[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/

AUD - 79
BEC - 80
FAR - 76
REG - 92

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

[Anonymous]

On Jan 2 of the current year, Lem Corp. bought machinery under a contract that required a down payment of $10,000, plus 24 monthly payments of $5,000 each, for total cash payment of $130,000. The cash equivalent price of the machinery was $110,000. The machinery has an estimated useful life of ten year and estimated salvage value of $5,000. Lem uses straight-line depreciation. In its year-end statement, what amount should Lem report as depreciation for this machinery?
A. $12,500

B. $13,000

C. $10,500

D. $11,000

The answer per Becker is 10,500. I understand how they calculated it, but am unsure why we would use FV and not cost? As usual, when I click the “See Lecture” it takes me to a section that says to calc straight line dep using cost – salvage. What am I missing?>

[Wannafree]

@CPA3rd ,Machinery is recorded at its historical cost, which is measured by the cash or cash equivalent price of obtaining the machine and preparing it for use. The journal entry to record this acquisition would be
Dr Machinery 110,000 (cash equivalent)
Dr Discount on N.P. 20,000 (130,000 – 110,000)
Cr N.P. 120,000 (24 x 5,000)
Cr Cash 10,000

The 20,000 discount represents future interest expense (the cost associated with paying for the asset over two years instead of immediately) rather than part of the cost of the machine. Straight-line depreciation for the year is computed as follows:
(Cost – Salvage value) x 1/useful life = Depre. Expense
(110,000 – 5,000) x 1/10 = 10,500

WannaB

[Anonymous]

Thanks Wannafree – I feel like there is no way I will every remember all of this. There are 3 different rules for everything. I'm working on Capitalizable interest and that's also impossible to remember all the rules. I am just going to do what I can and pray….

[Wannafree]

“There are 3 different rules for everything” LOL that's FAR.Yes I wish if I can develop some magic wand to make FAR easier.If there is just one rule then you have to know the corresponding rules for IFRS and sure it will make it 2 rules .LOL .well said.

WannaB

[Anonymous]

It's basically – Use X, unless it's Y, then use the lesser of A or B multiplied by C. For IFRS use the difference of Y and B.

I will never learn all of this. I've accepted it.

[Wannafree]

@C.P.A the third , hilarious.u R not alone.

WannaB

[sxy5130]

New to the forum, freaking out already. Two weeks left!

[IwannabeaCPA2017]

Oh god, Avoidable interest. Thanks @CPA, will have to review that stuff. So much to know 2 days left.

BEC- PASS (Expiring in DEC 2017)

REG- PASS (Expiring Feb 2018)

AUD- PASS (Expiring Oct 2018)

FAR- 65, 60, 59, 77!!! -GOD BLESS

If I can do it, anyone can do it!

 

[IwannabeaCPA2017]

FAR is such a BIT** How the heck are we suppose to recall all of these details. Doing these MCQ and still getting 60% on them cuz I can't recall the formula for goodwill or avoidable interest. With 2 days left I really can't do much except keep plugging. Im pretty sure I'm gonna fail once again and I can say goodbye to BEC. F*CK!! Sorry, just needed to vent cuz I'm literally trying my best and can't even feel a sense of prepared/accomplished. Its like we need a cheat sheet or something for this section

BEC- PASS (Expiring in DEC 2017)

REG- PASS (Expiring Feb 2018)

AUD- PASS (Expiring Oct 2018)

FAR- 65, 60, 59, 77!!! -GOD BLESS

If I can do it, anyone can do it!

 

[gguzman]

@IwannabeaCPA2017 I am right there with you. I am in my final hours and there is so much material I know I am not strong in. I feel like I am just ok at some things and have no idea on the rest. Some of the things that save me with some questions is that accounting intuition we picked up from our degrees.

All we can do is our best. I wish I can take my own advice, I am feeling like I suck at life. Maybe I should stop and do some flashcards and read my notes, instead of getting slaughtered by these MCQ's

We are all in this together. In the future when we are in our fields and some non-CPA controller, or business owner tries to ask us why is this accounted for like this? Why can't I take this deduction? how is this not revenue? why is this a business expense? and they do not understand, we will be able to look at them with confidence and say, it is because of this, I know because I spent thousands of hours studying.

