[jeff]

Free Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/

Free CPA Exam Survival Guide: https://www.another71.com/cpa-exam-survival-guide/

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

[Anonymous]

@Jpowell — That would be correct if you were using the par method. This problem calls for the cost method.

The par method considers what the amount was from original issuance. The cost method doesn't.

[HopefulCPA0601]

@bobcat & @jpowell:

so from the trend of questions, i see that cost method you can reverse all of your apic so my second entry is right and then anything over apic will be a debit to retained earnings. @bobcat – you would only decreases retained earnings by teh amount over apic, not the full amount

Then for par value method you take into account the $ value of apic per share.

BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE

Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ

[jpowell31]

it's funny because i am literally reviewing this right now. i'm at the stage where…when i'm doing HW problems and know what method i'm using, i got it down. but when i have to remember which method is being used and how it's different my anxiety kicks in and i draw a blank. under two weeks of FT studying to make it work!

i think @bobcat is right

Original issue:

DR Cash 1,100,000

CR Common stock 1,000,000

CR APIC 100,000 – common stock

Acquired (no APIC entry so none to offset loss against later)

DR Tstock 480,000

CR Cash 480,000

Reissue

Dr Cash 360,000

CR T-Stock 480,000

CR RE 120,000

[jpowell31]

par method you calculate the gain or loss when acquiring the t-stock so an APIC account would be created to offset any g/l later on reissuance.

[jpowell31]

beckers example is confusing because they reissue half at a gain and half at a loss so you can offset partial loss against the APIC recorded through the gain by recording the gain entry first…… :S

[jpowell31]

another confusing point that may help clarify – the original issuance APIC can not be used to offset tstock g/l – “APIC-t-stock” is separate

[HopefulCPA0601]

the second entry i had was per ninja mcq answers. You have to use up your apic first, before you go to your retained earnings, my question was just about the allocation or amount of apic you could use first. Also there is no gain/loss on t/stock transaction because theres no income statement impact.

@jpowell – i agree with your first two entries for issue and reacquisition, but i think the selling of t/s is recorded as:

dr. cash 360k

dr. apic 100k

dr. re 20k

cr. t/s 480k

Per Ninja:

Journal entry to record reacquisition of 30,000 shares at $16 per share using the cost method:

Dr. Treasury Shares 480,000

Cr. Cash 480,000

Journal entry to record sale of treasury shares (30,000 shares at $12 per share):

Dr. Cash 360,000

Dr. Paid-in Capital 100,000

Dr. Retained Earnings 20,000

Cr. Treasury Shares 480,000

When the initial issue of public stock was made, the 100,000 shares sold at $1 above the par value of $10. This resulted in a balance of $100,000 in the additional paid-in capital account. The $120,000 loss on sale should first be used to reduce additional paid-in capital to zero ($100,000) and debit the remainder (20,000) to retained earnings. Treasury stock transactions should never impact the net income for the current year.

BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE

Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ

[HopefulCPA0601]

12 more days of this crap, plus a full work week. i sort of want it to go fast, but at the same time you always need mroe time for this stuff

BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE

Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ

[HopefulCPA0601]

Standard Co. spent $10,000,000 on its new software package that is to be used only for internal use. The amount spent is for costs after the application development stage. The economic life of the product is expected to be three years. The equipment on which the package is to be used is being depreciated over five years. What amount of expense should Standard report on its income statement for the first full year?

A. $0 (my answer)

B. $2,000,000

C. $3,333,333 (correct answer)

D. $10,000,000

Ninja reasoning: Costs incurred to develop software for internal use are capitalized after the application development stage is reached (in accordance with FASB ASC 350-40-35-4). The costs are amortized over the benefited periods—three years in this case.

I selected $0 because per my notes costs for preliminary project stage are expensed, and costs after preliminary project stage are expensed. Also the above answer says that costs are capitalized after application development stage is reached, and the question above stages that costs are after the application development stage. so why are they saying there is an expense? I thought no expense because you capitalize it. Or are they referring to amortization expense?

I really hope to god that the questions on teh exam are more direct because this is making my head spin.

BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE

Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ

[HopefulCPA0601]

nvm im just driving myself crazy over here.. expense on income statement can be expense incurred in preliminary stage, and amortization expense taken on capitalized costs after preliminary stage.

BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE

Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ

[jpowell31]

ahhh that's how i would think it works but becker's example is confusing as they only have the one and it has a gain and then a loss and the APIC is only reduced by the amount accounted for in the gain JE (not the original issuance)…. now i don't know what to think.

[jpowell31]

i can't wait for the next two weeks to be over but i agree…i could always use more time. i just bought a new apartment and move in the week i get back from the exam so news of passing would be excellentttttttttt – i could celebrate so many things and not worry about preserving my brain cells. then it's slow season at work until about November and i could be a person again. in the real world. interacting with other people. grindstone.

[HopefulCPA0601]

@jpowell thats awesome!! congrats on the new apartment!!!! i hope we both get good news on the 22nd!!!

also, i know exactly what example you are talking about in becker, and its a terrible terrible example! esp how it says this transaction was made after the preceding transaction.. like wth becker really can anything be simple

BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE

Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ

[jpowell31]

if you have becker look at F7 page 10 – now i need to know!

[hopefulcpa8]

Do you guys do all of the Becker “optional” questions?

AUD 84
BEC 83
REG 77
FAR 78

DONE!!!

[Author]

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