FAR Study Group Q1 2015 - Page 36

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  • January 25, 2015 at 3:44 pm #654680
    hunter32
    Member

    I have no idea why, but the “which of these costs would be classified as R&D” questions drive me absolutely nuts. Has anyone had a good way nailing these down?

    BEC - 80 (Becker)
    AUD - 92 (Becker+NINJA MCQ)
    FAR - 87 (Becker+NINJA MCQ)
    REG - 90 (Becker+NINJA MCQ and Audio)

    January 25, 2015 at 3:48 pm #654681
    Determined CPA
    Participant

    Memorize! General idea – R&D expenses help to discover new information that will create a new product, service, etc.

    FASB ASC 730-10-55-1 provides examples of activities included in research and development:

    • Laboratory research aimed at discovery of new knowledge

    • Searching for applications of new research findings or other knowledge

    • Conceptual formulation and design of possible product or process alternatives

    • Testing in search for or evaluation of product or process alternatives

    • Modification of the formulation or design of a product or process

    • Design, construction, and testing of pre-production prototypes and models

    • Design of tools, jigs, molds, and dies involving new technology

    • Design, construction, and operation of a pilot plant that is not of a scale economically feasible to the enterprise for commercial production

    • Engineering activity required to advance the design of a product to the point that it meets specific functional and economic requirements and is ready for manufacture

    FASB ASC 730-10-55-2 gives examples of those types of activities that are not research and development activities:

    • Engineering follow-through in an early phase of commercial production

    • Quality control during commercial production including routine testing of products

    • Troubleshooting in connection with breakdowns during commercial production

    • Routine, ongoing efforts to refine, enrich, or otherwise improve upon the qualities of an existing product

    • Adaptation of an existing capability to a particular requirement or customer's need as part of a continuing commercial activity

    • Seasonal or other periodic design changes to existing products

    • Routine design of tools, jigs, molds, and dies

    • Activity, including design and construction engineering, related to the construction, relocation, rearrangement, or start-up of facilities or equipment other than (1) pilot plants and (2) facilities or equipment whose sole use is for a particular research and development project

    • Legal work in connection with patent applications or litigation, and the sale or licensing of patents

    If you read this enough times, it starts to stick.

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 25, 2015 at 4:00 pm #654682
    Determined CPA
    Participant

    Spending my day going over chapter 7 in Becker. I struggle with stockholders equity and cash flow (for both GAAP and IFRS). I think im going to create a cheat sheet for the cash flow and compare GAAP and IFRS.

    What are other people's weak areas??

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 25, 2015 at 4:14 pm #654683
    hunter32
    Member

    Whoa thanks for that! I'm actually doing Chapter 7 today too, I need a little work on Cost vs Par value method, and diluted EPS

    BEC - 80 (Becker)
    AUD - 92 (Becker+NINJA MCQ)
    FAR - 87 (Becker+NINJA MCQ)
    REG - 90 (Becker+NINJA MCQ and Audio)

    January 25, 2015 at 5:21 pm #654684
    Determined CPA
    Participant

    Lol that is a lot! You'll get it! I'm in the same situation! Par vs cost and diluted are my least fav! And cash flow. Ugh! Don't get me started on bonds!

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 25, 2015 at 5:38 pm #654685
    hunter32
    Member

    I'm willing to bet that by bonds you're referring to detachable warrants and conversion features lol?

    BEC - 80 (Becker)
    AUD - 92 (Becker+NINJA MCQ)
    FAR - 87 (Becker+NINJA MCQ)
    REG - 90 (Becker+NINJA MCQ and Audio)

    January 25, 2015 at 5:43 pm #654686
    Determined CPA
    Participant

    Nailed it!

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 25, 2015 at 5:43 pm #654687
    Determined CPA
    Participant

    Oh and spot rates just make me wanna crawl under a rock

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 25, 2015 at 5:45 pm #654688
    hunter32
    Member

    I was stumped on those at first really bad, but then I forced myself to do the journal entry on paper for every MCQ that I got and it really helped.

