[jeff]

Welcome to the Q2 2016 CPA Exam Study Group for FAR.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[KJ]

@ boating

For the 1st question:

Using IFRS each component is depreciated separately:

Bus = $100K-$25K-$10K = $65K/20 = $3250
Engine = $25K/10 = $2500
Seats = $10K/8 = $1250

$3250 + $2500 + $1250 = $7,000

2nd question:

Contract price is 7M – Total costs, 2M + 6M which is 8M = 1M loss

3rd question:

Denominator = 1,500,000 + (500,000 x 8/12 = 333,333) = $1,833,333
EPS = 2M/1.833 = $1.09.

Not sure why answer for this is D but maybe someone else can shed light on it. Maybe I am doing something wrong. D is only possible by doing 2M/1.5M = 1.33 but they issued additional 500,000 shares so not sure what is going on here.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[Anonymous]

Thank you again kanwal78!!!! Your explanations definitely helped me understand what I was missing during my calculations – you make it seem so simple!

I too got $1.09 for the last question so maybe it is a typo? At least I don't feel like I am completely losing my mind!

[KJ]

Thanks Dab!!

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[MaLoTu]

In case anyone is interested, this is a recording of Becker's DRS webinar … they actually walk through a financial DRS: https://dvg.adobeconnect.com/p59p6zq5qmc/?launcher=false&fcsContent=true&pbMode=normal

[MaLoTu]

It posted my message twice, but what is weird is that it was missing half of my message.

The recording was having some issues but it may just be my computer. Hopefully it helps.

[MaLoTu]

How do you solve for Effective Interest Rate? I was working through an example and the market rate was 12% but the EIR was 12.58% … where did 12.58% come from?

[SONA]

DRS will not be tested right, on 28th May?

[KJ]

On January 1, 10 years ago, Andrew Co. created a subsidiary for the purpose of buying an oil tanker depot at a cost of $1,500,000. Andrew expected to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove underground storage tanks. It was estimated that it would cost $150,000 to dismantle the depot and remove the tanks at the end of the depot's useful life. However, the actual cost to demolish and dismantle the depot and remove the tanks in the 10th year is $155,000.

What amount of retirement expense should Andrew Co. recognize in its financial statements in Year 10?

A.
None, recognized in prior years

B.
$20,000 expense

C.
$150,000 expense

D.
$155,000 expense

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[JT]

Kanwal

I think it's b 20k. My understanding is that since yr 1 you should have been charging expenses for 15k (which is basically straight line of the expected expense/retirement obligation of 150k over the 10 years). During year 10, you realized you actually have 5k more expenses then what was initially expected. So in yr 10 instead of charging the regular 15k, you should add the additional 5k which gives you a total of 20k.

MaLoTu, you got an example.

I believe effective interest is basically the amount of debt/interest (depending on the question) divided by its base. Also, thank you for that link. I Appreciate that.

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[KJ]

Correct Dab. Took me longer to figure out than expected but got the answer right.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[KJ]

Winn Co. sells subscriptions to a specialized directory that is published semiannually and shipped to subscribers on April 15 and October 15. Subscriptions received after the March 31 and September 30 cutoff dates are held for the next publication. Cash from subscribers is received evenly during the year and is credited to deferred subscription revenue. Data relating to 20X1 are as follows:

Deferred subscription revenue (January 1, 20X1) $ 750,000
Cash receipts from subscribers 3,600,000
In its December 31, 20X1, balance sheet, Winn should report deferred subscription revenue of:

A.
$2,700,000.

B.
$1,800,000.

C.
$1,650,000.

D.
$900,000.

I got this one wrong because those cutoff dates threw me off. I was overthinking on the question.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[JT]

I hate these questions. I think I got this wrong before too. I think it's d.

I completely disagree with the way this question is worded and asked though.

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[Zyx]

Is it D? 3.6M/12 months evenly * 3months deferred Oct-Dec.

REG: 77 x2
BEC: 81 x3
FAR: 68 retake 10/1
AUD: 8/27

[JT]

Actually, I hate all revenue and deferred revenue, and all warranty/deferred charged questions altogether!

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[Zyx]

Can someone please explain this question in human language? Year 3 is not the last year, thy expended all the cost?

On January 1, year 1, a company capitalized $100,000 of costs for software that is to be sold. The company amortizes the software costs on a straight-line basis over five years. The carrying value of the software costs on January 1, year 3, was $60,000. As of December 31, year 3, the estimated future gross revenue to be generated from the sale of the software is $23,000, and the estimated future cost of disposing of the software is $8,000. What amount should the company expense related to the software costs for the year ended December 31, year 3?
A.$18,400
B.$20,000
C.$37,000
D.$45,000

Software production costs are capitalized and reported at the lower of unamortized cost or net realizable value (NRV) once technological feasibility has been met. The unamortized cost is $60,000 and the NRV is $15,000 ($23,000 − $8,000); therefore, the software should be written down by $45,000 (i.e., expensed) to the NRV of $15,000. Answer D is correct.

REG: 77 x2
BEC: 81 x3
FAR: 68 retake 10/1
AUD: 8/27

[Author]

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