[jeff]

SO I know every test is different but does anyone have any insight on what has been heavily tested recently? I take the exam Monday and I need to narrow my focus….Thanks!

AUD - 79
BEC - 80
FAR - 76
REG - 92

Jeff Elliott, CPA (KS)
NINJA CPA | NINJA CMA | NINJA CPE | Another71

[Juliemiddle]

@aspiring – JEs for your questions…

Costs Incurred:

DR – CIP $2,000,000

CR – Cash or A/P $2,000,000

Invoicing Customer:

DR – A/R $1,800,000

CR – Billings $1,800,000

Collection f/ Customer:

DR – Cash $1,500,000

CR – A/R $1,500,000

YE Recognition of % of Completion Sale:

% of Completion = 2,000,000/(2,000,000 + 6,000,000) = 25%

% of Revenue to Recognize = 25% x 9,000,000

DR – CIP $250,000

CR – COGS $2,000,000

CR – Revenue $2,250,000

If you add up the amounts you've debited to CIP, the balance is $2,250,000. Things to remember for % of Completion:

-The COGS recognized for the year is the amount of costs incurred that year.

-CIP for the year should always equal the amount of revenue recognized that year (COGS incurred + Gross Margin)

-If you incur a loss for the year, the YE entry for CIP will be a credit to recognize the loss and/or previous years' profit amounts.

(I'm using COGS b/c it's quick to type, but the correct account name is “Construction Expense”)

AUD: 84 - Oct. 2013
BEC: 83 - Feb. 2014
REG: 91 - May, 2014
FAR: 68, 96 - Oct. 2014...DONE

CPAExcel, Ninja Audio (all sections)

[rbozung]

Question re: callable preferred stock:

The description of the correct answer implies that the Paid in capital – retirement of preferred stock is neither “Retained Earnings” or “Paid in capital preferred stock”. What type of account is this?

Thanks!

Question #6 (AICPA.083749FAR-SIM)

500 shares of 6%, $100 par callable preferred stock are called at $101. The shares were issued at $103 per share. The journal entry to record the retirement includes which of the following?

A. Cr. paid in capital from retirement of preferred stock, $1,000.

The $2 difference multiplied by 500 shares yields $1,000 paid in capital kept by the firm. The journal entry is:

DR: Preferred stock 500($100) 50,000

DR: PIC-preferred 500($103 – $100) 1,500

CR: PIC-retirement of preferred 1,000

CR: Cash 500($101) 50,500

B. Dr. paid in capital from retirement of preferred stock $1,500.

Any paid-in capital resulting from retirement would be debited, not credited. In this case the amount is $1,000, which is the difference between the total issuance price and call price. If a debit is needed to complete the entry, retained earnings is the account used.

C. Cr. retained earnings $1,000

D. Dr. preferred stock $51,500

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[rbozung]

Interest: I approached this problem as a simple did/should have done: (answer is A).

They expensed $1,500 in 2005.

They should have expensed based on principal x rate x time and adjusted for the amount of time the loan accrued in 05:

Loan 1: $5k x 12% x (12/12) = $600 x (10/12) = $500 for the 10 months in 05

Loan 2: $15k x 12% x (6/12) = $900 x 100% = $900 since the full amount was accrued in 05 = 100%

Loan 3: $8k x 12% x (9/12) = $720 x (8/12) = $480 (8 months in 05)

Total should have been expensed ($500 + $900+ $480) = $1880

Less: total expensed = $1500

=$380 understatement.

Anyone know where I went wrong?

Loeb's Corp. frequently borrows from the bank in order to maintain sufficient operating cash. The following loans were at a 12% interest rate, with interest payable at maturity. Loeb repaid each loan on its scheduled maturity date.

Date of loan Amount Maturity date Term of loan

11/1/04 $ 5,000 10/31/05 1 Year

2/1/05 15,000 7/31/05 6 Months

5/1/05 8,000 1/31/06 9 Months

Loeb records interest expense when the loans are repaid. As a result, the interest expense of $1,500 was recorded in 2005. If no correction is made, by what amount would 2005 interest expense be understated?

