[jeff]

SO I know every test is different but does anyone have any insight on what has been heavily tested recently? I take the exam Monday and I need to narrow my focus….Thanks!

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Gabe]

Ahh! I was going to respond and say I have no clue BUT I just remembered: with the first payment you are only paying principal no interest. So, technically, the interest expense would be based off of the present value amount.

FYI: I hate this question and always answer A too

CPA, CFE
CISA- Experience will be completed by August 2016

[Future Ninja]

@mb I reviewed Lease yesterday. The way I do it, I create 4 columns. First for cash payment, second for interest expense based on the carrying value multiply by the lesser of implied interest rate versus other rate, third for the amortization ( the difference of first column and second column and 4th for the carrying value which is 4th column less the 3rd column (amortization). They were asking what would be the amount in the second column = the interest expense multiply the carrying value.

It's hard to illustrate here by column but I hope this helps. Your logic will work to deduct automatic the $200,000 if the lessee paid it at the beginning of the lease = ,meaning due now = annuity due of $1.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[mb0363]

@gabe @ninja is this because the interest has not technically accrued yet? i feel like the explanation is trying to tell me that one year hasn't elapsed yet. (january 2- december 31 does not exactly equal one year)

@ninja very helpful!! i actually do columns too in a way my Becker professor taught us, very similar!

BEC - PASS
AUDIT - PASS
REG - PASS
FAR - PASS

[Determined CPA]

mb0363 – the lease began at the beginning of the year so you would take the PV and times that by the stated rate. The first lease payment wasn't until December so interest would be on the full PV amount

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Ssbknyc]

@mb0363 For a capital lease, the lessor records the lease as an asset and a liability at the LESSER of the FV of the asset at the inception of the lease OR PV of minimum lease payments

In that question the PV of the minimum lease payments is less than ($200,000 x 5 payments). Therefore, he would use $758,000.

The interest starts accruing on Jan 1 and is for the year so 10% of $758,000 is $75,800. Now if he made the first payment on Jan 1, i believe thats when you would subtract a payment from the total then calculate the interest for the year.

Done 08/2014-08/2015

[mb0363]

@Ssbknyc @Determined CPA @Future Ninja @Gabe JUST clicked! only took 4 people…haha thanks everyone!!!

If the payment does not occur when the lease started, we do not subtract it and Interest would be on the PVMLP.

BEC - PASS
AUDIT - PASS
REG - PASS
FAR - PASS

[Gabe]

Awesome! Thanks @Ssb!

I'll be on later studying…til then 🙂

CPA, CFE
CISA- Experience will be completed by August 2016

[Future Ninja]

thanks @Ssb. That's a great help.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Determined CPA]

Falton Co. had the following first-year amounts related to its $9,000,000 construction contract:

Actual costs incurred and paid $2,000,000

Estimated costs to complete 6,000,000

Progress billings 1,800,000

Cash collected 1,500,000

What amount should Falton recognize as a current liability at year-end, using the percentage-of-completion method?

Answer is 0

At year-end, Falton should record an account receivable of $300,000 (1,800,000 – 1,500,000) and inventory of $2,000,000. However, no current liability exists.

Journal entries:

Construction in Progress 2,250,000

Cash and profit 2,250,000

Accounts Receivable 1,800,000

Progress Billings 1,800,000

Cash 1,500,000

Accounts Receivable 1,500,000

Is the construction in progress the 2,000,000 costs incurred + 250,000 current gross profit? Im confused where the 2,250,000 comes from?

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[salring]

Determined CPA,

Construction in progress = actual costs/total cost X Contract price

Total costs = Actual costs + Cost to complete = 2,000,000 + 6,000,000 = 8,000,000

CIP = 2,000,000/8,000,000 X9,000,000 = 2,250,000

[Determined CPA]

Thank you salring

so much to absorb

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Determined CPA]

On January 2, 20X1, Nori Mining Co. (lessee) entered into a 5-year lease for drilling equipment. Nori accounted for the acquisition as a capital lease for $240,000, which includes a $10,000 bargain purchase option. At the end of the lease, Nori expects to exercise the bargain purchase option. Nori estimates that the equipment's fair value will be $20,000 at the end of its 8-year life. Nori regularly uses straight-line depreciation on similar equipment. For the year ended December 31, 20X1, what amount should Nori recognize as depreciation expense on the leased asset?

The answer is $27,500

The explanation said that with a capital lease, when a bargain purchase exists, depreciation should be computed over the useful life of the asset.

2 questions:

1. If there was no bargain purchase, we would have used 5 years, right?

2. If the bargain option wasn't included in the lease, would we have backed that amount out or added it to the lease?

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[ron10590]

Why are dividends paid by a parent or sub not reported in a consolidated balance sheet, even if paid to outside parties?

REG (7/14): 82
FAR (11/14): 81
BEC (1/15): 83
AUD (5/15):

[salring]

@Determined CPA,

Yes, are you familiar with OWNS?

Ownership @the end of the lease

Written BPO

90% FV

75% useful life

If the lease meets the first 2 criteria O & W use life of the asset/lease

If it meets the last 2 criteria N & S use the term of the lease which in most cases is shorter than the life of the leased asset.

If there was no BPO or transfer of ownership at the end of the lease term we would have deducted the $10K and used 5yrs

[salring]

Ron,

I think that only the dividends paid by the sub to the parent are eliminated, the portion of divs that belongs to the sub is added to the non-controlling interest for the acquiree also known as the sub. I think they are eliminating the divs paid by the sub to the parent to avoid double counting since the consolidated statements will be for both sub and parent.

Dividend's paid by the parent to others reduces the parent's retained earnings and the dividends paid by the sub reduces the NCI balance. Remember that even if these dividends paid were reported separated for each entity they would be reducing the RE and not recorded as a line item on the balance sheet.

[Author]

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