[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

[MrsOP75]

Anybody using Roger to prepare for the FAR Exam? I started two weeks ago and feel that I'm getting behind on the study planner already. I have my exam scheduled for 10/21 and was curious how much time others are giving themselves to prepare for FAR.

AUD - 84 - 7/19/2013
BEC - 75 - 8/29/2013
FAR - 81 - 10/28/2013
REG - 72 - Retake - 85! I'm DONE!!!

Ethics - 96%

2013 Roger CPA
2013 Wiley TB & Book

CA Candidate subject to the new 2014 Educational Requirements

[MrsOP75]

Anybody using Roger to prepare for the FAR Exam? I started two weeks ago and feel that I'm getting behind on the study planner already. I have my exam scheduled for 10/21 and was curious how much time others are giving themselves to prepare for FAR.

AUD - 84 - 7/19/2013
BEC - 75 - 8/29/2013
FAR - 81 - 10/28/2013
REG - 72 - Retake - 85! I'm DONE!!!

Ethics - 96%

2013 Roger CPA
2013 Wiley TB & Book

CA Candidate subject to the new 2014 Educational Requirements

[Anonymous]

During year 1, Mitchell Corp. started a construction job with a total contract price of $600,000. The job was completed on December 15, year 2. Additional data are as follows:

Year 1 Year 2

Actual costs incurred $225,000 $255,000

Estimated remaining costs 225,000

Billed to customer 240,000 360,000

Received from customer 200,000 400,000

Under the completed-contract method, what amount should Mitchell recognize as gross profit for year 2?

$120,000 This answer is correct. When a company uses the completed-contract method of accounting for construction projects, all revenue and expense recognition is deferred until the project is complete or substantially complete (ASC Topic 605). Also, note that neither customer billings nor payments on account are used to determine the revenue recognized under the completed-contract method (or under the percentage-of-completion method). Since the project was complete in year 2, Mitchell should recognize $120,000 ($600,000 – $480,000) in gross profit for year 2.

Few questions: If all revenue and expense recognition is deferred until the project is complete or substantially complete, why are we not recognizing the entire $600k? Is that because we recognized part of the project in year 1 because it was substantially complete?

Also, where are we getting the $480k?

[Anonymous]

During year 1, Mitchell Corp. started a construction job with a total contract price of $600,000. The job was completed on December 15, year 2. Additional data are as follows:

Year 1 Year 2

Actual costs incurred $225,000 $255,000

Estimated remaining costs 225,000

Billed to customer 240,000 360,000

Received from customer 200,000 400,000

Under the completed-contract method, what amount should Mitchell recognize as gross profit for year 2?

$120,000 This answer is correct. When a company uses the completed-contract method of accounting for construction projects, all revenue and expense recognition is deferred until the project is complete or substantially complete (ASC Topic 605). Also, note that neither customer billings nor payments on account are used to determine the revenue recognized under the completed-contract method (or under the percentage-of-completion method). Since the project was complete in year 2, Mitchell should recognize $120,000 ($600,000 – $480,000) in gross profit for year 2.

Few questions: If all revenue and expense recognition is deferred until the project is complete or substantially complete, why are we not recognizing the entire $600k? Is that because we recognized part of the project in year 1 because it was substantially complete?

Also, where are we getting the $480k?

[ZSRizvi]

@CPA2014Dream

The $480,000 is calculated as follows: $225,000 actual costs of Y1 + $255,000 actual costs of Y2 = $480,000

Hence, the gross profit of $120,000.

I'm not quite sure what you mean about recognizing the entire $600k. The $600K is recognized over the course of the contract under “billings” which are debited to accounts receivable (which isn't a revenue account). And “Billing on Construction” is credited for the same amount. Costs incurred are debited to “Construction in Progress.” These accounts are closed at the end of the contract and the difference between them is the gross profit.

So, at the end the “Construction in Progress” would have a balance of $480,000 and the “Billings” would have a balance of $480,000. So the profit would be “120,000.” 🙂

BEC (July 2013)
FAR (OCT 2013)
REG (NOV 2013)
AUD (JAN 2014)

The CPA Exam is an opponent that not even the Fellowship of the Ring would want to come across.

I have a long...long...journey ahead of me.

[ZSRizvi]

@CPA2014Dream

The $480,000 is calculated as follows: $225,000 actual costs of Y1 + $255,000 actual costs of Y2 = $480,000

Hence, the gross profit of $120,000.

I'm not quite sure what you mean about recognizing the entire $600k. The $600K is recognized over the course of the contract under “billings” which are debited to accounts receivable (which isn't a revenue account). And “Billing on Construction” is credited for the same amount. Costs incurred are debited to “Construction in Progress.” These accounts are closed at the end of the contract and the difference between them is the gross profit.

So, at the end the “Construction in Progress” would have a balance of $480,000 and the “Billings” would have a balance of $480,000. So the profit would be “120,000.” 🙂

BEC (July 2013)
FAR (OCT 2013)
REG (NOV 2013)
AUD (JAN 2014)

The CPA Exam is an opponent that not even the Fellowship of the Ring would want to come across.

