[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for FAR. 🙂

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

[Anonymous]

I think my panic was an overreaction. In the Blitz inventory II video, Jeff discusses the inventory valuation method and gives an example, as follows:

Cost $50
Selling price 75
Selling and disposal costs 2.50
Net realizable value 75-2.50 = 72.50

Take the lower of cost or NRV – 50

“old rule” of lower of cost or market applies only to LIFO and retail method.

[GiniC]

@BondVillain – I'll post with the answers a few lines below the choices, so you can try them with the answers off-screen. I figured all of them out, so let me know if you have trouble.

Which of the following statements are correct when a company applying the lower of cost or market
method reports its inventory at replacement cost?

I. The original cost is less than replacement cost.

II. The net realizable value is greater than replacement cost.

a. I only.
b. II only.
c. Neither I nor II.
d. Both I and II.

Aswer is B

[GiniC]

@Bondvillain – another NRV example:

Based on a physical inventory, a company recorded its inventory on a FIFO basis at $26,000 with a replacement cost of $20,000. They estimated that, after further processing costs of $12,000, the inventory could be sold as finished product for $40,000. Normal profit margin is 10% of sales. Under the lower of cost or net realizable value rule, what amount should the company report as chocolate inventory in its December 31 balance sheet?
a. $20,000
b. $26,000
C. $28,000
d. $24,000

Choice “b” is correct.

[GiniC]

@Bondvillain (and others) – I just looked at the Becker terms of use –

“You may not …
– rent, lease, license, lend, or otherwise transfer or provide (by gift, sale, or otherwise) all or any part of the Materials to anyone;
– permit the use of all or any part of the Materials by anyone other than you…”

That's probably included in the agreements for some of the other providers too, at least the ones that are paid for. We need to all check our terms of use and consider the agreements we signed before posting verbatim questions. Paraphrasing to help each other understand the material is (I believe) different from basically re-publishing the questions/answers.

We are responsible for professional ethics, not just accounting knowledge…

[Anonymous]

Thanks Ginic – yes, I respect Becker's or any of the other providers intellectual property. As to the question, I calculated it as follows:

Selling price 40,000
Disposal costs 12,000
NRV 28,000
Cost 26,000

Take the lower of cost or NRV and it's cost 26,000

The new method is actually much easier and quicker than the old method.

[Holly]

Someone please help me with the below question. I get the whole BASE thing, but I don't understand why you would subtract unearned rent from rent receivable for the beginning and ending balances, and then add to those numbers the amount of rent received. You're left with an unearned rent balance. When I see that it makes me think I'm calculating the unearned rent balance and not the revenue until I add the rent received. I'm obviously missing something.

Question CPA-00616
Tara Co. owns an office building and leases the offices under a variety of rental agreements involving rent paid in
advance monthly or annually. Not all tenants make timely payments of their rent. Tara's balance sheets contained the
following data:
Year 1 Year 2
Rent Receivable 9,600 12,400
Unearned Rent 32,000 24,000
During Year 2, Tara received $80,000 cash from tenants. What amount of rental revenue should Tara record for Year
2?
a. $90,800
b. $74,800
c. $85,200
d. $69,200

Explanation
Choice “a” is correct. $90,800 rental revenue earned for Year 2.

BEC - 79
REG - 85
AUD - 5/27/16

[Anonymous]

I like to look at the change in rent receivable and unearned rents accounts by themselves. Year 2 rent receivable went up by 2,800; so that means you credited rental income and debited rent receivable. Year 2 unearned rent decreased by 8,000; so that mean you debited unearned rent and credited rental income. The net change of the two accounts is 10,800; add that you your cash basis revenue to convert to accrual.

[mckan514w]

Are losses on non-monetary exchanges always recognized?

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[GiniC]

@HRSexton –

This looks cumbersome, but it really helped me to FOLLOW THE MONEY. Once you've done a few out this way, the transactions become more intuitive and you can do them correctly faster.

You're given year 1 to have beginning balances for year 2. Three T-Accounts below follow this sequence:

1. Unearned rent shown at the end of Year 1 is earned, likely in January

DR Unearned Rent 32,000
CR Rent Revenue 32,000

2. Rents paid during the year are credited to Rent Revenue,
EXCEPT that the unearned rent paid at the end of Year 2 for Jan Year 3 rents)

DR Cash 80,000
CR Rent Revenue 56,000
CR Unearned Rent 24,000

3. The difference between the beginning and ending balances in Rent Receivable
represent rent revenue earned that hasn't been paid yet by those slow paying tenants

DR Rent Receivable 2,800
CR Rent Revenue 2,800

Rent Revenue Unearned Rent Rent Receivable
———— —————— —————
| 0 | 32,000 9,600| Beginning Balances, Year 2
| 32,000 32,000 | | JE 1
| 56,000 | 24,000 | JE 2
____|__2,800_ _______|________ __2,800|_______ JE 3
90,800 24,000 12,400

[GiniC]

Sorry, the T Accounts didn't come through right! You should be able to reconstruct them from the journal entries though. If not tell me, I'll try again.

[GiniC]

@mckan514w – I haven't reviewed those yet, but I can't recall a situation where there's a reason NOT to recognize it. You presumably credited the full value of some asset and debited some new asset of a lesser value – the only way to balance the transaction is by booking the loss?

[mckan514w]

Thanks @GiniC… That sounds right / along the lines of what I was thinking– non-monetary transactions ALWAYS seem to screw me up…

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Scared-cpa]

Is there some way for me to access only questions not answered correctly in Ninja MCQ? I have completed all of the questions and now I am down to the 350 or so that have never been answered right, but I don't see a way to make custom testlets that include ONLY those questions. Because of this, I will go through 20 or 30 questions and only lessen the number 4 or 5 I have until I have review even though I answer most of them correct. I really would like to hit review by test time this Friday!

[mtaylo24]

@Scared_cpa, you want to select “missed last time seen” in custom and knock those out until the “not answered correctly” hits 0 in your progress report, then you are in review phase…

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[Scared-cpa]

@mtaylo24 Thanks!

My exam is Friday, the 20th. Based on my information, does it seem like I am on track to be prepared? What areas would y'all suggest I hit hard? I'm doing mcqs everyday but incorporating more sims so I'm usually averaging 80-100 mcqs now.

Average Trending Score: 83.40%
Average Score: 70%
Total Question Attempts: 2308
Questions Not Answered Correctly: 346

Category: Trending (Average)
1: Conceptual Framework: 88 (75)
2: Financial Statement Accounts: 83 (68)
3: Specific Transactions: 81 (72)
4: Governmental 72 (62)
5: NFP: 93 (75)

What scares me the most is the gap between my average and trending. When I first began restudying, about a month ago, I was averaging 50s and 60s on sets and now I am usually 80s and 90s (70s in weaker areas). I heard that if your gap between trending and average is big, your actual score usually falls in the middle and that is cutting it close for passing.

Any tips are gladly welcome! I'm hitting the final stretch and want to be fully primed and prepared! 🙂

[Author]

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