FAR Study Questions

faithful representation and completeness

According to the FASB conceptual framework, which of the following correctly pairs a primary qualitative characteristic of accounting information with one of its components?

275,000 Under 'from year 2 sales , add yest 2 = 200,000, and year 3 column from year 2 sales 75,000. Accrual-based revenue for Year 2 is the row titled, "From Year 2 sales" (200,000 + 75,000) regardless of when cash is received.

A company provides the following information: Year 1 Year 2 Year 3 Cash receipts from customers: From Year 1 sales $95,000 $120,000From Year 2 sales 200,000 $ 75,000From Year 3 sales 50,000 225,000 What is the accrual-based revenue for Year 2?

In the government-wide statement of net position in the governmental activities column. The noncurrent portion of leases financed by the general government is reported as general long-term liability. General long-term liabilities should be reported in the governmental activities column in the government-wide statement of net position.

A county acquired equipment through a lease agreement dated July 31, 20X1. The lease payments are to be financed with general government resources. Where should the noncurrent portion of the lease be reported in the June 30, 20X2, financial statements?

net assets with donor restrictions

A donor gives $10,000 to a nongovernmental, not-for-profit organization with instructions that it must be used to fund the organization's general operating expenses during the following fiscal year. The donation will increase the organization's: - net assets without donor restrictions. - net assets with donor restrictions. - restricted net assets. - restricted retained earnings.

fair value donor's book value promises are not considered revenue!!!!!!!!!

Contributions revenue should be measured at ________, not ________.

In operating activities as a deduction from income The cash proceeds from a sale of used equipment would be treated as a cash inflow from investing activities. Since these cash proceeds include both carrying value of the equipment and the gain from the sale, this gain would need to be deducted from income in order to avoid "double counting".

How should a gain from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method?

allowance account is contra asset. allowance account should be treated as a liability, whereas you keep the same sign for the operating activities.

increase in allowance for uncollectible accounts (cash flows provided by operating activities)

40

large accelerated filers & accelerated filers must file their form 10-Q within __ days of quarter end. large accelerated filers >700 million accelerated filers >75 million but <700 million & at least 100 million in annual revenues

A basis of accounting that the entity uses to comply with the requirements or financial reporting provisions of a regulatory agency whose jur

regulatory basis

Fiduciary funds and fiduciary component units are not reported in the government-wide financial statements. Fiduciary funds and component units represent assets held in a trust or custodial capacity by the government. They may not be used to support government programs and, as such, are NOT reported in the government-wide financial statements. Custodial funds are required to report a statement of changes in net position in the fund financial statements. Private-purpose trust funds are fiduciary funds, not governmental funds. Investment trust funds do not report revenues and expenses in the statement of changes in net position; additions and deductions are reported.

Which of the following statements regarding fiduciary funds is true?

residual interest

what is the appropriate characterization of the net assets of a nongovernmental not-for-profit organization?

decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of the decrease in the first quarter.

An inventory loss from a market price decline occurred in the first quarter, and the decline was not expected to reverse during the fiscal year. However, in the third quarter the inventory's market price recovery exceeded the market decline that occurred in the first quarter. For interim financial reporting, the dollar amount of net inventory should:

reporting segments SFAC 8 provides a summary of potential additional disclosures for assets and liabilities resulting from financial instruments or other contracts: the contractural or legal terms (e.g. timing of receipts & disbursements, degree of credit or nonperformance risk, potential effect related to inability to pay or perform & method used to determine the cash flows. Reporting segments are not one of the suggested disclosure items.

Contractual asset or liability disclosures identified in Statement of Financial Accounting Concepts 8 (SFAC 8), Chapter 8, include all of the following except: reporting segments. legal terms. degree of nonperformance risk. method used to calculate the cash flow.

Therefore, 12,500 would be recorded as contribution revenue (8000 + 4500 = 12500).

Contribution revenue and assets or expenses should be reported for donated services if: - special skills are required to perform the service. - the individual providing the service has those special skills, and - the organization would have to buy the services if they were not donated.

Handled as a change in estimate in form of a charge in accounting principle This circumstance would be reported as a cumulative effect of change in accounting principle. The financial statements are no restated

Gains and Losses classifications: Change from double-declining balance depreciation to straight-line depreciation

Other income or expense Infrequent and/or unusual items are reported as Nonoperating income or Expense.

Gains and Losses classifications: Effects of a long-term strike.

Discontinued operations Discontinued operations reflect the results of operations of a component that has been sold or is held for sale. The impairment loss is part of the discontinued operations amount.

Gains and Losses classifications: Impairment loss associated with writing down a component unit to its fair value before sale

Other income or expense Infrequent and/or unusual items are reported as Nonoperating income or Expense. This gain is an infrequent item for the company, but it is not unusual to sell land at a gain.

Gains and Losses classifications: Land at book value of 100,000 is sold for 120,000.

Other income or expense Infrequent and/or unusual items are reported as Nonoperating income or Expense. This loss is not unusual (but could be considered infrequent) as the business is located in Florida.

Gains and Losses classifications: Total destruction of a warehouse by hurricane in Florida

Form 10-Q SEC Form 10-Q is the quarterly report and would be used to file interim information. Form 10-K is the required annual report. SEC Form S-1 is the initial registration form for new securities required by the SEC for public companies. The SEC requires that shareholders of a company whose securities are registered under Section 12 of the Securities Exchange Act of 1934 receive a proxy statement (pursuant to Section 14(a)) prior to an annual or special meeting.

Which of the following reports would a company file to meet the U.S. Securities and Exchange Commission's requirements for unaudited, interim financial statements reviewed by an independent accountant? Form 10-Q Form 10-K 14A Proxy Statement Form S-1

0 available for sale securities are carried at FAIR VALUE on the balance sheet. Unrealized changes in fair value between periods are reported in OCI for the period. Gains and losses are not reported on the income statement, until they are REALIZED. Items in OCI are reported NET OF TAX. Dodd would recognize $0 in gain on its income statement. The unrealized gain in OCI is 4,800 (6,000 gain x (1-0.20 tax rate)).