I have a long...long...journey ahead of me.

[ZSRizvi]

On October 1, Velec Co., a U.S. company, contracted to purchase foreign goods requiring payment in francs one month after their receipt at Velec's factory. Title to the goods passed on December 15. The goods were still in transit on December 31. Exchange rates were one dollar to 22 francs, 20 francs, and 21 francs on October 1, December 15, and December 31, respectively. Velec should account for the exchange rate fluctuation as:

a. An extraordinary gain.

b. A gain included in net income before extraordinary items.

c. A loss included in net income before extraordinary items.

d. An extraordinary loss.

Choice “b” is correct. The transaction would first be journalized when title transfers to the buyer on December 15. At fiscal year-end, the exchange rate has increased from one dollar to 20 francs on 12/15 to one dollar to 21 francs on 12/31, so a foreign exchange gain would be recognized.

Choice “c” is incorrect. The transaction would first be journalized when title transfers to the buyer. At fiscal year-end, the exchange rate has increased so a foreign exchange gain would be recognized.

What I don't understand is why the purchase wouldn't be recorded from the initial contract date? That's when you're committing to buy the goods and incurring a liability, right? It doesn't make sense to record it from the date the title was transferred.

BEC (July 2013)
FAR (OCT 2013)
REG (NOV 2013)
AUD (JAN 2014)

The CPA Exam is an opponent that not even the Fellowship of the Ring would want to come across.

I have a long...long...journey ahead of me.

[ZSRizvi]

On October 1, Velec Co., a U.S. company, contracted to purchase foreign goods requiring payment in francs one month after their receipt at Velec's factory. Title to the goods passed on December 15. The goods were still in transit on December 31. Exchange rates were one dollar to 22 francs, 20 francs, and 21 francs on October 1, December 15, and December 31, respectively. Velec should account for the exchange rate fluctuation as:

a. An extraordinary gain.

b. A gain included in net income before extraordinary items.

c. A loss included in net income before extraordinary items.

d. An extraordinary loss.

Choice “b” is correct. The transaction would first be journalized when title transfers to the buyer on December 15. At fiscal year-end, the exchange rate has increased from one dollar to 20 francs on 12/15 to one dollar to 21 francs on 12/31, so a foreign exchange gain would be recognized.

Choice “c” is incorrect. The transaction would first be journalized when title transfers to the buyer. At fiscal year-end, the exchange rate has increased so a foreign exchange gain would be recognized.

What I don't understand is why the purchase wouldn't be recorded from the initial contract date? That's when you're committing to buy the goods and incurring a liability, right? It doesn't make sense to record it from the date the title was transferred.

BEC (July 2013)
FAR (OCT 2013)
REG (NOV 2013)
AUD (JAN 2014)

The CPA Exam is an opponent that not even the Fellowship of the Ring would want to come across.

I have a long...long...journey ahead of me.

[Anonymous]

@ZSRisvi

All four conditions necessary to recognize a sale have to be fulfilled: The signature of a contract by itself is not sufficient to warrant revenue recognition. Those four conditions are the following:

– Persuasive evidence of an arrangement ( Signed contract)

– Delivery has occurred or service rendered ( Transfer of risks and rewards)

– The price is fixed (No price contingency)

– Collection is reasonably assured ( Standard collection terms)

[Anonymous]

@ZSRisvi

All four conditions necessary to recognize a sale have to be fulfilled: The signature of a contract by itself is not sufficient to warrant revenue recognition. Those four conditions are the following:

– Persuasive evidence of an arrangement ( Signed contract)

– Delivery has occurred or service rendered ( Transfer of risks and rewards)

– The price is fixed (No price contingency)

– Collection is reasonably assured ( Standard collection terms)

[NYCaccountant]

I hope so @ ZSR and thank you.

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

[NYCaccountant]

I hope so @ ZSR and thank you.

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

[Anonymous]

Question on two-step impairment of finite lived intangibles under GAAP:

Step 1 – Look at net carrying value vs. undiscounted cash flows

–if net carrying value is more do you impair at that point on do you go on to Step 2 to determine impairment?

And where does the comparison to fair value come in?

Do you coompare NCV to FV? UDFCF to FV?

Is the comparison of FV done no matter what the results to Step 1 are?

I'm sure this is very simple but I just can't get the “order” of the steps down.

[Anonymous]

Question on two-step impairment of finite lived intangibles under GAAP:

Step 1 – Look at net carrying value vs. undiscounted cash flows

–if net carrying value is more do you impair at that point on do you go on to Step 2 to determine impairment?

And where does the comparison to fair value come in?

Do you coompare NCV to FV? UDFCF to FV?

Is the comparison of FV done no matter what the results to Step 1 are?

I'm sure this is very simple but I just can't get the “order” of the steps down.

[Monir]

@ZSR, I think when you purchase goods title is a important factor. Oct 1 the contract was initied but the title has not passed to buyer. In this case, title passes on Dec 15 and that's the date should be used to record your J/E. It's just like FOB shipping point and destination

[Author]

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