[jeff]

Welcome to the Q1 2016 CPA Exam Study Group for FAR.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[MaLoTu]

Any Becker users sitting for exam Q1? Are you using version 1.1 or 1.2? I am super confused on what is testable now because I keep getting conflicting information from Becker and people on here … Becker is even contradicting itself =(

[hitmi]

am in F2 my exam date is 1/20

This is taken from Becker CPA – 00605

Q. Under East Co.'s accounting system, all insurance premiums paid are debited to prepaid insurance. For interim financial reports, East makes monthly estimated charges to insurance expense with credits to prepaid insurance. Additional information for the year ended December 31, Year 2, is as follows:

Prepaid insurance at December 31, Year 1 – $105,000
Charges to insurance expense during Year 2 (including a year-end adjustment of $17,500)- $437,500
Prepaid insurance at December 31, Year 2 – $122,500

What was the total amount of insurance premiums paid by East during Year 2?
a. $437,500
b. $332,500
c. $420,000
d. $455,000

A. Choice “d” is correct. $455,000 insurance premiums paid during Year 2.

Prepaid Insurance
Begin balance 12/31/year 1 $105,000
Add payment 455,000
____________
sub total 560,000
Less expense (437,500)
___________
Ending balance 12/31/year 2 $122,500

A good T – Account Sollution for this question is

Prepaid Insurance
Dr
beg 105

?? 455

———
End 122,5

CR

437,5 insurance exp

FAR 06/09/2016 | 2014 (42) Didn't Study for it | 2015 (54)
Audit (66) i was expecting (99)

will Ninja MCQs make the difference in 09 June, Lets wait!

[hitmi]

F2

if we use T- Account why we subtract unearned revenue from from the collection in the second Quesion ? and why we added Unearned revenue into the collections in the first question ?

Q1

Tara Co. owns an office building and leases the offices under a \ariety of rental agreements im.ol'ving rent paid in
ad\ance monthly or annually. Not all tenants make timely payments of their rent. Tara's balance sheets contained
the following data:
Rent Recei\able $ 9,600 $ 12,400
Unearned Rent 32,000 24,000
During Year 2, Tara recei-.ed $80,000 cash from tenants. What amount of rental re-.enue should Tara record for
Year 2?
a. $90,800
b. $85,200
c. $74,800
d. $69,200
Explanation
Choice “a” is correct. $90,800 rental re-.enue earned for Year 2.
Asset Liability Net
Rentals Unearned Unearned
Receivable Rentals Rentals
Beginning balance at end of Year 1 $ 9,600 $ 32,000 = $ 22,400
Add cash collections 80,000
Subtotal 102,400
Less rental re-.enue earned (90,800) +- SQZ
Ending balance at end of Year 2 $ 12,400 – $ 24,000 = $ 11 ,600

Q2

Ward, a consultant, keeps her accounting records on a cash basis. During Year 2, Ward collected $200,000 in
fees from clients. At December 31, Year 1, Ward had accounts receivable of $40,000. At December 31 , Year 2,
Ward had accounts receivable of $60,000, and unearned fees of $5,000. On an accrual basis, what was Ward's
service re-.enue for Year 2?
a. $175,000
b. $180,000
C. $225,000
d. $215,000
Explanation
Choice “d” is correct. $215,000 service re-.enue for Year 2.
tl c.c.atlats.
Rec;.ejvab/e
Balance at Dec. 31, Year 1 $ 40,000
Re-.enue – Squeeze ? $ 215,000
Subtotal 255,000
Collections (195,000)
Balance at Dec. 31 , Year 2 $ 60,000

Note: Collections are $200,000 less $5,000 of unearned fees collected.

FAR 06/09/2016 | 2014 (42) Didn't Study for it | 2015 (54)
Audit (66) i was expecting (99)

will Ninja MCQs make the difference in 09 June, Lets wait!

[hitmi]

F2

Rice Co. salaried employees are paid biweekly. Advances made to employees are paid back by payroll deductions. Information relating to salaries follows:
12/31/Year 1 12/31/Year 2

Employee Advances $ 24,000 $ 36,000

Accrued Salaries Payable 40,000 ?

Salaries Expense During the Year 420,000

Salaries Paid During the Year (Gross) 390,000

In Rice's December 31, Year 2, balance sheet, accrued salaries payable was:

a.$94,000
b.$82,000
c.$70,000
d.$30,000

Answer is C.

My way of calculation is to Cash method to accrual method covenversion: So it will be Cash basis is 390K, accrual basis is 420K, Receivable (advance) increased $12K , Payable net increase should be 420k-390k-12k=18k. so Payable decrease $18k, the answer is 40k-18k=22K.

i like to work on J/E then T- Account for this kind of Problems is the below journal entries correct and if not please correct me

for Year 1

sallary exp 40
accrual salary payable 40

for Year 2

salary expense 420
accrual salary payable 420

Salary Payable 390
Cash 390

T – Account

Acraul salary payable

dr 390

cr 40
cr 420

End = 70

FAR 06/09/2016 | 2014 (42) Didn't Study for it | 2015 (54)
Audit (66) i was expecting (99)

will Ninja MCQs make the difference in 09 June, Lets wait!

