[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

[Anonymous]

You may be more prepared than you think you are. The nature of the exam will to always feel a little panic, which is good. Unless you are an accounting genius, not having a healthy fear of the exam can be very bad.

[Anonymous]

This a nasty one

On January 1, Card Corp. signed a three-year, noncancelable purchase contract, which allows Card to purchase up to 500,000 units of a computer part annually from Hart Supply Co. at $.10 per unit and guarantees a minimum annual purchase of 100,000 units. During the Year, the part unexpectedly became obsolete. Card had 250,000 units of this inventory at December 31 and believes these parts can be sold as scrap for $.02 per unit. What amount of probable loss from the purchase commitment should Card report in its December 31 income statement?
a.
$24,000
b.
$8,000
c.
$20,000
d.
$16,000

[Anonymous]

any body have any purchase commitment MCQ's they wanna share on here?

[emichelle2321]

Charlie54 what is the answer to that first one you posted? I hate these ones

[Porma Fierles]

Um I think this is C. Is it based on the minimum purchase requirement, not the maximum purchase amount

[emichelle2321]

I think its A. Guaranteed to Purchase 300k @ $.10, can only sell for $.02 = .08 cent loss per unit.

[mckan514w]

I would go with C here as well???? …

Man I am feeling worse and worse about Friday– just tried to work through the “hard” questions AICPA released and had my A## handed to me…. goodbye confidence.

Man I hate this.

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]

@Charlie54, Is the answer D?

1.)(100,000 * 2 yrs) * .10 = 20,000 Loss on obsolete units
2.)20,000 – (20,000 * .02 scrap) = 16,000 Loss on purchase commitment

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)

[mtaylo24]

Ball Corp, had the following foreign currency transactions during year 1:

-Merchandise was purchased from a foreign supplier on January 20, year 1, for the US dollar equivalent of $90,000. The invoice was paid on March 20, year 1, at the US dollar equivalent of $96,000.
-On July 1, year 1, Ball borrowed the US dollar equivalent of $500,00 evidenced by a note that was payable in the lender's local currency on July 1, year 3. On December 31, year 1, the US dollar equivalents of the principal amount and accrued interest were $520,000 and $26,000, respectively. Interest on the note is 10% per annum.

In Ball's year 1 income statement, what amount should be included as foreign exchange transaction loss as part of net income?

a. $0
b. $6,000
c. $21,000
d. $27,000

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)

[A1lessio]

43% on 30 question F1 to F5 progress test. EEEK

AUD (08/02/2016)

[Anonymous]

I'm leaning towards D for the loss on purchase commitments. My calc:

Minimum purchase of units in years 2 and 3 is 200,000 times .08 (.1 – .02) equals 16,000

By the ASC logic, you have to accrue a loss if it is probable and estimateable. As such the estimate of the loss should include the scrap value of $.02 per unit.

[mckan514w]

After reading through yes I agree with those of you who are going with 16– it is such a poorly written question though- as most of them are… it sucks to think you know what you are doing only to get hit in the face with questions like this that trip you up in the wording…

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

[mckan514w]

@mtaylo- D 27,000

You have a 6,000 loss on merch transaction plus a 20,000 one on the note payable Plus 1,000 on the accrued Interest?

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]

Bingo 😎

1.) 96,000 – 90,000 = 6,000
2.) 500,000 * 10% * 6/12 = 25,000
3.) 26,000 – 25,000 = 1,000
4.) 520,000 – 500,000 = 20,000
5.) 6,000 + 20,000 + 1,000 = 27,000

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)

[Anonymous]

Emichelle and Mtayl

Look at th

Yes it is 16,000 . CALL OF THE Question is the Probable Loss at year end 12/31 which means 100000 guaranteed times 2 years left at 12/31 .

200000*(.10-0.02)=16000

so when you sell the scrap it reduces the would have been 20000 loss to 16000 loss.good for tax purposes i guess

[Author]

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