[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

[mckan514w]

I am completely blanking– what is the exposure of contract? and why is it / 2???? wow I am feeling dumber and dumber here- I am so screwed Friday….

Dunne Co. sells equipment service contracts that cover a 2-year period. The sales price of each contract is $600. Dunne's past experience is that, of the total dollars spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. Dunne sold 1,000 contracts evenly throughout 20X1. In its December 31, 20X1, balance sheet, what amount should Dunne report as deferred service contract revenue?

The key to understanding and correctly solving this problem lies in the fact that the 1,000 contracts were sold evenly throughout 20X1; thus:
Average “exposure of contract solid 20X1= (100% + 0%) / 2 = 50%

Total contract revenue for 20X1 = 1,000 x $600= $600,000

Less: Revenue earned= 50% x 40% x $600,000 =  120,000
Deferred service contract revenue on December 31, 20X1$480,000

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

[vkvic2010]

Hi,
I just took FAR and have a feeling that I have failed bad. One question from the actual exam is still on my mind. It was about a company that signed a 3-year note payable with a related party with 2% interest when market rate was 10%. Is company supposed to record interest expense calculated using PV of the note payable and market interest rate?

REG 77
AUD 94
FAR 90

[vkvic2010]

Mckan514w, I think the logic here is that the year has passed and the company was supposed to pay out one half of the 1st service contracts. So, the second half is still outstanding. Not sure if my explanation is helpful

REG 77
AUD 94
FAR 90

[marqzho]

mckan514w

This is the main reason:
“Dunne sold 1,000 contracts EVENLY THROUGHOUT 20X1”

Short version, when you see this, you can assume ALL contract sold on July 1 and get your answer.

Long version,
The contract sold on 1/1, ALL or 100% of that 40% is earned as of the year end.
The contract sold on 12/31, NONE or 0% of that 40% is earned as of the year end.
The contact sold on 7/1, HALF or 50% of that 40% is earned as of the year end.
And so on….
You don't know exactly how many contract you sold on a specific day, so we take average by (beg+end)/2. In this case,
beg 1/1 = 100%
end 12/31 = 0%
Hence, Average “exposure of contract solid 20X1= (100% + 0%) / 2 = 50%

REG 90
FAR 95
AUD 98
BEC 84

[Spartans92]

vkvic, to answer your question I think you need to use the market rate.

BEC- PASS

[mckan514w]

ahhhh Spartan THANKS that actually makes PERFECT sense!

vkvic- this sounds to me like an imputed interest question where the agreed upon rate was too far below the market rate to accurately reflect the market so you would use the market rate as the imputed interest rate…

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]

No Problem. I was more thinking about using the effective interest method LOL. Everything is so foggy like I feel I understand but theres just so much to know. Last few days to knock as many MCQ as possible!

BEC- PASS

[Just3Letters]

Can somebody briefly explain to me the IFRS partial goodwill method?

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

[Claudia408]

mckan514w – was your question an installment sales topic? i was like wtf on your question…!!?? so much to know i am seriously forgetting!!

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

[vkvic2010]

Let me make sure I understood it right. So, let's say the company borrows 500k with 2% interest rate payable in 3 years and interest is payable in the end of each year. I will have to figure out present value of 500K (principal), present value of 10K (interest payments), add them and calculate 10% from that amount. Right? Or 10% from the face?

REG 77
AUD 94
FAR 90

[Anonymous]

IFRS partial goodwill means you calculate goodwill based on your % owned (your GW + the NCI GW = total goodwill [GAAP])

so i think it would be cash pd – FV net assets x % ownership

lmk if i'm missing something. taking the exam friday!

[Spartans92]

Are you guys re-reading the chapter to refresh the material. I have been re-reading/skimming over the chapter and I find this really time consuming. I have forgotten a lot of the material and I figure re-reading may be better than looking over the notes.

Guess Ill just use the outline in becker and crank out the MCQ. I prob shouldn't even be asking this since my exam is in a few days. Cant wait till get this over with and move on

BEC- PASS

[Crunchtime]

I'm joining you guys, Late in May will be my test. Starting to study tomorrow day after tax season!!! Pulled a 74 in January on this so I am going to get this done this time, I will!!! Waiting for my BEC score but I think I got that, so this is going to be it guys!!

AUD-77
BEC-70,73,68,74 SH##!!!!!, 80
REG-73,76
FAR -74,82

Ethics here I come!!

[mckan514w]

@spartan- I figure at this point I am too close to test date to start re-reading/re-skimming the chapters so I am just trying to knock out as many MCQ's as time allows…. like you I feel like I understand the “big concepts” but am getting really tied up in the minutia and my times are SUCKING.. so am hoping the more MCQ's I work the more some of this will work itself out– all though with what three days to go??? I am pretty much going in praying for the best but realizing that I will in all likelihood be re-testing… I just wish I had about 2 more weeks…

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

[Incoming91]

Just scored 72.6 weighted on the first practice exam in becker. 69% on the multiple choice alone. Not a good sign for me…

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

[Author]

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