[pyacpa49]

@cortes123 I actually haven't gone through AUD yet. I am just starting now and am sitting for far in January, so AUD is not even on my mind right now. For FAR, I just got out of college and after 4 years of financial accounting classes I'm more just using Wiley to touch on things that I don't feel as comfortable with. I have been taking full practice tests lately to make sure I can recall information. Seems to be going well but I'll just have to wait and see. Hopefully AUD for Wiley is helpful though because that is one test I'm not too confident about (not that I'm really comfortable with any). You scored really well on AUD though, any tips?

[pyacpa49]

@hitmi in your post above asking about the unearned revenue in Q2 “Ward, a consultant, keeps her accounting records on a cash basis. During Year 2, Ward collected $200,000..” You are going from cash basis to accrual basis. The 200,000 is the cash basis amount. The increase of 20,000 in A/R represents revenue that was earned, but not collected. This would not have been recognized in the 200,000 so you need to add that. The unearned fees is cash that is included in the original 200,000. However, because it is unearned, this cannot be recognized in revenue. In order to get to accrual basis this needs to be subtracted from the 200,000. 200,000+20,000-5,000=215,000.

Does that help?

[Anonymous]

@pyacpa49 With AUD you can feel overwhelmed at first if you haven't had any experience on the field plus it is a big change of paste studying for it bc all the material is theory and there is almost no calculations on it. With that being said Wiley was good for me bc they teach you the concepts in the chronological order of the audit process, there is overlaping bc some things are applied to more than one process but you can get the big picture once you start reviewing the material. But at first it can be confusing. FAR is gonna help you in some things so that's a plus.

[hitmi]

@pyacpa49 Many Thanks.. but why the unearned revenue is added back in the Other Question ? why we didn't subtract unearned revenue from the other question as you did in your solution ? appreciate your input pyacpa49

FAR 06/09/2016 | 2014 (42) Didn't Study for it | 2015 (54)
Audit (66) i was expecting (99)

will Ninja MCQs make the difference in 09 June, Lets wait!

[Anonymous]

In conclusion @pyacpa49 do not panic if you feel no motivation bc of the change of paste or if you cannot grasp the details on the concepts. It happened to me but with practice the big picture came together. Also in AUD in almost every question you can find two prossible answers on the MCQs and that can be frustrating too.

[Anonymous]

@hitmi when there has been a decrease on unearned revenues that means there has been a recognition of revenue from those cash receipts received on the prior year that were deferred revenue at the beginning of this year So we have to add that decrease portion to the accrual revenue. On the second one we have no beginning balance so that means that those 5,000 (increase) were cash received this year that was not earned yet, so that is why we have to deduct that portion from the receipts. I hope this makes sense 🙂

[hitmi]

well done cortes123 thats what i though but i was not sure. Thank You so Much

FAR 06/09/2016 | 2014 (42) Didn't Study for it | 2015 (54)
Audit (66) i was expecting (99)

will Ninja MCQs make the difference in 09 June, Lets wait!

[qfolmar]

Hi everyone,

Does anyone have a seamless way to tackle the cash to accrual, accrual to cash methods? I am completely bombing these questions.

Thanks!

FAR-79
REG-82
AUD-83
BEC- August 31st

[Anonymous]

Good morning everybody, I am trying to get some studying done before Christmas. How are you feeling about the exam? Ready. I need some explanation on the below question

How should the proceeds received from the advance sale of nonrefundable tickets for a theatrical performance be reported in the seller's financial statements before performance?
A. Revenue for the entire proceeds
B. Revenue to the extent of related costs expended
C. Unearned revenue to the extent of related costs expended
D. Unearned revenue for the entire proceeds

I am thinking that since the tickets are nonrefundable, the answer should be A because even though the company is obligated to the theatrical performance and needs to provide this service to the customers, the money received from the tickets purchased won't be return and is revenue to the company

What do you think?

[Anonymous]

Well, but with A, the rule of conservatism would not be follow, so the answer is D

[Anonymous]

@qfolmar you can start with this:

Cash to Accrual (go as assets go)
Add increase and substract decrease in assets
Add decrease and substract increase in payables

Accrual to Cash (go as payables go)
Add increase and substract decrease in payables
Add decrease and substract increase in assets

On the Cash Flow statement if you want to arrive to money paid to supplier:

COGS (accrual)
Add increase and deduct decrease on payables
Add decrease and deduct increase on inventory

There are other stuff with the cash flow statement but I do not remember now :). The first two formulas I posted helped me at first almost every time but I always say that it is best to understand the logic behind the substractions and additions bc the exam likes to throw curves and with mere formulas sometimes it is not enough to get by.

[Author]

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