[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

[adenisepen]

Greetings My Fellow CPA Test Takers,

I'm at it again. I decided to earn my Masters in Taxation to increase my study skills and refresh on the subject matter. I'm on my last semester. I'm using CPAexcel Jan 2015 for my review course. Good luck to everyone! Prayers going UP!!

FAR: 05/30/2016
BEC: 07/01/2016
REG: 08/31/2016
AUD: 11/15/2016

Using CPAExcel!
Cordova, TN

[Anonymous]

Hi guys this is Cherry and I am currently studying for FAR.. took AUD with no luck from a result of not taking study time too seriously ($3k Becker didn't help much and it is expiring in the next few weeks ugh).. nonetheless, like everyone here I am now pushing myself even more! no more wasting time (I hope!) at this time I am trying out for FAR as I feel I am a little bit more familiar with it due to my line of work. Anyway, I am excited to follow ninja's study plan and materials. I had been listening to the audio in the last few weeks at work, home and while driving and I have to admit the information is slowly “marinating” in my little head lol. I am picking up some sense of humor too hahaha thanks Jeff!! Wish me luck and everyone here 🙂

[Sherry]

Can anyone tell is there major changes in wiley cpaexcel exam review 2014 and 216

[Anonymous]

I won't start studying for FAR until May, but I'd love GLEIM review tips for this section if you have any. Or any tips for someone working 40 hours in a non accounting field.

Any tips would be useful.

Thanks!

[Operation_CPA]

The next item is based on the following data pertaining to Pell Co.'s construction jobs, which commenced during 1992:

……………………………………………………..Project 1 Project 2

Contract price………………………….. $ 420,000…..$ 300,000
Costs incurred during 1992……………240,000……..280,000
Estimated costs to complete………….120,000……..40,000
Billed to customers during 1992……..150,000…….270,000
Rec. from customers during 1992 ……90,000…….250,000

If Pell used the percentage-of-completion method, what amount of gross profit (loss) would Pell report in its 1992 income statement?

A. ($20,000)
B. $40,000
C. $20,000 <– Correct answer
D. $22,500

Haft Construction Co. has consistently used the percentage-of-completion method. On January 10, Year 1, Haft began work on a $3,000,000 construction contract. At the inception date, the estimated cost of construction was $2,250,000. The following data relate to the progress of the contract:

Income recognized at 12/31/Year 1 ………………………….$300,000
Costs incurred 1/10/ Year 1 through 12/31/Year 2……….1,800,000
Estimated cost to complete at 12/31/Year 2………………..600,000

In its income statement for the year ended December 31, Year 2, what amount of gross profit should Haft report?

A. $262,500
B. $150,000 <– Correct answer
C. $300,000
D. $450,000

Can someone please explain these problems step-by-step? I Plug the numbers into the % of completion formula which I have dedicated to memory, but it not yielding results, so clearly I am not understanding it. For example: The 2nd Q, Becker uses in Step 2: total cost to date but then adds in the estimated total cost, when in the book page 2-31 it says step 2 is simply total cost to date. Someone please help! Seem like easy Q's for exam day but it is not clicking right now.

Much appreciated.

[marqzho]

Operation_CPA

Make sure you remember 3 things when dealing with construction accounting:
1. make sure contract price > the most updated estimate total cost for the project. If not, then we need to recognize all loss
2. what is the project completion % as of reporting date
3. Recognized that % of profit ( remember we need to deduct prior year recognized profit to get the profit for this year)

Question 1
Project 1:
1. Contract price 420 > Total Cost 360, we have a profit 🙂
2. What's the %? Cost to-date 240 / Total Cost 360 = 66.66%
3. We need to recognized 420*66.66% – 240 = 40

Project 2
1. Contract price 300 < Total Cost 320, we have a loss, skip 2 & 3, recognize 20 loss 🙁
Therefore, ans is +40-20 = 20

