[jeff]

FAR 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

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Zackrampage]

Reading all this makes me just wanna say I know nothing besides gov, nfp, and lower of cost or market!

FAR - 62 , End of aug 2015
BEC - 67, 67
AUD - TBD
REG - TBD

[Hunnsterr]

Sorry folks I'm bringing Deferred Taxes up again. I got stuck on Deferred tax related questions on BUSINESS INVESTMENTS.

ABC inc, a newly org company, uses Equity method of accounting for it's 30% investment in Rex

During Year 1, Rex paid Dividends of $300,000 and reported Earnings of $900,000

Dividends from Rex are eligible for 80% Div Received Deduction

year 1 income tax are = 25%

Enacted tax rate for year 2 = 25%

What should be the Def Tax Laib for Year 1?

I'm stating my approach – (which is wrong)

Def Tax Laib is the basically the future taxable liabilities due to Temp Diff

So the financial books will record an income of $900,000 x 30% = $270,000

While the tax books will record an income of $300,000 x 30% x (100% – 80%) = $18,000

Which means my financial books show a higher income than the tax books, thereby causing a temp diff resulting in future tax liabilities (Because we have MORE Book income today)

Temp Diff = 270,000 – $18,000 = $252,000

DTL = $252,000 x 25% = $63,000

I was so pleased with my “logical” calculations, so you can imagine the horror when none of the four answer choices were even remotely close to my answer! They were all 4 digits!.

The explanation did NOT multiply (100% – 80%) to the Dividend received . Why so?

BEC - 88
REG - 72, 78
FAR - 75
AUD - 64, 64, 3rd attempt!!!

"A day of worry is more exhausting than a day of work" - John Lubbock

[Hunnsterr]

Sorry folks I'm bringing Deferred Taxes up again. I got stuck on Deferred tax related questions on BUSINESS INVESTMENTS.

ABC inc, a newly org company, uses Equity method of accounting for it's 30% investment in Rex

During Year 1, Rex paid Dividends of $300,000 and reported Earnings of $900,000

Dividends from Rex are eligible for 80% Div Received Deduction

year 1 income tax are = 25%

Enacted tax rate for year 2 = 25%

What should be the Def Tax Laib for Year 1?

I'm stating my approach – (which is wrong)

Def Tax Laib is the basically the future taxable liabilities due to Temp Diff

So the financial books will record an income of $900,000 x 30% = $270,000

While the tax books will record an income of $300,000 x 30% x (100% – 80%) = $18,000

Which means my financial books show a higher income than the tax books, thereby causing a temp diff resulting in future tax liabilities (Because we have MORE Book income today)

Temp Diff = 270,000 – $18,000 = $252,000

DTL = $252,000 x 25% = $63,000

I was so pleased with my “logical” calculations, so you can imagine the horror when none of the four answer choices were even remotely close to my answer! They were all 4 digits!.

The explanation did NOT multiply (100% – 80%) to the Dividend received . Why so?

BEC - 88
REG - 72, 78
FAR - 75
AUD - 64, 64, 3rd attempt!!!

"A day of worry is more exhausting than a day of work" - John Lubbock

[lvr21]

Sooooo you know your studying WAYY too much when your husband puts your Valentine's present in your study chair!!!!!!!!!!!

Haha!

{R: PASSED!! (I passed one!)}
{B: PASSED!! (Halfway there!)}
{F: PASSED!! (1 left!!!)}
{A: PASSED(I am done!!)}

[lvr21]

Sooooo you know your studying WAYY too much when your husband puts your Valentine's present in your study chair!!!!!!!!!!!

Haha!

{R: PASSED!! (I passed one!)}
{B: PASSED!! (Halfway there!)}
{F: PASSED!! (1 left!!!)}
{A: PASSED(I am done!!)}

[lvr21]

@Amay

Yes fund balance and budgetary control are the “same” thing, but I can see the exam giving your both options and the correct option would be budgetary control!

@Zack .. what exactly do you mean by governmental activities in the correct fund?? I may be able to help you, but I need to know exactly what you need help with!

{R: PASSED!! (I passed one!)}
{B: PASSED!! (Halfway there!)}
{F: PASSED!! (1 left!!!)}
{A: PASSED(I am done!!)}

[lvr21]

@Amay

Yes fund balance and budgetary control are the “same” thing, but I can see the exam giving your both options and the correct option would be budgetary control!

@Zack .. what exactly do you mean by governmental activities in the correct fund?? I may be able to help you, but I need to know exactly what you need help with!

{R: PASSED!! (I passed one!)}
{B: PASSED!! (Halfway there!)}
{F: PASSED!! (1 left!!!)}
{A: PASSED(I am done!!)}

[Zackrampage]

Various events go to which of the 5 governmental funds?

FAR - 62 , End of aug 2015
BEC - 67, 67
AUD - TBD
REG - TBD

[Zackrampage]

Various events go to which of the 5 governmental funds?

FAR - 62 , End of aug 2015
BEC - 67, 67
AUD - TBD
REG - TBD

[smsingla]

@Hunnsterr. Let me try to explain

In equity method, % of Net income is book income. in this case $900,000×30%=270,000

but dividends is reduction of investment account. $300,000×30% $90,000

So dividends that we didn't receive (270,000-90,000=180,000) will eventually be distributed to us. And since we get 80% div rec'd deduction, only 36,000(180,000×20%) will be taxable, a temp difference. and future tax rate is 25% so our future tax liab. will be 9,000 (36,000×25%).

