I'm working FT while studying. I failed my first 4 when I wasn't working and passed my first one just before starting work! I think it was because I had a structure to my life rather than waking up at 8-9am and not having anything to do but study, so I just half assed it. I study at work a lot, oops.
@CPANOVICE
Principle: Retrospective
Reporting Entity: Retrospective
Estimates: Prospective
Error: Restatement
-I just remember Principle is Retro because it seems to be the “main” one they test, then reporting entity is also Retro because it begins with an R. Just something you have to remember. Estimate Vs Error, I just remember Estimates are for depreciation because you're estimating it's life and depreciating it til it dies, you wouldn't go back and try to restate all the F/S, you only do it forward. Error, is just like a math error, mistake in applying GAAP, and changing from non-GAAP to GAAP (cash to accrual). Inventory errors correct themselves in 2 years. You restate prior periods for RE if the errors are in previous periods, NOT in the current period (because it can be corrected right then).
@2014 CPA
Capitalization of Interest: Bigger, better, or longer, NOT for repairs & maintenance (routine).
I stare at this problem, I wrote out everything so that it makes complete sense. It looks crazy at first, but maybe it will help you!
Cougar built a warehouse during years 2 and 3. The following payments were made during construction for building materials, labor, and overhead:
Jan 1, yr 2: $130,000
April 1, yr 2: $240,000
Oct 1, yr 2: $200,000
Jan 1, yr 3: $350,000
In addition, Cougar:
-Borrowed $300,000 at 12% on January 1, year 2, under a construction note.
-Had bonds outstanding of $100,000 at 10%, on January 1, year 2; interest payable annually on Dec 31.
-Had notes payable outstanding of $300,000 at 7% on Jan 1, year 2; interest payable annually on Dec 31.
-Completed construction on the building, which was ready for immediate use on March 1, year 3.
Weighted Average Accumulated Expenditures for year 2: $360,000 (prorate by month)
Interest incurred for all borrowings for year 2: $67,000 (multiply additional info above)
Avoidable interest for year 2: $40,650 (shown below)
$300,000*12% = $36,000
$360,000 WWAE-$300,000 Note = $60,000 Other borrowings used for construction
($10,000+$21,000)/($100,000+$300,000) = 8% Weighted avg interest rate on other
$60,000*8% = $4,650 Interest on other borrowings used for construction
-$36,000 + $4,650 = $40,650
Interest capitalized for year 2: Lesser of incurred or avoidable = $40,650
Interest expense for year 2: Total interest $67,000 – Capitalized $40,650 = $26,350
Wish I could bold stuff to make it easier. Maybe C&Pit into word and bold.
AUD: 84
REG: 84
BEC: 79
FAR: 83
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