[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

[se7en.14]

does anyone know under which section/bullet point I can select the Completed Contract and %of Completion construction questions in?
I just wanted to practice a few on these types of questions, but can't seem to find them..not sure what topic its labeled as

thanks

[MaLoTu]

Are you using ninja? If yes I don't think there is any way to segregate construction. There are 5 categories and I am actually not sure which one it falls under.

[Titleistg0lfer]

@se7en.14 I would just remember the major points for both of those, because I wouldn't think you would get a lot of questions on those.

Completed Contract — Only recognize revenue when the contract is fully completed OR when there is a loss that can be reasonably estimated

% of Completion — Use this calculation to figure out % of completion:

Total Costs to date / Total Estimated Costs for Completion = % of Project Completed

Gross Profit for that year = % of Project Completed x Estimated Gross Profit (Est. Revenue – Est. Total Costs)

It only gets a little more complicated after the first year because then you have to figure out what revenue you reported in the first year and find the difference between the second year and the first year to come up with what you need to report.

I believe this is very similar to installment sales as well…you just use the sales instead of costs. Please someone correct me if I am wrong here in thinking.

REG: 84 (10/5/15)
AUD: 83 (11/23/15)
BEC: 77 (2/27/16) - The bubble sucks
FAR: 90 (7/20/16) - AND DONE FOREVER!!!!!

[MaLoTu]

titliest – thanks for those formulas. I need to brush up on that topic as well. I believe that installment sales are very similar in calculation.

[MaLoTu]

My exam is tomorrow, but the good news is that accruals vs. cash are starting to click for me! lol.

[Titleistg0lfer]

That's awesome MaLoTu…good luck tomorrow!! I hope both of us can pass this beast!

REG: 84 (10/5/15)
AUD: 83 (11/23/15)
BEC: 77 (2/27/16) - The bubble sucks
FAR: 90 (7/20/16) - AND DONE FOREVER!!!!!

[MaLoTu]

You definitely got this, titleist! I am just doing intense review and hopefully the minutiae sticks … at least the details I need come exam day. With FAR you can know a lot and still NOT know a lot, lol.

[Titleistg0lfer]

I couldn't have said it better myself. Everytime I do a progress test, new things come up that I totally forgot. Such as last night, I totally forgot about the Detachable stock warrants and how those come into play. I am just praying for a 75!!

REG: 84 (10/5/15)
AUD: 83 (11/23/15)
BEC: 77 (2/27/16) - The bubble sucks
FAR: 90 (7/20/16) - AND DONE FOREVER!!!!!

[MaLoTu]

Here is a link to a webinar becker did on the new DRS format for the sims … it is prerecorded: https://dvg.adobeconnect.com/p59p6zq5qmc/?launcher=false&fcsContent=true&pbMode=normal

[se7en.14]

@Titleistg0lfer
thanks for clarification, I understand the formulas, but just need to practice a few prob so they stick better.

@MaLoTu
Yes I meant NINJA mcq & good luck on FAR!

[MaLoTu]

Here is a link to a webinar becker did on the new DRS format for the sims … it is prerecorded: https://dvg.adobeconnect.com/p59p6zq5qmc/?launcher=false&fcsContent=true&pbMode=normal

[MaLoTu]

Does anyone understand what they did here? The answer is d … I am frustratingly confused because it says they are annual payments then all of a sudden it appears they change it to monthly.

A company enters into a three-year operating lease agreement effective January 1, year 1. The amounts due on the first day of each year are $25,000 in year 1, $30,000 in year 2, and $35,000 in year 3. What amount, if any, is the related liability on the first day of year 2?
a. $0
b. $60,000
c. $65,000
d. $5,000
Explanation

Choice “d” is correct. Operating lease expense must be recorded equally over the life of the lease. The average annual lease amount is $30,000 per year, or $2,500 per month. In year 1, the lease would be accounted for as follows:

[Stilgoin]

It is because each year is supposed to be $30,000 because the total payments are spread evenly over the life of the lease. Since only $25,000 was paid the first year, there is a $5,000 liability associated with the lease.

I added 25 plus 30 plus 35 to get $90,000. $90,000/3 = $30,000

I suppose you could do 36 months instead of 3 years. I hope this helps. 😉

B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, Waiting

Ethics | 93

"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill

“In a world full of critics, be an encourager."

[MaLoTu]

Yeah, that helps, thanks, stilgoin.

How about this one, why if the payments are on April and October 1, do they include interest expense for 7 months when the payment in October should have been made? What am I missing? I get the math, just not the logic…

On June 1 of the current year, Cross Corp. issued $300,000 of 8% bonds payable at par with interest payment dates of April 1 and October 1. In its income statement for the current year ended December 31, what amount of interest expense should Cross report?
a. $8,000
b. $6,000
c. $12,000
d. $14,000
Explanation

Choice “d” is correct. Interest expense is calculated from the date the bond is issued. Interest would be calculated from June 1 through December 31 (7 months).

[KJ]

When there are uneven payments for a lease, rental revenue (expense) is recognized on a straight-line basis and is prorated over the full term of the lease. In this question, even though they are not asking rental payments or revenue but to calculate liability you will have to do what @stilgoin did to get the monthly payment.

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

[Author]

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