[jeff]

Welcome to the Q4 2017 CPA Exam Study Group for FAR. 🙂

Introduce yourselves and let your fellow NINJAs know when you plan to take your FAR exam.

The Five Steps (NINJA Framework): https://www.another71.com/pass-the-cpa-exam/

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

[Jmac645]

So, i’ve Finished going through my Becker book for chapters 1-10. I gotta say, its overwhelming. I then went through & made a study guide for each chapter, one per day, then followed by MC the rest of the day for that chapter. I’m not a little over a week a way from my exam, & feel even more overwhelmed just based on the volume of material on the exam. I don’t find the concepts too hard individually, but cumulatively the exam feels like a monster. Any advice on how to proceed for the next week plus? My exam is Oct 16 & unfortunately i work full time during the week. Any advice is appreciated!

[Anonymous]

@kdcpa
for question 2, Revenus – fees. This question is asking about the fee income (exchange transaction). Info you are given:
Music festival to raise funds for a local hospital
Admission fees 5,000
Sales of food and drinks 14,000
Expenses 4,000
Federal youth training fee for service grant
Cash received during Year 2 30,000
Instructor salaries paid 26,000

The admission fees is fee income. Fee income (revenue) is the receipt from customer who accepted service from the ORG. The sales of food and drinks is resale item (retail or sales) income. Don't be confused with fee income. The Federal youth training fee for service grant is grant income. Don't be mixed with fee income. So the fee revenue is $5000.

For question 4. program expenses. This one I actually get wrong and I still think my answer is right. Info you are given:
Cash received in Year 1 with donor's only stipulation that a bus be purchased
Expenditure of full amount of donation 7/1/Year 2 37,000 >>this is increase the fixed assets, not expense
Citizens volunteered to serve meals to the homeless
400 hrs. free; fair value of services $5 per hr. 2,000 >>this volunteer hours will not be recognized
Music festival to raise funds for a local hospital
Admission fees 5,000
Sales of food and drinks 14,000
Expenses 4,000 >>this is special event expense of support service, not program expense, not fundraising expense
Reading materials donated to Community and distributed to children in Year 2
Fair value 8,000 >>this is recognized as program expense and contribution revenue, otherwise, need to buy from others
Federal youth training fee for service grant
Cash received during Year 2 30,000
Instructor salaries paid 26,000 >>this is program expense
Other cash operating expenses
Business manager salary 60,000 >>I consider this is program expense but Gleim doesn't. My reason is I consider the bus service is for public, because the entity is to provide service to community, such as some ORG provide bus service to senior citizen. But the fact doesn't get very clear explanation in the entire simulation. I guess Gleim sets the question that the bus is for riding for their own employees. That way, the bus service is support service not program service. The real exam gives questions and facts very clear.
General bookkeeper salary 40,000 >>support service, general administration
Director of community activities salary 50,000 >>program service
Space rental (75% for community activities,
25% for office activities) 20,000 >>15000 program and 5000 support-general admin
Printing and mailing costs for pledge cards 2,000 >>this is a support service, fundraising expense

Interest payment on short-term bank loan in Year 2 1,000 >>since the debt is for program, the cost on the debt is for program, otherwise, it is avoidable

Principal payment on short-term bank loan used for
program services in Year 2 20,000 >>debt is used for program

At first, my answer was 160,000. I considered bus manager is part of the program service. Gleim's answer is 100,000.

for question 5, see explanation above

[Anonymous]

@Jmac645

You are right the concepts are not difficult. You need to continue practicing MCQs and learn and memorize through practice. Try to train your ability to react to questions as fast as possible. For example, when you see a new question, you can quickly identify what concepts applied to this question. Practice, practice, and practice. If you can learn from taking notes, write down your notes from the question you were wrong or even you answered right (luckily guess) but you think you are not familiar with the concepts.

Three weeks before my exam, I still struggled with pension accounting. I found a series YouTube videos and they helped me understand the pension accounting. I also followed the video, drew my own T account chart. After that, I felt I understand the pension very well and completely remembered the concepts before JE. So I don't need to remember the JE. I understand the pension and JE is a piece of cake. So, use you own hand to write stuff, and use your own words to explanation the concepts. That, you should understand and remember the concepts for a long time.

[IwannabeaCPA2017]

I'm really struggling with these Cash to Accrual Questions can anyone help?

