Club 75 Live Event: FAR and REG Webcast Monday November 9th @ 10pm EST
Update: This webcast is now archived and available for viewing after joining Club 75
View time: Approx 61 minutes
Order of topics:
1. REG – Like Kind Exchanges
2. FAR – 141R
3. REG – 1231,1245, 1250 assets
4. REG – Partnership Distributions
5. Wrap up: Final thoughts from Phil on FAR and REG preparation as you
exam nears.
Original Post:
Dr. Phil Yaeger of Yaeger CPA Review will be hosting a live webcast Monday November 9, 2009 at 10 pm EST for Club 75 members.
He will cover four hot CPA Exam topics, three from Regulation and one from Financial Accounting and Reporting.
Regulation:
-1231, 1245, and 1250 Assets
-Like-kind exchanges – with and without a liability attached (…does your review course cover like-kind exchanges with a liability in-depth? It should.)
-Corporate and Partnership liquidating/non-liquidating distributions
Financial Accounting and Reporting:
-141R Consolidations
If you are taking either REG or FAR in the upcoming weeks, you don’t want to miss this event.
Improving your proficiency on these hot exam topics could very well give you the extra boost you need for your upcoming exam.
Join Club 75 and a link to the webcast will be provided.
Details:
-This webcast is for Club 75 members. [Go here to join Club 75]
-If you join, you can also take part in a [Wiley CPA Review 2010 beta test (worth approx $100)]
Yaeger CPA Review’s CPA Exam Question of the Day for FAR: Governmental Accounting
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.
In December 2007, the general fund of Millard City received $25,000 from the state as an advance on the city’s portion of sales tax revenues, and it received $20,000 from property owners for property taxes to be levied in 2008. The advance payment of sales taxes represented the amount that the state collected in 2007 that would have been distributed to Millard in the early part of 2008.
Millard used the advance to pay for expenditures incurred by the general fund in 2007. The cash received from property owners for property taxes to be levied in 2008 will be used to pay for expenditures incurred in 2008.
In accordance with GASB 33, Accounting and Reporting for Nonexchange Transactions, what amount of revenue from these transactions should be reported by Millard’s general fund on the statement of revenues, expenditures, and changes in fund balances for the year ended December 31, 2007?
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.
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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
Yaeger CPA Review’s CPA Exam Question of the Day for BEC: Financial Analysis – Breakeven Point
The next CPA Exam Question of the Day is answered by Yaeger CPA Review Instructor Cindy Simpson, CPA, CMA, CIA. Yaeger CPA Review provides these exclusively to the readers of another71.com.
2009 Wiley BEC, Module 45 (Planning, Control, and Analysis), MCQ 14, Page 338.
In calculating the breakeven point for a multi-product company, which of the following assumptions are commonly made when variable costing is used?
I. Sales volume equals production volume.
II. Variable costs are constant per unit.
III. A given sales mix is maintained for all volume changes.
A. I and II.
B. I and III.
C. II and III.
D. I, II, and III.
The Wiley answer on pages 347–348 states that [C] is the correct answer. Wiley states that item [I] is false in variable costing because the breakeven point will be the same even if production does not equal sales. Here is some additional explanation for why [C] is the BEST answer.
This question can be a little tricky because it mixes two concepts: CVP analysis and variable costing. If you refer to page 320 in the Wiley BEC book, item 3, you can see under the Assumptions of CVP Analysis, that question item [I] corresponds to assumption item [g] Units produced = Units sold, question item [II] corresponds to assumption item [d] Variable costs per unit are constant, and question item [III] corresponds to assumption item [b] The sales mix remains constant. Therefore, [I], [II], and [III] are all assumptions of CVP analysis. Regarding question items [II] and [III], both assumptions apply to variable costing because they are important in calculating contribution margin in single- and multi-product firms, and contribution margin is used in the variable costing income statement found on page 321 (middle of the page). Contribution margin = sales price — variable costs.
But what makes this question tricky is that they also include variable costing in the question. The difference between variable costing and absorption costing is the treatment of fixed factory overhead. In variable costing, fixed factory overhead is treated as a PERIOD cost and the entire amount is always subtracted in calculating net income.
However, in absorption costing (which is the costing we use in GAAP), fixed factory overhead is treated as a PRODUCT cost and flows through the inventory accounts of work-in-process and finished goods inventory, and is eventually expensed as Cost of Goods Sold (COGS) when the product is sold. If we produce MORE than we sell, then finished goods inventory goes up (trapping the fixed factory overhead), COGS goes down, and net income is higher (as compared to net income under variable costing). If we produce LESS than we sell, then finished goods inventory goes down (releasing the fixed factory overhead), COGS goes up, and net income is lower (as compared to net income under variable costing). The thing is, as you can see in my examples of comparing absorption costing versus variable costing . . . there is no requirement in variable costing that Sales = Production, so question item [I] is FALSE. That makes the BEST answer as question items [II] and [III] because these assumptions apply to both CVP analysis and variable costing, which is answer [C].
One other note: There is no requirement that Sales = Production in absorption costing either; that’s why we have changes in ending inventory from one accounting period to the next.
***
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 BEC HomeStudy course for only $345