REG 81
BEC 74,65,78
FAR 79
AUD 85 DONE!!!

[smsingla]

@Hunnsterr. Let me try to explain

In equity method, % of Net income is book income. in this case $900,000×30%=270,000

but dividends is reduction of investment account. $300,000×30% $90,000

So dividends that we didn't receive (270,000-90,000=180,000) will eventually be distributed to us. And since we get 80% div rec'd deduction, only 36,000(180,000×20%) will be taxable, a temp difference. and future tax rate is 25% so our future tax liab. will be 9,000 (36,000×25%).

REG 81
BEC 74,65,78
FAR 79
AUD 85 DONE!!!

[samdiegoCPA]

This is what I have as of now. I still have to go back and re-write condensed notes for Governmental.

-General: This fund accounts for and reports any activity of function by the government unit that is not being accounted for in another fund, such as ordinary operations, public safety, public works, culture, and recreation. Revenue sources include property taxes, fees, fines, licenses, permits, and grants. Aggregate lease liability is recorded as Expenditure if not in Capital Projects account. Integrate budgetary accounts.

-Special Revenue: These funds are used to account for and report specific revenues from earmarked sourced that are restricted or committed to be used to finance designated activities other than Capital Projects and Debt Service. EX: gas tax that finances repairs and maintenance of the roads. Revenue sources include fees, grants, specific taxes, and other earmarked revenue sources. Integrate budgetary accounts.

-Capital Projects: These funds account for major acquisition or construction activities of capital assets, other than those financed by proprietary or trust funds. This fund accounts for and reports the financial resources that are restricted, committed, or assigned for these types of capital outlay. EX: the construction of a city hall, convention center, or county courthouse. Revenue sources include special tax revenues or capital grains. Other Financing Sources include proceeds from bonds or transfers. “Other Financing Sources” in the operating statement.

-Debt Service: This fund is responsible for accumulating and making interest and principal payments on the tax supported debts of the governmental funds. The DSF accounts for and reports the resources that are restricted, committed, or assigned for this LT debt purpose. The expenditures may also include premiums on insurance of bonds or bond issue costs. Revenue sources include portions of property taxes and transfers. Cash received from a transfer is reported as “Other Financing Source”. Interest is NOT recorded until it is legally payable.

-Permanent: These funds account and report assets whose principal is restricted and may not be spent, but must be invested on a permanent basis (income may be spent). Revenue sources are usually from the investment earnings of the trust. Real estate held as an investment by a government endowment is reported at FV at each reporting date.

*A government unit must have one general fund, but can establish as many special revenue, capital projects, and permanent funds as needed. A debt service fund is only needed if the entity issues general obligations debts.

AUD: 84
REG: 84
BEC: 79
FAR: 83

[samdiegoCPA]

This is what I have as of now. I still have to go back and re-write condensed notes for Governmental.

-General: This fund accounts for and reports any activity of function by the government unit that is not being accounted for in another fund, such as ordinary operations, public safety, public works, culture, and recreation. Revenue sources include property taxes, fees, fines, licenses, permits, and grants. Aggregate lease liability is recorded as Expenditure if not in Capital Projects account. Integrate budgetary accounts.

-Special Revenue: These funds are used to account for and report specific revenues from earmarked sourced that are restricted or committed to be used to finance designated activities other than Capital Projects and Debt Service. EX: gas tax that finances repairs and maintenance of the roads. Revenue sources include fees, grants, specific taxes, and other earmarked revenue sources. Integrate budgetary accounts.

-Capital Projects: These funds account for major acquisition or construction activities of capital assets, other than those financed by proprietary or trust funds. This fund accounts for and reports the financial resources that are restricted, committed, or assigned for these types of capital outlay. EX: the construction of a city hall, convention center, or county courthouse. Revenue sources include special tax revenues or capital grains. Other Financing Sources include proceeds from bonds or transfers. “Other Financing Sources” in the operating statement.

-Debt Service: This fund is responsible for accumulating and making interest and principal payments on the tax supported debts of the governmental funds. The DSF accounts for and reports the resources that are restricted, committed, or assigned for this LT debt purpose. The expenditures may also include premiums on insurance of bonds or bond issue costs. Revenue sources include portions of property taxes and transfers. Cash received from a transfer is reported as “Other Financing Source”. Interest is NOT recorded until it is legally payable.

-Permanent: These funds account and report assets whose principal is restricted and may not be spent, but must be invested on a permanent basis (income may be spent). Revenue sources are usually from the investment earnings of the trust. Real estate held as an investment by a government endowment is reported at FV at each reporting date.

*A government unit must have one general fund, but can establish as many special revenue, capital projects, and permanent funds as needed. A debt service fund is only needed if the entity issues general obligations debts.

AUD: 84
REG: 84
BEC: 79
FAR: 83

[Zackrampage]

Thanks Sam. I appreciate the explanation. My biggest issue is actually seeing specific events mentioned in becker or wiley and figuring out which fund lol. Unless its an easy one like debt or pension.

FAR - 62 , End of aug 2015
BEC - 67, 67
AUD - TBD
REG - TBD

[Zackrampage]

Thanks Sam. I appreciate the explanation. My biggest issue is actually seeing specific events mentioned in becker or wiley and figuring out which fund lol. Unless its an easy one like debt or pension.

FAR - 62 , End of aug 2015
BEC - 67, 67
AUD - TBD
REG - TBD

[Author]

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