Dodd Co.'s debt securities at December 31 included available-for-sale securities with a cost basis of $24,000 and a fair value of $30,000. Dodd's income tax rate was 20%. What amount of unrealized gain or loss should Dodd recognize in its income statement at December 31?

200,000 net income - (8000 x $20 x 10%) = 184,000 184,000 / 25,000 shares = $7.36 per common share

During the current year, Comma Co. had outstanding: 25,000 shares of common stock, 8,000 shares of $20 par, 10% cumulative preferred stock, and 3,000 bonds that are $1,000 par and 9% convertible. The bonds were originally issued at par, and each bond was convertible into 30 shares of common stock. During the year, net income was $200,000, no dividends were declared, and the tax rate was 30%. What amount was Comma's basic earnings per share for the current year?

25,000 An estimate of the effective tax rate expected for the annual period is made at the end of each interim period. This rate is used in providing for income taxes on a current year-to-date basis. Worth should use its expected rate of 25%: $100,000 × 0.25 = $25,000.

During the first quarter of the calendar year, Worth Co. had income before taxes of $100,000 and its effective income tax rate was 15%. Worth's effective annual income tax rate for the previous year was 30%. Worth expects that its effective annual income tax rate for the current year will be 25%. The statutory tax rate for the current year is 35%. In its first-quarter interim income statement, what amount of income tax expense should Worth report?

When a new partner is admitted by investing into the partnership, the total capital of the partnership changes, and the purchase price (amount of new investment) can be equal to, more than, or less than book value. When the purchase price = the book value, no goodwill or bonuses are recorded. When the purchase price is MORE or LESS than book value, either goodwill or bonuses must be recorded. The total capital of the resulting new partnership determines whether goodwill or bonuses are recorded. Under the goodwill approach, goodwill is recognized on the basis of the total value of the new partnership implied by the new partner's investment relative to the partner's total capital. Under the bonus approach, such implied value is not considered. In this problem, the assets are revalued, suggesting that goodwill is being recorded. In this problem, the assets are revalued, suggesting that goodwill IS being recorded. Implied value after new investment: 20,000 represents 25% of total value (Robb's investment) Therefore, the implied total value is 120,000 (30,000 / 0.25). Implied value = 120,000 Total partner's capital accounts = (100,000) = from (45k share + 25k share + 30k Robb's share) Goodwill to original partners = 20,000

Eagle and Falk are partners with capital balances of $45,000 and $25,000, respectively. They agree to admit Robb as a partner. After the assets of the partnership are revalued, Robb will have a 25% interest in capital and profits, for an investment of $30,000. What amount should be recorded as goodwill to the original partners?

such as local denomination demand deposits, do not require further explanatory information. However, other line items require varying degrees of disclosure. A summary of potential additional disclosures is as follows: ASSETS = the nature, quality and location, future cash flows, relation to other line items, & significant contractual, statutory, regulatory, or judicial restrictions. ASSETS & LIABILITIES = resulting from financial instruments or other contracts, contractual or legal terms (ex. timing of receipts & disbursements), degree of credit or nonperformance risk, potential effect related to inability to pay or perform, & method used to determine the cash flows.

Financial statement line item explanations...

E2 + D3 carrying amount for year 2 = carrying amt for year 1 + discount amort for year 2

Foley Co. is preparing the electronic spreadsheet below to amortize the discount on its 10-year, 6%, $100,000 bonds payable. Bonds were issued on December 31 to yield 8%. Interest is paid annually. Foley uses the effective interest method to amortize bond discounts. A B C D E carrying amount 1 Yr Cash paid Int exp discount amort carr amt 2 1 86580 3 2 6000 Which formula should Foley use in cell E3 to calculate the bonds' carrying amount at the end of Year 2?

Cumulative effect of change in accounting principles The circumstance would be reported as a cumulative effect of change in accounting principle. The financial statements are not restated, but the retained earnings statement includes the cumulative effect of the change on retained earnings for the period(s) at the beginning of the period in which the change is made.

Gains and Losses classifications: Change from completed contracts method of revenue recognition to percentage-of-completion method

300000*0.05 = 15,000 annual interest expense. The annual interest expense is multiplied by the tax rate & then that amount is subtracted from the annual interest expense to arrive at after-tax interest expense (15,000*(1-0.35) = 5,250 income tax expense). After tax interest expense = 15,000-5,250 = 9750.

Glinko Corporation has convertible bonds as part of its capital structure. The bonds were issued at par and have a face value of $300,000. The interest rate on the bonds is 5%. If Glinko has an income tax rate of 35%, what is the amount that will be added to the numerator in the computation of diluted earnings per share?

indirect method in this method, only the inc in inventory and the dec in accounts payable affect operating activities. (Mortgage payment & bonds issued = financing activities) net income = 70,000 inventory increase = (40,000) accounts payable decrease = (30,000) net cash provided by operating activities = $0

Paper Co. had net income of $70,000 during the year. Dividend payment was $10,000. The following information is available: Mortgage repayment $20,000 Bonds payable--issued 50,000 increase Inventory 40,000 increase Accounts payable 30,000 decrease What amount should Paper report as net cash provided by operating activities in its statement of cash flows for the year?

be displayed in a financial statement that has the same prominence as other financial statements. FASB requires that all items that are recognized as components of comprehensive income be reported in a financial statement that has the same prominence as other financial statements. However, the FASB does not prescribe a specific format for the display of such information.

When a full set of general purpose financial statements are presented, comprehensive income and its components should: - appear as a part of discontinued operations and cumulative effect of a change in accounting principle. - be reported net of related income tax effect, in total and individually. - appear in a supplemental schedule in the notes to the financial statements. - be displayed in a financial statement that has the same prominence as other financial statements.

