CPA FAR EXAM WITH CORRECT
ANSWERS
1. Accounting by Debtors for TDR - ANSWER-- Transfer of assets
- Transfer of Equity Interest
- Modification of Terms
2. Accounting Capital Lease - Lessee - ANSWER-records the lease as an
asset & a liability at the lesser of:
- FV of asset at inception
or
- PV of minimum lease payments
3. Accounting of Leasehold Improvement - ANSWER-Capitalize and add to
PPE
then depreciate over lesser of
- lease life
- asset/improvement life
4. Accounting Principles Board - ANSWER-determined GAAP from 1959 to
1973
- part time committee of the AICPA that issued Accounting
Principles Board Opinions and APB interpretations
5. Accretion Expense - ANSWER-increase in the ARO liability due to the
passage of time
= Beginning ARO X Accretion rate
Dr: Accretion Expense
Cr: Asset Retirement Obligation
,6. Amortization including Bond Issuance Costs - ANSWER-Dr: Bond
Interest Expense
Cr: Discount and Bond Issuance Costs
Cr: Cash
7. Amortization of Discount JE - ANSWER-Dr: Bond Interest Expense
Cr: Discount on Bonds Payable
Cr: Cash
8. Amortization of Premium - ANSWER-- interest paid in advance to the
issuer by bondholders who then receive a return of this premium in the
form of larger interest payments
- amortized over the life of the bond, with amortized amounts
decreasing interest expense each period
- amortization is SUBTRACTED from the amount of cash paid at the
coupon rate to = interest expense
9. Amortization of Premium JE - ANSWER-Dr: Bond Interest Expense
Dr: Premium on Bonds Payable
Cr: Cash
10. Amortization of the Discount - ANSWER-- represents additional
interest to be paid to investors at maturity
- amortized over the life of the bond, with amortized amounts
increasing interest expense each period
- amortization is ADDED to the amount of cash paid at the coupon
rate to = interest expense
11. Amortization Period - ANSWER-period over which to amortize a
bond premium or discount
- from the date that the bonds are actually sold
- over contractual life of the bond
,12. Amortization using Effective Interest Method - ANSWER-Amortiz.
of Discount = Interest Expense - Coupon Payment
13. Amortiz. of Premium = Coupon Payment - Interest Expense
14. Annual Financial Reporting - ANSWER-- 2 Balance Sheets
- 3 Income Statements
- 3 Cash Flows
- 3 Changes in Owner's Equity
15. Annual financial Reporting IFRS - ANSWER-- 2 balance sheets
- 2 statements of comprehensive income
- 2 statements of changes in equity
- 2 statements of cash flows
16. ARC (Asset Retirement Cost) - ANSWER-the amount capitalized
that increases the carrying amount of the long-lived asset when a
liability for an ARO is recognized
- subject to depreciation expense
- use of SLM for depreciation expense
17. ARO (Asset Retirement Obligation) - ANSWER-the obligation
associated with the retirement of a tangible long-lived asset
- recorded at PV
- subject to accretion/interest expense using the credit-adjusted
interest rate
18. Arrangements between Company and Business Entity (VIE) -
ANSWER-One of Four:
1. The company participated in the business entity's design
, 2. Substantially all of the business entity's activities are conducted on
behalf of the company
3. More than half of the total of the equity/financial support is provided by
the company
4. Primary activities of entity - securitizations or other forms of asset-
backed financing agreements
19. Asset and Liability Method/Balance Sheet Approach - ANSWER--
required by GAAP for comprehensive allocation
- either income taxes payable or a deferred tax liability (asset) be
recorded for all tax consequences of the current period
20. Asset Retirement Obligation - ANSWER-a legal obligation
associated with the retirement of a tangible long-lived asset
Results from :
- the acquisition, construction or development, and/or normal
operation of a long-lived asset
Ex: oil and gas and mining industries
21. Asset Retirement Obligation recognized - ANSWER-Meets the
definition of liability
- Duty or responsibility
- Little or no discretion to avoid
- Obligating event
*record even if we don't plan on removing it ourselves
22. Bond Disclosure Requirements - ANSWER-show details regarding
the liability maturity dates, interest rates, call and conversion
privileges, assets pledges as security and borrower-imposed
