2 strange FAR MCQs!!

  • Creator
    Topic
  • November 19, 2015 at 3:32 pm #198387
    Omar
    Participant

    NINJA Question –

    Hi, I was studying today and found something wrong (I think) in this questions:

    First number 1559 I think the answer is wrong because one of the choices:

    “Goods shipped to Kew FOB destination on December 20 of the prior year, were received on January 6 of the current year. The invoice cost was $50,000.”

    You considered this wrong because “The goods shipped FOB destination that did not arrive until January were not the company inventory until the title passed in January (upon arrival), so they should not be added to payables.”. The goods arrived this year not next year .

    Second a question about Inventory the lower of cost or market which changed to the lower of cost or net realizable value in Accounting Standards Update (ASU) 2015-11. Is this applied to Nov. exams?

    FAR: 73, 85
    BEC: 79
    REG: TBA
    AUD: TBA

Viewing 7 replies - 1 through 7 (of 7 total)
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  • November 19, 2015 at 3:44 pm #744027
    MaLoTu
    Participant

    The new standards should be testable Q1 2016, but there has been some debate about what is testable.

    I am not sure what your first question is … but FOB Destination doesn't change title until the purchaser receives it. They shipped on 10/20 and were received on 1/6.

    November 19, 2015 at 4:00 pm #744028
    Missy
    Participant

    for the first problem we would need to see the entire question not just one of the solutions. Often the disconnect is not understanding exactly what the question is asking you. Can't weigh in on the solution without knowing the entire question but it sounds like the question is asking about adjustments to the prior year end balance.

    Licensed Massachusetts Non Reporting CPA since 2012
    Finance/Admin/HR Manager

    November 19, 2015 at 7:13 pm #744029
    Omar
    Participant

    So you sure that the new updates not testable in this quarter cause my FAR exam scheduled 11/24/2015 and I don't wanna to go wrong in such easy questions.

    About my first question:
    Kew Co.’s accounts payable balance at December 31 of the prior year was $2,200,000 before considering the following data:

    * Goods shipped to Kew FOB shipping point on December 22 of the prior year were lost in transit. The invoice cost of $40,000 was not recorded by Kew. On January 7 of the current year, Kew filed a $40,000 claim against the common carrier.
    * On December 27 of the prior year, a vendor authorized Kew to return, for full credit, goods shipped and billed at $70,000 on December 3 of the prior year. The returned goods were shipped by Kew on December 28 of the prior year. A $70,000 credit memo was received and recorded by Kew on January 5 of the current year.
    * Goods shipped to Kew FOB destination on December 20 of the prior year, were received on January 6 of the current year. The invoice cost was $50,000.

    What amount should Kew report as accounts payable in its prior year December 31 balance sheet?
    A. $2,170,000
    B. $2,180,000
    C. $2,230,000
    D. $2,280,000
    ————–
    What is the right answer?

    FAR: 73, 85
    BEC: 79
    REG: TBA
    AUD: TBA

    November 19, 2015 at 8:16 pm #744030
    ohiostategirlcpa
    Participant

    Answer is A.

    start with 2200,
    add 40 because Kew is responsible
    subtract 70 because Kew shipped them back
    ignore the 50 because it was not received in the year being closed (prior year)

    F91 A95 R90 B94
    CMA since 2015
    (Gleim books/PDFs, MCQs, SIMS)

    November 19, 2015 at 8:47 pm #744031
    Omar
    Participant

    In the answer they wrote “The goods shipped FOB destination that did not arrive until January were not the company inventory until the title passed in January (upon arrival), so they should not be added to payables.”
    The goods received on January this year not prior year. It's FOB destination not recorded until received which in Jan this year. Or did I miss something?

    FAR: 73, 85
    BEC: 79
    REG: TBA
    AUD: TBA

    November 19, 2015 at 11:19 pm #744032
    ohiostategirlcpa
    Participant

    January does not count because the year closed in December (prior year).
    They are asking for the AP balance as of Dec 31, not as of Jan 31!!!!

    The scenario assumes we are in January and making the adjusting entries for the December that just passed (prior year).

    F91 A95 R90 B94
    CMA since 2015
    (Gleim books/PDFs, MCQs, SIMS)

    July 3, 2016 at 3:04 pm #744033
    BenB
    Participant

    Anyone else read this as it was already recorded on the books? The prior year wording is tricky.

    “:A $70,000 credit memo was received and recorded by Kew on January 5 of the current year.”

    FAR 7/11/16 - 87
    BEC 9/9/16
    REG TBD
    AUD TBD

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