Decreases both accounts receivable and the allowance for uncollectible accounts. Typical J/E under the allowance method include: Bad debt expense Allowance for uncollectible accts (to recognize periodic uncollectible accounts expense and provide allowance) Allowance for uncollectible accts Accts receivable (to write off uncollectible account) **When an account is written off both accounts receivable and allowance for uncollectible accounts are decreased.**

When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account:

Both I and II Other than GAAP, accounting bases that may be used to prepare financial statements in comformity with a comprehensive basis of accounting other than GAAP: 1 - cash basis 2 - tax (income) basis 3 - regulatory basis 4 - contractual basis 5 - other basis (Note - both the income tax (tax (income basis) and cash (cash basis) bases are on this list.

Which of the following accounting bases may be used to prepare financial statements in conformity with a comprehensive basis of accounting other than generally accepted accounting principles (also known as a special purpose framework)? I. Basis of accounting used by an entity to file its income tax return II. Cash receipts and disbursements basis of accounting

in the period received at fair value Unconditional contributions, whether promised or received as cash, are recognized as revenue in the period received. Contributions revenue should be measured at fair value, not donor's book value. Donor intentions to give, rather than unconditional promises, are not considered revenue.

Which of the following best describes a situation in which an unconditional contribution should be recognized as revenue by a private not-for-profit organization?

Cumulative effect of a change in accounting estimate The components of other comprehensive income are to be presented based on their nature. Under current authoritative accounting literature, three categories of elements of other comprehensive income exist: 1 - unrealized gains and losses on available-for-sale debt investments 2 - foreign currency items 3 - changes in unrecognized prior service costs, unrecognized gains and losses, and unrecognized transition assets or obligations related to defined benefit pension plans and defined benefit other postretirement plans

Which of the following does NOT represent an element of other comprehensive income under generally accepted accounting principles?

Modified cash basis of accounting where some fixed assets are capitalized while others are expensed. Financial statements may be prepared using a comprehensive basis of accounting other than GAAP (often referred to as a special purpose framework). For the modified cash basis to be an acceptable form, the modifications must be applied logically and consistently. Capitalizing some fixed assets while expensing others would not represent a consistent or logical application of the framework.

Which of the following is not a special-purpose framework? Modified cash basis of accounting where some fixed assets are capitalized while others are expensed Basis of accounting used by an entity to file its income tax return Cash receipts and disbursements basis of accounting Basis of accounting used by an entity to comply with the financial reporting requirements of a government regulatory agency

When a company has a large number of the same kind of assets, it is appropriate to use the group depreciation method but not the composite depreciation method. Group depreciation is used when many of the same type of assets are used by a company (e.g. telephone poles). Composite depreciation is used for assets that are similar but not the same (e.g. cars and trucks). Therefore, the only correct statement indicates that group depreciation will be used when there are many of the same type of asset.

Which of the following statements about group and composite depreciation is true?

An item is included in gross income for the year in which it is earned. The accrual method for tax purposes is, for the most part, the same as the accrual method required by GAAP. An item is included in gross income for the year in which it is earned. A deduction can be recognized when: - all the events have occurred to create the liability & - the amount of the liability can be determined with reasonable accuracy.

Which of the following statements about the accrual basis of determining taxable income is true? Increases in accounts receivable are not included in gross income. An item is included in gross income for the year in which it is earned. Property or services received are included in gross income when actually or constructively received. None of the answer choices are true statements regarding the accrual method.

GAAP applicable to nonbusiness organizations differ significantly from those applicable to business enterprises and among the various types of nonbusiness organizations.

Which of the following statements is true? GAAP applicable to nonbusiness organizations differ significantly from those applicable to business enterprises. Applicable GAAP differ significantly among the various types of nonbusiness organizations. GAAP applicable to nonbusiness organizations differ significantly from those applicable to business enterprises and among the various types of nonbusiness organizations. None of the answer choices are correct.

teacher salaries

Which of the following would a nongovernmental not-for-profit educational institution report as program services? Publicity costs Teacher salaries Management salaries Fundraising expenses

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 PREVIOUS RECOGNIZED LOSSES. So if the loss in a prior period was 10, the gain in another period cannot exceed 10. 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.

inventory losses from market declines

net income + deprec expense - gain on sale of equipment = cash provided by operating activities. exclude: the decrease in fixed assets, capital expenditures, and proceeds from the sale of equipment (bcs they're all investing activities).

when doing cash flows provided from operating activities, add depreciation expense, and SUBTRACT any gains. (think of gains as an asset, where you do the opposite, gain is a plus, so we subtract it out.

when the pledge conditions are met

when should a conditional pledge to nongovernmental not-for-profit organization be recognized as revenue?

Degree of credit or nonperformance risk

Financial statement line item explanations include which of the following? -Segment reporting -Degree of credit or nonperformance risk -Potential litigation -Inability to maintain a qualified workforce

if there is an increase in the allowance account, its should be a positive. if there is a decrease in the allowance account, like a liability, keep the same sign and deduct it from net income.

For a question about cash flows provided from operating activities, treat the account - allowance for uncollectible accounts as a liability.

May 10

A U.S. publicly traded company's second fiscal quarter ends on March 31. If the company is an accelerated filer, what is the latest date that the Form 10-Q should be filed with the U.S. Securities and Exchange Commission (SEC)?

when promises to give cash are initially recognized, an expense for estimated uncollectible promises should be recorded.

All of the following are acceptable when not-for-profit (NFP) entities accept unconditional promises to give except: - NFPs may use the fair value at the date a promise to give securities was initially recognized even if the contribution will not take place for several years. - when promises to give cash are initially recognized, an expense for estimated uncollectible promises should be recorded. - when promises to give cash are initially recognized, the amount recorded could be based on the present value of estimated future cash flows. - when promises to give cash are initially recognized, the amount recognized should exclude amounts expected to be uncollectible.

(net income - cum preferred dividend) / weighted avg common shares outstanding

Basic EPS formula

A basis of accounting that the entity uses to record cash receipts and disbursements and modifications of the cash basis having substantial support (for example, recording depreciation on fixed assets.

