service fund subtract book value of capital asset sold
349
general capital asset report where ?
r all capital ssets not reproted in proprietary fund or fiduciary fund.report only in governmental activities column of WIDE
350
if agency fund received 1% fee, how to record this ?
due to general fund, since agency fund do not recog rev
351
govern WIDE statement of activities
may not be required to allocate depreciation
352
state appropriations to a state university ? wut is this in proprietary fund ?
nonoperating rev
353
combining fund statements are
part of the comprehensive financial report but not part of the basic financial statements.
354
nonmajor fudn
As a nonmajor fund, the financial information for the Road Tax fund is combined with other nonmajor funds in the basic financial statements. Individual fund financial statements would be required to demonstrate compliance with state law in this case. Whether shown in RSI or as part of the basic financial statements, the budgetary data would not otherwise show the details of individual, nonmajor funds. In combining nonmajor funds, it does not matter if only one of the governmental funds was a special revenue fund. Because the focus of fund financial reporting is on major funds, nonmajor funds should be aggregated and do not need to be shown individually.
355
defer income tax expense
The temporary difference generated in the year is the noncurrent part of the tax expenseget the temp diff * rate
356
govern allocate indirect expenses, where to report?
in a column separate from the direct expenses to enhance comparability with other governments Special and extraordinary expenses are reported separately at the bottom of the statement of activities.
357
expected postretirement health care benefit period
begins at employee's date of hire and ends at the full eligibility date
358
depreciable life in lease ?
Douglas Co. should capitalize the lease because the lease term (five years) is equal to 83% (equal to or more than 75%) of the economic life (six years). Under a capital lease, the lease is depreciated using the life of the lease if the 75% or 90% of fair market value criteria are met. If the lease transfers ownership or has a bargain purchase, the life of the asset is used to determine depreciation. (FASB ASC 840-30-35-1)
359
interest capitalization
using the remaining months, just like outstanding common stock calculation for EPS, divide by 12, even though it close at Jun 30
360
capitalized software cost ?
you do the usual amortization, then compare the carry amount vs the net realizable value , pick lower of 2 , so the total expense = the depreciation + the loss write down ( let say carry amount at yr end is 45 vs NRV of 15)
361
a convertible debt securities has wut interest compared to nonconvertible debt ?
a convertible debt securities has lower interset than nonconvertible debt
362
allocation of detachable stock warrant , effect?
decrease premium and increase discount
363
apic of treasury stock
if it has not previously reissued TS, it has zero balance in APIC to offset the loss
364
when scrip dividend is declared?
When a scrip dividend is declared, retained earnings should be debited and scrip dividends (or notes) payable should be credited for the amount of the dividend ($100,000) excluding interest. Interest accrued on the scrip dividend is recorded as a debit to interest expense up to the balance sheet date with a corresponding credit for interest payable. Thus, interest expense will be debited and interest payable credited for $7,500 [$100,000 × 10% × (9 months ÷ 12 months)] on 10/31/Year 3.
365
a 30% stock dividend is declared, effect ?
no effect on total equity because a portion of RE is reclassified as contributed capital
366
capital lease lia at year 2, payment is made at year end Dec 31.signed lease at dec 31 yr 1, 50 payment at Dec 31was to be 10%, was $316,5012% was $298,500.
Present value of NINE lease payments at December 31, 20X1 (at implicit rate) $316,500Less December 31, 20X1 payment 50,000 --------Present value of lease obligation at beginning of 20X2 $266,500Add 20X2 interest at 10% (.10 x 266,500) 26,650 --------Lease obligation prior to 12/31/X2 payment $293,150Less December 31, 20X2, payment 50,000 --------Capital lease liability on 12/31/X2 balance sheet $243,150
367
a complete set of FS for NFP
statement of financial postion as of end of periodstatement of activitiesstatement of CFnoteemphasize infor about entity as a whole
368
net asset in NFP
net asset without donor restriction and net asset with donor restriction
369
financing activities in NFP
include receipts of restricted resources that by donor stipulation must be used for long term purpose
370
non cash investing and financing report where ?
report in the related disclosure,ex: obtaining asset by assuming lia, exchanging noncash asset or lia for another
371
functional expenses
program services, management & general , and fundraising
372
program expenses
relate directly to the mission include direct and allocation of indirect cost
373
supporting expenses
management & general + fundraising + membership development
374
professional roofer repair the roof, how to recog ?
an increase in expense and increase in contribution from donated services
375
if investment applies Uniform Prudent Management of Institutional Funds Act (UPMIFA)
without other language in the gift instrument, the assets in the fund (including the return) are net assets with donor restrictions until appropriation.
