[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

[pyacpa49]

@Aguspesci78 With your question it is important to remember when revenues are recognized. FASB says that revenue is recognized when an entity has substantially completed the revenue generation process. A large part of this is actually earning the revenue. In this question, although the cash is non-refundable, they still have not upheld their end of the transaction, so the cash received cannot be considered revenue. Revenue is not earned in this case until the performance takes place.

I definitely am getting more nervous about the exam as my test date approaches. Just trying to keep calm and get through as many questions as possible. Really focusing on the things I keep missing. Don't think I will be taking much of a break for Christmas, but I will definitely enjoy my time off. Good luck 🙂

[qfolmar]

@cortes123, Thanks so much for the information. I just needed a solid base to work from.

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

[Anonymous]

Sure. The same thing happened to me and those formulas helped me understand better the logic behind the calculations.

[hitmi]

F2

this kind of question driving me crazy. any easy way of solving it ? how important do you think its ?

A state requires quarterly sales tax returns to be filed with the sales tax bureau by the 20th day following the end
of the calendar quarter. Ho\Never, the state further requires that sales taxes col lected be remitted to the sales tax
bureau by the 20th day of the month following any month such collections exceed $500. These payments can be
taken as credits on the quarterly sales tax return.
Taft Corp. operates a retail hardware store. All items are sold subject to a 6% state sales tax, which Taft collects
and records as sales revenue. The sales taxes paid by Taft are charged against sales revenue. Taft pays the
sales taxes when they are due.
Following is a monthly summary appearing in Taft's first quarter sales revenue account:
January $ $ 10,600
February 600 7,420
March 9,540
$ 600 $ 27,560
In its financial statements for the quarter ended March 31 , Taft's sales revenue and sales taxes payable v,.ould be:
Sales
Sales taxes
revenue payable
a. $27,560 $1 ,560
b. $26,000 $960
C. $26,000 $1 ,560
d. $26,960 $600
Explanation
Choice “b” is correct. $26,000, $960.
Credits to sales reve nue
Salestax rate plus one
Sales tax rate
Sales tax collected
Less advance payments
Sales tax payable
= $2 7,560 =
1 .06 $26,000
X .06
1,560
600
$ 960
sales revenue
C

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!

[marqzho]

@hitmi

To me, I'd say this is very important. It goes to your basis Debit Credit concept. You will need it in the exam or in the real life. The best way for practicing purpose is to do all entries/T-account in the right way.

All cash received and paid by the company (price+tax) are charge to the sales revenue account.
So from the pre-adj entries, we can tell:
Taft Corp has paid $600 in sales tax, has collected $27560 in cash (which you should be able to tell in $27560, $26,000 is real sales revenue and the remaining $1560 is sales tax collected for the state)

The correct entries would be:
Dr. Cash 26000
Cr. Sales Revenue 26000

Dr. Cash 1560
Cr. Sales tax payable 1560

Dr. Sales tax payable 600
Cr. Cash 600

So at the F/S, you will have Sales revenue $26000, cash $26960, sales tax payable $960

Once you understand the basis concept, next time you should be able to do all the entries on top of your head =)

REG 90
FAR 95
AUD 98
BEC 84

[hitmi]

Thank you marqzho that was very helpful

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

i think it can be solved this way as well

DR. cash 27,560
CR. sales 26,000
CR. sales tax payble 1,560

to remit the tax

DR.sales tax payble 600
CR. cash 600

by T-Account Tax payble will net 960
sales are equal to the 27,560 / 1.06 = 26,000

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]

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

I think i lost the concentration!. why in this question the correct answer which is A) it says the gain is recorded in income as it offsets previous recorded loss. while in explanation of the incorrect questions it states that the gain is recorded in OCI as its a gain ?

