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FAR Study Group MCQ’s.
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September 9, 2013 at 2:08 pm #180296
jeff
KeymasterFAR Resources:
Free FAR Notes & Audio – https://www.another71.com/cpa-exam-study-plan
FAR 10 Point Combo: https://www.another71.com/products-page/ten-point-combo
FAR Score Release: https://www.another71.com/cpa-exam-scores-results-release
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September 13, 2013 at 3:30 pm #476164
Anonymous
InactiveMy cpaexcel lecture on healthcare says that NFP recognize revenues at gross and bad debts are recognized separately. Public entities recognize the revenues adjusted for uncollectables. I think I'll just come back to this later. I'm confusing myself I think.
September 13, 2013 at 3:30 pm #476235Anonymous
InactiveMy cpaexcel lecture on healthcare says that NFP recognize revenues at gross and bad debts are recognized separately. Public entities recognize the revenues adjusted for uncollectables. I think I'll just come back to this later. I'm confusing myself I think.
September 13, 2013 at 9:30 pm #476166Anonymous
InactiveSeptember 13, 2013 at 9:30 pm #476237Anonymous
InactiveSeptember 13, 2013 at 11:53 pm #476168munxmun
MemberCan someone help me with this question. Becker's explanation does not make sense to me 🙁 Question is from F2 homework.
Sonex Construction Co. incurred the following costs and made the following estimates in the first two years of a three-year construction project.
Year 1 Year 2
Actual current year costs incurred $ 1,200,000 $ 1,000,000
Estimated costs to complete contract 1,800,000 550,000
Contract price 5,000,000 5,000,000
Billings and collections 2,500,000 1,500,000
Using the percentage of completion method of accounting, what amount would Sonex show as either a net current asset or a net current liability as of the end of Year 2 due to its construction activity?
a. $0
b. $4,000,000 asset.
c. $1,500,000 liability.
d. $1,800,000 asset.
Explanation
Choice “a” is correct. If the sum of cumulative costs incurred plus cumulative gross profit recognized exceeds cumulative billings, the excess is reported as a current asset. If cumulative billings exceeds the sum of cumulative costs incurred plus cumulative gross profit recognized, the difference is reported as a current liability. If the two amounts are equal, no asset or liability is recognized.
Year End 1 Year End 2
Cumulative costs incurred $ 1,200,000 $ 2,200,000
Add: Cumulative gross profit recognized 800,000 1,800,000
Less: Cumulative billings (2,500,000) (4,000,000)
Total: $ (500,000) $ 0
Choices “b”, “d”, and “c” are incorrect, per the above explanation.
September 13, 2013 at 11:53 pm #476239munxmun
MemberCan someone help me with this question. Becker's explanation does not make sense to me 🙁 Question is from F2 homework.
Sonex Construction Co. incurred the following costs and made the following estimates in the first two years of a three-year construction project.
Year 1 Year 2
Actual current year costs incurred $ 1,200,000 $ 1,000,000
Estimated costs to complete contract 1,800,000 550,000
Contract price 5,000,000 5,000,000
Billings and collections 2,500,000 1,500,000
Using the percentage of completion method of accounting, what amount would Sonex show as either a net current asset or a net current liability as of the end of Year 2 due to its construction activity?
a. $0
b. $4,000,000 asset.
c. $1,500,000 liability.
d. $1,800,000 asset.
Explanation
Choice “a” is correct. If the sum of cumulative costs incurred plus cumulative gross profit recognized exceeds cumulative billings, the excess is reported as a current asset. If cumulative billings exceeds the sum of cumulative costs incurred plus cumulative gross profit recognized, the difference is reported as a current liability. If the two amounts are equal, no asset or liability is recognized.
Year End 1 Year End 2
Cumulative costs incurred $ 1,200,000 $ 2,200,000
Add: Cumulative gross profit recognized 800,000 1,800,000
Less: Cumulative billings (2,500,000) (4,000,000)
Total: $ (500,000) $ 0
Choices “b”, “d”, and “c” are incorrect, per the above explanation.
September 14, 2013 at 12:30 am #476170NYCaccountant
Participant@ DJN Dividends on cumulative preferred stock have to be declared for them to be reported on the balance sheet as a liability. Absent the declaration, they are reported as dividends in arrears in the notes to the financial statements.
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.September 14, 2013 at 12:30 am #476241NYCaccountant
Participant@ DJN Dividends on cumulative preferred stock have to be declared for them to be reported on the balance sheet as a liability. Absent the declaration, they are reported as dividends in arrears in the notes to the financial statements.
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.September 14, 2013 at 12:46 am #476172Anonymous
Inactive@NYCaccountant, – thank you. For some reason I had it in my head that “cumulative” also meant it was “automatic” and did not have to be actually declared.