Cash basis

Consolidated current assets before eliminations - intercompany profit on remaining inventory purchased from Kent = adj consol. current assets 320,000 - 12,000 = 308,000 12,000 = 48k/240k = 20% 20% x 60,000 = 12,000 Note also that since Clark owns less than 20% of Dean Inc., and does not exert significant influence, the gross profit from the sale to Dean does not require elimination.

Clark Co. had the following transactions with affiliated parties during 20X1: Sales of $60,000 to Dean, Inc., with $20,000 gross profit. Dean had $15,000 of this inventory on hand at year-end. Clark owns a 15% interest in Dean and does not exert significant influence. Purchases of raw materials totaling $240,000 from Kent Corp., a wholly owned subsidiary. Kent's gross profit on the sale was $48,000. Clark had $60,000 of this inventory remaining on December 31, 20X1. Before eliminating entries, Clark had consolidated current assets of $320,000. What amount should Clark report in its December 31, 20X1, consolidated balance sheet for current assets?

25,000 The amount reported on the consolidated statement retained earnings as "dividends paid" would include only dividends paid to majority shareholders directly, the 25,000 distributed by Pare Co. of the 5,000 dividends paid by Kidd, the parent's share (3,750) would be eliminated on the consolidated worksheet & the other 1250 would be included in the noncontrolling (minority) interest. However, the 1,250 would not be included in "dividends paid" on the consolidated statement of retained earnings.

During 20X1, Pare and Kidd paid cash dividends of $25,000 and $5,000, respectively, to their shareholders. There were no other intercompany transactions. In its December 31, 20X1, consolidated statement of retained earnings, what amount should Pare report as dividends paid?

Weighted-avg common shares Jan 1 - Mar 31 = (3/12 x 15,000) = 3,750 Apr 1 - May 31 = (2/12 x 12,500) = 2,083 Jun 1 - Dec 31 = (7/12 x 17,000) = 9,917 Total = 15,750 125,000 net income / 15,750 = $7.94 The exercise of the incentive stock options would be anti-dilutive since the exercise price exceeds the market price of the stock.

Ian Co. is calculating earnings per share amounts for inclusion in Ian's annual report to shareholders. Ian has obtained the following information from the controller's office as well as shareholder services: Net income from January 1 to December 31 $125,000 Number of outstanding shares: January 1 to March 31 15,000 April 1 to May 31 12,500 June 1 to December 31 17,000 In addition, Ian has issued 10,000 incentive stock options with an exercise price of $30 to its employees and a year-end market price of $25 per share. What amount is Ian's diluted earnings per share for the year ended December 31?

timeliness over faithful representation As stated in FASB, Interim financial information is essential to provide investors and others with timely information as to the progress of the enterprise. Timeliness is mentioned, but faithful representation is not.

Interim financial statements emphasize ___ over ____.

Not reported FASB ASC 230-10-45-1 states: "A statement of cash flows shall report the cash effect during a period of an entity's operations, its investing transactions, and its financing transactions." It is further noted that these are the "same amounts as similarly titled line-items or subtotals shown in the statements of financial position as of those dates." Since Mend's policy is to treat these investments as cash equivalents, the purchase would not be reported in the statement of cash flows.

Mend Co. purchased a 3-month U.S. Treasury bill. Mend's policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Mend's statement of cash flows? - as an outflow from operating activities - as an outflow from investing activities - as an outflow from financing activities - not reported

trying to estimate an uncollectible promise before the promised to give are intially recognized is jumping the gun. its too soon.

NFPs should NOT RECORD AN EXPENSE for estimated uncollectible promises when promises to give are initially recognized. The other 3 treatments are proper. FASB ASC 958-605-30-8 allows NFPs to use the fair value at the date a promise to give securities was initially recognized even if the contribution will not take place for several years. When promises to give cash are initially recognized, they could be based on the present value of estimated future cash flows (FASB ASC 958-605-55-22). When NFPs recognize promises to give, they create an Allowance for Uncollectible Promises (or Contributions) but do not recognize Bad Debt Expense as a business does. Instead, the NFP recognizes the net realizable value of the contribution revenue (FASB ASC 958-605-30-4).

45

Non-accelerated filers must file within ___ days. size = <75 mil or <100 mil in annual revenues

5400 Nongovt NFP entities must depreciate all fixed assets used in operations except land. All expenses of nongovt NFP entities must be reported as changes in net assets without donor restrictions. Donated assets must be recorded at fair value at the date of donation. Therefore, the depreciation expense both of the purchased vehicle ($15,000 / 5 years= 3,000 depreciation expense). Donated vehicle = $12,000 / 5 years = 2400. 3000 + 2400 = 5400 (both of the vehicles depreciation expense would be reported under changes in net assets without donor restrictions.

On December 31, 20X1, Dahlia, a nongovernmental not-for-profit entity, purchased a vehicle with $15,000 unrestricted cash and received a donated second vehicle having a fair value of $12,000. Dahlia expects each vehicle to provide it with equal service value over each of the next five years and then to have no residual value. Dahlia has an accounting policy implying a time restriction on gifts of long-lived assets. In Dahlia's 20X2 statement of activities, what depreciation expense should be included under changes in net assets without donor restrictions?

7,600 remeasurement gain FASB ASC 830-10-45-17 provides that remeasurement for transactions denominated in a currency other than the functional currency will give rise to a "foreign currency transaction gain or loss that generally shall be included in determining net income for the period in which the exchange rate changes." FASB ASC 830-30-45-12 states, "Translation adjustments shall not be included in determining net income but shall be reported separately and accumulated in comprehensive income." Based on this, Park should include the $7,600 remeasurement gain in its income statement, but not the translation gain.

Park Co.'s wholly owned subsidiary, Schnell Corp., maintains its accounting records in German marks. Because all of Schnell's branch offices are in Switzerland, its functional currency is the Swiss franc. (Park's functional currency is also the Swiss franc.) Remeasurement of Schnell's 20X1 financial statements resulted in a $7,600 gain, and translation of its financial statements resulted in an $8,100 gain. What amount should Park report as a foreign exchange gain in its income statement for the year ended December 31, 20X1?