376
investment in common s tock and investment in debt securities measure at ?
fair value , even for BOND. G/L reported in statement of actvities
377
G/L on investment purchased with net asset with donor restriction ? report where
unless explicitly restricted by donor or law, G/L report in statement of activities as increase or decrease in net asset without donor restrictions
378
wut is net patient service formula
gross rev - charity care - contractual adj ,;; remember to ignore provision for bad debt
379
when supplier cancel invoice
debit payable, credit other operating revenue
380
NFP healthcare entity FS
statement of financial postion as of end of periodstatement of activitiesstatement of CFstatement of changes in net asset
381
construction in progress consist of
construction in progress consist of contract costs incurred to date plus estimated profit
382
Richter had previously recorded $300,000 of goodwill related to an acquisition. At December 31, Year 1, the carrying value of the identifiable net assets acquired exceeded their fair value by $50,000. The implied fair value of the goodwill was $310,000. Prepare the journal entry, if any, to adjust the carrying value of goodwill.
because implied fair value is higher than carry amount, it will not be written down
383
contingency for general business decline in the future?
General or unspecified business risks do not meet the conditions for accrual and no accrual for a loss should be made. The conditions for accrual are (1) the amount of the loss can be reasonably estimated and (2) it is probable that an asset had been impaired or a liability has been incurred.
384
Cost of parking lot for new warehouse
Capitalize and depreciate
Costs incurred to construct parking lots are considered land improvement costs. These costs are set up in a separate Land Improvement account, and depreciated over their useful lives. The invoice from Three Brothers Construction shows the cost of the parking lot construction to be $90,000.
385
criteria that identify operating segment that can be combined
n applying these criteria, operating segments may be combined in order to meet these criteria if they have the following similar characteristics:
Nature of products and services
Nature of the production processes
Type or class of customer
Distribution methods for products or services
Nature of regulatory environment (if appropriate)
386
On March 1, 20X0, Fine Co. borrowed $10,000 and signed a 2-year note bearing interest at 12% per annum compounded annually. Interest is payable in full at maturity on February 28, 20X2. What amount should Fine report as a liability for accrued interest on December 31, 20X1?
Accrued interest on December 31, 20X1:
For 20X0: $10,000 x .12 x (10/12) = $1,000
For 20X1: ($10,000 + $1,000) x .12 = 1,320
------
Total $2,320
387
unrecognized prior service costThis arrangement is not substantially different from a consignment. Devlin does not meet the requirements for a sale until Jensen has sold the goods
When plan amendments are made, additional benefits are sometimes applied retroactively to employees for service rendered in prior years. This increase in the benefits to be paid to employees represents a cost to the employer. GAAP requires that this cost be recognized as a component of net periodic pension cost over the remaining service years of the affected employees. FASB ASC 715-30-25-4 requires that the unrecognized prior service cost be recognized as a component of other comprehensive income. The amortization of the unrecognized prior service cost is recognized as an increase in net periodic pension cost and as a reduction of the unrecognized amount remaining in accumulated other comprehensive income.
Prior service costs $600,000
Expected service years / 2,000
Cost per service year $ 300
Service years completed this year x 350
Unrecognized prior service cost amortization $105,000
388
employer accrual for payroll tax
Employer's payroll taxes do not include amounts withheld from employee pay. Employer payroll taxes include:
the employer's matching share of FICA taxes ($80,000 × 0.07 = $5,600) and
unemployment taxes ($20,000 × 0.03 = $600),
for a total of $6,200 ($5,600 + $600).
389
On December 30, Devlin Co. sold goods to Jensen Co. for $10,000, under an arrangement in which (1) Jensen has an unlimited right of return and (2) Jensen's obligation to pay Devlin is contingent upon Jensen's reselling the goods. Past experience has shown that Jensen ordinarily resells 60% of goods and returns the other 40%. What amount should Devlin include in sales revenue for this transaction on its December 31 income statement?
