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fundamentals of advanced accounting

Questions and Answers of Fundamentals Of Advanced Accounting

An order for reliefa. Prohibits creditors from taking action to collect from an insolvent company without court approval.b. Calls for the immediate distribution of free assets to unsecured creditors.
An involuntary bankruptcy petition must be filed bya. The insolvent company’s attorney.b. The holders of the insolvent company’s debenture bonds. LO4c. Unsecured creditors with total debts of at
In reporting a company that is to be liquidated, assets are shown ata. Present value calculated using an appropriate effective rate.b. Net realizable value. LO4c. Historical cost.d. Book value.
In a bankruptcy, which of the following statements is true?a. An order for relief results only from a voluntary petition.b. Creditors entering an involuntary petition must have debts totaling at
What are the objectives of the bankruptcy laws in the United States?a. Provide relief for the court system and ensure that all debtors are treated the same.b. Distribute assets fairly and discharge
How is goodwill computed if fresh start accounting is applied to a reorganized company? LO4
When fresh start accounting is utilized, how are a company’s assets and its liabilities reported? LO4
Under what conditions does a company emerging from a bankruptcy reorganization use fresh start accounting? LO4
What does fresh start accounting mean? LO4
What accounting is made of the professional fees incurred during a reorganization? LO4
During reorganization, how should a company’s income statement be structured? LO4
While a company goes through reorganization, how should its liabilities be reported? LO4
In a bankruptcy proceeding, what is a cram down? LO4
Under normal conditions, how does a reorganization plan become effective? LO4
What types of proposals might a reorganization plan include? LO4
Who can develop reorganization plans in a Chapter 11 bankruptcy? LO4
What does the term debtor in possession mean? LO4
A statement of realization and liquidation is prepared for a company being liquidated. What information can be ascertained from this statement? LO4
A trustee for a company that is being liquidated voids a preference transfer. What has happened, and why did the trustee take this action? LO4
In a bankruptcy liquidation, what actions does the trustee perform? LO4
What is the purpose of a statement of financial affairs? Why might this statement be prepared before a bankruptcy petition has been filed? LO4
Why might unsecured creditors favor reorganizing an insolvent company rather than forcing it into liquidation? LO4
What is the difference between a Chapter 7 bankruptcy and a Chapter 11 bankruptcy? LO4
Why are the administrative expenses incurred during a liquidation classified as liabilities having priority? LO4
In a bankruptcy proceeding, what is the significance ofa liability with priority? What are the general categories of liabilities that have priority in a liquidation? LO4
What is the difference between fully secured liabilities, partially secured liabilities, and unsecured liabilities? LO4
A bankruptcy court enters an order for relief. How does this action affect an insolvent company and its creditors? LO4
A bankruptcy case may begin with either a voluntary or an involuntary petition. What is the differ¬ ence? What are the requirements for an involuntary petition? LO4
What are the primary objectives of a bankruptcy proceeding? LO4
At present, what federal legislation governs most bankruptcy proceedings? LO4
What does the term insolvent mean? LO4
If an insolvent company is liquidated, how are the assets that result distrib¬ uted? How is a fair and equitable settle¬ ment produced? LO4
What financial reporting does a com¬ pany that successfully leaves bankruptcy reorganization make? LO4
What financial reporting is made for a company while it goes through reorganization? LO4
What provisions are frequently included in a bankruptcy reorganization plan? LO4
What assistance can an accountant provide to an insolvent company? LO4
Why would the creditors of an insolvent company allow it to reorganize rather than attempt to force a liquidation of its assets? LO4
How does the liquidation of an insolvent company (a Chapter 7 bankruptcy) differ from a reorganization (a Chapter 11 bankruptcy)? LO4
What is the difference between a vol¬ untary and an involuntary bankruptcy petition? LO4
EXCEL CASE The City of Loveland previously adopted GASB Statement 34. Now city officials are attempting to determine reported values for major infrastructure assets that it had obtained prior to the
COMMUNICATION CASE 2 The City of Larissa recently opened a solid waste landfill to serve the area’s citizens and businesses. The city’s accountant has gone to city officials for guidance as to
COMMUNICATION CASE 1 Read the following articles and any other papers that are available on setting governmental accounting standards:“25 Years of State and Local Governmental Financial
ANALYSIS CASE 2 Go to Web site www.portlandonline.com/omf/index.cfm?c=43896 and find the 2006 comprehensive annual financial report for the City of Portland, Oregon. One of the most important changes
RESEARCH CASE 1 The City ofAbernethy has three large bridges built in the later part of the 1980s that were not capitalized at the time. The city’s accountant is interested in receiving suggestions
