FAR Study Group Q1 2016 - Page 9

Viewing 15 replies - 121 through 135 (of 835 total)
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  • #746051
    Anonymous
    Inactive

    @ trish_1234, well I took the exam and got a 74! :(. I am still mad with my self and with NASBA but I am back to study again. I need it to pass it by Feb 2 or I will lose REG. When are you taking FAR?
    REG:77
    BEC:73/74/81
    AUD:58/76
    FAR:74

    #746052
    Anonymous
    Inactive

    Hey everyone, in the direct wire-off method for A/R, when you collect payment on a previously written off account, the entry is Debit Cash, Credit Bad Debts Recovered…. What type of account is Bad Debts Recovered? It wouldn't be a revenue account would it? since revenue would have already been recognized at the initial recording of the sale?

    Thanks for the help!

    #746053
    marqzho
    Participant

    CPADREAMIN

    It has to be a revenue account.

    When you direct write off an account, you do this
    Dr. Bad Debt expense 100
    Cr. A/R 100

    So you hit $100 expense to income statement.

    When you collect payment on this account, kind of like you made a mistake before. They are not a bad debt. So you have to kind of “reverse” back that 100 expense by hitting a $100 revenue/ negative expense

    Dr. A/R 100
    Cr. Bad Debt Recovery(I/S) 100
    Dr. Cash 100
    Cr. A/R 100

    I just started for the 1st week in preparing FAR, so I maybe wrong =)

    REG 90
    FAR 95
    AUD 98
    BEC 84

    #746054
    Lidis
    Participant

    Hi the correct answer is:
    95,000-20,000+16,000=91,000

    #746055
    Broag
    Participant

    Is Ninja MCQ wrong or is it just me?

    Douglas Co. leased machinery with an economic useful life of six years. For tax purposes, the depreciable life is seven years. The lease is for five years, and Douglas can purchase the machinery at fair market value at the end of the lease. What is the depreciable life of the leased machinery for financial reporting?

    A.
    Zero

    B.
    Five years

    C.
    Six years

    D.
    Seven years

    Answer is B but I picked C. According to my studying with Becker, if there is an option to buy and/or transfer of title passes to the Lessee, then you depreciate the life of the asset. Not the life of the lease. This question doesn't make sense.

    REG - 79
    FAR - ?
    AUD - ?
    BEC - ?

    #746056
    marqzho
    Participant

    Broag

    The answer is correct on Ninja.

    if you have Bargain Purchase Option or Title Transfer at the end of lease term, you depreciate the asset over its useful life

    Since the question is: “can purchase the machinery at fair market value at the end of the lease”, not a BPO and it meet the 75% life criteria, we depreciate over the shorter of lease term or useful life.

    REG 90
    FAR 95
    AUD 98
    BEC 84

    #746057
    Broag
    Participant

    “can purchase the machinery at FMV at the end of lease” reads a lot like a purchase option to me. Those dirty AICPA question makers!!

    Thanks for clarifying marqzho.

    REG - 79
    FAR - ?
    AUD - ?
    BEC - ?

    #746058
    hadijordan
    Member

    hey guys i need your help , my first attempt in CPA exam was the Far and i have scored 73 the SIMS were too hard
    my next attempt will be on Jan 2016
    i need your advises how to study again

    FAR 73
    BEC N/A
    AUD N/A
    REG N/A

    #746059
    thek1d
    Participant

    Hi rp 12

    This answer requires two calculations – first we need to find the amount of PURCHASES and then we use that number to find the amount of CASH PAID.

    I like to use BASE on these types of questions.

    B 45
    A PLUG
    S (270)
    E 60

    Therefore, our purchases (A) is 285.

    Next we use BASE again for AP. Remember we are looking for cash paid.

    B 39
    A 285 (from above)
    S (PLUG)
    E 26

    The 2nd plug amount is the final answer of 298. Hope this helped!

    #746060
    Anonymous
    Inactive

    @marqzho- Thanks!

