[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

[Anonymous]

MaLoTu but doesnt inventory qualify for interest capitalization too? I thought that unless the inventories are routinely manufactured then interest expense incurred for construction of them can be capitalized.

[MaLoTu]

The answer references a specific set of assets that fall under this category. I think part of the caveat is that they put a deposit on it and are making payments during construction.

[Anonymous]

Man I feel that my brain has shut down lol! Maybe after I get a break I will get this, but as of know I still cannot see it. Per FASB 835-20 qualifying assets for interest capitalization includes assets that will be used internally and assets that wll be held for sale and the amount capitalized depends on the accumulated expenditures for the period. Since the bank financed the loan I thought that the entire loan qualified as a expenditure and bc of that the interest for it can be capitalized.

In other words from what I get from FASB 835-20 is that the same treatment is given to assets that are held for sale and for the ones that are going to be used internaly in regards to interest capitalization.

Sorry if I am confused! lol

[jonm857]

Which chapters in FAR take the longest to get through? I'm still on F-2 MCQs. Been working them since Thursday for bleep's sake!!! Granted this is my first run through, so I'm learning a lot, but still. I'm starting to get concerned about the amount of time I'm spending on this chapter.

B - 81
A - 87
R - 73
F - July 5th

[Steve Brule]

@jonm857, F2 was a really hard chapter for me as well. I spent double the amount of time than what I spent on most of the other chapters because there's so many different topics. I do think it's an important chapter though.

FAR - 86
AUD - 99
REG - 88
BEC - 08/29/2016

For your health!

[yicao74]

I have a question : CPA01179

Lisa County issued $5,000,000 of general obligation bonds at 101 to finance a capital project. The $50,000 premium was to be used for payment of principal and interest. This transaction should be accounted for in the:
a. Capital projects funds, debt service funds and as assets and liabilities in the government-wide financial statements.
b. Debt service funds only.
c. Capital projects funds and debt service funds only.
d. Debt service funds and the general long-term debt account group only.

Explanation
Choice “a” is correct. The transaction should be accounted for in the:
Capital projects funds for the proceeds net of premium;
Debt service funds for the premium; and
Governmental activities column of the government-wide statement of net position as assets and liabilities
Choice “c” is incorrect. Issuance of debt would not be exclusively reported in the funds. Fund accounting ignores the operational accountability objectives of government-wide reporting.

I still do not understand why the correct answer is A instead of C. Why it has to post on the governmental activities？The question only mentioned the governmental funds.

BEC 10/03/15 75
FAR 01/04/16

[Anonymous]

yicao74 the Government wide F.S. of Net Position is part of the basic F.S. that all governments have to present. So in addition of the transaction being presented on the Fund F.S. it has to be presented on the Gov Wide F.S. also. So the transaction will be presented on the gov activities section of the Gov Wide F.S. of Net Position.

[yicao74]

cortes123, thanks. The Becker book F8-7: Governmental fund fs are reconciled to the governmental activities section of the gov-wide presentation. Got it.

BEC 10/03/15 75
FAR 01/04/16

[Anonymous]

The following information is relevant to one of the City of Mullins' General Fund's derived tax revenues:

Fiscal year-end June 30
Beginning receivables $450,000
Beginning deferred revenues 100,000
Beginning allowance for doubtful accounts 50,000
Receipts 1,250,000
Ending receivables 600,000
Receivables collected 6/30 – 8/30 125,000
Ending allowance for doubtful accounts 60,000
The City of Mullins considers derived tax receivables collected within 60 days after the close of the fiscal year to be “available.” Furthermore, the City wrote off $30,000 of receivables as uncollectible during the year.

What would be the amount of revenues reported at the fund level?

A. $1,400,000

B. $1,390,000

C. $965,000

D. $1,075,000

Ans is D. Derived tax revenues are reported when the underlying transaction has occurred, and for the modified accrual method of accounting, when the resource is considered to be available. At the fund level, the General Fund computes revenues using the modified accrual method. Furthermore, governmental entities report revenues net of any allowance for doubtful accounts.
A total of $100,000 of the beginning receivable had been deferred and $50,000 was classified as doubtful. Therefore, the balance ($300,000) would have been previously recognized as revenue of a prior period. When you subtract the $300,000 of prior-year revenues from current-year receipts ($1,250,000) and add to it that portion of the ending receivable considered to be available at year-end ($125,000) you have revenues for the current year equal to $1,075,000.

Beginning receivables $450,000
Beginning deferred revenues (100,000)
———
$350,000
Beginning doubtful accounts (50,000)
———
Prior-year revenues $300,000
=========

Current-year receipts $1,250,000
Prior-year revenue 300,000
———–
$950,000
Available at end of year 125,000
———–
Current-year revenue $1,075,000

Even though is not a possible answer, does anyone know why dont we subtract the 60,000 of ending allowance for uncollectible since revenue is reported net of uncollectibles? This revenue recognition thing on modified accrual is messing with my head…

[MaLoTu]

Does anyone have an explanation for a 360 day year if we know each year has 365 days? I get that it is 12 months * 30 days, but why?
Do you always use 360 instead of 365?

[Anonymous]

For Q1 they are changing the rules for impairment losses regarding Goodwill. Can anyone point me to examples of test questions we might see. Same for Going Concern questions, which has apparently replaced Extraordinary items on the CSO.

[MaLoTu]

@Sunni – are you sure about the goodwill impairment? I don't recall that being a part of the updates. Nor do I recall anything related to going concern. I could be wrong. However, GAAP will no longer acknowledge extraordinary items. I am also curious as to how the changes will be tested. I am looking forward to hearing the new exam experiences for FAR in Q1.

[m1kal]

taking it 1/11/16.

REG - 76
BEC - 76
AUD - 93
FAR - 71, 68,69, 70, retake 7/19/16

[Larry]

Aguspesci, did you pass? I hope you did!

REG - 82
FAR - 78
BEC - 76
AUD - 8/27/16

[Anonymous]

@Malotu you are correct. I was scatterbrained last night. I meant to say LCM has become Lower of Cost or NRV. I need to know how it is done. Is it essentially the same but with NRV instead? Or did they switch to a similar one step method as IFRS?

[Author]

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