WILEY CPAEXCEL EXAM REVIEW: FINANCIAL ACCOUNTING AND REPORTING APRIL 2017

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1 ERRATA Added text is underlined. Deleted text is struck out. Modified text is in bold. In some cases, additional text, before and/or after the change, may be included to clarify the context or specific location. Italicized text is FYI. Study text Page 50 Under Tax Services, Signing and filing tax return on behalf of client management if authorized by management and requirements are met would Not Impair independence. Page 70: This lesson presents an overview of the balance sheet income statement. Page 73: Under II. F. 2. change "third" to "second" Page 93: In the Example, Entry Calculation of Cash Paid to Suppliers, please make changes: DR: Cost of Goods Sold (given) $400,000 CR DR: Increase in Inventory (given) 20,000 CR: Increase in Accts. Payable (given) $ 10,000 DR CR: Cash paid to Suppliers (amt. to bal.) 410,000 Page 103: VII. H. The Indirect Method requires an additional disclosure of the amount (of cash) paid for interest and dividends income taxes paid. Page 149: In the Example: Company P / I/C Revenue (from S) = $10,000 (DR) (CR) Company S / I/C Expense (to P) = $10,000 (CR) (DR) Page 206: Net income $42,000 $30,000 Page 224: Update Notice Page 228: Update Notice Page 295: III.D Example 2. Sales should be 1.45 Page 307: Update Notice Page 321: In last example under V. item 2. should read A note payable Page 322: In last example under V. indent: Interest expense 38,200 (credit) Page 333: Depletion Rate = (Natural Resources Account Balance - Residual Value) / (Total Estimated Units) Page 1 John Wiley and Sons, Inc.

2 Page 339: In the example, remove repeating Asset held for disposal Page 428: I. C. Within the table: IFRS: More likely than not (> 50%) Page 467: Example "Assume a $1,300 dividend payment $8,900 = 2,700 + $6,000 + $600 + net income $1,300 Net income = $900 Page 493: Stock Dividends and Stock Splits lesson online under I. E. 3. b. b. We have distinguished small and large stock dividends by referring to less than 20% 25%, which is sufficient in most cases. However, for SEC registrants, less than 25% is considered small. For other firms, if the dividend percentage is between 20% and 25%, the firm may choose to record the dividend at fair value or at par value of the shares. If less than 20%, par fair value is used; if more than 25%, fair par value is used. The expectation is that the CPA Exam would not use a percentage of 20 25% in order to avoid this confusion. Page 497: Revise the following in example III: Dividend remaining = $9,000 ($14,000 - $5,000 allocated above) This amount exceeds is less than 4% of total par of both classes of stock: ($2,400 =.04 $60,000) Page 543: Note: The two methods as it repeats in 3. Page 642: In the Example: 2. The carrying value of goodwill would be increased decreased by $10,000. Page 643: In IV. Example journal entry formatting to be shown as follows: Plant and Equipment (200, ,000) 40,000 Land (160, ,000) 40,000 Goodwill (400,000 (480, ,000) 60,000 Bonds Payable (90,000 70,000) 20,000 Revaluation Capital 120,000 Page 718: Change AP to AR in the Entries with Broker row, for the first journal entry under both December 31 and February 14. See corrected on right: Page 2 John Wiley and Sons, Inc.

3 DR Balance + PO Issued Page 836: Revise text under I. B. as follows Encumbrances Goods Rec'd Budgetary Fund Balance Assigned (or Committed) for Encumbrances CR Balance + Goods Rec'd PO Issued Page 850: Revise the alignment of the following content in I. D. 1. Property taxes DR: Property Taxes Receivable Current CR: Est. Uncollectible Taxes Current CR: Revenues (or Property Tax Revenue) Page 906: Under the definition Primary Government, please add items 1.-3.: To be fiscally independent the organization must be authorized to take all three of these specific actions without the approval of another government: 1. determine its budget, 2. levy taxes or set user fees, and 3. issue bonded debt. Page 996/1120: Under Impairment Assets for Use and Held-for-Sale, please remove the following question/answer: 344. AICPA FAR-P1-FA Page 986/1112: Revise answer explanation as follows: 279. AICPA FAR The lower of cost or market method is applicable to inventory carried at LIFO. Market is replacement cost subject to a ceiling and floor. The ceiling for replacement cost is net realizable value (selling price less cost to complete) and the floor is net realizable value less normal profit margin. Use simple numbers to help solve this abstract question. In this question original cost (assume = 100) is greater than market ((replacement cost) assume = 80). Market (80) is greater than net realizable value (assume = 70). Market is subject to a ceiling of net realizable value (70). In this case the inventory would be valued at net realizable value. Page 1033/1146: Under Pension Expense Delayed Recognition, change the correct answer as follows: 579. AICPA FAR Solution: B is Correct. The entire PSC amount, at present value, is recognized immediately in pension expense. Page 1039: Make the following elimination 616. AICPA FAR-P1-FA On January 2, 20X4, Ross Co. purchases a machine for $70,000. This machine has a five year useful life, a residual value of $10,000, and is depreciated using the straight line method for financial statement purposes. For tax purposes, depreciation expense was $25,000 for 20X4 and $20,000 for 20X5. Ross elected early application of FASB Statement No. 109, Accounting for Income Taxes. Ross' 20X5 income, before income tax and depreciation expense, was $100,000 and its tax rate was 30%. If Ross had made no estimated tax payments during 20X5, what amount of current income tax liability would Ross report in its December 31, 20X5 balance sheet? Page 3 John Wiley and Sons, Inc.