    BEC - 80 (Becker)
    AUD - 92 (Becker+NINJA MCQ)
    FAR - 87 (Becker+NINJA MCQ)
    REG - 90 (Becker+NINJA MCQ and Audio)

    January 25, 2015 at 6:31 pm #654689
    excel monkey
    Participant

    Put me down for hating the statement of cash flows as well. It's been my Achilles heel for as long as I can remember. Other than that, I haven't struggled with to much. As weird as it sounds, I'll take an exam full of bond and lease questions over anything to do with cash flows.

    FAR - 91
    AUD - 88
    BEC - 86
    REG - 79

    January 25, 2015 at 6:37 pm #654690
    hunter32
    Member

    I love cash flow, but it's helped that I work at a firm where I do a lot of financial statement prep for clients. I'll second your comment on an exam with leases and bond tho. I'd also take a lot of consolidation questions too.

    BEC - 80 (Becker)
    AUD - 92 (Becker+NINJA MCQ)
    FAR - 87 (Becker+NINJA MCQ)
    REG - 90 (Becker+NINJA MCQ and Audio)

    January 25, 2015 at 9:43 pm #654691
    Anonymous
    Inactive

    So which type of interfund transactions are reported on the Gov't wide FS?

    January 25, 2015 at 10:36 pm #654692
    Determined CPA
    Participant

    Can anyone help me with becker question CPA-01198 – its on dilutive EPS.

    I understand why we deduct the 10,000 from net income in the numerator, because it is non-cumulative, they are backed out regardless if they are paid or declared. What I don't understand is why we don't also back out the 16,000 of pref dividends that were paid in that year.

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 25, 2015 at 11:28 pm #654693
    excel monkey
    Participant

    We deduct the 10,000 because it is cumulative. Only cumulative preferred stock dividends get backed out regardless of if they are declared or not.

    There are a couple of reasons that the 16,000 is not deducted. First, remember EPS goes on the Income Statement, and net income is for a specific period, i.e. the year ended 12/31/20X1, so we are calculating EPS for that same period. Based off that, for preferred stock, we deduct the dividend they are entitled to for that year. For cumulative preferred, the are entitled to the dividend no matter what, so we back it out of net income for the period. For non-cumulative, we only back out dividends that are declared during the year, regardless of when they are paid.

    It might also help to consider the journal entries for dividends. When they are declared, they reduce retained earnings during that period, not the period they are paid out in.

    I hope this helps. It makes sense in my head at least.

    FAR - 91
    AUD - 88
    BEC - 86
    REG - 79

    January 25, 2015 at 11:42 pm #654694
    Determined CPA
    Participant

    Right, cumulative, thats what i meant. Ugh – i guess that helps a little. I just feel like if the 16,000 was definitely paid, why not back it out? Is it already included? So confusing. Financial is by far the most difficult exam for me.

    Ok, another question on cash flow (as you can see i have spent an entire weekend on this ridiculous chapter)

    Karr inc reported NI of $300,000 for year 2. changes occurred in several bs accounts as follows:

    equipment 25,000 increase

    A/D 40,000 increase

    note payable 30,000 increase

    additional info:

    during year 2, karr sold equipment costing 25,000, with AD of 12,000, for a gain of 5000

    in december year 2, karr purchased equip costing 50000 with 20000 cash and a 12% n/p of 30000

    depreciation exp for the year was 52,000

    in karrs yr 2 stmt of cash flow, net cash provided by operating activities should be?

    net income 300,000

    depr exp 52,000

    gain on sale of equip (5000)

    total 347000

    however, in the next question they have the same facts but ask for investing activities?

    sale of equip 18,000 (25000-12000+5000 gain)

    punch of equip (20000)

    total 2000

    Why are we accounting for the gain in both op and inv??? I thought once it was in one activity it can't be in another…..

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

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