    #746061
    kcoops44
    Participant

    House Publishers offered a contest in which the winner would receive $1,000,000, payable over 20 years. On December 31, Year 1, House announced the winner of the contest and signed a note payable to the winner for $1,000,000, payable in $50,000 installments every January 2. Also on December 31, Year 1, House purchased an annuity for $418,250 to provide the $950,000 prize monies remaining after the first $50,000 installment, which was paid on January 2, Year 2.
    In its Year 1 income statement, what should House report as contest prize expense?

    a.
    $1,000,000
    b.
    $418,250
    c.
    $0
    d.
    $468,250

    I selected c.)0 as the answer but that's wrong. The answer is d. I didn't really understand why exactly since the explanation did not do a very good job at explaining. It only showed the calculation. Any insight?

    #746062
    marqzho
    Participant

    expense is already incurred when House announced the winner. What make you think it should be $0?

    REG 90
    FAR 95
    AUD 98
    BEC 84

    #746063
    Anonymous
    Inactive

    Hey @kcoops44 I saw your question and without much thought chose b but I guess D makes much sense bc of the first 50,000 payment. What I think that the company did was that it bought the present value of those annuities due. In other words it gave itself a posible way to pay the installments of 50,000 to the prize winner totalling 950,000 by giving now (buying) the discounted amount (418,250) of those annuities totaling 950,000. Instead of having to pay 50,000 each year it just bought an investment for the discounted amount and the investment is gonna give him the 50,000 annualy. At least I think that is what happened. I may be wrong.

    #746064
    MaLoTu
    Participant

    @cortes – yes, it is the price they paid for the annuity (that is payable to the winner) and the 50k they will pay on 1/2

    #746065
    rahurst
    Participant

    Hi all – Can someone explain the answer of this question for me… I'm really confused about the interest weighted average accumulated expenditures and don't understand why it is included. I only calculated the interest on the $500k loan.

    At the beginning of the year, Cann Co. started construction on a new $2 million addition to its plant. Total construction expenditures made during the year were $200,000 on January 2, $600,000 on May 1, and $300,000 on December 1. On January 2, the company borrowed $500,000 for the construction at 12%. The only other outstanding debt the company had was a 10% interest rate, long-term mortgage of $800,000, which had been outstanding the entire year. What amount of interest should Cann capitalize as part of the cost of the plant addition?

    A. $140,000
    B. $132,000
    C. $72,500
    D. $60,000

    The total interest cost during the year includes the $500,000 at 12% interest ($500,000 × 0.12 = $60,000) and the interest on the other debt ($800,000 × 0.10 = $80,000). There cannot be more than $140,000 interest capitalized (the total interest accrued of $60,000 and $80,000).

    The weighted-average accumulated expenditures take into account the amounts expended on the building during the year based on how much of the year occurred after the payment. The $200,000 paid in January was paid at the beginning of the year and was outstanding all year ($200,000 × 12/12 of the year, or $200,000). The May payment was only outstanding for May through December for 8/12 of the year, so $600,000 × 8/12 = $400,000 weighted-average expenditure. The December payment was made for only the last month, or 1/12 of the year, for an expenditure of $300,000 × 1/12 = $25,000.

    The total weighted-average accumulated expenditures were thus $200,000 + $400,000 + $25,000, for a total of $625,000.

    The capitalized interest cost on these expenditures is based on the interest rates of the debt outstanding during the year, first, to the extent of any specific construction debt, i.e., the $500,000 at 12%. The interest capitalized on the first $500,000 of expenditures is based on 12%, or $60,000, and the interest on the remaining $125,000 of expenditures ($625,000 – $500,000) is paid at the rate of 10% for another $12,500 of capitalized interest.

    Thus, the total of the capitalized interest is $60,000 and $12,500, for a total of $72,500.

    FAR - 60 (11/25/14) 61 (1/6/16) 75 (4/19/16)
    AUD - 75 (1/6/15)
    BEC - 71 (4/7/15) 77 (7/2/15)
    REG - 62 (8/28/15) 71 (11/2/15) 84 (2/12/16)

Viewing 15 replies - 121 through 135 (of 835 total)
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