Better yet they won't even ask any questions because we have earned our CPA designation. I think I motivated myself a little.

Good luck everyone. Keep pushing!

AUD - NINJA in Training
BEC - NINJA in Training
FAR - 69
REG - 78

Gabriel Guzman- Metro Detroit, MI
FAR: 04/12/18
AUD: 05/31/18
BEC: 07/12/18

[Wannafree]

@gguzman , all the best.Please do share your exam experience.

WannaB

[Anonymous]

@Iwannabe – preach!

FAR has soooooooooooo much. Each section is fairly easy, but together is so tough! I would spend the next couple days trying to sort all of that out. My guess is that you know this stuff, but have a hard time deciphering what's what. Try to work out as much of that as possible (easier said than done). I felt like that for REG and once I worked it out (enough) I was able to pass. I'm working on the same thing for FAR!

[Anonymous]

Anyone have any advice for sorting through all the Inventory methods? I feel like I understand them all but can't seem to figure out which to use when asked the question.

[itooshallpass]

@gguzman and @iwannabeacpa2017 Me too. I've been studying for three months, three days to go, and I feel like I peaked last week. There's SO much material and my brain is so exhausted, it's all just becoming a muddled worthless mess. With mediocre quiz scores and so much uncertainty I don't even know what I should be focusing on, besides weaknesses I pointed out weeks ago. But not sure how much those will help me either. I just want to give it a go and be done with it. I hope I will not have to take FAR again… I have to make it.

FAR - 85 (12/17)
AUD - 80 (1/18)
REG - 83 (6/18)
BEC - 85 (7/18)

Ethics - 95

DONE DONE DONE DONE

[Wannafree]

CPA3rd , Here is my summarized notes on Inventory.
COGS
Included
Freight In
Handling costs
Insurance on shipment
Direct materials
Factory overhead
Merchandise purchased for resale
Direct labor
Purchase returns (Subtract)
Purchase discounts (Subtract)
Not Included
Freight Out
Purchase discounts not taken
Packaging for shipment to customers
Sales returns
Interest on inventory loans
***
Weighted avg inventory method is applicable to

Periodic – Yes
Perpetual – No
Used to calculate inv for AN ENTIRE PERIOD

**
Lower of cost or market inventory method
Departure from the principal of historical cost
MARKET VALUE IS DEFINED AS REPLACEMENT COST
MUST BE LESS THAN ORIGINAL COST
Provided that the amt is between (NORMALLY)
NRV (Ceiling)
NRV less a normal profit margin (Floor) Original Cost
If original cost is below both NRV and replacement cost
Inventory will be valued at original cost NRV
Normally, replacement cost should be less than original cost
If original cost is above both NRV and replacement cost NRV – Normal Profit
And replacement cost is less than NRV less a normal profit margin
NRV less a normal profit margin will be used to value inventory Replacement Cost

In a period of rising prices
The carrying amount will be maximized by using
Perpetual method
Cost application of TOTAL INVENTORY
Cost of the items sold throughout the year is the average of earlier, lower prices

Most approximate current cost of inventory
COGS – LIFO
Ending Inv – FIFO

***
Inventory Concepts
Gross margin method
Historical sales
Dollar value LIFO
Uses price indexing system
Preserves old inventory by charging current costs to COGS
Increases and decreases are measured by the total dollar value of the layer
Measures price changes between current year and base year
FIFO
During a period of rising prices
Higher income
Closest match to physical flow of inventory
COGS balance is the same whether a perpetual or periodic inv is used
LIFO
During a period of rising prices
Lowest ending inventory amount
Perpetual and periodic inventory methods will result in different COGS balances
If used for tax purposes, must also be used for reporting purposes
Specific Identification
Small amount of significant dollar value items
Weighted Average
Averages cost of all items on hand and purchased during the period
****

WannaB

[Author]

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