Cpa Far Exam

Foreign Currency: NO
US Dollar: YES

Either Translation or Remeasurement.

the statements are translated

the statements are remeasured

the income statement

carried directly to an equity account, bypassing the income statement entirely. OCI

Statements are Remeasured and gains and lossess are recognized in the income statement.

1. they are held for public exhibition, education, or research in furtherance of public service rather than financial gain;
2. are protected, kept unencumbered, cared for, and preserved;
3. or are subject to a policy that requires the proceeds of items that are sold to be used to acquire other items for the collection.

should be depreciated over their estimated useful lives. Depreciation is not required for collections or individual items that are inexhaustible.

Book Value: the owners' equity of the issuing firm is increased by the Book Value of the debt converted plus or minus any premium or discount.
Market Value: Just calculate the market rate per share.
No Gain/Loss is recognized.

The unearned fees (current liability) balance is the sum of cash received, plus the present value of the note. The remaining amount (total payments less present value) is interest to be recognized over the note term. No revenue is recognized until the service is performed.

the domestic price of one unit of a foreign currency: US$.011 per 1.00 JPYen.

faithful representation, along with completeness and free from material error.

but rather simply places the appropriate percent of sales into uncollectible accounts expense and the allowance account.

1. Figure out the % of completion: (costs incurred divided by costs incurred plus estimated costs to complete)
2. Construction Contract total less Cost Incurred less Estimated costs to complete times % of Completion.

Between items measured at fair value on a recurring basis and items measured at fair value on a non-recurring basis.
Disclosure requirements when fair value measurement is used are differentiated between items measured at fair value on a recurring basis and items measured at fair value on a non-recurring basis. Items measured at fair value on a recurring basis are adjusted to (measured at) fair value period after period; an example would be investments held-for-trading. Items measured at fair value on a non-recurring basis are adjusted to (measured at) fair value only when certain conditions are met; an example would be the impairment of an asset.

Newly issued shares to effect the consolidation has no prior market value, therefore the shares' fair value is equal to the fair value of the net assets acquired and no goodwill is recognized.

Bond pAyable: Discount Add to cash flow.
Premium subtract from cash flow

Bond Investment: Discount Subtract from cash flows.
Premium add to cash flows.

the same as the accounts giving rise to the deferred taxes.

because treasury shares are included in issued shares. This is key when figuring out Par Value of issued common stock.

is equal to the parent's net income as of the date of combination.
The subsidiary's net income is part of what the parent pays for in its cost of investment and is eliminated against the Investment on the consolidating worksheet. [Business combinations can no longer be accounted for using the pooling-of-interests method; only the purchase method can be used.]

Not adjusted to Fair Value, but are reported at Amortized Cost.

are adjusted to Fair Value and gain/loss recognized in current income.

are adjusted to Fair Value and gain/loss recognized in current income.

the original cost/amortized cost of the investment and the proceeds from the sale of the investment. Any amounts accumulated in other comprehensive income would be reversed as part of the year-end adjustment of the available for sale to fair value. Those amounts will not affect the gain/loss of the sale.

the original cost of available-for-sale securities and the fair value of those securities at a balance sheet date.

Both criteria must be met for an item to be extraordinary (not OR): (1) The gain or loss is unusual in nature AND (2) the gain or loss is infrequent in occurrence.

Appropriations Control account, a budgetary account, would be credited for the amount of the authorized spending limit. Not Reserve Appropriations, not Encumbrances, or Reserve Encumbrances (POs).

It is acting as an INVESTOR. Such flows are investing cash inflows and outflows.

Financing cash flows.

Operating Cash Flow

Operating and Financing Cash Flows (IFRS & GAAP)

Financing Cash Flows

The year-one error has no bearing on the amount of depreciation to be recognized in subsequent years. In year two, a Prior period adjustment will be recorded, correcting beginning retained earnings and accumulated depreciation. Year-one statements reported comparatively with year two's statements will be shown correctly. Year two will report normal depreciation expense.

The ending construction-in-progress balance is the same for both methods: Cost to Date Less overall Loss.

Treasury shares are considered ISSUED, but not outstanding.

Dividends do not affect Income, Dividends affect the Investment amount. The dividends received are not recognized as income; rather, they reduce the investment account under the equity method. For income be careful of partial years.

A lease classified as a sales-type capital lease by the acquiree.
In a business combination, an acquirer that obtains a lease contract should continue to classify the contract as established at the inception of the contract. The classification of a lease contract is established at the inception of the lease and WOULD NOT CHANGE as a result of a transfer of ownership in a business combination.

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.
When interim period inventory market value declines are not considered temporary (not expected to reverse), they are recognized in the quarter in which the decline occurs. Later recoveries are recognized as gains to the extent of previous losses only. The inventory may not be marked up above cost.

An economic resources measurement focus.
Nongovernmental not-for-profit organizations use full accrual accounting and the flow of economic resources measurement focus.

Liabilities:
Add Begining Liability: ABL
Subtract Ending Liability: SEL
Asset:
Subtract Begining Asset: SBA
Add Ending Asset: AEA

Liabilities:
Subtract Begining Liability: SBL
Add Ending Liability: AEL
Asset:
Add Begining Asset: ABA
Subtract Ending Asset: SEA

Available.
Under the modified accrual basis of accounting, revenues should be recognized when measurable and available to finance expenditures of the current period.
Not Earned, Not Budgeted, Not Collected, but AVAILABLE.

Net realizable value.
When a firm is in liquidation, historical cost and entry values (replacement cost) are no longer relevant.
The going concern assumption supports the historical cost principle. The firm is no longer a going concern. The only amounts relevant are the amounts to be received on sale of the assets. Net realizable value is the net value to be received, after the costs of getting the asset ready for sale are deducted.

Total costs incurred TO DATE to total estimated costs.
The proportion of completion at the end of any year for a construction contract is the amount of work done, divided by the total amount of work required for the contract. Typically, cost is the measure of "work done." At the end of year three, the numerator is the cost incurred for all three years. The denominator is the total estimated cost of the project, which is the sum of
(1) the cost incurred for all three years so far, plus
(2) estimated costs to complete as of the end of year three.
The percentage of completion changes each year, because both the numerator and denominator change. The gross profit to be reported for year three is the profit for all three years (using the proportion of completion just computed), less the profit already reported in the first two years.

1. Take the ending total amount and multiply by the difference between the two exchange rates.
2. Take the increase of the investment and multiply against the beginning exchange rate.
3. Plus or minus methods one and two.

A prior period adjustment is recorded if the error is discovered in year two.
Counterbalancing simply means that the effect of the inventory error in the second year is opposite that of the first year. Discovery in year two provides an opportunity for the firm to correct year two beginning retained earnings, which is overstated by the error in year one. The overstatement of inventory in year one caused cost of goods sold to be understated and income overstated in year one. The prior period adjustment, dated as of the beginning of year two, is a debit to retained earnings for the after-tax effect of the income overstatement in year one. Inventory is credited for the amount of the overstatement. This allows year two to begin with corrected balances.

The reporting currency is the currency in which the final consolidated financial statements are presented (reported).

All of the adjustments should be recognized directly in retained earnings or, if appropriate, in another category of equity.
All of the adjustment is recognized directly into retained earnings.