restrictions
ANSWERS
1. Accounting by Debtors for TDR - ANSWER-- Transfer of assets
- Transfer of Equity Interest
- Modification of Terms
2. Accounting Capital Lease - Lessee - ANSWER-records the lease as an
asset & a liability at the lesser of:
- FV of asset at inception
or
- PV of minimum lease payments
3. Accounting of Leasehold Improvement - ANSWER-Capitalize and add to
PPE
then depreciate over lesser of
- lease life
- asset/improvement life
4. Accounting Principles Board - ANSWER-determined GAAP from 1959 to
1973
- part time committee of the AICPA that issued Accounting
Principles Board Opinions and APB interpretations
5. Accretion Expense - ANSWER-increase in the ARO liability due to the
passage of time
= Beginning ARO X Accretion rate
Dr: Accretion Expense
Cr: Asset Retirement Obligation
,6. Amortization including Bond Issuance Costs - ANSWER-Dr: Bond
Interest Expense
Cr: Discount and Bond Issuance Costs
Cr: Cash
7. Amortization of Discount JE - ANSWER-Dr: Bond Interest Expense
Cr: Discount on Bonds Payable
Cr: Cash
8. Amortization of Premium - ANSWER-- interest paid in advance to the
issuer by bondholders who then receive a return of this premium in the
form of larger interest payments
- amortized over the life of the bond, with amortized amounts
decreasing interest expense each period
- amortization is SUBTRACTED from the amount of cash paid at the
coupon rate to = interest expense
9. Amortization of Premium JE - ANSWER-Dr: Bond Interest Expense
Dr: Premium on Bonds Payable
Cr: Cash
10. Amortization of the Discount - ANSWER-- represents additional
interest to be paid to investors at maturity
- amortized over the life of the bond, with amortized amounts
increasing interest expense each period
- amortization is ADDED to the amount of cash paid at the coupon
rate to = interest expense
11. Amortization Period - ANSWER-period over which to amortize a
bond premium or discount
- from the date that the bonds are actually sold
- over contractual life of the bond
,12. Amortization using Effective Interest Method - ANSWER-Amortiz.
of Discount = Interest Expense - Coupon Payment
13. Amortiz. of Premium = Coupon Payment - Interest Expense
14. Annual Financial Reporting - ANSWER-- 2 Balance Sheets
- 3 Income Statements
- 3 Cash Flows
- 3 Changes in Owner's Equity
15. Annual financial Reporting IFRS - ANSWER-- 2 balance sheets
- 2 statements of comprehensive income
- 2 statements of changes in equity
- 2 statements of cash flows
16. ARC (Asset Retirement Cost) - ANSWER-the amount capitalized
that increases the carrying amount of the long-lived asset when a
liability for an ARO is recognized
- subject to depreciation expense
- use of SLM for depreciation expense
17. ARO (Asset Retirement Obligation) - ANSWER-the obligation
associated with the retirement of a tangible long-lived asset
- recorded at PV
- subject to accretion/interest expense using the credit-adjusted
interest rate
18. Arrangements between Company and Business Entity (VIE) -
ANSWER-One of Four:
1. The company participated in the business entity's design
, 2. Substantially all of the business entity's activities are conducted on
behalf of the company
3. More than half of the total of the equity/financial support is provided by
the company
4. Primary activities of entity - securitizations or other forms of asset-
backed financing agreements
19. Asset and Liability Method/Balance Sheet Approach - ANSWER--
required by GAAP for comprehensive allocation
- either income taxes payable or a deferred tax liability (asset) be
recorded for all tax consequences of the current period
20. Asset Retirement Obligation - ANSWER-a legal obligation
associated with the retirement of a tangible long-lived asset
Results from :
- the acquisition, construction or development, and/or normal
operation of a long-lived asset
Ex: oil and gas and mining industries
21. Asset Retirement Obligation recognized - ANSWER-Meets the
definition of liability
- Duty or responsibility
- Little or no discretion to avoid
- Obligating event
*record even if we don't plan on removing it ourselves
22. Bond Disclosure Requirements - ANSWER-show details regarding
the liability maturity dates, interest rates, call and conversion
privileges, assets pledges as security and borrower-imposed
restrictions
