[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

[marqzho]

Claudia

You have a temp difference, if book income is higher than taxable income, you will have a tax liability in the future. Therefore you have a deferred tax liability today 🙂

REG 90
FAR 95
AUD 98
BEC 84

[Incoming91]

marqzho

Thanks Ill apply that to the questions i do now.

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

[marqzho]

let say you have a book income of $100 this year but your taxable income is $0. your tax rate is 20%. $20 will be paid next year

Since we are in an accrual world 🙂 and because of matching principle, we have a income of $80 instead of $100 for this year. you need to create a liability today to reflect that tax effect by doing this J/E

Dr. Tax expense 20
Cr. Deferred tax liability 20

REG 90
FAR 95
AUD 98
BEC 84

[Spartans92]

Deferred inflows and outflows troubles me as well. I just can't seem to understand the logic of those.

BEC- PASS

[Just3Letters]

Dyna Corporation had a COGS of $300,000 for the year ended December 31 and an ending inventory of $50,000. The beginning balances in inventory and accounts payable, respectively, were 20,000 and 16,000. Dyna finances 80% of purchases with accounts payable, incurs purchases ratably throughout the year, and consistently pays for its purchases 30 days after purchase. What was amount paid on accounts payable during the year?

Answer: 258,000.

After about 3 minutes of thinking I figured out what purchases had to be with the squeeze formula (330,000), but I couldn't figure out how that translated into accounts payable. I took a guess and figured out that AP payments were probably bigger than purchases and I guessed right. However, I don't want to have to guess at all obviously. Anybody understand this?

Thanks!

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

[Spartans92]

Just3, based on the info given we can use the formula which is more cost accounting related. Beg bal. + Purchases – End Invt = COGS
We can see X= 330,000 from this that is your purchases. It says 80% of Purchases with AP = 264,000 was on credit for the entire year. Now it says purchases were paid 30 days after and incurs purchases ratably throughout year. So 1 month/12 * 264000 = 22,000 Per month paid. we were given beg of 16,000 so the difference is 6k. Then you take 264-6 = 258k

Haha thanks marqzho.

BEC- PASS

[marqzho]

Spartans92

Good work ! I am about to type an explanation 100 times complicated 🙂

REG 90
FAR 95
AUD 98
BEC 84

[Just3Letters]

Oh my god I was SO CLOSE lol

Thanks Spartans! That makes perfect sense now!

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

[Just3Letters]

Sorry to just jump into another question but does anybody have a good way to memorize the ratios from F7? I keep getting terrible scores from the few questions because I can't seem to remember where all the pieces go in the various ratios

A/R turnover in days or normal
Average total assets, etc.

Thanks!

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

[Incoming91]

Thats a tricky question – great explanation spartan. I had trouble with that question as well.

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

[Spartans92]

just3, a good way to remember is whatever is turning over is always the average of it in denominator. Like Total Asset turnover = Net sales/ Average Total asset. Another one working capital = Sales/ Average Working Capital.

BEC- PASS

[Just3Letters]

Oh that's an awesome way to think about it.

You guys are lifesavers!

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

[Spartans92]

Good luck! Originally had a question but figured out after re-reading it haha

BEC- PASS

[mckan514w]

Disregard my early post part about NOT ranting about Governmental– seriously WTF it is like straight Orwellian Speak– “report in the statement of activities column NOT the government wide statement of activities”–

seriously every single explanation is like this– if they are going to be so effed up in reporting anyway ( “Use modified then use accrual” – but we really prefer cash”) the very LEAST they can do is come up with separate and distinctive names for accounts and statements….

and here I was thinking having to learn IFRS was STUPID this is BEYOND Stupid because at least with IFRS convergence might one day theoretically potentially happen while I can assure you there is no way in HELL I will EVER resort to governmental accounting….

Sorry rant over just had to get it out….

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

[Spartans92]

House Publishers offered a contest in which the winner would receive $1,000,000, payable over 20 years. On December 31, Year 1, House announced the winner of the contest and signed a note payable to the winner for $1,000,000, payable in $50,000 installments every January 2. Also on December 31, Year 1, House purchased an annuity for $418,250 to provide the $950,000 prize monies remaining after the first $50,000 installment, which was paid on January 2, Year 2.

In its Year 1 income statement, what should House report as contest prize expense?

Answer: 468,250.. Why do you add the 50k I thought it was already netted since it says 950k remaining after first 50k payout and PV is 418250 so should that not be the prize expense if all to be pay out?

BEC- PASS

[Author]

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