[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

[Lidis]

The answer is C

[Anonymous]

Hi! I'm new to the forum. Taking FAR in July, haven't gotten my NTS yet so I haven't scheduled the exam. I had a question about the Becker materials I'm using that I'm hoping you guys can help with. It is in F2:

On January 2, Elbert's Delivery Company and Wanda's Exporters exchanged similar delivery trucks in an exchange that lacks commercial substance. Data relative to the trucks follow:

Elbert's Truck

Original Cost $10,000

Acc. Depreciation $8,000

FMV $3,000

Wanda's Truck

Book Value $15,000

In exchange, Elbert paid Wanda cash of $10,000. Elbert's Delivery Company should record the new truck at:

A. $13,000

B. $8,000

C. $12,000

D. $10,000

---

The answer that they say is correct is A, $13,000. The explanation is that the transaction is considered to be a monetary exchange, becasue the boot ($10,000) exceeds 25% of the total consideration ($10,000 plus $3,000 of the fair value of the old truck transferred to Wanda). Therefore, both parties to the exchange recognize all gains/losses.

I don't understand this. The book specifically said if a BOOT IS PAID, then no gain is recognized. It goes on to say “When the boot RECEIVED equals or exceeds 25% of the total consideration, both parties consider the transaction a monetary exchange..” But in this case, a boot is PAID, not received by Elbert.

Is this a mistake on Becker's part? Am I doing something wrong? :/ Thanks.

[EYNewHire]

@Revenue You get a DTA if you pay income taxes on a return but don't on your books. In this case we record higher depreciation on our books than on our return making our book income lower and therefore paying less taxes than on our income tax return. This creates a DTA.

At the beginning of 20×2 we have had two years of depreciation. The total difference between book and tax return is 18,000 (50,000-32,000). This means we have a DTA of 7,200 (18,000*40%).

When we switch to SL for books our depreciation per year will be 14,615.38 (190,000/13). This is lower than our tax return which means we will be reducing our DTA every year till it's gone. The amount we will reduce the DTA is by ~554.

Therefore letter C is your answer.

On a side note I think they calculated their double declining depreciation wrong. I get 32k for year 1 but as it's given I didn't worry about it.

[Tarheelgirl]

Well I am calling it a night of studying Bonds. Boy do I hate them. Taking tomorrow off studying, since tomorrow is my BIRTHDAY! I sure could use the break, been going non stop practically. But who knows, my conscience may tell me to study.

Hope everyone has a good rest of the weekend.

FAR - 46, 79 (7/8/14)
AUD - 56, 59, 2/23/15 3rd times a charm!
BEC - 69, 74 Really??
REG - April, I hope. Fingers crossed!

[Mamabear]

@Revenue–I understand why it affects the DTA, but my numbers don't match theirs so I can't determine the reduction/increase. I would have thought that depreciation for 2010 for the DDB method would have been $32K, not $30K. 240,000/15*2 =$32K. Maybe I've forgotten how to calculate DDB. It's been awhile. In terms of it affecting DTA–DDB always exceeds straightline depreciation in the beginning so the depreciation on your income statement for the first couple of years would be more than your depreciation for tax purposes. That would lower your pretax income more than your taxable income so you would have paid more tax in the those first couple of years than you would have recorded on your income statement, thus a DTA would result.

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[EYNewHire]

@Tarheelgirl Happy birthday!

@dashboardangel You kind of answered your own question. “When the boot RECEIVED equals or exceeds 25% of the total consideration, both parties consider the transaction a monetary exchange.” BOTH parties consider the transaction a monetary exchange. Doesn't matter if given or received.

[Anonymous]

In 2000 and 2001 book expense was > than tax expense, so deferred asset was recorded.

In 2002 book value of the asset was lower, depreciation expense was lower, so dta was reduced.

[Anonymous]

@EYNewHire – well, I feel stupid lol Thanks. Getting tired of this section, I've been at it for 4 days and it's still not clicking even though this was a section I excelled in at school 🙁

[Anonymous]

@EYNewHire – well, I feel stupid lol Thanks. Getting tired of this section, I've been at it for 4 days and it's still not clicking even though this was a section I excelled in at school 🙁

[Tarheelgirl]

@EYnewhire – Thanks!

FAR - 46, 79 (7/8/14)
AUD - 56, 59, 2/23/15 3rd times a charm!
BEC - 69, 74 Really??
REG - April, I hope. Fingers crossed!

[nicole2035]

@mamabear how did u go through your review?

currently i'm relistening to audio, rewriting notes etc also doing more MC on my weak areas, getting together jes. during your last week did you just primarily do MC constantly on everything?

[Mamabear]

A few days before I went through each section of notes, then took a 20-30 question quiz on that section, then read through the next section of notes and took a quiz on that section, and so on until I got through all the sections. I did extra on my weaker areas after that. The day before I just read through my notes and stopped doing MCQ because I was burnt out on them. I ran out of time to rewrite notes for FAR, but it is extremely helpful so continue doing that.

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Anonymous]

Looking for some advice about studying for FAR:

I am planning to take FAR (first time first exam) around the end of AUG. I graduated from university about a year ago and am having trouble studying the amount of materials for this exam. I am using Wiley CPAexcel study guide and my goal is to do at least 2-3 hours a day for 6 days per week. The problem is that I am scoring only about 40-50% on the MCQs, it's only my 3rd week into this. Even though I have about a solid 2 months to go, I am worried that I am scoring so low on these questions at this stage. Has anyone struggled this hard in the beginning and made drastic improvements by the time of their exam?

BTW, I do have becker materials to supplement my wiley, I planned to finish wiley and then do Becker. Should I be doing it a different way? Thanks guys

[Lidis]

EYNewHire

Thank you for the answer

That question comes form NINJA-MCQ, but the answer is too long, It was lost

[Mamabear]

@Big Bob–You are right on target this early on. Do not stress yourself about learning everything as you go through it the first time. It will not happen. There is just too much material. Go through each chapter and try to retain what you are reading. I suggest not taking notes while you are reading, but save your notetaking for when you are working the MCQ because if you do it while you are reading you will write down every little minut detail and wind up with a hundred pages of notes before you know it. I suggest getting the Ninja Notes because it gives you a high level view of the important topics and you can just add your own notes into it for more detail. Having two sets of MCQ are good practice. Make sure you work as many MCQ and SIMS as possible. That's where it's all going to start coming together…when you are quizzing over and over and over. Don't stress–you are where you should be. 200 hours is the average I've seen on the forum for time put into to studying FAR. You may want to try to average 25 hours per week instead of the 18 you are currently doing, but it's really a personal decision on how much time you put in. Good luck!

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Author]

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