Question 2
1. Contract price 3000 > Total Cost 2400, we have a profit 🙂
2. What's the %? Cost to-date 1800 / Total Cost 2400 = 75%
3. We need to recognized 3000*75% -1800 = 450 <——This represent all the profit for the project. For this year only, we need to deduct prior year recognized profit 450 – 300 = 150 <—ans

REG 90
FAR 95
AUD 98
BEC 84

[Spartans92]

Dang Marqzho! I just went back to Becker and this was one of the question I got wrong and I had no clue but after seeing your explanation everything got much more simple! Thank you very much! Sadly, not in review phase yet. Back to F7 🙁

BEC- PASS

[Operation_CPA]

@Marqzho

Wow. You just made those problems click for me. Thank you! Very detailed, yet simple explanation. I know who I will be asking if I have anymore questions HA!

[marqzho]

🙂 You guys are welcome. I do construction accounting for living

REG 90
FAR 95
AUD 98
BEC 84

[samer]

On March 15, 2016, the FASB issued Accounting Standards Update 2016-07, Simplifying the Transition to the Equity Method of Accounting, which eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment.

will that be reflected in 2016 exam?

How do we account the transition from Equity to cost method? prospectively?

[samer]

Just checked roger website:

It goes into effect for periods beginning after December 15, 2016.

[wjxhahaha]

Hi guys…does anyone know why these items are beling classified a current liabilities in this question?
Warranty liability
Deferred compensation liability
———————————————————————————————
Rom Corp. began business in Year 1 and reported taxable income of $50,000 on its Year 1 tax return. Rom's enacted tax rate is 30% for Year 1 and future years. All differences except for equipment relate to current balance sheet accounts. The following is a schedule of Rom's December 31, Year 1, temporary differences in thousands of dollars:

12/31/Year 1 Future taxable
(deductible) amounts
Book basis Year 2 Year 3 Year 4 Year 5
over (under)
tax basis

Warranty liability (20) (20) 0 0 0
Deferred compensation liability (15) 0 (5) 0 (5)
———————————————————————————————
The question asks for net current defered tax asset assuming enacted rate 30%.
The answer says (20+15)*0.3
———————–why???

Any help please!!!

[wjxhahaha]

Lol just found out that @Spartans worked on the same question, but asked something differently

[Broag]

Can anyone please explain this idiotic question to me? Or maybe I'm the idiot. Who knows. Why the hell would you add the $50,000 when it clearly says it is a debit to A/P? Can someone show this in JE form? Thanks in advance.

Acme Co.'s accounts payable balance at December 31 was $850,000 before necessary year-end adjustments, if any, related to the following information:

At December 31, Acme has a $50,000 debit balance in its accounts payable resulting from a payment to a supplier for goods to be manufactured to Acme's specifications.
Goods shipped FOB destination on December 20 were received and recorded by Acme on January 2; the invoice cost was $45,000.
In its December 31 balance sheet, what amount should Acme report as accounts payable?

A.
$850,000

B.
$895,000

Correct C.
$900,000

D.
$945,000

The $50,000 debit balance in accounts payable for goods to be manufactured should be shown in accounts receivable unless right to set off exists. The goods shipped FOB destination should not be included as a liability until received and were not included in the $850,000 balance.

$850,000 + 50,000 = $900,000

REG - 79
FAR - ?
AUD - ?
BEC - ?

[Spartans92]

@Broag, I think a “T” Account is best for this question. So A/P you have a balance of 50,000 DR. It says your Dec 31 balance is 850,000 (this is a Credit) before any adjustment. So to get that ending balance you would have to credit 900k. As far as the FOB destination you do not record that payment until receiving the goods and it say it was recorded and received on Jan 2 so this is irrelevant. Hope that helps!

Let's say the cost of 45k was recorded and received by dec 31 and is part of the factor. Then you would debit this 45k because you reduced you A/P. Then your answer would be 945K.
Dr. A/P 45k
CR Cash 45k

BEC- PASS

[Author]

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