Q: In its cash flow statement for the year, Ness Co. reported cash paid for interest of $70,000. Ness did not capitalize any interest during the year. Decreases occurred in several balance sheet accounts as follows: Accrued interest payable $17,000 and Prepaid interest $23,000. In its Income statement what is Ness interest expense..

I was following this equation someone mentioned a while back Increase in CA = Add. Decrease in CA = subtract. Increase in CL = Subtract and Decrease in CL = Add. From that I took 70,000-23,000 = 17,000 and I got 64k which is incorrect.

[lam2848]

@iwannabeaCPA2017 I think you have it backwards. Current assets you do the opposite and current liabilities you do the same. So I think it should be 70k – 17k + 23k = 76,000.

You can think of it this way, prepaid expense went down which means that interest expense has gone up so you have to add that to accrual accounting expenses.

[lam2848]

Does anyone know of any good videos or sources that I can use to study Governmental accounting? I have Becker but for some reason the lectures just aren't clicking with me.

[Anonymous]

@IwannabeaCPA2017

Follow this way, you will easily solve all cash to accrual or accrual to cash problems in seconds. Below is the reasoning. For solving questions, it just takes seconds.

The accounting equation is Asset=Liab+Equity. Extent the equity components, so Asset=Liab+Revenue-Expense+OE
Now, changes in those elements are still fit in the equation. ∆asset=∆liab+revenue-expense+∆OE
In your question, cash paid for interest of $70,000 means the ∆cash=-70,000.
Decrease in prepaid interest $23,000 means ∆prepaid interest = -23,000.
Decrease in accrued interest payable $17,000 means ∆accrued int payable = -17,000.
Now put them in the equation, ∆cash+∆prepaid=∆accrued payable-expense => expense=∆accrued payable – ∆cash – ∆prepaid = -17,000-(-70,000)-(-23,000) = -17,000+70,000+23,000=76,000.

One more reasoning for indirect method for cash flow. From basic accounting equation and you know all changes in accounts related to operating activities, you can get, ∆cash net income+∆AR+∆inventory+∆prepaids=∆AP+∆accrued payable+∆accrued net income. You just put all related changes in basic accounting equation, then you can get you answer, either for cash basis or accrual basis.

Just really understand the basic accounting equation, you don't need to remember those formulas, you can solve this kind of questions quickly.

[Anonymous]

@lam2848

I had taken two governmental accounting courses at different levels in university. So far, I did not find a better lecture for gov't accounting online than my instructor yet. Everyone's learning experience is different. You can still search in YouTube and find which is good for you (help you to understand).
The big difference compared to for profit business is the governmental fund. Make sure you understand that well. The proprietary fund and fiduciary fund are mostly the same as for profit business. You need to understand the differences between the government business type and for profit. The most parts are the same as for profit, so you don't need to hard remember. Understanding proprietary fund and fiduciary fund also helps you to understand the non-gov't NFP.

[Earla Riopel (NYCARE)]

Hi @Iam2848,
As to,
“Does anyone know of any good videos or sources that I can use to study Governmental accounting? I have Becker but for some reason the lectures just aren't clicking with me.”

Try this lists:


https://www.youtube.com/channel/UCWu1tVBhdmMeAI-pkJeaGjQ/playlists?

If you're not actively reading your your Becker textbook, and doing Gov't Acctg. MCQs and SIMs, especially doing JEs, try adding a supplement material, try Ninja Plus videos.

Make sure though, you take notes. Last year, Q4 2016, I watched Ninja Plus videos without taking notes, completely forgotten about them, after so many months. Lately, re-activated my subscription.

Today, I just finished taking notes with the Ninja Plus FAR videos. Mr. Monnette was great. So many Gov't Accounting videos. It's worth your time, and money, especially if you fully utilized it, by taking notes. It's very important. Also, the Ninja MCQs app has so many Gov'tal Accounting test bank questions, as well.

Good luck.

[SGAuditninja]

Hi.

Shouldn't the answer be 250K? The checking account has a negative balance. It should be classified as a liability. Please let me know your thoughts. thanks

On December 31, 20X1, Kale Co. had the following balances in the accounts it maintains at First State Bank:

Checking account 101 $175,000
Checking account 201 (10,000)
Money market account 25,000
90-day certificate of deposit
due February 28, 20X2 50,000
180-day certificate of deposit
due March 15, 20X2 80,000
Kale classifies investments with original maturities of three months or less as cash equivalents. On the December 31, 20X1, balance sheet, what amount should Kale report as cash and cash equivalents?