70% x fair value of its identifiable net assets 880,000 = 616000 purchase cost 960,000 - 616,000 = 344,000 (excess of purchase price over fair value of assets attrib. to goodwill

Qual Inc. purchased 70% of Saucer Co.'s outstanding common stock on December 31, 20X2, for $960,000. On that date, Saucer's stockholders' equity was $775,000, and the fair value of its identifiable net assets was $880,000. On December 31, 20X2, what amount of goodwill should Qual attribute to this acquisition?

related party reporting

Reporting entity disclosures include which of the following? - Related party reporting - Potential litigation - Asset nature, location, and quality - Accounting method change impact

price that would be RECEIVED to when selling an asset or paid when transferring a liability in an orderly transaction between market participants FASB Accounting Standards Codification: Fair Value: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." (FASB ASC 820-10-20)

The fair value of an asset or liability is measured as the:

1050000 demand bank deposits + net long term receivables (exclude patents and trademarks) Monetary assets are cash or items whose amounts are fixed in terms of numbers of dollars.

The following assets were among those that appeared on Baird Co.'s books at the end of the year: Demand bank deposits $650,000Net long-term receivables 400,000Patents and trademarks 150,000 In preparing constant dollar financial statements, how much should Baird classify as monetary assets?

Liabilities of a company represent benefits incurred by a company that have not been settled. As of June 30, the company has incurred a benefit for the period May 16 to June 30 without settling with the utility company. The period from April 16 to May 15 is not included because the liability has already been settled. The outstanding liability is as follows: Period Covered Amount April 16-May 15 $ 0 May 16-June 15 6,000 June 16-July 15 4,000 ($8,000 unpaid × 1/2 June month) Total liability $10,000

The following information pertains to Dash Co.'s utility bills: Period Covered Amount Date Paid April 16-May 15 $5,000 June 1 May 16-June 15 6,000 July 1 June 16-July 15 8,000 August 1 What is the amount that Dash should report as a liability in its June 30 balance sheet?

Carlton's income statement will have to be revised to include the earnings per share data. FASB ASC 260 requires that EPS be presented on the face of the income statement of publicly held enterprises.

The senior accountant for Carlton Co., a public company with a complex capital structure, has just finished preparing Carlton's income statement for the current fiscal year. While reviewing the income statement, Carlton's finance director noticed that the earnings per share data has been omitted. What changes will have to be made to Carlton's income statement as a result of the omission of the earnings per share data? - No changes will have to be made to Carlton's income statement. The income statement is complete without the earnings per share data. - Carlton's income statement will have to be revised to include the earnings per share data. - Carlton's income statement will only have to be revised to include the earnings per share data if Carlton's market capitalization is greater than $5,000,000. - Carlton's income statement will only have to be revised to include the earnings per share data if Carlton's net income for the past two years was greater than $5,000,000.

discontinued operations Only one of the items listed is reported net of tax in the income statement, discont ops. All of the other items listed are reported above the line item, Income Tax Expense, in the income statement and therefore are not reported net of tax.

What is reported net of tax?

The relationship between the amount of value given and received. For governmental units, an exchange transaction involves giving and receiving equal value in a transaction. A nonexchange transaction (such as property tax collected or grant provided) means the government receives value from another party without directly providing value or provides value to another party without directly receiving value.

What is the major difference between an exchange transaction and a nonexchange transaction for governmental units?

When dealing with unrealized gains and losses in a consolidated financial statement setting, the objective is to defer unrealized gains to establish both historical cost balances and recognize appropriate income within in the consolidated financial statement. The unrealized gain of the sale of the equipment to Cinn is located in the cost of the equipment on Cinn's books. Depreciation expense on a consolidated basis should be the depreciation that would have been expensed on Zest's books if the equipment had not been sold. Depreciation on Cinn's books (unrealized gain) = 72,000 cost / 3 yr = 24,000 Depreciation on Zest's books (original cost) = 80,000 org cost / 5 yr zest = 16,000 24,000 -16,000 = 8,000 depreciation expense

Zest Co. owns 100% of Cinn, Inc. On January 2, 20X1, Zest sold equipment with an original cost of $80,000 and a carrying amount of $48,000 to Cinn for $72,000. Zest had been depreciating the equipment over a 5-year period using straight-line depreciation with no residual value. Cinn is using straight-line depreciation over three years with no residual value. In Zest's December 31, 20X1, consolidating worksheet, by what amount should depreciation expense be decreased?

convertible bonds

____ _____ do not affect basic earnings per share. They are used in computing diluted earnings per share. When the preferred stock dividends preference is cumulative, the current-year dividend on preferred stock must be deducted each year in computing the numerator for basic EPS, regardless of the amount of preferred dividends actually declared and/or paid.

fair value. At year-end, the fair value of the plan was 10.25 million. The original cost & change in value of one investment are not relevant to the year-end value.. Note that this treatment is substantially different from defined benefit plans.

Defined benefit contribution plans managed by employers are reported at

net income - preferred cumulative dividend = 236,000 - (60,000 x $60 x 0.04) = 212,000 weight avg CS outstand. = 50,000 + (8,000 x 9/12) = 56,000 shares 212,000 / 56,00 shares = 3.79/sh basic eps

A company had the following outstanding shares as of January 1, Year 2: Preferred stock, $60 par, 4%, cumulative 10,000 sharesCommon stock, $3 par 50,000 shares On April 1, Year 2, the company sold 8,000 shares of previously unissued common stock. No dividends were in arrears on January 1, Year 2, and no dividends were declared or paid during Year 2. Net income for Year 2 totaled $236,000. What amount is basic earnings per share for the year ended December 31, Year 2?

12,500 veterinarian volunteers animal care (yes, this is their trade, and they would have to pay for it if not) Board members volunteer? YES special skills are required, and they would have had to outsource if not. Registered nurse volunteers as receptionist (no, not her trade) Teacher provides volunteer dog walking (no, not her trade)

A nongovernmental not-for-profit animal shelter receives contributed services from the following individuals valued at their normal billing rate: Veterinarian provides volunteer animal care $8,000Board members volunteer to prepare books for audit 4,500Registered nurse volunteers as receptionist 3,000Teacher provides volunteer dog walking 2,000 What amount should the shelter record as contribution revenue?

