[jeff]

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

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

[norseman88]

@iceman6 good luck!

[Iceman6]

Thanks all. Will report back with my exam experience. (After having a burger and a nice whiskey for lunch)

[aatoural]

good luck

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

[Holly]

Dahl Co. traded a delivery van and $5,000 cash for a newer van owned by West Corp. The following information relates to the values of the vans on the exchange date:

Carrying Value Fair Value
————– ———-
Old van $30,000 $45,000
New van 40,000 50,000

Dahl's income tax rate is 30%. What amounts should Dahl report as gain on exchange of the vans?

Why does this transaction have commercial substance?

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

[Sticky Nicky]

bc he gave cash,,,which means cash flow changed

[Holly]

There are examples in Becker where cash and a machine was traded??? I'm having a real problem understanding this stuff.

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

[Holly]

let me finish… where cash was traded with a machine AND considered lacking commercial substance.

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

[norseman88]

@HRSexton, is answer 15k?

[GiniC]

@iceman6 GOOD LUCK!!!! 🙂

[GiniC]

@aatoural – You need one of the post-its on the side of my monitor: DATES, DAMMIT!!.

The new stock was sold on April 1, so it only counted for 9 of 12 months. 9/12 x 8000 shares = 6000 shares added to the original 50,000.

I don't remember which method was “first” and “second”, so the other way –

50,000 total shares Jan-Mar x 3/12 = 12,500
58,000 total shares Apr-Dec x 9/12 = 43,500
. . . . . . . . . . . . . . .WACSO = 56,000

[GiniC]

@HRSexton – as I read it, since future cash flows will not change, the transaction lacks commercial substance. No boot received = no gain recognized. What is the answer?

Unless the new van, with a longer expected life, will bring in more delivery charges and therefore change the future cash flows?

DR new van………..50,000 (FV of consideration given)
…CR old van (NBV)……..30,000
…DR Cash given…………5,000
…CR gain……………..15,000 (plug)

According to Becker, the cash exchanged has no bearing on gain or loss – but it has to show up in the journal entries for the books to balance. (see the Pass Key on pg F2-36)

[Holly]

@ginic & @ norseman88 $15k because it has commercial substance

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

[mtaylo24]

254 in FAR, 255 in BEC…what a weekend!

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)

[Holly]

@mtaylo24 Impressive!

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

[mckan514w]

Good luck today @iceman!!!

@hr- that question is awful!!! all three of my test banks has it- one explained that it has commercial substance because a new truck would be more efficient / change the cash flow substantially compared to the old one….. GRRRRRRRRRRRR

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

[Author]

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