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Question 1

Examples of non recognized and non classified revenue for NFP

Answer 1

• notified donations (no receivables are recorded)
• services that are not contributions like connecting donors
  -death, but has not met conditions

Question 2

How to determine most advantageous price on mrkt and FV

Answer 2

1. Identify market with highest net proceeds (price - transaction cost)
2. Determine FV using gross price

*transportation cost may reduce FV if location attribute of the asset

Question 3

How are donated stocks from a stock holder reported ?

Answer 3

When a company receives its own stock as a donation from a shareholder, it does not reduce the total stockholders’ equity at all.

Dr treasury
Cr APIC

Question 4

What is avoidable interest or capitalized interest and how do you calculate it

Answer 4

It represents the interest related directly to the construction expenditures. Cost that a company could have avoided if it had not borrowed money to finance a construction project. You add this to the cost of the asset

1. Take the WAAE
2. Calculate interest on construction loan for the full or outstanding interest
3. Take the excess WAAE - specific loan
   4.

Question 5

What is actual interest and how to calculate

Answer 5

Actual interest is the total interest expense the company incurs on all its borrowings during the period, including both the construction loan and any other loans.

=(total) loan aumount * interest rate)

Question 6

If not given salvage value in amortization what value should you use for amortization of lease

Answer 6

Fair Value at end of lease term

Accquisition of finance lease + purchase option - FV/estimated useful life

Question 7

Factoring with and without recourse

Answer 7

With, the company selling the receivables (the seller) retains some risk. (You record a liability)

Without, means the factor assumes all the risk of uncollectible accounts.

Question 8

Other word for carry value of a bond

Answer 8

Net bonds payable

Or bonds payable at balance sheet (since it is reported at CV)

Question 9

Formula to calculate credit loss expense (bad debt expense)

Answer 9

Beg allowance + credit loss expense - write offs + recoveries = end allowance

Expected credit losses could be a percentage of year end AR

Question 10

Steps to impairment analysis

Answer 10

1. Compare CV or BV to sum of undiscounted future cash flows

The if impairment existe
Present value of Future cash flow - CV

Or

Impairment los CV - FV

Question 11

When can a finance lease be amortized over lease term instead of useful life

Same for leasehold improvements?

Answer 11

If there is no transfer of ownership and the lease term also does not contain a bargain purchase option, the ROU asset cannot be depreciated over its estimated remaining life

Leasehold improvements should be amortized over the lesser of the remaining life of the lease and life

Question 12

What is an ARC and ARO

Give example

Answer 12

Asset retirement cost is an asset on the books that is depreciated evenly until it reaches zero
The cost to dismantle is capitalized as ARC increases the CV of the platform( then depreciated)

You capitalize the asset retirement cost at its present (discounted) value, not the full undiscounted future cost.

asset retirement obligation is a liability that increases each year by the accretion rate
Example: a drilling platform that the company is legally required to dismantle (PV of the future obligation)
Dr asset retirement cost
Cr asset retirement obligation

Rate ^n

Both depreciation and accretion expenses are recognized annually, and their sum is the total expense related to the ARO.

Question 13

What is a charitable remainder trust and how does it represent a split interest arrangement?

Answer 13

Its a legal arrangement where assets are donated to a trust that provides income to the donor or a designated beneficiary, creating a split interest because the income interest belongs to the donor

Question 14

Classification for expenses on NFP

Answer 14

Natural (salaries, wages,utilities) and functional (program services and support services)

• program are directly related to the mission ( services, research, supplies used directly in program, salaries of program staff)
• indirect cost, memberships, budgeting, bookkeeping)

Question 15

Definition
Source of dividend
Equity effect

Dividend, liquidating dividend, stock dividend, property dividend

Answer 15

Dividend: distribution of profits paid out of RE, decreases RE, decreases Equity

Liquidating dividend:
Dividend paid in excess of RE returning capital to share holders, source is APIC, it decreases APIC and RE
Decreases equity

Stock dividend:
Paid in additional shares from RE to common stock and APIC total equity unchanged (no divided income)

Property dividend:
Its adjusted to FMV, difference from BV is gain or loss, affecting netincome
Reducing RE by FV ( and a netting affect on RE by the GAIN)

Question 16

Price to earnings ratio & dividend payout ratio

Answer 16

Price to earnings ratio
= mrkt/eps

compares a company’s stock price to its earnings per share and reflects investors’ expectations of growth and investment potential.

