[jeff]

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

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

[nardo]

In theory, if a company buys a building solely for R&D for 10,000,000 (no alternative uses – practically a building would have alternative uses, but for the sake of example let's pretend it won't), is the entire thing expensed when bought/title transfers (i.e. not capitalized)?

[Sticky Nicky]

@hokage..it depends..will the building only benefit the current project? if so expense, if it will be used for future R&D projects as well then u capitalize and depr

[Namstut]

@aatoural, I am behind too! I am just now wrapping up Becker Chapter 6.

I am definitely not studying as diligently as I did for REG, but either way I am going in on the 9th.

The plan is to get through the remaining 4 chapters in the next 10 days and then for 2 weeks do progress tests and work/rework SIMs.
Is it even possible with a 55+ hour work week and family???

For some reason a very high probability of failing FAR does not bother me much. Maybe it's because this my last one and I have until January of 2018 to pass it.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[wkh1]

Yes, $273,000 is correct answer

thank you very much !

[Holly]

@monicasanta That's not the specific question I asked about but I pasted what may pertain to your question. My question was about a year 7 plan and the pbo was given for end of year 6. Becker says because coming into year 7 the fund is overfunded, it would be an asset. Year 7 was the year I was supposed to be giving entries for.

If there is a net asset, then new things like the current year service cost would first reduce the net asset and then go to creating a net liability. You are certainly correct that the credit because of service cost is larger then than the overfunding and so the net result will be a liability that shows up on the balance sheet. But because they are overfunded before this, we don't say we credit liability, we say we credit the asset (the net asset). The ending balance as always will be the beginning balance (which here is an asset minus any credits to plan liability and or plan assets plus any debits to plan liability or plan assets.

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

[ng3926a]

During Year 2, a former employee of Dane Co. began a suit against Dane for wrongful termination in November year 1. After considering all of the facts, Dane's legal counsel believes that the former employee will prevail and will probably receive damages of between $1,000,000 and $1,500,000, with $1,300,000 being the most likely amount. Dane's financial statements for the year ended December 31, Year 1, will not be issued until February Year 2. In its December 31, Year 1, balance sheet, what amount should Dane report as a liability with respect to the suit?
a. $1,300,000
b. $1,500,000
c. $0
d. $1,000,000
Explanation
Choice “a” is correct. When a contingent loss is probable and a range of probable losses is given, GAAP requires that the best estimate be accrued. Dane's legal counsel believes that the damages are most likely to be $1,300,000, so this amount will be accrued on the December 31, Year 1 balance sheet.

I'm not sure why A is the right answer? The litigation started in Y2 and the probable loss was determined in year 2, so shouldn't it be included in year 2 B/S then? I guess the only reasonable answer is that since the termination occurred in Y1, the litigation is considered a Y1 B/S item?

[mo3athn]

@nathalia
They are applying the rule of conservative which says whenever you have a probability of loss it should be immediately recognized and gain only recognized when occured 🙂

[GiniC]

I feel like I'm learning statements of cash flows mistake by mistake. AGONIZING AND TOO SLOW!!!

[ng3926a]

@mo3athn my question is, is it recognised in Y1 because the termination occurred in Y1 or is it recognised because the Y1 financial statements hadn't been put out yet?

So based on what your saying is that if any losses occurred between 1/1/2 and the issue date of the financial statements, it would be on the Y1 financials – no matter what because of the rule of conservatism?

[mo3athn]

@nathalia
Yes because the termination and the suit began in year 1, like if the suit began like in the middle of January year 2 and still year one statements not yet issued so it will be recognized in year 2 and has nothing to do with year one statements

[mo3athn]

@nathalia

Sorry, if the termination happened in middle of january year 2 before issuing year one financial statement then it has nothing to do with year one statements

[ng3926a]

@mo3athn The suit did begin in Y2. Termination was the only thing that happened in Y1, so based on what you just said, it should be in Y2 and not 1?
“During Year 2, a former employee of Dane Co. began a suit against Dane for wrongful termination in November year 1.”

I know I'm over thinking this particular question, but I just want to make sure I have subsequent events and losses and lawsuits all figured out.

[mo3athn]

No problem at all sometime simple questions will take time longer than extremely hard questions to understand, i made another reply rectifying that i meant to say if the termination happened in year 2 then it has nothing to do with year 1 statements

[ng3926a]

Got it! Thanks!

[mo3athn]

Anytime 🙂 @nathalia

[Author]

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