[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

[Claudia408]

terrible study day… this feels impossible.

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[marqzho]

take a night off 🙂 happy Friday night

REG 90
FAR 95
AUD 98
BEC 84

[Claudia408]

Marqzho can I hire you as my far tutor? Ugh! I hate the cpa exam so much!!! Why won't you just die!!! Omg I'm hysterical… Don't mind me…

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[cultur3]

What part of the mcq is partnership with bonus and goodwill methods? I can't seem to find it

F 83 4/09/16
A 85 6/10/16
B 81 7/19/16

[marqzho]

I am struggling with audit sampling. Hate it. REG and FAR are much more fun.

REG 90
FAR 95
AUD 98
BEC 84

[KJ]

Cor-Eng Partnership was formed on January 2, 20X1. Under the partnership agreement, each partner has an equal initial capital balance accounted for under the goodwill method. Partnership net income or loss is allocated 60% to Cor and 40% to Eng. To form the partnership, Cor originally contributed assets costing $30,000 with a fair value of $60,000 on January 2, 20X1, while Eng contributed $20,000 in cash. Drawings by the partners during 20X1 totaled $3,000 by Cor and $9,000 by Eng. Cor-Eng's net income was $25,000.

Eng's initial capital balance in Cor-Eng is:

A.
$20,000.

B.
$25,000.

C.
$40,000.

D.
$60,000.

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]

Kern and Pate are partners with capital balances of $60,000 and $20,000, respectively. Profits and losses are divided in the ratio of 60:40. Kern and Pate decided to form a new partnership with Grant, who invested land valued at $15,000 for a 20% capital interest in the new partnership. Grant's cost of the land was $12,000. The partnership elected to use the bonus method to record the admission of Grant into the partnership. Grant's capital account should be credited for:

A.
$12,000.

B.
$15,000.

C.
$16,000.

D.
$19,000.

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

[cultur3]

What section are those questions in?!

F 83 4/09/16
A 85 6/10/16
B 81 7/19/16

[Incoming91]

Does anyone else get caught up on this type of question for DTA & DTL? I get confused about the basis part for depreciable asset. Could someone shed some light if possible? Thanks everyone!

As a result of differences between depreciation for financial reporting purposes and tax purposes, the financial reporting basis of Noor Co.'s sole depreciable asset, acquired in Year 1, exceeded its tax basis by $250,000 at December 31, Year 1. This difference will reverse in future years. The enacted tax rate is 30% for Year 1, and 40% for future years. Noor has no other temporary differences. In its December 31, Year 1, balance sheet, how should Noor report the deferred tax effect of this difference?

REG: 80
FAR: 78 (x2)
AUD: 6/10
BEC: 7/20

[Spartans92]

Hey Incoming, I too struggled with DTA and DTL even when I was taking intermediate accounting. It took me the whole day just to understand the topic. Since I haven't looked at the subject in weeks so I may be forgetting but I'll give it a try. In your question when the depreciable asset exceeded its tax basis it means simply your book income is higher or your taxable income is lower. Therefore, you will get a DTL. Depreciable basis is just like your book value. Put it this way if you have less income for tax purposes because you took more Depreciation so you pay less today and more in future. The wording is really tricky.

Since it is in the future then you would use the future tax rate 40% x 250,000 = 100k DTL. I would say the more practice you do things will click eventually. I had to refer back to notes to answer this Q. Good Luck!

BEC- PASS

[Just3Letters]

Incoming91,

I understand your confusion here. I just did that question in Becker last week and it had me stumped for a minute.

The trick is that it mentions the “basis” rather than which depreciation itself. You just have to know that if the financial reporting basis is higher at Dec. 31, year 1, there was more depreciation under tax than financial.

If there is a higher tax deduction in year 1 (as is true in this case) you won't be able to deduct as much in later years for tax. This is a deferred tax liability The amount would be 250,000 * 0.4 because you always use the enacted rate for future years in questions like this.

250,000*0.4= 100,000 DTL

Just a last note: I finally cracked most of my deferred tax questions when I started thinking of the deduction as being the central piece to everything. If you deduct more from taxable income now = DTL; if you deduct less now and have deductions in the future=DTA. I don't know if that helps, but it helped me.

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Spartans92]

@just3letters, I just looked back into the book and noticed the word can be phrased differently and yield the same results. Since you are on the topic can you clarify this. If tax depreciation exceeded book depreciation it is also a DTL (more deduction on tax) is essentially the same as book depreciation exceeded its tax basis (like Question above). The wording is very confusing. 🙂

BEC- PASS

[Just3Letters]

Does anybody know if the answer to this question is only true for IFRS? I thought with GAAP, as long as you had a contract before the ISSUE of F/S, you could change the CL to Long-Term.

Smith Company reports under IFRS. A note payable is classified as current in Smith’s statement of financial position. Under what conditions can the note payable be classified as noncurrent instead of current?

If Smith has the intent and ability to reclassify the note before the issuance of the financial statements.
If Smith has the intent and ability to reclassify the note before the statement of financial position date.
If Smith has executed an agreement to refinance the note as long-term, before the statement of financial position date.
If Smith has executed an agreement to refinance the note as long-term, before issuance of the financial statements.

This answer is incorrect because the agreement must be executed before the statement of financial position date, not the issuance date of the financial statements.

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Incoming91]

@Spartans92

Thanks Spartans – I think I finally figured it out. I wasn't comprehending a piece of the question.

So the question is essential saying…. after all is said and done (deprecation expense for book and for tax is taken), the net book value for book is higher (less expense/depreciation taken on books) than the net book value for tax (more expense/depreciation on tax). In other words, book income is higher than taxable income resulting in the DTL!!!!!

MAKES SENSE NOW! getting there one question at a time…LOL

REG: 80
FAR: 78 (x2)
AUD: 6/10
BEC: 7/20

[Incoming91]

@Just3Letters

You guys are awesome. Took me a while to figure this stuff out. Literally all day yesterday. It has finally clicked with you and spartans explanation! Thanks for your help!

REG: 80
FAR: 78 (x2)
AUD: 6/10
BEC: 7/20

[Author]

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