53. A city starts a public library that has separate incorporation and gets some of its money from the state and some from private donations. Indicate whether each of the following independent
52. A city receives a copy of its original charter from the year 1799 as a gift from a citizen. The docu¬ ment will be put under glass and displayed in the city hall for all to see. The fair value
51. Use the same information as in problem 50 except that, by the end ofYear 3, the landfill is 40 per¬ cent filled. The city realizes that the total closure costs will be $3 million. Indicate
50. A city has a solid waste landfill that was filled 12 percent in Year 1 and 26 percent in Year 2. Dur¬ ing those periods, the government expected that total closure costs would be $2 million. As
49. A police department leases a car on July 1, Year 1, with five annual payments of$20,000 each. It imme¬ diately makes the first payment, and the present value of the annuity due is $78,000 based
48. The City of Wolfe bought a $20,000 machine with a five-year life and no salvage value for its school system. It was capitalized but no other entries were ever made. The machine was monitored
47. The city has a landfill that has been recorded within its parks. The landfill generated program revenues of $4,000 in Year 4 and cash expenses of $15,000. It also paid $3,000 cash for a piece of
46. At the end ofYear 4, the city owed teachers $60,000 in vacation pay that had not been recorded. The assumption is that these vacations will be taken evenly over the next year.a. What is the
45. Assume that the one component unit had program revenues of $30,000 and expenses of $42,000 and spent $10,000 for land during Year 4. However, it should have been handled as a blended com¬ ponent
44. On January 1, Year 4, the government leased a police car for five years at $20,000 per year with the first payment being made on December 31, Year 4. This is a capitalized lease. Assume that, at
43. On the first day ofYear 4, the city receives a painting as a gift that qualifies as a work of art. It has a 30-year life, is worth $15,000, and is being displayed at one of the parks. The
42. For each of the following, indicate whether the statement is true or false and include a brief expla¬ nation for your answer.a. A pension trust fund appears in the government-wide financial
41. Use the information in problem 40 to prepare the 2008 fund-based financial statements for the gov¬ ernmental funds and the proprietary funds. A statement of cash flows is not required. Assume
40. The City of Pfeiffer starts the year of 2008 with the General Fund and an enterprise fund. The General Fund has two activities: education and parks/recreation. For convenience, assume that the
39. The City of Bernard starts the year of 2008 with the following unrestricted amounts in its Gen¬ eral Fund: cash of $20,000 and investments of $70,000. In addition, it holds a building bought on
38. The following information pertains to the City of Williamson for 2008, its first year of legal existence. For convenience, assume that all transactions are for the General Fund, which has three
37. The County of Maxnell decides to create a sanitation department and offer its services to the pub¬ lic for a fee. As a result, county officials plan to account for this activity within the
36. The City of Francois, Texas, has begun the process of producing a comprehensive annual financial report (CAFR). Several organizations that operate within the city are related in some way to the
35. A city government adds street lights within its boundaries at a total cost of $100,000. The lights should burn for at least 10 years but can last significantly longer if maintained properly. The
34. On January 1, 2008, a city pays $60,000 for a work of art to display in the local library. The city will take appropriate measures to protect and preserve the piece. However, if the work is ever
33. On January 1,2008, a rich citizen of the Town of Ristoni donates a painting valued at $300,000 to be displayed to the public in a government building. Although this painting meets the three
32. Mary T. Lincoln works for the City of Columbus. She volunteered to work over the 2008 Christmas break to earn a short vacation during the first week of January 2009. She earns three vacation days
31. The City of Lawrence opens a solid waste landfill in 2008 that is at 54 percent of capacity on December 31, 2008. The city had initially anticipated closure costs of $2 million but later that
30. On January 1,2008, the City of Hastings created a solid waste landfill that it expects to reach capac¬ ity gradually over the next 20 years. If the landfill were to be closed at the current
29. On January 1, 2008, the City ofVerga leased a large truck for five years and made the initial annual payment of $22,000 immediately. The present value of these payments based on an 8 percent
28.On January 1, 2008, a city government leased the following pieces of equipment. Each lease qual¬ ifies as a capital lease. Initial payments are on December 31, 2008. An interest rate of 12
27. On January 1, 2008, a city government leased the following pieces of equipment. Each lease qual¬ ifies as a capital lease. Initial payments are on December 31, 2008. An interest rate of 10
26. Which of the following is most likely to be true about the financial reporting of a public college or university?a. It resembles the financial reporting of private colleges and universities.b. It
