[jeff]

Welcome to the Q4 2016 CPA Exam Study Group for FAR.

If this is your first post in the study group – please post your target exam date (just the time frame to preserve your anonymity), and your past history with this exam (optional, of course).

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

[Mscfisher]

@mckan514w
Gains and losses are always recognize and exchanges that have commercial substance and are computed as a difference between fair value and the book value of asset given up so basically you really don't even need to think about what they received just take the difference between the book value of what they were giving up and the fair value of what they were giving up because it has commercials substance whatever they receive is supposed to be equal to what they gave up.
That's just how I see it….

[mckan514w]

Thanks Mscfisher- but then what would your JE be? Because see in the question below you are recognizing the Gain based on the FMV of the asset you are receiving… what am I missing here?

On January 1, Feld traded a delivery truck and paid $10,000 cash for a tow truck owned by Baker. The delivery truck had an original cost of $140,000, accumulated depreciation of $80,000, and an estimated fair value of $90,000. Feld estimated the fair value of Baker's tow truck to be $100,000. The transaction had commercial substance. What amount of gain should be recognized by Feld?

A.$0

B.$3,000

C.$10,000

Correct D.$30,000

Feld should recognize $30,000 gain:

Value received ($100,000 value of
tow truck less $10,000) $90,000
Book value of delivery truck:
Cost $140,000
Accumulated depreciation 80,000 60,000
——-
Gain $30,000

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

[Mscfisher]

Ahhhh i see your point exactly. So basically in this question that you gave me I wouldn't even look at the asset that is being received I would simply look at the fair value of the asset given up, the fair value at $90,000 and then the book value which is the 140 minus 80 equals 60. I would then take the difference between the 60 and the 90 to calculate the gain. Now as far as the journal entry goes I know that cash/boot has to be recorded So the fair value of the new asset would have to be a 100k so that after subtracting the 10,000 given up it equals the fair value of the oldest asset.
Let me look a little bit more into the original question and the journal entry for that. I'm driving home and stupid Miami traffic. I am wondering if you're just supposed to write down that new asset from 55 to 50..

[Teal]

@jsn3004 I would've thought it was LIFO too…

FAR (66,68) Aug 26
REG (66) July 25
AUD (66) December 1st
BEC - October 3rd

[mtaylo24]

I've always hated this question….

Question: 24 On January 2, Year 3, to better reflect the variable use of its only machine, Holly, Inc., elected to change its method of depreciation from the straight-line method to the units-of-production method. The original cost of the machine on January 2, Year 1, was $50,000 with no salvage value, and its estimated life was 10 years. Holly estimates that the machine’s total life is 50,000 machine hours. The machine hours usage was 8,500 during Year 2 and 3,500 during Year 1. Holly’s income tax rate is 30%, and the machine hours usage was 10,000 in Year 3. If Holly issues single-period statements only, it should report the accounting change in its Year 3 financial statements as a(n)

A. Cumulative effect of a change in accounting principle of $2,000 in its income statement.
B. Adjustment to beginning retained earnings of $2,000.
C. Change in estimate and depreciation expense of $10,526.
D. Adjustment to beginning retained earnings of $1,400.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[Mscfisher]

@mckan514w
Ok the answer seems to be, because it is an exchange of land. You can't write up the value of land…

[accountingisfun]

I've been AWOL since my exam but I wanted to say thanks to everyone who helped with every dumb little question I asked.

Even though I'm now done with the exam, I'll try to return the favor 🙂

[mckan514w]

@Mscfisher DUH DAMN! I always forget that land rule!!!! Thank you so much!

@MTAYLO WOO HOO!!!! SAW YOUR REG!!!!! I know I am not as happy as you but I'm pretty darn happy! WOO HOOO!!!!!!!! Now lets knock this FAR out of the park!!!

@accountingisfun CONGRATS!!! and your DONE! ahhhhh I can't even…. CONGRATS hope you have being celebrations for tonight 🙂

@MTaylo- is the answer C- Change in estimate and depreciation expense of $10,526.??? Depreciation is prospective change in estimate so it wouldn't go to the income statement ruling out A, B and D?????

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

[Teal]

congrats @mtaylo!! What would you say was the biggest contributor to your passing? Doing so many questions?

FAR (66,68) Aug 26
REG (66) July 25
AUD (66) December 1st
BEC - October 3rd

[mtaylo24]

@McKan I did it buddy! Time to do the same to FAR. The answer is C, you can tell by the description, but the math always throws me off

Answer (C) is correct.
A change in depreciation method is a change in principle inseparable from a change in estimate. It is accounted for prospectively. The total depreciation for Year 1 and Year 2 under the straight-line method was $10,000 [($50,000 ÷ 10 years) × 2]. Thus, the carrying amount at the beginning of Year 3 was $40,000 ($50,000 – $10,000). Given that 12,000 machine hours (8,500 + 3,500) were used in Year 1 and Year 2, the remaining service potential was 38,000 hours (50,000 – 12,000). Accordingly, depreciation for Year 3 was $10,526 [$40,000 CA × (10,000 MH ÷ 38,000)].

@Teal thanks. It was def a combo of MCQs and luck. My MCQs in the actual test were kind of crappy though, but I felt ok about the sims.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mckan514w]

If I were in charge of the CPA exam I would do away with BEC- meld the cost accounting stuff into the FAR exam and make GVT and NFP its own separate exam… seriously this stuff is just messing with my brain its so backwards that by the time I figure it out I have forgotten how to do “regular” accounting… sorry just needed to vent 🙂 Happy studying today guys!

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

[mtaylo24]

A test of IT/BLAW/ECON/GOVTNFP would be the worst!

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mckan514w]

LOL NO S-T Mtaylo…. ha ha ha just put a bullet through my brain even the thought of it makes me want to do bodily harm to either myself or someone else… oh but don't forget to throw some COSO in there for good measure 😉

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

[mtaylo24]

Was this thread actin up for anybody? I wasn't able to get my posts out yesterday.

@Teal thanks! Practicing the MCQs and luck both probably were a factor. My MCQ on the actual exam were hell, the sims were ok.

@McKan, the answer is C. You can answer it by the description, but the math for some reasonalways throws me off..

1.) [(50,000/10 years)*2=10,000
2.) 50,000-10,000=40,000 carrying amount
3.) 8,500+3,500=12,000 machine hours
4.) 50,000-12,000=38,000
5.) 40,000 Carrying Amt * (10,000 MH / 38,000) = 10,526

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mckan514w]

yeah whole site was acting up for me yesterday! thanks for responding on the question… I have been DESPERATELY TRYING not to rely on “math” for the answer but rather trying very hard to reason things out as I seem to recall on every exam it seems like they will give you an answer with several of the correct “math numbers” and the right answer is dependent on knowing the reasoning….

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

[Author]

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