A. $540

B. $620

C. $640

D. $720

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[Juliemiddle]

@rbo – You're making your interest expense calculations too complicated. 🙂 The interest rate in these questions is always an APR.

Loan 1: $5k x 12% x (10/12) = $500 for the 10 months in 05

Loan 2: $15k x 12% x (6/12) = $900 for the 6 months in 05

Loan 3: $8k x 12% x (8/12) = $640 for the 8 months in 05

Interest Expense for 2005 = $ 500 + $900 + $640 = $2,040

Understated Interest Expense = $2,040 – $1,500 = $540

AUD: 84 - Oct. 2013
BEC: 83 - Feb. 2014
REG: 91 - May, 2014
FAR: 68, 96 - Oct. 2014...DONE

CPAExcel, Ninja Audio (all sections)

[rbozung]

Thanks, Julie. Good luck on the 20th! Do you feel ready?

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[Ssbknyc]

Bunson Township was incorporated on January 1, Year 1, and is preparing its government-wide financial statements for the year ended December 31, Year 1. The governmental funds displayed a combined change in fund balance of $500,000 for that year and also had the following balances, data, or transactions:

Capital outlay of $250,000 partially funded by long-term debt proceeds of $225,000;

Current year depreciation of $60,000 on a capital asset base of $1,200,000;

Principal payments (on debt) of $40,000;

Interest payments (on debt) through October 1 of $30,000;

Principal payments of $10,000 incurred through December 31 but paid on January 2;

Interest payments of $7,500 incurred through December 31 but paid on January 2;

Sales tax revenues of $30,000 associated with December 31, Year 1 sales remitted to the State in February and paid to the Township in March.

The government-wide changes in net position would be displayed as:

a. $587,500

b. $597,500

c. $527,500 – Correct Answer

d. $455,000

I don't understand why the answer doesn't include

Interest payments (on debt) through October 1 of $30,000;

Principal payments of $10,000 incurred through December 31 but paid on January 2;

Can anyone help?

Done 08/2014-08/2015

[Juliemiddle]

@rbo – Thank you. Don't think I'll ever feel ready, but I'm trying to be! I'm re-read all the Govt. accounting sections, and I'm re-typing my notes right now.

AUD: 84 - Oct. 2013
BEC: 83 - Feb. 2014
REG: 91 - May, 2014
FAR: 68, 96 - Oct. 2014...DONE

CPAExcel, Ninja Audio (all sections)

[lab2008]

Becker text states, “Computer Software developed internally or obtained for internal use only – Expense costs incurred for the preliminary project state and costs incurred for training and maintenance,” to me this means developing software internally, expense it. Yet the below problem says costs to develop s/w for the company's MIS system is not an R&D expense. Can you help clarify?

Brill Co. made the following expenditures during the current year:

Costs to develop computer software for use in

Costs to develop computer software for use in

Brill's general management information system

$100,000

Costs of market research activities

75,000

What amount of these expenditures should Brill report in its current year income statement as research and development expenses under U.S. GAAP?

a.

$0

b.

$100,000

c.

$75,000

d.

$175,000

Explanation

Choice “a” is correct. Under U.S. GAAP, Research and development includes costs incurred prior to technological feasibility for developed software that is to be sold, leased, or marketed. This software is for internal use, unrelated to production and is not considered research and development. Market research is also not research and development because it is not aimed at discovery of new knowledge to develop a new product or service.

Choice “d” is incorrect. This software is for internal use, unrelated to production and is not considered research and development. Market research is also not research and development because it is not aimed at discovery of new knowledge to develop a new product or service.

Choice “b” is incorrect. This software is for internal use, unrelated to production and is not considered research and development.

Choice “c” is incorrect. Market research is also not research and development because it is not aimed at discovery of new knowledge to develop a new product or service.

3 out of 4 passed and sitting for FAR on May 31. Will lose credit for Audit if I don't pass FAR by Aug 4. I love leases and bonds.