BTW, when are you taking FAR? And it that your last exam?
September 14, 2013 at 12:46 am #476243Anonymous
Inactive@NYCaccountant, – thank you. For some reason I had it in my head that “cumulative” also meant it was “automatic” and did not have to be actually declared.
BTW, when are you taking FAR? And it that your last exam?
September 14, 2013 at 12:58 am #476174NYCaccountant
Participant@ Mun Basically in year one you were 40 percent done with the project based on actual and estimated costs (1,200,000 (actual costs) + 1,800,000 (Estimated costs left)=3,000,000/1,200,000=40%. So you say that this project will cost 3,000,000 to construct and so far you've spent 1,200,000, which means that your 40% complete with the project. Because you've taken
40% of the cost, you should take 40% of the total fee you are charging the client (5,000,000 *40%=2,000,000) as revenue.
The entries would be:
Construction expense Dr. 1,200,000 income statement account
Accounts Payable/Cash Cr. 1,200,000 income statement account
Construction in progress Dr. 2,000,000 Asset account
Revenue Cr.2,000,000 income statement account
Then you billed and collected from the client 2,500,000. Journal entry below
Cash Dr. 2,500,000 Asset account
Billings on construction contract Cr. 2,500,000 contra asset account.
Now the only things relevant to this question are construction in progress and billings on construction contract.
So you earned 2,000,000 worth of revenue related to construction and collect 2,500,000, which means you have a liability in year one (Deferred revenue). Billings on construction is a contra asset account of construction in progress.
So after year one you have a liability for 500,000 because you collected more cash then you earned.
Now in year two, you are 80% complete with the project. Now on a cumulative basis (year 1 and year 2 combined) you have earned 80% of the project fee (5,000,000*80%=4,000,000). So long story short, your construction in progress account should now have a cumulative (year 1 and year 2 balance of 4,000,000. Now during year 2 you billed and collected another 1,500,000 from the client, which means on a cumulative basis (year 1 and year 2) you have collected 4,000,000 from the client. Now remember that billing and collections on construction contracts is a contra asset account of construction in progress. so at this point your balance sheet looks like this:
Construction in progress Dr. 4,000,000
Billings on construction contract Cr. 4,000,000
They net each other out, and equal 0.
I hope that helps.
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.September 14, 2013 at 12:58 am #476245NYCaccountant
Participant@ Mun Basically in year one you were 40 percent done with the project based on actual and estimated costs (1,200,000 (actual costs) + 1,800,000 (Estimated costs left)=3,000,000/1,200,000=40%. So you say that this project will cost 3,000,000 to construct and so far you've spent 1,200,000, which means that your 40% complete with the project. Because you've taken
40% of the cost, you should take 40% of the total fee you are charging the client (5,000,000 *40%=2,000,000) as revenue.
The entries would be:
Construction expense Dr. 1,200,000 income statement account
Accounts Payable/Cash Cr. 1,200,000 income statement account
Construction in progress Dr. 2,000,000 Asset account
Revenue Cr.2,000,000 income statement account
Then you billed and collected from the client 2,500,000. Journal entry below
Cash Dr. 2,500,000 Asset account
Billings on construction contract Cr. 2,500,000 contra asset account.
Now the only things relevant to this question are construction in progress and billings on construction contract.
So you earned 2,000,000 worth of revenue related to construction and collect 2,500,000, which means you have a liability in year one (Deferred revenue). Billings on construction is a contra asset account of construction in progress.
So after year one you have a liability for 500,000 because you collected more cash then you earned.
Now in year two, you are 80% complete with the project. Now on a cumulative basis (year 1 and year 2 combined) you have earned 80% of the project fee (5,000,000*80%=4,000,000). So long story short, your construction in progress account should now have a cumulative (year 1 and year 2 balance of 4,000,000. Now during year 2 you billed and collected another 1,500,000 from the client, which means on a cumulative basis (year 1 and year 2) you have collected 4,000,000 from the client. Now remember that billing and collections on construction contracts is a contra asset account of construction in progress. so at this point your balance sheet looks like this:
Construction in progress Dr. 4,000,000
Billings on construction contract Cr. 4,000,000
They net each other out, and equal 0.
I hope that helps.
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.September 14, 2013 at 12:59 am #476176NYCaccountant
Participant@ DJN I'm taking FAR October 5th, and it will be my first CPA exam ever. Just starting the journey.
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.September 14, 2013 at 12:59 am #476247NYCaccountant
Participant@ DJN I'm taking FAR October 5th, and it will be my first CPA exam ever. Just starting the journey.
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.September 14, 2013 at 1:05 am #476178Anonymous
Inactive@NYCaccountant, judging by your participation in these FAR threads you will pass with absolutely flying colors.
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