80,000 Donated capital assets should be reported at their estimated fair value at donation date PLUS ancillary charges, if any. General capital assets are capital assets not specifically related to activities reported in proprietary or fiduciary funds. They are reported in the governmental activities column of the government-wide statement of net position. Site preparation costs of 20,000 and the 60,000 fair market value of the land are both properly included in the cost of the land.

A parcel of land was donated to Palm City in 20X1. The city intends to use the land as a parking lot for general government purposes. Site preparation costs were $20,000. The land's fair market value on the donation date was $60,000. What amount should be reported as a capital asset in the government-wide statement of net position in the governmental activities column for this land?

all enterprise funds The business-like activities portion of the government-wide financial statements report the functions also reported in the enterprise funds and internal service funds providing goods and services to the enterprise funds. In this problem, the internal service funds provide goods and services ONLY for governmental functions. Fiduciary fund information is not shown within the government-wide financial statements. Discretely presented component unit information is shown seperate from the governmental and business-like activities portions on the government-wide financial statements.

A summary reconciliation between fund financial statements and government-wide financial statements is required at the bottom of the fund statements or in an accompanying schedule. Assume that internal service funds provide goods and services for governmental functions. For the business-type activities portion of the government-wide statement of net position, the reconciliation should tie with the fund balance(s) of:

Comparison of underfunded versus overfunded endowment funds. Required disclosures do include the governing board's interpretation of the relevant state UPMIFA law as to its ability to spend from underwater endowment funds; the NFP's policy, and any actions taken during the period, concerning the appropriation of underwater endowment funds; the aggregate amount of the fair value of underwater endowment funds; the total original endowment gifts or levels required to be maintained by donor stipulation or law; & the total amount of the funds deficiencies.

ASU 2016-14 stipulates a number of disclosures required for underwater endowment funds. Which of the following is not one of the required disclosures?

confirmatory value SFAC 8.3 ("Qualitative Characteristics of Useful Financial Information"), paragraph QC19, states: "Comparability, verifiability, timeliness, and understandability are qualitative characteristics that enhance the usefulness of information that is relevant and faithfully represented." Thus, comparability, verifiability and timeliness all relate to both relevance and faithful representation. Confirmatory value is a component of relevance.

According to the FASB conceptual framework, which of the following does not relate to both relevance and faithful representation? Comparability Confirmatory value Verifiability Timeliness

the needs of the users of the information. SFAC, chapter 1 = "the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. These decisions involve buying selling or holding equity and debt instruments and providing or settling loans and other forms of credit." Thus, the objective of financial reporting is based on USER NEEDS.

According to the FASB's conceptual framework, the objectives of financial reporting for business enterprises are based on: generally accepted accounting principles. reporting on management's stewardship. the need for conservatism. the needs of the users of the information.

Revenue test - is it revenue is 10% or more of the combinned revenue of all operating segments (for purpose of this test, revenue includes both sales to external customers and intersegmental sales or transfers). Profitability test - if the absolute amount of its reported profit or loss is 10% or more of the greater, in an absolute amount, of: - the combined reported profit of all operating segments that did not report a loss or - the combined reported loss of all operating segments that did report a loss asset test - if its assets are 10% or more of the combined assets of all operating segments

After an enterprise has identified its operating segments (including those that represent an aggregation of 2+ separate segments), it must report separately information about each operating segment that meets any 1 or more of the following tests. Those segments that meet at least one of the tests represent REPORTABLE SEGMENTS for which specified information must be reported.

Net assets changed by 523,000. (take the end of year fair value of 502,000 of securities and the interest 21,000 = 523,000. Unrealized gains on investments carried at fair value increase net assets and unrealized losses on investments carried at fair value decrease net assets. As the investments themselves were an unrestricted gift, increasing net assets, the unrealized loss would decrease net assets without donor restrictions. Investment income includes dividends that increase net assets without donor restrictions unless there are donor stipulations.

Altruist Humanitarians received debt securities valued at $525,000. The donation was given as a gift with no restrictions. During the same year, Altruist Humanitarians received $21,000 in interest from these securities; at year-end, the securities had a fair market value of $502,000. By what amount did these transactions change Altruist Humanitarians' net assets?

timeliness over faithful representation interim financial statements emphasize timeliness over faithful representation. Using the gross profit method, which is a type of estimation, can sacrifice accuracy because the company does not take a physical count of inventory, but is acceptable for interim reporting, which has a GREATER NEED FOR TIMELINESS.

Conceptually, using an inventory estimation method like the gross profit method at interim reporting periods instead of doing a physical inventory count can be described as emphasizing:

such control does not rest with the majority owner because the subsidiary is in bankruptcy.

Consolidated financial statements are typically prepared when one company has a controlling financial interest in another, unless: - the subsidiary is a finance company. - the fiscal year-ends of the two companies are more than three months apart. - such control does not rest with the majority owner because the subsidiary is in bankruptcy. -the two companies are in unrelated industries, such as manufacturing and real estate.

This form must be filed electronically on EDGAR unless this filing causes hardship on the filing company. Under federal securities laws, publicly traded companies are required to file forms with the SEC periodically. The forms are available to anyone using the EDGAR database at www.sec.gov. The most common forms are the 10-K and the 10-Q. These forms must be filed electronically on EDGAR unless this filing causes hardship on the filing company. Form 10-Q is the quarterly report required to be filed with the SEC by all publicly traded companies. The Form 10-Q contains financial statements, a discussion from the management, and a list of "material events" that have occurred with the company.