[rbozung]

@lab2008. This question is only testing your knowledge of the items that should be included in the category “R&D expense” not whether or not they are expensed in general. “Market Research” and “Software Development Costs” are items that are specifically excluded from the R&D expense classification.

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[lab2008]

Thanks rbozung

I have another one. The text says, “Gains and losses are always recognized in exchanges having commercial substance and are computed as the differences b/w FV and BV of the asset given up.” The below problem says the transaction has commercial substance, so the difference between the FV and BV of the asset given up is $500, yet the answer to the question is FV of truck surrendered. So which is it? What am I missing here?

On July 1, Year 1, Balt Co. exchanged a truck for 25 shares of Ace Corp.'s common stock. On that date, the truck's carrying amount was $2,500, and its fair value was $3,000. Also, the book value of Ace's stock was $60 per share. On December 31, Year 1, Ace had 250 shares of common stock outstanding and its book value per share was $50. What amount should Balt report in its December 31, Year 1 balance sheet as investment in Ace assuming the transaction had commercial substance?

a.

$3,000

b.

$1,500

c.

$2,500

d.

$1,250

Explanation

Choice “a” is correct. $3,000 (fair value of the truck surrendered). If a nonmonetary exchange has commercial substance, the transaction is accounted for using the fair value of the asset surrendered or received, whichever is more evident. In this question, it appears that the exchange has commercial substance, as it appears to culminate the earnings process (i.e., a truck is exchanged for stock, which would appear in a business sense to have affected the expected configuration of cash). Therefore, the accounting uses the fair value of the asset surrendered or the fair value of the asset received, whichever is more evident, as the value for the exchange. The question indicates that the fair value of the truck is $3,000 on the date of the exchange, and it does not provide the fair value of the stock (don't use the book value of the stock as an “approximation” of the fair value); therefore, the $3,000 fair value of the truck is used for measuring the transaction.

Choice “c” is incorrect. $2,500 is the book value of the asset surrendered. The book value of the asset surrendered is not used to account for the exchange if the fair value of the asset surrendered is more evident.

Choice “b” is incorrect. $1,500 (25 shares x $60) is Ace's book value of the stock on July 1, Year 1. The book value of the asset received is not used to account for the exchange.

Choice “d” is incorrect. $1,250 (25 shares x $50) is Ace's book value of the stock at December 31, Year 1. The book value of the asset received is not used to account for the exchange.

3 out of 4 passed and sitting for FAR on May 31. Will lose credit for Audit if I don't pass FAR by Aug 4. I love leases and bonds.

[rbozung]

Lab 2008, the question is asking for the amount recorded on the balance sheet for the investment received in the exchange, not the gain. Since you have commercial substance, The FV of the asset given up (truck) or the FV of the asset received (stock) is what you use to determine the gain (FV of the asset given up is “more readily determinable” than the FV of the stock so use that). The JE is DR. Investment in Ace $3k. CR. Book Value of the Truck ($2.5k) and CR the gain ($500). Make sense?

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[mikferr]

Just finished up the Inventory section using CPAExcel. I'm struggling with Dollar Value LIFO. I looked through the NINJA Notes and those don't even go over the Dollar Value LIFO. Should I continue spending time on how to calculate this? or Should I move on and be good with just knowing the basic concept of Dollar Value LIFO?

[Juliemiddle]

@mikferr – Unfortunately, it's one of those topics…if you happen to get a question or 2 on the exam, it could make all the difference between a 74 and 75. Or you may not see it at all. 🙁

I'd say if you have time to review it again, during your final review, you should. But, it shouldn't trump you learning mega topics – Govt., NFP, Bonds, etc.

AUD: 84 - Oct. 2013
BEC: 83 - Feb. 2014
REG: 91 - May, 2014
FAR: 68, 96 - Oct. 2014...DONE

CPAExcel, Ninja Audio (all sections)

[nosleep135]

Good luck to the FAR-TERS (FAR Test Takers) who are taking the exam tomorrow!!! 😉

[Future Ninja]

hey guys. joining the thread to kick-off far. 4 more weeks to go.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Author]

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