FAR Study Group – Q1 2018 - Page 6

@Bianca I'm glad I am not the only one who struggles with this. I haven't found a way to properly determine this either and have found myself answering by memory.

If anyone has figured this out I'd really appreciate it too.

@ash

I may have possibly figured it out.. if I am wrong someone please correct me.

Gross Profit= Contract Price- Total Estimated Cost*

GP %=Total Costs incurred to date/Total Estimated Cost*

***I have realized that the Total Estimated cost includes both cost incurred to date + estimated costs to complete.

“Costs incurred to date” may be given or it may have to be solved for by adding indivual years costs incurred to the year you are solving for.

For example, if trying to find GP to date for the 2nd year of the contract, we are to add cost incurred for Y1 + cost incurred for Y2/COst incurred for Y1+ Cost incurred for Y2+ Costs to complete in order to find GP% for Y2, then multiply % by estimated GP and deduct previously recognized GP to find Y2 GP to date.

I realized that the wording is very important to pay attention to. If “costs incurred in Y1,Y2,Y3, etc” given, then each year needs to be added together for the numerator. Whereas if “costs incurred to date” are given, then you just take that number as the numerator for GP%.

Hope this makes some sort of sense to you as it does to me.

Maybe I am missing something? If the cost of inventory was not included doesn't this mean that expense is understated, which means Net Income is over stated which would require a DECREASE in Net Income (net of tax) to be removed from the beginning Retained Earnings?

Can someone please clear this up for me?!!

Tack, Inc., reported a retained earnings balance of $150,000 on December 31, 20X1. In June 20X2, Tack discovered that merchandise costing $40,000 had not been included in inventory in its 20X1 financial statements. Tack has a 30% tax rate. What amount should Tack report as adjusted beginning retained earnings in its statement of retained earnings at December 31, 20X2?

A.
$190,000

B.
$178,000

C.
$150,000

D.Incorrect
$122,000

@mskcle Thank you for the reply. I discovered my error when I found the same question in Becker. Becker gave a more thorough explanation. Thanks again

Hi everyone! I just graduated with my 150 about two weeks ago. I have already started studying for FAR using Becker (provided by my firm I am starting at next week). I feel as if I am over studying but that is just my nature.

I am intending to take FAR the first week of April as I probably will not receive my NTS until mid-March based on the timeline outlined by NASBA.

Intended Exam Dates:

FAR – 4/7
AUD – 6/10
REG – 9/10
BEC – 11/15

My firm gives a bonus for passing all of them within the first year of employment, hence my desire to get them accomplished as quickly as possible.

Good luck to everyone!

@chasingrainbows I found the best way for me to study Roger was to read the text first, then listen to his lectures, skipping any class question lectures. I would then watch the videos provided by Ninja Plus of Bob Monette that corresponded to the same section in Roger. I found that Bob's videos really helped to break down things Roger may have rushed or assumed you remembered from previous accounting courses. Once I started watching the corresponding videos from Bob, I would go back and do Roger's class questions and listen to those lectures explaining the answers. This method enabled me to answer Roger's class questions with much more ease and less mistakes. There will be more differences between Roger and Bob now that the 2018 changes have taken effect, but I still think this method could prove useful to you.

Hi All

Taking FAR in February. Waiting for evaluation review to come through. Thanks!