A.
$190,000

B.
$200,000

Correct C.
$240,000

D.
$320,000

[lam2848]

@ckcpa18 I unfortunately didn't take government or nonprofit accounting in college so this is all new to me. I somehow understand nonprofits but governmental accounting sounds like another language. I'll just practice more! I can remember what funds are governmental, proprietary, and fiduciary, I'm just having trouble with what each fund is actually for.

@EarlaTheBeanGardener Thanks for the links! I will definitely try those! My friend took governmental accounting last year and she is letting me use her textbook, so hopefully that will help too!

[Anonymous]

@lam2848,
If your friend gives her textbook to you, try from there. The basic part is you have to remember what fund is governmental, proprietary, or fiduciary. Read their definitions, think about them maybe use your own words to describe them, or remember the name of their examples.

Proprietary includes enterprise. Exchange transaction with outside parties, just like a for profit business, costs need to be recovered from fees changes to users not from government, such as city water, city sewer, city bus… The users, no matter the residents, the companies, or government agents, all of them need to pay. Most used by and paid from the residents and other businesses (outside parties).

Internal service fund at fund level is proprietary and mostly the governmental activity at government-wide level. Because it accounts the exchange transaction, and mostly the users are the government agents or other governments, it is central purchasing or pool for the government. If the major users are outside parties other than governments, then the internal fund will not be in governmental activity at gov't-wide level. Think about, if this is in real life, why government still name the fund as internal service, actually they will change the fund name to a different one. So the purpose of most funds is just like their name.

Fiduciary includes all agency type and trust type funds. The gov't has no power to decide how to use them. Agency fund is the resources pass through government to somewhere else. The same fact is that the NFP has agency fund as well. Trust fund is the government manages the trust for someone else other than this government itself. There are three categories in fiduciary trust fund. For example, the gov't employee pension fund or other post retirement benefit fund. The second category is the investment trust fund. Usually government uses (a) investment pool(s). In a investment pool, the unit portion of this government (who manages) is accounted in it's governmental fund, because those units of the whole investment belongs to itself. Other units in the investment pool are accounted in the fiduciary for other governments or governmental entities. It is like your friend gave you $100 and said put the money in your high yield savings account to earn some high interest instead of open her own at a lower interest rate. You are actually the trustee for her $100 investment principal. The three fiduciary trust is private-purpose trust fund. This is very like a governmental permanent fund, BUT, the owner and beneficiary are different. For example, you donated $1M and pointed your local government to manage the donation and distribute the earnings from this donation to local veteran's kids for sending Christmas gifts to them. This is not for the public benefit purpose, which would be accounted in governmental permanent fund. This is just for a specified group, so it's private-purpose. Again, the government just represents you to administrate the investment and distribute the earnings for the purpose you had assigned.

[californiaholic]

Can someone explain this to me please? I'm struggling to understand why we're doing what we're doing and the explanation from Roger is not helping me.

During 20X1, Clark Company manufactured equipment for its own use at a total cost of $2,400,000. The project required the entire year to complete and all costs were incurred uniformly throughout the year. At the beginning of the period, Clark was able to borrow $1,500,000 at 6% specifically for the purchase of materials and the manufacture of the equipment. The entire debt, with interest was repaid on December 31, 20X1, replaced with a long-term loan. Throughout 20X1, Clark Company had additional debt of $1,000,000 with a weighted average interest rate of 7%.

If Clark Company capitalizes the maximum amount of interest allowable under GAAP, how much will Clark report as interest expense in 20X1?

Answer: $88,000

[JRM]

Weighted average cost = 2,400/2= 1,200 (since the costs were incurred evenly throughout the year)
Take the 1,200 *6%= 72,000 Interest that is capitalized. You take it from the first loan borrowed. The remaining interest would be expensed 1,000 *.07=70 and the remaining from the first loan 1,500*.06 =90-72(capitalized amount) = 18,000. Answer 18,000+70,000=88,000 Interest Expense.

[kdcpa]

Can someone please explain the concept of dollar value LIFO and dollar value LIFO retail method?

[Author]

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