25. Which of the following is true about the statement of cash flows for the proprietary funds of a state or local government?a. The indirect method of reporting cash flows from operating activities
24. Government-wide financial statements make a distinction between program revenues and general revenues. How is that difference shown?a. Program revenues are offset against the expenses of a
23. A government reports that its public safety function had expenses of $900,000 last year and pro¬ gram revenues of $200,000 so that its net expenses were $700,000. On which financial statement is
22. For component units, what is the difference in discrete presentation and blending?a. A blended component unit is shown to the left of the statements; a discretely presented com¬ ponent unit is
21. The Edison County Art Museum is legally separate from the City of Edison. Which of the follow¬ ing is true?a. If the art museum qualifies as a special purpose local government, it cannot be a
20. An employment agency for the handicapped works closely with the City of Hanover. The employment agency is legally separate from the city but still depends on it for financial support. How should
19. An accountant is trying to determine whether the school system of the City of Abraham is fiscally independent. Which of the following is not a requirement for being deemed fiscally independent?a.
18. Which of the following is not necessary for a special purpose local government to be viewed as a primary government for reporting purposes?a. It must have a separately elected governing body.b.
17. Which of the following is true about the management’s discussion and analysis (MD&A)?a. It is an optional addition to the comprehensive annual financial report, but the GASB encour¬ ages its
16. Which of the following is true about use of the modified approach?a. It can be applied to all capital assets of a state or local government.b. It is used to adjust depreciation expense either up
15. A city builds sidewalks throughout its various neighborhoods at a cost of $200,000. Which of the following is not true?a. Because the sidewalks qualify as infrastructure, the asset is viewed in
14. Assume in problem 12 that the city reports the work as a capital asset. Which ofthe following is true?a. Depreciation is not recorded because the city has no cost.b. Depreciation is not required
13. In problem 12, which of the following statements is true about reporting a revenue?a. A revenue will be reported.b. Revenue is reported but only if the asset is reported.c. If the asset is not
12. The City of Wilson receives a large piece of sculpture valued at $240,000 as a gift to be placed in front of the municipal building. Which of the following is true for reporting the gift on the
11. What amount of liability should the city recognize on fund-based financial statements at December 31, Year 1 ? Assume that all remaining vacations will be taken in July.a.It depends on whether
10. What liability should the city report on government-wide financial statements at the end ofYear 1?a. It depends on whether the employees work at governmental activities or business-type
9. If this landfill is judged to be a governmental fund, what liability will be reported at the end of the second year on fund-based financial statements?a. $-0-.b. $110,000.c. $190,000.d. $200,000.
8. If this landfill is judged to be a proprietary fund, what liability will be reported at the end of the second year on fund-based financial statements?a. $-0-.b. $110,000.c. $190,000.d. $200,000.
7. Which of the following is true for the Year 2 government-wide financial statements?a. Both expense and liability will be zero.b. Both expense and liability will be $110,000.c. Expense will be
6.Acity creates a solid waste landfill. It assesses every person or company that uses the landfill a charge based on the amount of materials contributed. In which of the following will the landfill
5.Acity government has a nine-year capital lease for property being used within the General Fund. The lease was signed on January 1,2008. Minimum lease payments total $90,000 starting at the end of
4. A city government has a nine-year capital lease for property being used within the General Fund. The lease was signed on January 1,2008. Minimum lease payments total $90,000 starting at the end of
3. A city government holds a six-year capital lease for property being used within the General Fund. Minimum lease payments total $70,000 starting next year but have a current present value ot
2. A city government has a six-year capital lease for property being used within the General Fund. Minimum lease payments total $70,000 starting next year but have a current present value of $49,000.
1. A city government has obtained an asset through a capital lease. Which of the following is true for the government-wide financial statements?a. The accounting parallels that used in for-profit
25. What is the most common form for the financial statements of public colleges and universities?
24. What are some of the major differences that exist between private colleges and universities and pub¬ lic colleges and universities that affect financial reporting?
23. How are fiduciary funds reported on government-wide financial statements?

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