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FAR By SuperfastCPA – Questions And Answers
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FAR By SuperfastCPA – Questions And AnswersIf there is commercial substance to an exchange, the exchange is measured
at: Correct Ans - 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.
How does retail inventory method establish lower of cost or market
valuation for ending inventory? Correct Ans - By excluding net
markdowns from the cost to retail ratio.
Can consolidated financial statements be prepared from a business
combination that was accounted for using the acquisition method OR the
pooling of interests method? Correct Ans - Yes to both. The pooling
of interest method CANNOT be used anymore for business combinations,
combinations that happened before that still need to be consolidated.
Does a foreign sub using the local currency as its functional currency has
their financials translated or remeasured? Correct Ans - Translated.
Does a foreign sub using US dollars as its functional currency has their
financials translated or remeasured? Correct Ans - Remeasured.
Under translation, common stock is translated at the what exchange rate?
Correct Ans - The historic exchange rate.
500 shares of 6%, $100 par callable preferred stock are called at $101. The
shares were issued at $103 per share. What is the journal entry to record
the retirement? Correct Ans - DR preferred stock for 50,000DR PIC-
preferred for 1,500CR PIC retirement of preferred for 1,000CR Cash for
50,500
Working capital: Correct Ans - current assets - current liabilities
Acid test: Correct Ans - (cash + net receivables)/current liabilities
Acc Rec turnover: Correct Ans - Sales/ avg net receivables
Inventory turnover: Correct Ans - COGS/ avg inventory
,Times interest earned: Correct Ans - EBIT/ interest expense
Return on total assets: Correct Ans - (net income + after-tax
interest expense)/ avg total assets
Return on equity: Correct Ans - Net income / avg owners equity
Dividend payout ratio Correct Ans - Common dividends / net
income
What are the 2 primary qualitative characteristics? Correct Ans -
Relevance and Faithful representation
2 components of relevance: Correct Ans - Predictive value and
confirmatory value
3 components of Faithful Representation Correct Ans -
Completeness, neutrality, and free from material error
What are the 4 enhancing characteristics? Correct Ans -
Comparability, verifiability, timeliness, and understandability
Times interest earned is: Correct Ans - income before interest and
income tax over interest expense
What is a central characteristic of a joint venture? Correct Ans -
Shared control. None of the participating parties are likely to have
unilateral control of the joint venture.
What is the defensive-interval ratio? Correct Ans - The ratio of
quick assets to daily operating expenditures. The ratio is showing the
length of time in days that the firm can operate with its present liquid
resources- so it's a liquidity measure.
Inventory turnover ratio: Correct Ans - COGS/ avg inventory for the
period
, Where are G/L on remeasurment and translation booked? Correct Ans
- Remeasurement is on the income statement, translation go in an
equity account. Remeasurement is when the foreign sub's currency is the
US dollar. It's translation if the sub's currency is the local foreign currency.
Receivables turnover ratio: Correct Ans - Net sales / avg net
accounts receivable
What statements are usually included in personal financial statements?
Correct Ans - A statement of financial condition and a statement of
changes in net worth.
If a donation is conditional, how should it be accounted for? Correct
Ans - As a refundable advance.
For donation of specialized services to a nonprofit, at what value should
they be recognized? Correct Ans - Fair value.
For a NP, are contributions spread over a few years restricted or non
restricted? Correct Ans - The contribution in the current year is
non restricted(unless it comes with an actual restriction), and the
contributions for future years are recognized at present value and are
RESTRICTED.
When are the payments for an "Annuity Due" made? Correct Ans -
At the beginning of each period.
How is a lease payment calculated when the lease payments are due at the
beginning of the period? Correct Ans - You divide the FAIR VALUE
of the leased equipment by the ANNUITY DUE rate.
What is the journal entry at the inception of a capital lease and the
payments are due at the beginning of each period? Correct Ans -
DR: Leased asset for its fair value amountCR: Lease Liability for plug
amountCR: Cash for the payment amount
How do you calculate the interest expense at the end of the year on a
capital lease with payments at the beginning of the period? What is the
journal entry? Correct Ans - You multiply the remaining lease
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