This arrangement is not substantially different from a consignment. Devlin does not meet the requirements for a sale until Jensen has sold the goods
390
conditions for accrual of employee compensation for future absences
Four conditions are necessary for accrual of employees' compensation for future absences according to provisions in FASB ASC 710-10-25-1. The four conditions are:
rights to compensation vest or accumulate,
payment of compensation is probable,
amount of payment can be reasonably estimated, and
the compensation is attributable to employees' services already rendered.
391
different between gross and net reporting
The difference between gross and net reporting is that at gross reporting, the discounts are not recognized in the carrying values of the accounts until payment is made. Thus, the accounts in question will be carried at their full gross amounts due (not less the discount available).
The account that will be affected by the change is the accounts payable account that keeps track of the payments still due, at their full gross amount due of $30,000. The purchases already paid for have been adjusted for any available discount and do not require adjustment now. Any expired discounts are also no longer available and any purchases they relate to should stay at gross amounts due. The unexpired discounts that are still available to take, the $200, should be adjusted into the carrying value of accounts payable now still outstanding, and that is the only adjustment to make.
Thus, what needs to be done is to restate accounts payable down by the $200 unexpired discounts, from $30,000 to $29,800.
392
Gem City's internal service fund received $50,000 cash from the general fund that does not need to be repaid. This should be reported in Gem's internal service fund as a credit to:
Inflows of assets from other funds without a requirement for repayment are considered interfund transfers. In proprietary funds (which include internal service funds), transfers should be reported separately after nonoperating revenues and expenses in the statement of revenues, expenses and changes in fund net position. An interfund transfer to/from a governmental fund should be reported as “other financing sources or uses” in the governmental fund.
393
payment of principal on long term debt
Because the governmental funds have the measurement focus of current financial resources, all three disbursements ($900,000) would be reported as expenditures. Because governmental funds do not account for noncurrent assets or liabilities, the purchase of equipment ($300,000) and the payment of principal on long-term debt ($100,000) are fund expenditures, as well as the payments to vendors ($500,000)
394
Jorge sells $150,000 of product to Wilson, and also purchases $25,000 of advertising services from Wilson. The advertising services have a fair value of $20,000. Jorge should record revenue on its sale of product to Wilson of:
An entity should recognize a refund liability if it receives consideration from a customer and expects to refund some or all of that consideration to the customer. A refund liability is measured at the amount of consideration received or receivable for which the entity does not expect to be entitled; that is, amounts not included in the transaction price. The refund liability and corresponding change in the transaction price, and therefore the contract liability, should be updated at the end of each reporting period for changes in circumstances.
Jorge is paying more for advertising services than the fair value of those services, so the excess of $5,000 ($25,000 price paid – $20,000 fair value) is a refund of part of the $150,000 sale. Therefore, Jorge records revenue of $145,000 ($150,000 – $5,000).
395
The Dunstown County general fund received a notice of a federal grant award for an expenditure-driven (reimbursement) grant in the amount of $1,000,000. Included with the notice was an advance of $250,000. During the year, the County incurred $400,000 of qualifying eligible grant expenditures and no additional money had been received from the grantor.
What amount of grant revenues would be reported for the year by the general fund?
On the modified accrual basis, revenues should be recognized when all applicable eligibility requirements are met and the resources are available. The $400,000 of qualifying eligible grant expenditures would be recognized as revenues during the period. A receivable of $150,000 from the federal agency would be shown as an asset.
396
net operating margin
net operating margin = operating income / sales .
| Operating income = sale less COGS less operating expenses
397
Ajax Corp. has an effective tax rate of 30%. On January 1 of the current year, Ajax purchased equipment for $100,000. The equipment has a useful life of 10 years. What amount of current tax benefit will Ajax realize during the year by using the 150%-declining-balance method of depreciation for tax purposes instead of the straight-line method?
Ajax will realize $1,500 of current tax benefit using the 150%-declining-balance method:
Tax benefit of 150%-declining-balance
($100,000 x .15 = $15,000;
$15,000 x .30) $4,500
Tax benefit of straight-line
($100,000 / 10 = $10,000;
$10,000 x .30) 3,000
Benefit of using 150%-declining-balance $1,500
398
apply dollar value LIFO method
When applying the dollar-value LIFO retail method, you need to (as in dollar-value LIFO) restate ending-year retail to base-year prices:
$660,000 ÷ 1.10 (1 + 10% increase) = $600,000
This is a $100,000 increase in the ending-year retail amount over the retail amount at the beginning of the year (in base-year prices).
