[jeff]

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

[Anonymous]

i don't understand this question. i understand there is 8000 period loss but the question is asking the gross profit recognized? not the loss. so shouldnt the answer be zero?

Tag Question

A contractor recognizes $42,000 of gross profit on a contract at the end of year one of the contract under the percentage-of-completion method. At the end of year two, the gross profit to be recognized for both years together is $34,000. The total anticipated gross profit on the project estimated at the end of year two is $78,000. What amount of gross profit is to be recognized for year two alone?

A. $78,000

B. $34,000

C. $8,000

D. $0

Correct!

This is an example of a single-period loss on a profitable contract. The loss for year two is computed as: $34,000 gross profit through year two – $42,000 gross profit year one = – $8,000 single-period loss. The loss “reverses” $8,000 of the $42,000 gross profit recognized in year one.

[Anonymous]

NYC – They usually indicate the time frame by the virtue of the way the question is worded with phrases like “this year” (which would mean weight based on the time that has passed in the current year if you aren't dealing with a full year) or “for the current” year, which generally means with a date ending 12/31/XX. Also, they questions tend to say “as of June 30, Year XX…” and you can tell what they're asking based on the type of question and the time frames given in the facts.

I can't think of a bond one off the top of my head, but for example if you were doing an EPS question and they wanted to make sure you caught the fact that there was a stock split in Year 2 that would affect outstanding shares retroactively in Year 1 they will give you both years of info and then specify what they want in the question.

Does that makes any sense? I'm afraid I'm not being very clear here.

BTW, what section does notes payable (where you are the borrower) go on in the SOCF? I would think financing but it doesn't seem to rise to the “level” of a mortgage or other borrowing used for financing purposes so I wonder if it goes somewhere else (which wouldn't make any sense to me, but I'm just trying to cover all my bases… ).

So sorry, one more thing. I have in my notes Depreciation, Amortization, GW and ALLOWANCES go in Operating. I am having a hard time wrapping my head around allowances in general. For these, how should I think of adding them and how should I think of subtracting them on the SOCF?

[Anonymous]

NYC – They usually indicate the time frame by the virtue of the way the question is worded with phrases like “this year” (which would mean weight based on the time that has passed in the current year if you aren't dealing with a full year) or “for the current” year, which generally means with a date ending 12/31/XX. Also, they questions tend to say “as of June 30, Year XX…” and you can tell what they're asking based on the type of question and the time frames given in the facts.

I can't think of a bond one off the top of my head, but for example if you were doing an EPS question and they wanted to make sure you caught the fact that there was a stock split in Year 2 that would affect outstanding shares retroactively in Year 1 they will give you both years of info and then specify what they want in the question.

Does that makes any sense? I'm afraid I'm not being very clear here.

BTW, what section does notes payable (where you are the borrower) go on in the SOCF? I would think financing but it doesn't seem to rise to the “level” of a mortgage or other borrowing used for financing purposes so I wonder if it goes somewhere else (which wouldn't make any sense to me, but I'm just trying to cover all my bases… ).

So sorry, one more thing. I have in my notes Depreciation, Amortization, GW and ALLOWANCES go in Operating. I am having a hard time wrapping my head around allowances in general. For these, how should I think of adding them and how should I think of subtracting them on the SOCF?

[ZSRizvi]

@DJN

There's this section in Becker that I think was very helpful (not sure if you recall) but it talks about how the Indirect Method has an inverse relationship with Debit Balance Accounts and a direct relationship with Credit Balance Accounts. So if the allowance normally has a credit balance, and it increase, then the cash flow from operating activities would also increase. If the allowance normally has a debit balance and it increases, then the cash flow from operating activities would decrease.

I also would think that notes payable is a financing activity…

@NYC

You would use the weighted-average of 6 months (if the conversion happened in July that is). Since WACSO calls for the weighted average of shares and then interest, net of tax, would be added into the numerator to calculate diluted EPS (if they're going to ask that as well).

And yes! Convert to Beckerism. You won't be disappointed. I've been doing 100 MCQ on Wiley and 20-30% of the material asked I've never even seen on Becker so it's pretty frustrating.

@CPA

That question is just worded strangely. You're right in that the gross profit is $0. I wouldn't worry about it too much because exam day questions aren't going to be as convoluted (or so I've heard).

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]

@DJN

There's this section in Becker that I think was very helpful (not sure if you recall) but it talks about how the Indirect Method has an inverse relationship with Debit Balance Accounts and a direct relationship with Credit Balance Accounts. So if the allowance normally has a credit balance, and it increase, then the cash flow from operating activities would also increase. If the allowance normally has a debit balance and it increases, then the cash flow from operating activities would decrease.

I also would think that notes payable is a financing activity…

@NYC

You would use the weighted-average of 6 months (if the conversion happened in July that is). Since WACSO calls for the weighted average of shares and then interest, net of tax, would be added into the numerator to calculate diluted EPS (if they're going to ask that as well).