How is the Form 10-Q filed with the SEC?

credit: tax anticipation notes payable In this problem, a city obtained short-term bank financing secured by the city's taxing power. This is interpreted to mean that (1) the General Fund is involved, since some or all of a city's tax revenues are normally recorded in that fund, and (2) future tax proceeds will be used to repay the loan. The journal entry to record the transaction will include a debit to cash, of course. In this problem, the loan is short-term and there is no information to suggest that the loan will be refinanced with long-term borrowing. Therefore, the loan represents establishment of a fund liability, (not an increase in "other financing sources" as is the case when the General Fund accounts for the proceeds from long-term borrowing). The credit side of the entry then must be to some liability account. The only available response in this problem that increases a liability is "credit tax anticipation notes payable". Moreover, in view of the information given, this is the ideal response.

How would a municipality that uses modified accrual and emcumberance accounting record the transaction of short-term financing received from a bank, secured by the city's taxing power.

Treasury stock: 108,000; Additional paid in capital: 42,000 The cost method of accounting for treasury stock treats the acquisition and reissue of the shares as two parts of one transaction. Thus Seda Corp, would make the following entries: Acquisition: treasury stock (at cost) (6000 sh x 36/sh) 216000 cash 216000 Reissue: Cash (3000 sh x 50) 150000 Treasury stock (at cost) (3000 x 36/sh) 108000 Additional paid-in capital (3000 sh x (50/sh - 36/sh) 42,000

In 20X1, Seda Corp. acquired 6,000 shares of its $1 par value common stock at $36 per share. During 20X2, Seda issued 3,000 of these shares at $50 per share. Seda uses the cost method to account for its treasury stock transactions. What accounts and amounts should Seda credit in 20X2 to record the issuance of the 3,000 shares?

retroactive Ex. 1/1 100,000 outstanding 3/30 24,000 stock dividend 6/30 5,000 stock issued 100,000+ (24,000 x 12/12 retro) = 124,000 (5,000 x 6/12 = 2,500) 124,000 + 2,500 = 126,5000 weighted avg CS outstanding.

In computing weighted-average number of shares, ___ 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).

both sales to unaffiliated customers and intersegment sales

In financial reporting of segment data, which of the following must be considered in determining if an industry segment is a reportable segment? - Both sales to unaffiliated customers and intersegment sales - Sales to unaffiliated customers Intersegment sales - Neither sales to unaffiliated customers nor intersegment sales

330,000 COGS inventory decrease ? (do the opposite sign for assets - indirect method, and do the same for assets for the direct method). inventory decrease = subtract from COGS COGS - inventory dec = Purchases Purchases + accounts payable decrease (do the same sign for liabilities for the indirect method, do the opposite sign for the direct method). 450,000 - 160,000 = 290,000. 290,000 + 40,000 = 330,000 Cash paid to suppliers using the direct method.

In its 20X1 income statement, Kilm Co. reported cost of goods sold of $450,000. Changes occurred in several balance sheet accounts as follows: Inventory $160,000 decrease Accounts payable—suppliers 40,000 decrease What amount should Kilm report as cash paid to suppliers in its 20X1 cash flow statement, prepared under the direct method?

include: - net sales revenue - interest revenue - gain on sale of equipment add them all up = total revenues they should have reported. exclude: results from discontinued operations: loss from operations of component (net of 1200 tax effect). Gain on disposal of component (net of 7200 tax effect). GAAP requires that the other items listed appear in other sections of the income statement or in another financial statement.

In the revenues section of the 20x2 income statement, Baer Food should have reported total revenues of:

16000 Impairment testing for tangible assets is a two-step process. First, the recoverability test is performed. If the carrying value of the asset is not recoverable, the second part of the process, the determining of the amount of the loss, is performed. Because the undiscounted cash flows of 127,000 are LESS than the carrying amount of the asset of 137,000. (238,000 - 101,000 = 137,000 carrying amount). The second part of the process is to determine the amount of the impairment loss. This is the difference between the carrying value of the asset and its fair value. In this specific instance, because the asset is not recoverable, the impairment loss is equal to 16,000. fair value - carrying value = impairment loss 121,000 - 137,000 = (16,000).

Jamison Company owns an asset for which concern exists about impairment. Jamison's analysis of the future cash flows related to the asset reveal that the future undiscounted cash flows are expected to be $127,000. The asset has a cost of $238,000 and has accumulated depreciation of $101,000. The fair value of the asset is $121,000. What amount, if any, should Jamison record as an impairment loss for this asset?

Examples: 1 entity holds subsidiaries to sell and another integrates them into operations, related party disclosures, and disaggregated legal entity and segment information.

Many reporting entity disclosures are part of separate standards (e.g. segment reporting & related party information) and therefore do not required additional disclosure requirements. Items included under this category include the nature of primary activities, special restrictions, advantages & diadvantages relative to other entities including unusual or unique regulatory or legal factors not readily available to users

The gain or loss on disposal should be reported seperately net of income tax effects, as a component of income. Loss in 20X1: 250,000 (division's pretax losses) - (0.3 tax rate x 250,000 pretax losses) = (175,000) Loss in 20X2: gain on disposal= 450,000 minus loss on operations = (320,000) Gain before taxes = 130,000 minus tax at 30% = (130k x 0.3) = 39,000 Gain from discontinued operations = 91,000

Munn Corp.'s income statements for the years ended December 31, 20X2 and 20X1, included the following, before adjustments: 20X2 20X1Operating income $ 800,000 $600,000Gain on sale of division 450,000 -- 1,250,000 600,000Provision for income taxes 375,000 180,000Net income $ 875,000 $420,000========== ======== On January 1, 20X2, in a strategic shift, Munn agreed to sell the assets and product line of one its operating divisions for $1,600,000. The sale was consummated on December 31, 20X2, and resulted in a gain on disposition of $450,000. This division's pretax losses were $320,000 in 20X2 and $250,000 in 20X1. The income tax rate for both years was 30%. In preparing revised comparative income statements, assuming that the division qualified as a component, Munn should report which of the following amounts of gain (loss) from discontinued operations?

0 The GASB evaluated these debt issuance costs and concluded hat, with the exception of prepaid insurance, the costs relate to services provided n the current period and thus they should be expensed in the current period.