Now, determine the ending inventory using dollar-value LIFO retail directly, by adding to the beginning inventory of $360,000 the new layer of $100,000 multiplied by both the new layer’s cost-to-retail percentage and the new layer price level of 1.1:
$360,000 + ($100,000 × 0.7 × 1.1) = $437,000
399
what to note when calculating weighted average number of share
Weighted-average number of shares is determined by relating (a) the portion of time within a reporting period that common shares have been outstanding to (b) the total time in that period. In computing weighted-average number of shares (also called weighted-average common shares), retroactive application is given to stock splits, stock dividends, and shares of common stock issued in a business combination accounted for as a pooling of interests (i.e., they are treated as if they were outstanding for all of any periods presented)
400
profit on sale type lease and interest revenue
When accounting for a capital lease from the perspective of the lessor, one needs to decide if the lease is sales type or direct financing. In a sales-type lease, there is an element of gross profit recognized by the lessor at the beginning of the lease, generally based on the difference between the sales price and the cost of the item to the lessor.
Here that gross profit recognized immediately is $720,000, the difference between the selling price and the cost of the equipment ($3,520,000 – $2,800,000). After the first payment is received, the remaining lease obligation will be paid like a long-term liability, with interest accruing on the unpaid balance. The unpaid balance for the first year is generally the difference between the selling price and the rent payment (when the payment is made at the start of the year). The unpaid balance for interest to accrue on is thus $2,920,000 ($3,520,000 – $600,000). The interest accrues from the payment in July to the end of the year, thus $146,000 ($2,920,000 × 0.1 × 6/12)
401
Which of the following should not be disclosed in an enterprise's statement of cash flows prepared using the indirect method?
Cash flow per share should not be disclosed under either the direct or indirect method. FASB ASC 230-10-45-3 is very specific concerning per share cash flow disclosures: "Financial statements shall not report an amount of cash flow per share."
402
The letter of transmittal and the statistical section are classified as:
The letter of transmittal and the statistical section required for a CAFR and GFOA's certificate are neither basic statements nor required supplemental information.
403
Orleans Co., a cash-basis taxpayer, prepares accrual-basis financial statements. In its current-year balance sheet, Orleans’ deferred income tax liabilities increased compared to the previous year. Which of the following changes would cause this increase in deferred income tax liabilities?
An increase in prepaid insurance
An increase in rent receivable
An increase in warranty obligations
Deferred income tax liabilities are caused by items that defer payment of taxes, which cause more taxes to be paid in later years than the income tax expense taken currently. An increase in prepaid insurance can lower taxes now by adding to the expenses deductible, and cause deferral of taxes to the future, so it would qualify a change that would increase deferred tax liabilities.
An increase in rent receivable, a pushing forward of the receipt of the rent in cash (when it will be taxed), can also defer taxes to the future and add to later taxes due, so it would also increase deferred tax liabilities.
An increase in warranty obligations means one is pushing forward the paying of the expense in cash (which allows the deduction), and this would lower taxes in the future, not add to the future liabilities.
All deferred tax assets and liabilities are classified as noncurrent on the balance sheet.
404
The functional currency of Nash, Inc.’s, subsidiary is the euro. Nash borrowed euros as a partial hedge of its investment in the subsidiary. In preparing consolidated financial statements, Nash’s translation loss on its investment in the subsidiary exceeded its exchange gain on the borrowing. How should the effects of the loss and gain be reported in Nash’s consolidated financial statements?
Both of the items involved, the translation loss on the investment in the subsidiary and the partial hedge through the borrowing of euros, are items that will be reported in other comprehensive income. Since one is a gain and the other is a loss, the net effect of both is reported in other comprehensive income.
405
To determine the accounting treatment for a transaction, a governmental entity must first refer to:
GASB Statements are in category A of the governmental GAAP hierarchy.
406
merchandise sold at 25% mark up, what is the COGS ?
x = COGS
x * 1.15 = Sale ,
COGS = sale / 1.25
407
the government wide statement of activities explan changes in
The government-wide statement of activities explains changes in total net position. Retained earnings, net income, and equity are terms that apply to for-profit entities.
408
how to convert mark up on cost % to gross profit %
gross profit % = (markup on cost % ) / (100+markup)
409
gross profit % to COGS ?
gross profit % = 20%
| COGS = 80%
