Today’s CPA Exam Question of the Day from Yaeger CPA Review Instructor Cindy Simpson, CPA, CMA, CIA covers Governmental Accounting for the Financial and Accounting section of the Exam. Yaeger CPA Review provides these exclusively to the readers of another71.com.

2009 Wiley FAR, Module 19 (Governmental Accounting), MCQ 44, Page 894.

A. $25,000
B. $20,000
C. $0
D. $45,000

The Wiley answer on page 906 states that [A] is the correct answer because only the $25,000 received from the state as an advance of sales tax revenues meets the GASB 33 requirements for recognizing revenue under the modified accrual basis of accounting; the modified accrual basis requires that revenues be recognized when they are both measurable and available. Here is some additional explanation for why [A] is the BEST answer.

First of all, this is a question which involves the modified accrual basis of accounting. The two clues that indicate the modified accrual basis are:
(1) the general fund, which is one of the five governmental funds (the governmental funds use the modified accrual basis) and
(2) the statement of revenues, expenditures, and changes in fund balances (expenditures are used in the modified accrual basis).

Under the modified accrual basis, revenues are recognized when they are both:
(1) measurable: you can come up with a figure and
(2) available: you will collect the money by the end of the year (balance sheet date) or within a short time after the end of the year so that you can pay the bills for that year.

For example, for the money to be available in 2007, you have to be able to pay the bills for 2007 using that money. If you cannot use the money to pay the bills of 2007, then you cannot call it revenue in 2007. What makes this question so tricky is that they call the 2007 sales taxes received in 2007 an “advance” and they receive the 2008 property taxes in 2007.

Because the $25,000 of sales taxes received will be used to pay 2007 bills, you can recognize it as revenue in 2007. But, because the $20,000 of property taxes received will be used to pay 2008 bills, you cannot recognize it as revenue until 2008. Therefore, the best answer is $25,000; the answer is [A].

Some other notes: In this question, Millard City collected the money before December 31, 2007 (the balance sheet date), but that may not be the case in questions on the CPA exam. There are some tricky rules about how quickly you must collect the money after the balance sheet date in order for that money to be “available.” Specifically for property taxes, you must collect the money within 60 days of the balance sheet date; for other types of taxes, you must collect the money within a reasonable time after the balance sheet date, such as 180 days. But, don’t forget . . . you can only call it revenue in that year if you use the money to pay the bills for that year, regardless of how quickly you collect it. Also, under GASB 33, sales taxes are “derived” nonexchange revenues and property taxes are “imposed” nonexchange revenues.

***

Have questions? Need help? Take advantage of this opportunity from Yaeger CPA Review.

Here are the guidelines for submitting CPA Exam questions:
1) This is open to all current CPA Exam candidates
2) Questions submitted can only be from the 2009 Wiley CPA Review 4-volume textbooks
3) Questions can only be in multiple choice format, (no simulations)
4) Questions need to be emailed directly to Yaeger CPA Review at phil4help@aol.com

Get the complete Yaeger CPA Review FAR HomeStudy course for only $345

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1. Yaeger CPA Review’s CPA Exam Question of the Day for BEC: Financial Analysis – Breakeven Point
2. Reviews, Compilations, and 3 Weeks Until Auditing and Attestation
3. Wiley CPA FAR MCQ: Partnership Accounting

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Yaeger CPA Review released a Financial Accounting and Reporting video on consolidations in relation to SFAS 141R. More specifically, it deals with FIN 46R and its relevance to the CPA Exam.

Phil Yaeger, CPA and Cindy Simpson, CPA, CMA, CIA filmed the approximately 42 minute video and it’s free for all candidates to view.

“…we feel that this will be on the CPA Exam in 2009, and obviously in 2010.”

Link: FIN 46R video on Variable Interest Entities

Related posts:

1. Free CPA Exam FAR Video on Investments, Inventory, SE, and Pensions
2. “Last Minute FAR Tips” with Dr. Phil Yaeger, CPA Now Archived
3. FREE BEC CPA Review Videos

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The original FAS 141 is now a clunker

With the coming and going of the April/May 2009 testing window, Financial Accounting and Reporting (FAR) exam takers will now have to tackle SFAS 141(R) – Business Combinations and Consolidations starting on July 1, 2009. With FAS 141(R) many of the key terms have changed and it’s a completely new way of consolidating financial statements.

Your CPA review materials may or may not cover this in great deal, but know this: it’s very important that you understand the new consolidation method.

If your current CPA Exam study materials don’t cover this change in-depth (as in devote 2-3 hours to the topic), then you should consider buying Yaeger CPA Review’s recently released SFAS 141(R) lecture.

The 3.5 hour class comes on a USB thumb drive and includes a 56 page download of text, multiple choice questions, and explanations. It costs $50.

Current Yaeger students already have this lecture included in their 2009 FAR HomeStudy. Students of other courses may want to invest their time and money in this because if you skimp on studying SFAS 141(R) – it could spell disaster for you on exam day.

Phil Yaeger also discussed the change on the CPA Exam Insider podcast (don’t laugh…I’m still working out the kinks…I’m a bean counter, not a radio guy.)

FAS 141(R) will be ripe to be tested as a simulation. Make SURE you know it.

Oh – and one more thing: you will need to know BOTH consolidation methods until they get all of the SFAS 141 questions purged from their test bank that contains thousands of questions. I’m sure that the AICPA will do it’s best to get them removed, but don’t be surprised if you see one that tests the old method.

(Just what you wanted to hear).

Get the FAS 141(R) update here…

Photo courtesy of Flickr user Royal Broil under this Creative Commons license.

Related posts:

1. Free CPA Exam FAR Video on Investments, Inventory, SE, and Pensions
2. 74
3. Roger’s CPA Exam Game Plan

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Yaeger CPA Review is offering free clarification videos over Financial Accounting and Reporting (FAR) to all CPA Exam candidates online through the end of April May. The videos cover some of the more confusing elements of FAR, including investments, inventory, stockholders’ equity, pensions, as well as updates for FASB 160, 161 and 162.

You can watch them online here. The link expires 4/30/2009 5/31/2009.

Related posts:

1. Free FAR Consolidation Video: Variable Interest Entities
2. FREE FAR CPA Review Videos
3. Wiley CPA Exam Question – FAR

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Any score update info and all FAR comments regarding the Oct/Nov 2008 test window (studying as well as exam results) will take place here. This saves people the trouble of having to read multiple posts on the topic.

Please:
1. No posting of actual exam info (hints included)
2. For legal reasons, if you think that company X has horrible material and you failed miserably using them, please don’t mention them.

If your comment doesn’t follow these loose guidelines, I won’t be able to post it.

As always – thank you for reading.

Related posts:

1. REG – October/November 2008 Window
2. FAR Rant – July/August 2008
3. REG Rant – July/August 2008

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If you sat for FAR during the July/August window and want to share a success story or vent some frustration, please do so. Any thoughts or insights you share can be beneficial to current or future candidates.

Guidelines:

1. No disclosing or hints about actual exam content
2. For legal reasons if you failed with review company X and think they’re horrible, please don’t name them

Any comments that don’t follow these loose guidelines won’t be posted.

This may be a success…or may be stupid…if it helps people cope with the exam, I’m willing to try it.

Thanks everyone.

Related posts:

1. REG Rant – July/August 2008
2. REG – October/November 2008 Window
3. FAR – October/November 2008 Window

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