[jeff]

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

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

[mckan514w]

@sticky- if rental payment is greater than 90% of Fair Value of the property then it is assumed the seller / leases retains substantial rights to the property and thus it should be treated as a capital lease and all gain should be deferred / off-set against depreciation expense

If the rental payment is between 10-90% then it may either be a capital lease or an operational lease and then you use the same rules that you normally would in determining whether to treat it as operating or capital i.e. TTBPO75/90 rule to determine whether to defer or recognize gains….

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

[mckan514w]

LOL GiniC and I posted at same time- so basically what she said 🙂

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

[mckan514w]

When are your new test dates Mtaylo? Hope you feel as much relief as I did when I pushed mine back 🙂

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

[mtaylo24]

^^^McKan, relief is an understatement. I just updated my sig. BEC on Sat 3/4, FAR on Fri 3/10. I blame Ninja for killing the confidence I thought I had, especially in BEC 😂.

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)

[Sticky Nicky]

damn bro ur taking 2 within a week from each other?

[mtaylo24]

Yup, unfortunately. The good thing is that neither one is a cram, been tacklin both all window. I could have met my orignal dates, but there really is no point of rushing it if the dates are open…

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)

[aatoural]

I am still confusing some concepts with the enacted tax rate.

Becker for some problems uses the total of 2 years with different enacted tax rates to calculate total deferred tax liability based on the last year's enacted rate. Then there are other problems that it uses both. Here are two examples of what I am referring to. Can somebody tell me what Im missing?

Problem 1
Huff Corp. began operations on January 1, Year 1. Huff recognizes revenues from all sales under the accrual method for financial reporting purposes and appropriately uses the installment method for income tax purposes. Huff's gross margin on installment sales under each method was as follows:
Year
Accrual method
Installment method
Year 1
$800,000
$300,000
Year 2
1,300,000
700,000
Enacted income tax rates are 30% for Year 2 and 25% thereafter. There are no other temporary differences. In Huff's December 31, Year 2 balance sheet, the deferred income tax liability should be:
a.$150,000
b.$275,000 CORRECT 500 + 600 = 1,100 * 25% = 275
c.$330,000
d.$180,000

Problem 2
For Year 1, Clark Corp. reported depreciation of $300,000 in its income statement. On its Year 1 income tax return, Clark reported depreciation of $500,000. Clark's income statement also included $50,000 accrued warranty expense that will be deducted for tax purposes when paid. Clark's enacted tax rates are 30% for Year 1 and Year 2, and 25% for Year 3 and Year 4. The depreciation difference and warranty expense will reverse over the next three years as follows:
Depreciation
difference Warranty
expense
Year 2 $ 80,000 $ 10,000
Year 3 70,000 15,000
Year 4 50,000 25,000
$ 200,000 $ 50,000
These were Clark's only temporary differences. In Clark's Year 1 income statement, the deferred portion of its provision for income taxes should be:
a.$67,000
b.$41,000 CORRECT (70*30%) + (55*25%) + (25*25%) = 41
c.$45,000
d.$37,500

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[Sticky Nicky]

the first one says year 2 balance sheet so you use rates for years 3 and on,,,the second one is year 1 balance sheet so you use year 2 and on,,but the year 1 rate is the same as year 2 rate so thats why they use the 2 rates

[wkh1]

Can someone explain to me how to study research question for putting section number in? i am quit lost reading it, it was in final review of Becker……

Black Tar Corporation has an asset retirement obligation (ARO) related to its oil drilling operations, Black Tar has not been able to determine the fair value of the ARO. Is black Tar required to recognize an ARO liability?

FASB ASC ______-______-______-_____

thanks

[GiniC]

@wkh1 –

I searched for the exact phrase “asset retirement obligation” to find the right section, then while on that section I searched for “Fair Value” as a phrase and “recognition”. I had to check a couple of paragraphs then I came to 410-20-25-4.

I'm not always that successful, but the trick I was told is to look for a phrase or concept in the wording of the question and search for that to narrow down the topic, then search again within the narrowed area until you only have a few paragraphs to read through in order to see if they contain the answer you seek.

[ng3926a]

I just took my exam and the mcqs seemed medium hard medium. The sims were on a whole different level… That research question just was impossible to figure out… My only advise is save a ton of time for the Sims. Like maybe 1:45. I only had about an hour and that will definitely be the reason I fail. Also, the amount of questions that had info on a different tab was high. I wish we could make the text smaller on the exam since SIMS are so ridiculous to manage on a small screen.

Long story short, I'll be back here for q2 it seems.

[Sticky Nicky]

i posted early about a question that had a note due in less than one year: in the answer the note was presented using present value,,heres another question contradicting that one:

On December 31, 20X1, Jet Co. received two $10,000 notes receivable from customers in exchange for services rendered. On both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity. The note from Hart Corp. made under customary trade terms, is due in nine months and the note from Maxx, Inc., is due in five years. The market interest rate for similar notes on December 31, 20X1, was 8%. The compound interest factors to convert future values into present values at 8% follow:

Present value of $1 due in nine months: .9440
Present value of $1 due in five years: .6806
At what amounts should these two notes receivable be reported in Jet's December 31, 20X1, balance sheet?

A.
Hart: $9,440; Maxx: $6,800

B.
Hart: $9,652; Maxx: $7,827

Hart: $10,000; Maxx: $6,800

D.
Hart: $10,000; Maxx: $7,827 correct

FASB ASC 310 provides that notes receivable stating either no interest or an unreasonably low interest rate be reported at their present value computed using an appropriate interest rate if the original maturity date of the note exceeds one year.

The Hart note would be reported at its face amount of $10,000 since it matures within the current 1-year accounting period.

The correct value for reporting the Maxx note is:

Present value of Maxx note
= Maturity amount x Present value factor
= ($10,000 + ($10,000 x 3% x 5 years)) x .6806
= ($10,000 + $1,500) x .6806
= $7,827

[Sticky Nicky]

heres the other one:

I thought if a note was less than a year you didnt need to use PV?

On October 1 of the prior year, Fleur Retailers signed a 4-month, 16% note payable to finance the pur­chase of holiday merchandise. At that date, there was no direct method of pricing the merchandise, and the note’s market rate of interest was 11%. Fleur recorded the purchase at the note’s face amount. All of the merchandise was sold by December 1 of the prior year. Fleur’s prior-year financial statements reported interest payable and interest expense on the note for three months at 16%. All amounts due on the note were paid February 1 of the current year. As a result of Fleur’s accounting treatment of the note, interest, and merchandise, which of the following items was reported correctly?

Incorrect A.
Prior-year 12/31 retained earnings, yes; Prior-year 12/31 interest payable, yes

B.
Prior-year 12/31 retained earnings, no; Prior-year 12/31 interest payable, no

C.
Prior-year 12/31 retained earnings, yes; Prior-year 12/31 interest payable, no

D.
Prior-year 12/31 retained earnings, no; Prior-year 12/31 interest payable, yes

The cost of the merchandise purchased (and sold by the end of the year) should have been based on the present value of the note used to pay for them, not the face amount. Since the note paid a higher rate of interest than what was required as a yield, the note would have a premium, a higher value than face.

[Cruzer]

Anyone else struggling with the 70 MCQ's on LTD? Just did first 20 after watching Bob explain in the videos and taking good notes in my own language and got 40% right. The interest periods screw me up. This seems to be the biggest section in Section 2 so I know the examiners are going to hammer away at it.

[Sticky Nicky]

? LTD? long term debt?

[Author]

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