4 $26,400 $25,800 $24,000 $22,500 Page 1040: Delete the questions under Valuation Allowance for Deferred Tax Assets. Page 1041: Change Uncertain Tax Positions question heading to Valuation Allowance for Deferred Tax Assets. Change Net Operating Losses question heading to Uncertain Tax Positions. Change Accounting Changes and Error Corrections question heading to Net Operating Losses. Page 1041: Under Uncertain Tax Positions, remove current from question: 623. AICPA FAR-FA On its December 31, 20X5 balance sheet, Shin Co. has income tax payable of $13,000 and a current deferred tax asset of $20,000, before determining the need for a valuation account. Shin had reported a deferred tax asset of $15,000 at December 31, 20X4. No estimated tax payments are made during 20X5. At December 31, 20X5, Shin determines that it is more likely than not that 10% of the deferred tax asset would not be realized. In its 20X5 income statement, what amount should Shin report as total income tax expense? $8,000 $8,500 $10,000 $13,000 Page 1084/1181: Under Health Care Organizations 920. AICPA FAR-AR Terry, an auditor, is performing test work for a not-for-profit hospital. Listed below are components of the Statement of Operations: Revenue relating to charity care $100,000 Bad debt expense related to patient accounts receivable 70,000 Net Assets released from restrictions and used for operations 50,000 Other revenue 80,000 Net Patient Service Revenue (includes revenue related to charity care) 500,000 What amount would be reported as total revenues, gains, and other support on the Statement of Operations? A. $460,000 B. $530,000 C. $580,000 D. $630,000 Answer is A. $460,000 Total revenues, gains, and other support on the Statement of Operations includes net patient revenue, premium revenues (e.g., HMO capitation fees), other revenue, and net assets released from restrictions for operating purposes. Net patient revenues are fees for patient services less contractual adjustments and charity care. Both governmental and not-for-profit hospitals record estimates for uncollectible patient accounts as contra-revenue accounts. The correct answer is $460,000: $500,000 (net patient revenues including charity care) less $100,000 (charity care), less $70,000 uncollectible patent accounts, plus $50,000 (net assets released for operating activities) plus $80,000 (other revenue). Take note that uncollectible accounts other than patient accounts are recorded as bad debt expense by not-for-profit hospitals (ASC ) and that governmental hospitals will not report bad debt expense since they use a net revenue approach. Moreover, had the net assets released from restrictions not been for operating purposes; such as to acquire fixed assets, the reclassification of net assets released would not be included in total revenues, gains, and other support section. Rather, the amount would appear after the excess (deficiency) of revenues, gains, and other support over expenses and losses (e.g., the performance indicator) near the bottom of the unrestricted net asset section of the Statement of Operations. Page 1119: Revise rationale for #340 for the missing addition sign: Cost of goods sold = $12,500,000 + $10,000,000 = $22,500,000 Page 1158: Add to the end of the answer explanation for #683 AICPA FAR.III.A-SIM Acquisition-related costs (except as noted below) should be expensed in the period in which the costs are incurred and the services are received. These costs, in this case the $110,000 legal and consulting fees incurred in relation to the acquisition are not included as part of the cost of an acquired business Page 4 John Wiley and Sons, Inc.

5 The cost of issuing debt and equity securities for the purposes of a business combination are not treated as cost of the acquired business, but should be accounted for generally as follows - Debt issuance costs may be either recognized as a deferred asset and amortized over the life of the debt, or expensed when incurred. In this case, equity was issued in the acquisition, not debt. - Equity issuance costs reduce the proceeds from the securities issued and, in effect, reduce Additional Paid-in Capital. In this case, the information states $35,000 is incurred for registration and issuance costs for the stock issued. Print flashcards: : Personal Financial Statements: FAR 001: FC4730 Related Parties and Related Party Transactions FAR 193: FC5720 IASB and Structure FAR 075: FC5160 Flashcards titled Interest Capitalization I change to Interest Capitalization Basics Flashcards titled Interest Capitalization II change to Interest Capitalization Limits Focus Notes: Page: 4 Replace/remove Feedback value and Materiality with Confirmatory value Page: 19 Page: 36 Page: 47 Ending inventory = 15,000 units (given) = January 10,000 units $ April 1,500 5,000 units $5.50 = $58,250 77,500 (ending inventory consists of earliest purchased units) Cost of sales: Total available Ending inventory = $293,750 58,250 77,500 = $235, ,250 Pages: Pages: Page 5 John Wiley and Sons, Inc.