[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

[Mehwish]

S Company had purchased equipment for $280,000 on Jan 1, Year 1. 8 Year useful life, Salvage value=$40,000. SL depreciation.

In August, year 4, S questioned the recoverability of the carrying amount of this equipment. At August 31, year 4, the expected net future cash inflow (undiscounted) related to the continued use and eventual disposal of the equipment totaled $175,000,

and FV on August 31, year is $150,000.

After any loss on impairment has been recognized, what is the carrying value of S's equipment as of August 31, year 4?

–

a.$175,000

b.$170,000

c.$150,000

d.$130,000

There is no impairment loss, since the carrying value calculated is less than future cash inflows.

To get the carrying value I calculated the depreciation for the first three years, plus the 8 months in year four by taking Oringinal cost ($280,000)-Salvage Value ($40,000)= $240,000 , than took $240,0000/(8*12)=$2500/ month

than,

$2500*44=$110,000

Than I took the Original Cost ($280,000)- Salvage Value ($40,000)- Deprecation (110,000) =$130,000

But the correct answer $170,000 for the carrying value of the asset. It didn't take out the salvage value.

Why don't you take out the salvage value when you are calculating the carry value? Is this always the case or just in impairment loss problems?

[jstay]

@mehwish, im not really sure why you dont take it out. to me, its just one of those “rules” you gotta know. your calculations were all right you just gotta remember, in an impairment loss problem, you subtract depreciation from the original cost and not original cost – salvage value

[Iggy1985]

You don't carry ppe on the books less the salvage value, it's only used to calculate the depreciation. If you did, you'd end up depreciating it below salvage value

FAR - 89 (8/19/14) Wiley TB, Wiley Book, Books from School, Ninja Audio/Notes
AUD - 92 (10/14/14) Wiley TB, Wiley Book, Ninja Audio
BEC - 82 (5/8/15) Mostly Ninja MCQ, sprinkles of Becker lectures and Ninja Audio
REG - (8/14/15)

[Peterman25]

To further what Iggy said….

You depreciate TO salvage value because that is what you expect to get when you sell the asset at the end. Since you have already accounted for salvage value in your depreciation calculation there is no need to account for it again when determining carrying value.

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[jstay]

im drawing a blank..what is the rules for DTA& DTL. i know for ifrs they are non current but when can they be netted? when they are related to same jurisdiction?

likewise for GAAP. when can the be netted?

[Iggy1985]

under GAAP the DTAs and DTLs are current or noncurrent depending on where they originated from, i.e. a warranty obligation that the company expects to actually pay next year = current, whereas a DTL on PPE is typically noncurrent. You just can't net noncurrent with current.

IFRS always noncurrent, and you can net as long as they are in the same taxing jurisdiction

FAR - 89 (8/19/14) Wiley TB, Wiley Book, Books from School, Ninja Audio/Notes
AUD - 92 (10/14/14) Wiley TB, Wiley Book, Ninja Audio
BEC - 82 (5/8/15) Mostly Ninja MCQ, sprinkles of Becker lectures and Ninja Audio
REG - (8/14/15)

[jstay]

yeesss ok thanks, lol i randomly try and run through these facts in my head to make sure they are sticking

[Yashy]

Hey Everyone,

I have a quick question for the ones who took FAR and REG. I start work on 10/6 (Tax – Corporate) and will have taken AUD and BEC (no idea if i passed or not). Do you think it would be smart just to study for FAR until the 10/18 exam or study for REG in between too and take REG before work? I am in Tax, so studying for REG during that may be easier or helpful after a 2 week training on “Tax Fundamentals – Corporate” in November. This is my schedule as of now:

BEC Exam 8/31

REG live Becker classes: Saturdays in September

FAR and REG studying (9/6-10/4 nothing else except studying at a library)

REG Exam 10/4

Work begins 10/6

FAR Exam 10/18

Training on the 10/19

Any insight would be very much appreciated.

[Mehwish]

thanks! that makes sense!

[hopefulcpa8]

Becker users- Is everyone doing all 109 Timing Issues MCs in F2??

AUD 84
BEC 83
REG 77
FAR 78

DONE!!!

[jstay]

@hopefulcpa8 i def would, and then do them another time lol–to me F2 was a b***h!!

[pia ach]

I am doing deferred taxes mcq's and it is making everything i learnt till now so confusing…can someone help me out..i have so many doubts in this topic..

Pine Corp.’s books showed pretax income of $800,000 for the year ended December 31, year 3. In the computation of federal income taxes, the following data were considered:

Gain on an involuntary conversion (Pine has elected to replace the property within the statutory period using total proceeds) $350,000

Depreciation deducted for tax purposes in excess of depreciable deducted for book purposes 50,000

Federal estimated tax payments, year 3 70,000

Enacted federal tax rate, year 3 30%

What amount should Pine report as its current federal income tax liability on its December 31, year 3 balance sheet?

Ans–

The current federal income tax liability is based on taxable income, which is computed in the “book to tax reconciliation” below.

Accounting income $800,000

Nontaxable gain (350,000)

Excess tax depreciation (50,000)

Taxable income $400,000

The gain on involuntary conversion was included in accounting income but is deferred for tax purposes. Depreciation deducted for tax purposes in excess of book depreciation also causes taxable income to be less than accounting income. Taxes payable before considering estimated tax payments is $120,000 ($400,000 x 30%). Since tax payments of $70,000 have already been made, the 12/31/Y3 current federal income tax liability is $50,000 ($120,000 – $70,000).

My doubt is why is the excess depreciation added to taxable income…it should be added right?

The gain on involuntary conversion was included in accounting income but is deferred for tax purpose, so since it is deferred we got to deduct it now. However Depreciation deducted for tax purposes in excess of book depreciation also causes taxable income to be less than accounting income. The taxable income is already lower than accounting income why is it getting deducted again??

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[jstay]

its not that its added, its just that for…hypothetical purposes…lets say book depreciation was 100. and you had subtracted that 100 to get to the 800 book income. however for Tax purposes, it was 50 more. so it really should be 150 on your tax return. so you would need to take another 50 off to get to the tax income.

[pia ach]

Jstay going by your example for tax purpose in the tax return it is 200 already and in the book it is 50..so when u arriving at taxable income from book income what do you do?

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[jstay]

im not really sure what your asking. but in my example to relate it back to yours, depreciation was 100 to get to the 800 book income. we would need to take another 50 to get to 750 taxable income

[Author]

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