Note 13 - cpa prep PDF

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the average accumulated expenditures. That is taking the amounts spent through the year each multiplied by the portion of the year remaining.Next you calculate avoidable interest. Avoidable interest is the interest on the construction specific loan(s), and then the amount of other debt above the amount of the construction loans.Then calculate actual interest. The lesser of the avoidable interest and the actual interest is the amount that can be capitalized.

How is a lease payment calculated when the lease payments are due at the beginning of the period? - FAIR VALUE of the leased equipment / ANNUITY DUE rate.

How is a prior service cost due to a change in the projected benefit obligation due to a contractual adjustment treated under IFRS and GAAP? - Under IFRS it is expensed immediately to the extent that benefits have vested. Under GAAP it is recorded to accumulated other comprehensive income and then amortized to expense over the years the employees are expected to work.

How is an impairment loss on equipment determined under IFRS? - A loss must be recognized if the book value exceeds the higher of the PRESENT VALUE of the future cash flows and the fair value less necessary costs to sell the equipment.

How is an initial franchise fee classified, capitalized, amortized, and impaired? - Can be definite or indefinite life, only capitalize expenses to external parties, amortization depends on definite or indefinite, as does impairment.

How is an internal service fund reported on the gov wide statements if another gov agency is its main beneficiary? - As a gov fund instead of a business type fund.

How is interest expense and dividends paid classified as far as cash flow under IFRS? - Interest expense and dividends paid can be classified as EITHER operating or financing activities.

How is interest revenue and dividend revenue classified under IFRS for cash flows? - They can both be either cash flows from operating OR investing activities.

How is the refinancing of a liability due within a year treated under GAAP and IFRS? - Under GAAP, if the refinancing happens before the ISSUANCE date of the financial statements, then it can be considered long term again. Under IFRS, the refinancing has to happen before the BALANCE SHEET DATE for it to be considered a long term liability again.

How is the reversal of an impairment loss recorded under IFRS? - The recovery of an impairment in value must be recognized if the circumstances that caused the impairment are reversed.

How often is useful life and depreciation method reviewed under IFRS? - Annually. Under GAAP it's only when events or circumstances change.

How would 5 year bonds appear in the fund based statements and the gov wide statements? They wont show up in the fund based statements because they aren't a claim against current assets. They will show up as a long term liability in the gov wide statements.

If a city imposes a 2% tax on hotel charges which will be used to promote tourism in the city, what type of nonexchange transaction is this? - It is a Derived Tax Revenue.

If a city plans on collecting $10k a month from property taxes for the next 18 months, how much revenue should be reported in year one? - $140,000. 10k for each month of the year plus Jan and Feb of the following year.

If a city takes on a project but accepts no liability for the work being done, what type of fund is used. - An agency fund.

If a company changes from FIFO to weighted avg inventory during 2005, how is the cumulative effect of the change measured? - The change is measured as of the beginning of the year of change.

If a decline in inventory value is not considered temporary, the decline is recognized in the quarter in which the decline occurs. Later recoveries are: - Recognized as gains to the extent of the previous losses only.

If a donation is conditional, how should it be accounted for? - As a refundable advance.

If a firm buys land to build a warehouse on, is the interest from the land loan and the warehouse construction capitalized? - Only interest on the warehouse construction can be capitalized.

If a firm is going to discontinue a segment early next year, but there is a loss in that segment ending this year, how is that loss reported? - As an operating loss of the discontinued segment. This section is below income from continuing ops but above extraordinary items.

If an IFRS company decides to revalue its equipment each year, what effect would a drop of $2000 in value above regular depreciation be? - It would be a 2000 expense for that year, recognized in income. BUT.... an increase in the value would go under other comprehensive income.

If an investment in 30% of another company is accounted for using the fair value method, what is recognized as net income from the investment? - Cash dividends received and increases in the fair value of the investment are recognized in net income from the investment. The portion of the company's net income is NOT recognized in net income from the investment.