Dividend payout ratio
Dividends per share / eps
(When its per share)

When its not (because earnings = net income)
Total Dividends / netincome

Question 17

Impairment loss on a patent

Answer 17

Impairment loss + amortization expense for the year

Question 18

Core concept percentage of completion and what is not included (5) steps

Answer 18

1. total estimated cost
   Cost incurred to date + estimated cost remaining
2. percentage of completion
   Cost incurred to date /total estimated cost
3. Estimated gross proft
   Contract price- total estimated cost

4.CUMULATIVE gross profit recognized
Gross profit * percentage complete

5. CIP
   Const incurred to date + cumulative gross profit - billings to date

• progress billings or cash collections do NOT affect gross profit calculation directly

Question 19

FCU (with us exchange)—> USD
USD—> FCU

Answer 19

FCU * exchange rate usd

USD / exchange rate fcu

Question 20

Key formula when asked about gain or loss on bond retirement, and if not given amortized CV what to do

Answer 20

If unamortized premium*
Dr bond payable (FaceValue)
DrUnamortized premium
Cr gain (this is what you calc)
Cr cash paid

If unamortized discount
Dr bond payable
Dr loss (you calculate)
Cr discount on bonds payable
Cr cash paid

If not given CV make table

Question 21

When using the equity method, why do you amortize the excess of FV compared to BV and what is the affect on current asset and land

Answer 21

Because the investee’s net income is based on book value, but the investor paid more (FV)

Amortizing the excess is an additional expense included in COGS and has no affect on land

Question 22

What is a current expected credit loss on a HTM or ASF security , how to determine you need it and where is it reported and why

Answer 22

Its a loss allowance recorded when the present value of expected future cash flows (principal + interest, adjusted for expected credit losses) is less than the bond’s amortized cost.

You do not use fair value to determine the credit loss for HTM securities.

This ensure CV of bond reflects expected credit loss (impairment loss) , reducing net income

This is reported in the income statement, because its a permanent loss

Question 23

How do you calculate Current Expected Credit Loss on a HTM bond

Answer 23

Amortized cost - PV of expected future cash flows

Expected future cash flows
(PV of interest payments + PV of face value at maturity)

Question 24

Cash equivalents (highly liquid assets)

Answer 24

(Maturities 90 days or less)
US Tbills
Commercial papers
Money market funds
CDs
Bankers acceptances (credit instruments)
Negotiable papers

What is not
Post dated checks are not considered cash until date the become eligible for deposit

Question 25

Difference between direct method and indirect method in the statement of cash flows

Answer 25

Direct method ; shows actual cash receipts Indirect method = adjusts netincome to cash flow by adding/subtracting non-cash(depreciation) and working capital changes(AR and AP) converting accrual based net income to cash basis.

Question 26

Mnemonic for income conversion (Cash -> accrual)

Answer 26

Assets: add increases, subtract decreases Liabilities: add decreases, subtract increases Opposite from cash flow!! Ps: Increases in prepaid expenses means less expenses where made

Question 27

What are Expenses for NFP

Answer 27

Grants to other organizations(funds that the NFP distributed to other entities) and depreciation Both reduce the organizations net assets with out donor restrictions

Question 28

What base should be used when there has been improvement in a patent or lease useful life

Answer 28

Lesser of the remaining lease term or the useful life of the improvements

Question 29

Formula for current estimated credit losses model for trade receivables

Answer 29

Allowance for credit losses = total receivables in each aging category * estimated loss rate for that category)

Question 30

What is the affect of a write off in AR and a collection of write off in netincome and total assets

Answer 30

For both scenarios its a net affect meaning there is no increase or decrease

Question 31

When revenue is recognized over time, the percentage of completion is calculated as follows

Answer 31

Total cost to date/ estimated cost of contract

Question 32

When goods are shipped FOB destination or shipping point, when is they correct moment to record a Accounts Payable.

Answer 32

If its FOB destination , when the goods are transferred to you. If its FOB shipping point when the goods are shipped

Question 33

What is an escrow liability And how to calculate it

Answer 33

Its like a pool where you hold money for tax purposes in this case a company. There is a balance that it owes to customers, when it collects it increases its liability amount, and when it pays it decreases its liability amount. Beg + receipts(deposits) -payments + interest earned - maintenance fee