On December 31 , Year 1, Classic Company re\elued a patent under IFRS. On that date, the patent had a canying
value of $250,000, a fair \Glue of $200,000, and a remaining useful life of 5 years. On December 31 , Year 2, the
patent's fair \Glue was $175,000. In its December 31, Year 2 financial statements, Classic will report a current
period revaluation:
a. Gain of$15,000.
b. Loss of $75,000.
c. Gain of $40,000.
d. Loss of $25,000.

Explanation

Choice “a” is correct. During Year 2, Classic will record amortization on the patent of $40,000 ($200,000 revalued
patent I 5 years). The canying value of the patent on December 31 , Year 2 will be $160,000 ($200,000 fair value
on revaluation date- $40,000 amortization) and a revaluation gain of $15,000 will be recorded in Year 2 income to
adjust the patent to its December 31, Year 2 fair value of $175,000. This represents a revaluation gain that
partially offsets a pre\1ously recorded revaluation loss, so this is an income statement item.

Choice “c” is incorrect. The patent is a finite life intangible asset with a remaining life of 5 years on December 31 ,
Year 1. Classic will record amortization on the patent of$40,000 ($200,000 revalued patent I 5 years) during Year
2, and a re\eluation gain of $15,000 to adjust the patent to is December 31 , Year 2 fair value of $175,000.

Choice “d” is incorrect. The canying value ofthe patent on December31 , Year2 will be $160,000 ($200,000 fair
value on re\eluation date- $40,000 amortization) and a revaluation gain of $15,000 will be recorded in Year 2 other
comprehensi-..e income to adjust the patent to its December 31 , Year 2 fair value of $175,000. If the patent had an
indefinite life and was not amortized, then the company ‘M:>uld report a revaluation loss of $25,000 on December
31 , Year2.

Choice “b” is incorrect. The canying value of the patent on December 31 , Year 2 will be $160,000 ($200,000 fair
value on re\eluation date- $40,000 amortization) and a revaluation gain of $15,000 will be recorded in Year 2 other
comprehensi-..e income to adjust the patent to its December 31 , Year 2 fair value of $175,000. Classic will not
record a $75,000 re\eluation loss.

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!

[marqzho]

Year 1
Carrying amount 25000 and FV 20000
there will be a revaluation loss for $5000

Dr. Revaluation Loss 5000 (IS)
Cr. Patent 5000

Year 2
Account for amortization
Dr. Amortization expense (20000/5) 4000
Cr. Patent / Acc. Amort. 4000

New Carrying amount = 16000 and FV =17500
Dr. Patent 1500
Cr. Revaluation Gain 1500 (I/S)<- This is an Income statement gain because we have previously recorded a I/S Loss

Let say Year 2 FV is not 17500 but 30000
entries will be:
Dr. Patent 14000
Cr. Revaluation Gain 5000(I/S)<-offset all previous gain
Cr. Revaluation Surplus 9000(OCI)

REG 90
FAR 95
AUD 98
BEC 84

[Anonymous]

Hey guys don't you think that by year 2 the amortization should be 5,000? (20,000/4) or is there a rule that I am missing that says that if there is no amortization bc of a revaluation then that year is not spent? I suck at IFRS

[marqzho]

Question said

On December 31 , Year 1……….. a remaining useful life of 5 years

There should be an amortization on year 1 which is already reflected on the carrying amount of $25000

I suck too =(

REG 90
FAR 95
AUD 98
BEC 84

[Anonymous]

Ugh there is too much info already without IFRS…. I saw what I was doing, I was counting Dec Y2 as a year “used” in the sense that I could not use it for calculating the amortization expense. I am getting crazy….

[zkk]

Hello,

I have a question in regard to F10 Trouble debt restructuring topic. There are two gains: one is ordinary gain, the other is debt restructuring gain. My question is do both of the two gains record on Income statement or they have different treatments????

Thank you.

Julia.C

[Anonymous]

I dont have Beckers but the two gains that I know of is the gain (if any) from the valluation of the asset to FV and then the gain from the difference between the carrying amount of debt and the FV of the asset, cash or stock issued. Those two go to the I.S. Is there another one?

[Author]

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