If both parties consider a lease to be a capital lease, what interest rate do they both use under IFRS? - They both use the implicit rate built into the contract.

If financial statements prepared on another basis besides GAAP are not appropriately titled, the auditor must: - Disclose any reservations in an explanatory paragraph and qualify the opinion for the inappropriate title of the statements.

If intercompany fixed asset balances are NOT eliminated, will consolidated income or loss be overstated. - Both can be overstated.

If the percentage of completion method cannot be applied, how are profits recognized on longterm contracts under GAAP and IFRS? - Under GAAP the profits will be recognized once the job is completed- which is the completed contract method. Under IFRS, all profits will be recognized when all the costs have been recovered- the cost recovery method.

If there is commercial substance to an exchange, the exchange is measured at: - Fair Value. The gain is equal to the old asset's fair value and it's book value. If the fair value was 30 and its book value is 25, the gain is 5.

If you have an investment that isn't enough to be equity method, then you invest more later that does take it to equity method, how is that treated? - The equity method is retroactively applied to the first amount. So if you owned 10% the whole year then bought another 20% at year end, you would recognize 10% of the company's earnings under the equity method.

IFRS investment property - ljwoj

In a cash flow hedge, the item being hedged is measured using: - The present value of expected cash inflows or outflows. The item being hedged could be associated with an asset, a liability, or a forecasted transaction.

In a period of rising prices, a company that wants to maximize profits will use what inventory method? - FIFO. In rising prices using FIFO, the earliest goods will be sold first which makes COGS lower and NI higher.

In a personal statement of financial condition, a life insurance policy should be reported at cash surrender value less any: - Loans outstanding against the policy.

In a sale-leaseback, how is the gain on sale recognized? - It is amortized over the lease term. A 50,000 unearned gain on a sale-leaseback over 10 years will result in 5,000 being recognized in each of the 10 years.

In financial statements prepared on the income-tax basis, how should nondeductible expenses such as meals be reported? - Included in the expense category in determination of income. These are still business expenses and need to be included to calculate income on the financial statements.

In the general fund, what 3 accounts are affected when property taxes are levied? - Revenue control is credited, property taxes receivable is credited, and allowance for uncollectible taxes is credited. Bad Debt Expense is ONLY an accrual accounting concept, and IS NOT used in modified accrual accounting.

In troubled debt restructuring, what does the creditor do, and how do they recognize interest on the restructured loan? - They reduce the amount owed to the present value of future cash flows on the ORIGINAL interest rate. Then, they recognize interest by using the original interest rate

times the BV of the new receivable. The debtor recognizes a loss as the difference between the current BV of its receivable and the present value of the future cash flows.

In troubled debt restructuring, what does the debtor do? - They compute the total cash flows now owed. So you take the future interest payments and add them to the new principal amount.

Inventory turnover - COGS / avg inventory

Inventory turnover ratio: - COGS/ avg inventory for the period

Inventory turnover: - COGS/ avg inventory

Is a computer or office supplies reported as an asset on the fund-based governmental statements? - Office supplies are an asset- capitalized assets such as a computer are not.

Is a finder's fee for a lease expensed or allocated over the lease term? - The finder's fee benefits the entire lease term and is therefore expensed evenly over the lease term.

Is additional compensation to former shareholders after a business combination considered additional costs of the business combination? - No.

JE for treasury stock purchase under cost method? - DR: Treasury stockCR: CashContributed capital is NOT affected. If treasury shares are resold at less than cost, then retained earnings is reduced by the difference in cost and reissue price.

OCI for investments differences in GAAP vs IFRS: - In GAAP gains/losses are recorded in OCI ONLY for AFS securities. In IFRS the entity may ELECT to records gains/losses to OCI at the initial measurement, but the election cannot be undone.

On the statement of activities, what is included in program revenues? - Any revenue generated by the activity, as well as any grants related specifically to that activity. This is then netted against the expense....