Oak County incurred the following expenditures in issuing long-term bonds: Issue cost $400,000 Debt insurance 90,000 When Oak establishes the accounting for operating debt service, what amount should be deferred and amortized over the life of the bonds?

depreciation expense would be decreased and goodwill impairment would be assessed. Goodwill is the excess of the fair value of the consideration given over the fair value of the net identifiable assets acquired. The carrying amounts of Scarp's assets and liabilities approximated their fair values, except that the fair value of the building is less than its book value. Since Prim paid cash equal to the book value of the stock, the amount paid was greater than the fair value of the net identifiable assets of Scarp, resulting in goodwill being recognized. In this particular case, the amount of the goodwill is equal to the excess of the book value of the building over its fair value. One could argue that Scarp already should have recognized an impairment loss on its own books with regard to the building. However, there is insufficient information to know if the criteria specified in FASB ASC 360-10-05-4 have been met. The mere fact that the fair value of the building is less than its book value is not necessarily sufficient evidence. Thus, presumably the depreciation expense recorded by Scarp is based on the book value amount. In any event, the building should be included in the consolidated assets at its fair value, which is an amount lower than its book value. The consolidated depreciation should be based on this lower amount. Therefore, the consolidated depreciation expense is less than the sum of the depreciation amounts reported by Prim and Scarp as separate entities (i.e., before the consolidated statements are prepared). Thus, for consolidated financial statement purposes, depreciation is decreased from the amounts reported by the two separate entities. Regardless of the depreciation issue, FASB ASC 350-20-35-28 requires goodwill to be tested for impairment at least annually, as well as in the year of acquisition. Therefore, goodwill impairment must be assessed in this case.

On January 1, 20X1, Prim, Inc., acquired all the outstanding common shares of Scarp, Inc., for cash equal to the book value of the stock. The carrying amounts of Scarp's assets and liabilities approximated their fair values, except that the carrying amount of its building was more than fair value. The combination is accounted for as an acquisition. In preparing Prim's 20X1 consolidated income statement, which of the following adjustments would be made?

2500 This payment is partially an exchange transaction and partially a contribution and the two parts should be accounted for separately. Oz would recognize ticket sales revenue for the 25 tickets (2500) and recognize the balance as contribution revenue.

Oz, a nongovernmental not-for-profit entity, received $50,000 from Ame Company to sponsor a play given by Oz at the local theater. Oz gave Ame 25 tickets, which generally cost $100 each. Ame received no other benefits. What amount of ticket sales revenue should Oz record?

29,800 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 unexpured discounts that are still available to take, the $200, should be adjusted into the carrying value of accounts payable now still outstandinf, 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.

Rabb Co. records its purchases at gross amounts but wishes to change to recording purchases net of purchase discounts. Discounts available on purchases recorded from last October 1 to this September 30 totaled $2,000. Of this amount, $200 is still available in the accounts payable balance. The balances in Rabb's accounts as of and for the current year ended September 30 before conversion are: Purchases $100,000Purchase discounts taken 800Accounts payable 30,000 What is Rabb's current-year accounts payable balance as of September 30 after the conversion?

140,000 The cost of land includes the cost to BUY and the cost to MAKE it ready for its intended use, which in this case includes the cost of tearing down the old building. The cost to tear down the building (less the salvage revenue) is a cost to make the land ready for its intended use, which is to put up the new building on it. purchase price = 100,000 cost of razing building = 50,000 less: proceeds from sale of scrap = 10,000 =(50k - 10k = 40k) 100,000 + 40,000 = 140,000 capitalized cost of land

Samm Corp purchased a plot of land for 100,000. The cost to raze a building on the property amounted to 50,000 and Samm received 10,000 from the sale of scrap materials. Samm built a new plant on the site at a total cost of 800,000 including excavation costs of 30,000. What amount should Samm capitalize in its land account?

A basis of accounting that the entity uses to file its income tax return for the period covered by the financial statements.

Tax basis

acquire other items for collections

The Pel Museum, a not-for-profit entity, received a contribution of historical artifacts. Pel need not recognize the contribution if the artifacts are to be sold and the proceeds used to:

One needs to convert from accrual to cash method income (revenue when collected in cash). Cash collected from cash sales ($40,000 − $2,000) = $ 38,000 Cash collected from credit sales: Net credit sales for 20X1 ($60,000 − $3,000) $57,000 January 1, 20X1, accounts receivable 20,000 Subtotal $77,000 Less December 31, 20X1, accounts receivable 15,000 62,000 Cash basis revenue for 20X1 $100,000

The following information pertains to Spee Co.'s 20X1 sales: Cash SalesGross $40,000Returns and allowances 2,000Credit SalesGross 60,000Discounts 3,000 On January 1, 20X1, customers owed Spee $20,000. On December 31, 20X1, customers owed Spee $15,000. Spee uses the direct write-off method for bad debts. No bad debts were recorded in 20X1. Under the cash basis of accounting, what amount of revenue should Spee report for 20X1?

1 - one or more of the purposes of the activity is to accomplish some program function or management & general responsibility of the entity 2 - the audience for the activity was chosen based on some criteria other than the ability to make contributions; and 3 - the content of the activity motivates the audience to take specific actions other than making contributions, and these actions support the program goals or fulfill a management and general responsibility of the entity.

There are 3 conditions that must be met to allow a nongovernmental NFP to report costs of join activities in a category other than fundraising activities. Those 3 conditions are:

including a line item on the face of the financial statement with disclosures regarding XYZ Museum's permanent art collection, which includes the painting.

XYZ Museum, a not-for-profit entity, received a very important painting three years ago as a donation to its permanent collection. At the time of receipt, the painting was appropriately valued. The museum does not capitalize its collections. Disclosure would be handled by: disregarding the painting entirely because XYZ Museum opted not to capitalize. including a line item on the face of the financial statement with disclosures regarding XYZ Museum's permanent art collection, which includes the painting. including the value of the painting in the net assets with donor restrictions. including the value of the painting in the net assets without donor restrictions.