And yes! Convert to Beckerism. You won't be disappointed. I've been doing 100 MCQ on Wiley and 20-30% of the material asked I've never even seen on Becker so it's pretty frustrating.

@CPA

That question is just worded strangely. You're right in that the gross profit is $0. I wouldn't worry about it too much because exam day questions aren't going to be as convoluted (or so I've heard).

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.

[NYCaccountant]

@ DJN Notes go into the financing section. Depreciation amortization are added back to net income in the operating section because they are non uses of cash. Allowances and GW(Goodwill)? Impairment losses on good will would be added back and allowances for bad debt, sales, ect are added back as well because they are not actually using cash. You are basically establishing an accrual, which counts the expense but has no cash effect. By the way, thanks ZSR.

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

[NYCaccountant]

@ DJN Notes go into the financing section. Depreciation amortization are added back to net income in the operating section because they are non uses of cash. Allowances and GW(Goodwill)? Impairment losses on good will would be added back and allowances for bad debt, sales, ect are added back as well because they are not actually using cash. You are basically establishing an accrual, which counts the expense but has no cash effect. By the way, thanks ZSR.

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

[nbad311]

@DJN , thanks for that. However, I feel like I do understand the basics of when it's an asset versus liability that arises. I was just getting confused calculating the amounts for some reason. Maybe the gleim questions I was doing were like, worst-case-scenario ones in terms of difficulty.

I'm a little burnt out right now. Doing some MCQs right now and rounding out my… 24th study hour this week? I wish I could take a little break and for a day or two without studying or maybe take 3-4 days of 1-hour lunch break study times ONLY, but my FAR exam is 10/20 and I can't afford the off time.

REG - 65, 70, 80!
BEC - 35, 62, 79!
AUD - 73, 75!
FAR - 65, 73, 70, 75! DONE.

[nbad311]

@DJN , thanks for that. However, I feel like I do understand the basics of when it's an asset versus liability that arises. I was just getting confused calculating the amounts for some reason. Maybe the gleim questions I was doing were like, worst-case-scenario ones in terms of difficulty.

I'm a little burnt out right now. Doing some MCQs right now and rounding out my… 24th study hour this week? I wish I could take a little break and for a day or two without studying or maybe take 3-4 days of 1-hour lunch break study times ONLY, but my FAR exam is 10/20 and I can't afford the off time.

REG - 65, 70, 80!
BEC - 35, 62, 79!
AUD - 73, 75!
FAR - 65, 73, 70, 75! DONE.

[ZSRizvi]

Anyone see the new questions from 2013 they added to Becker?

I just came across one talking about “balloon notes” and I had no idea what those were. So I looked them up and it says they're mortgage notes that mature in annual installments which is why I put the maturing portion as a “current liability” but apparently…the answer labeled it as “noncurrent.”

Confusing.

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]

Anyone see the new questions from 2013 they added to Becker?

I just came across one talking about “balloon notes” and I had no idea what those were. So I looked them up and it says they're mortgage notes that mature in annual installments which is why I put the maturing portion as a “current liability” but apparently…the answer labeled it as “noncurrent.”

Confusing.

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.

[NYCaccountant]

@ ZSR Wait so does Wiley cover more material than Becker? If so, I can understand when people say that Wiley has a lot of fluff in their material.

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

[NYCaccountant]

@ ZSR Wait so does Wiley cover more material than Becker? If so, I can understand when people say that Wiley has a lot of fluff in their material.

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

[ZSRizvi]

Ahh pulled an all-nighter studying. It's 5AM now. MY EYES.

Anyway, yes, from what I've experienced with BEC and now with FAR, Wiley goes too much into detail. Details that won't be covered, for the most part, on the real exam. I like Becker because it condenses the material down into the important parts that you need and that pop up on the exam.

Personally, I also feel like the Test Bank was a waste of money (for me) because Becker question are a lot harder (in my opinion) and more relevant.

I would suggest buying it. I know it's expensive so why not try buying just one section from them and see how it goes? I heard their REG section is pretty good so you could take it for a test drive. 🙂

…and now, I must sleep.

And wake up again in 2 hours.

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]

Ahh pulled an all-nighter studying. It's 5AM now. MY EYES.

Anyway, yes, from what I've experienced with BEC and now with FAR, Wiley goes too much into detail. Details that won't be covered, for the most part, on the real exam. I like Becker because it condenses the material down into the important parts that you need and that pop up on the exam.

Personally, I also feel like the Test Bank was a waste of money (for me) because Becker question are a lot harder (in my opinion) and more relevant.

I would suggest buying it. I know it's expensive so why not try buying just one section from them and see how it goes? I heard their REG section is pretty good so you could take it for a test drive. 🙂

…and now, I must sleep.

And wake up again in 2 hours.

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.

[Author]

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