[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

[thehip41]

Test in 16 days. Only have the 2 government chapters and the non profit chapter left in Gleim. Then as much review as I can get done.

Can't wait to be done with FAR

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[Anonymous]

COGS question: The following information pertains to Deal Corp.'s cost of goods sold:

90,000 Inventory, 1/1

124,000 Purchases

34,000 Write-off of obsolete inventory

30,000 Inventory, 12/31

The inventory written off became obsolete due to an unexpected and unusual technological advance by a competitor. In its income statement, what amount should Deal report as cost of goods sold?

a.$150,000

b.$124,000

c.$184,000

d.$218,000

Explanation: Choice “a” is correct. The cost of goods sold is calculated as follows:

90,000 Inventory, 1/1

124,000 Purchases

214,000 equals Goods available for sale

(34,000) Obsolete inventory

(30,000) Inventory, 12/31

150,000 equals Cost of goods sold

The write-off of obsolete inventory is treated as an operating loss and not as cost of goods sold. (BUT BY VIRTUE OF SUBTRACTING THE OBSOLETE INVENTORY IN THIS CALCULATION AREN'T THEY THEREFORE TAKING IT INTO ACCOUNT IN COGS? SEE ALSO “C” BELOW.)

Choice “d” is incorrect. The $34,000 write off of inventory is subtracted, not added to inventory.

Choice “c” is incorrect. Obsolete inventory is not included in cost of goods sold. It is deducted from inventory and included in unusual gains or losses on the income statement. Total reduction in inventory is $184,000, but $34,000 is not included in cost of goods sold.

Choice “b” is incorrect. Purchases reflect costs of goods sold on a cash basis, not on an accrual basis.

[thehip41]

@DJN

When you physically write off the inventory, it's an operating loss. You are writing down the Inventory to FMV.

So yes, on the income statement, the loss on the write down and the cost of goods sold will add up to 184,000.

But, as accountants, we are concerned with what type of expenses cause what on the income statement.

Cost of Goods Sold is 150,000

Loss on Revaluation of Inventory is 34,000

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[Anonymous]

@thehip41, “So yes, on the income statement, the loss on the write down and the cost of goods sold will add up to 184,000.”

BUT the COGS is $150,000 and the Loss is $34,000. If they are asking us to calculate the COGS why would the loss be included in that number?

(I used to consider myself a fairly intelligent person… NOT ANY MORE.)

[Anonymous]

@DJN

I am not sure if i am thinking right but your COGS is made up of BI + Purch – EI. Now when you write down your obsolete inventroy , your EI goes down as well. therefore 90+124-30-34. I am assuming the writedown is not yet reflected in the EI.

Hope it helps. Please correct me if i am wrong

[thehip41]

I think I understand what's going on. Just make a T-account for Inventory

on the left side of the T account

90,000 Beginning Inv

124,000 Purchases

Right side

150,000 Cost of Good sold

34,000 Loss on Revaluation

Ending DR balance 30,000

You have these JE in the year.

DR Inventory (purchases, etc)

CR cash/payable 124,000

DR Loss on Revaluation of Inventory 34,000

CR Inventory

DR Sales

CR Revenue some amount

DR Cost of goods sold 150,000

CR Inventory

There you go.

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[jeff]

NINJA BLITZ: FAR – Inventory: https://www.another71.com/ninja-blitz/

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

[Utopia]

Becker final exam question:

Data Rescue Corporation specializes in software and hardware disaster recovery. During the year ended December31, the company provided services to its client located in Bedrock, Idaho following an earthquake. Earthquakes are extremely unusual in the area, as it had not experienced an earthquake of this magnitude in over 50 years. While providing services, an aftershock destroyed the company's trucks and generators at a net loss of $300,000. Assuming the tax rate is 30%, what is the amount of the extraordinary loss reported by Data Rescue on their financial statement under U.S GAAP?

A $ 300,000

B $210,000

C$90,000

D 0

The answer provided is D. Can someone give me a better explanation?

Thanks.

[peetree]

This is tricky @utopia but think about which company they are asking the question about. If they were asking about the client located in bedrock, ID, then yes, this would be an extraordinary loss. They aren't though, they are asking about the disaster recovery company. The data rescue company being that they are a disaster recovery corporation specializes in putting there assets into disaster areas and it shouldn't be a shock that they lost some assets due to an aftershock. Think of it as a cost of doing business for them.

Disaster recovery company = loss on assets

Client in ID (Potato co?) = extraordinary (act of god ruining potato crops)

FAR 02/21/13 - 95
REG 07/02/13 - 87
AUD 08/02/13 - 94
BEC 08/30/13 - 85
Ethics Exam - 90

Illinois candidate awaiting his license

Used Becker Self Study | Ninja Audio | Becker Flash Cards | Ninja Notes | Wiley Test Bank

[Utopia]

Thanks peetree. That helps.

[LT-P]

@typhoon44 thank u!

- passed all 4 exams on my first try using Becker!

Ethics: TBD

[LT-P]

Governmental (External Reporting) question –

When we reconcile the change in Fund Balance to change in Net Position, we need to add expenditures .. if Principal, and not Interest, is included as an expenditure, am I to assume that's because the Principal payment is due but the Interest isn't? (Basically, why include P but not I)?

Thank u!

- passed all 4 exams on my first try using Becker!

Ethics: TBD

[CPA2B_NJ]

Ahhhhhhhhhhhhhhhhhhhh

2 weeks left and I'm still scoring in the low 60's!!!

Sorry, I just needed to vent.

FAR - 50, 78
BEC - 67, 72, 75
AUD - 72, 80
REG - 70, 85

To God be the glory! Forever, amen!

NJ License

[NYCaccountant]

Which review materials are you using? @CPA2B_NJ

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[newuseracc]

“House Publishers offered a contest in which the winner would receive $1,000,000, payable over 20 years. On December 31, Year 1, House announced the winner of the contest and signed a note payable to the winner for $1,000,000, payable in $50,000 installments every January 2. Also on December 31, Year 1, House purchased an annuity for $418,250 to provide the $950,000 prize monies remaining after the first $50,000 installment, which was paid on January 2, Year 2.

In its Year 1 income statement, what should House report as contest prize expense?”

The answer is 468,250(418,250+50,000).

I guess I sort of get it but not really. Like what would be the journal entries associated with everything in this problem??

[Author]

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