[yicao74]

Thank you guys. Merry Christmas

BEC 10/03/15 75
FAR 01/04/16

[yicao74]

Can some one tell me why the “Note payable 30,000 increase” does not add back to the Net income? I got $377,000

Karr, Inc., reported net income of $300,000 for 20X1. Changes occurred in several balance sheet accounts as follows:

Equipment $25,000 increase

Accumulated depreciation 40,000 increase

Note payable 30,000 increase

Additional Information

During 20X1, Karr sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.

In December 20X1, Karr purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000.

Depreciation expense for the year was $52,000.

In Karr's 20X1 statement of cash flows, net cash provided by operating activities should be:

A. $340,000.

B. $347,000.

C. $352,000.

D. $357,000.

BEC 10/03/15 75
FAR 01/04/16

[yicao74]

I choose the same answer as you. Try to find the explanation

BEC 10/03/15 75
FAR 01/04/16

[yicao74]

why the 10,000 patent cost is capitalized? According to the becker book, the patent developed internally should be expensed. Therefore, my answer is 10,000+60,000+80,000+200,000=350,000 .

BEC 10/03/15 75
FAR 01/04/16

[yicao74]

West, Inc. made the following expenditures relating to Product Y:
Legal costs to file a patent on Product Y
Production of the finished product would not have been undertaken without the patent
$ 10,000
Special equipment to be used solely for development of Product Y
The equipment has no other use and has an estimated useful life of four years
60,000
Labor and material costs incurred in producing a prototype model
200,000
Cost of testing the prototype
80,000
What is the total amount of costs that will be expensed when incurred under U.S. GAAP?
a.
$340,000
b.
$295,000
c.
$350,000
d.
$280,000

The correct answer is A instead of C. My question is why the patents should be capitalized?The patents is developed internally, The becker book writes: the internally developed intangible assets should be expensed.

BEC 10/03/15 75
FAR 01/04/16

[yicao74]

cortes123, thanks. The Becker book F8-7: Governmental fund fs are reconciled to the governmental activities section of the gov-wide presentation. Got it.

BEC 10/03/15 75
FAR 01/04/16

[yicao74]

I have a question : CPA01179

Lisa County issued $5,000,000 of general obligation bonds at 101 to finance a capital project. The $50,000 premium was to be used for payment of principal and interest. This transaction should be accounted for in the:
a. Capital projects funds, debt service funds and as assets and liabilities in the government-wide financial statements.
b. Debt service funds only.
c. Capital projects funds and debt service funds only.
d. Debt service funds and the general long-term debt account group only.

Explanation
Choice “a” is correct. The transaction should be accounted for in the:
Capital projects funds for the proceeds net of premium;
Debt service funds for the premium; and
Governmental activities column of the government-wide statement of net position as assets and liabilities
Choice “c” is incorrect. Issuance of debt would not be exclusively reported in the funds. Fund accounting ignores the operational accountability objectives of government-wide reporting.

I still do not understand why the correct answer is A instead of C. Why it has to post on the governmental activities？The question only mentioned the governmental funds.

BEC 10/03/15 75
FAR 01/04/16

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