[Anonymous]

In Chapter 7 – Fixed Assets of the FAR Ninja Audio, Jeff says that when depreciating an asset using Double Declining Balance, you’re supposed to switch over to straight line once the amount of depreciation drops below what it would be if you were using straight line. He says you do this because otherwise the asset would never be fully depreciated. Becker says you continue to depreciate the asset using double declining until it hits the salvage value and then you stop depreciation because the book value can never drop below salvage value. This is a big difference. Can someone please let me know which is correct?

[Mrs 300]

Thanks Entourage. I'm just signing in to tag this post and follow….I would also like to know this.

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[jeff]

I just did a quick google search and 4/4 of the articles/examples I read use the method I describe in the NINJA FAR Notes/Audio.

[Sandra]

Its essentially the same exact thing- just a different way of wording it. Neither method depreciates past the salvage. If you depreciate something DDB when you don't have enough of a carrying value left to depreciate a full years worth of DDB you depreciate the balance “straight-line” that year.

[jeff]

For exam purposes, I recommend the way the ninjas prescribe 🙂

[Mrs 300]

I also Googled this (Jeff, I completely trust you, but I got a 74 on FAR last time and I am borderline psychotic right now) and I read a few articles that give the Becker example and also reference straight-line saying that “a switch to straight line is also permitted.” So it sounds like either way is acceptable.

I know that it's google and not really a primary source, but I'll take it. Besides, I'll pray that I get a question on Double Declining balance with all the other garbage that's in FAR!

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[Anonymous]

Chances are if there is a DDB question, it won't ask you for the depreciation in a year that's close to salvage value anyway. Thanks for all the answers though!

[Anonymous]

Sorry but I think I came across another difference. In chapter 15, governmental, Jeff says that estimated uncollectible property tax revenues do not offset revenues so do not net them. With Becker, the J/E is set up with a debit to property tax receivable and credits to revenues and allowance for uncollectible taxes receivable. The uncollectible allowance is the plug. Wouldn't this mean that these 2 accounts are netted because the allowance reduces the property tax revenue? I could be interpreting this the wrong way so please let me know.

[Mrs 300]

The allowance account would be a contra (asset) account to the Real property Taxes Receivable account, NOT the revenue account. I see the page in Becker you are talking about. Does this make sense?

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[Anonymous]

Ah yes, thank you. Essentially when you get to revenue, the allowance has already been subtracted. Is this correct?

[Mrs 300]

Well, you book the revenue based on the amount of taxes that are deemed “measurable and available.” So for example, of the $1,800,000 property taxes “out there” so to speak, the company believes that $180,000 will be uncollectible. So they only believe that they will receive $1,620,000 in property taxes for that year. Thus, they can only recognize revenue of that amount.

So like you said, the revenue already starts out at the net amount.

At least this is how I interpret it!

When do you take FAR?

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[Anonymous]

July 19th, it's my first attempt at it. How about you? I feel like I'm grasping a good portion of the material but, as everyone says, there is SO MUCH information that I can't possible hold on to every trick or rule. I'm just trying to make sure I don't lose the big picture. How is your studying going along?

[Mrs 300]

I re-take on the 13th. My studying is going well. I really feel like I'm better prepared than the last time so I hope it's enough. If I pass, I'm done with the CPA exam forever! 🙂

Good luck and I hope that you do really well!

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[Anonymous]

You too! If you feel better prepared than last time and only missed out by 1 point, I'm sure you'll kill it this time around. Less than a week until you're free!

[Author]

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