2016 part 1 wiley CMAexcel learning system exam review self study guide

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2016 part 1 wiley CMAexcel learning system exam review self study guide

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ISBN 978-1-119-05680-5 (Part 1) WILEY CMAEXCEL LEARNING SYSTEM EXAM REVIEW 2016: SELF-STUDY GUIDE Part 1: Financial Reporting, Planning, Performance, and Control 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 Section A: External Financial Reporting Decisions Topic 1: Financial Statements Page: 29 Figure 1A-3: +/- Extraordinary items +/- Changes in accounting principle Net income Page: 31 Order revised as appropriate for balance sheet presentation: Capital stock Shareholders’ Equity Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income Page: 36 Figure 1A-9 change as follows: Increase (decrease) Decrease (increase) in merchandise inventory Topic 2: Recognition, Measurement, Valuation, and Disclosure Page 46: Level inputs: The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities Level inputs: The fair value hierarchy gives intermediate priority to inputs other than quoted prices included in Level 1, that can be determined indirectly from the values of related assets with quoted prices in active markets are observable either directly or indirectly for assets or liabilities, such as quoted prices for similar assets or liabilities in active markets Level inputs: The fair value hierarchy gives the lowest priority to unobservable inputs and should be used only if observable inputs are not available Page: 48 Figure 1A-11 On July 10, $50,000 $49,500 is received Page: 49 Debit alignment of “cost of goods” is modified Dr Sales returns and allowances Cr Accounts receivable 4.24.2017 | Page selling price selling price | John Wiley and Sons, Inc ISBN 978-1-119-05680-5 (Part 1) WILEY CMAEXCEL LEARNING SYSTEM EXAM REVIEW 2016: SELF-STUDY GUIDE Part 1: Financial Reporting, Planning, Performance, and Control Dr Merchandise inventory (or Loss on damaged goods) Cr Cost of goods sold cost of goods cost of goods Page: 50-51 Similarly, if the allowance for doubtful accounts had a $6,000 $1,000 debit balance, then the amount needed to adjust the balance in the allowance account to the desired level would be a debit credit of $2,000 $5,000 Allowance for Doubtful Accounts 6,000 1,000 Existing balance Adjustment Desired ending balance 2,000 5,000 4,000 Page: 52 If an amount previously written off using the direct write-off method is later collected, the amount is debited to cash and credited to a revenue account, such as uncollectible accounts recovered the amount is debited to accounts receivable and credited to a revenue account such as bad debts recovered and then another entry debits cash and credits accounts receivable The first entry re-establishes the receivable Dr Accounts receivable $XX Cr Bad debts recovered $XX The second journal entry records the cash received Dr Cash $XX Cr Accounts receivable $XX Page: 69 Income Statement (partial Other revenues and gains Interest revenue Other expenses and losses Loss on sale of securities Net income Other comprehensive income Unrealized holding gain (loss) on availablefor-sale securities Total other comprehensive income Comprehensive income Page: 73 Undervalued depreciable assets ($1 million/10 years) Unrecorded intangibles ($1.5 million/15 years) Total 4.24.2017 | Page $ xxx xxx $ xxx (12,000) xxx $ xxx $ 100,000 300,000 $ 400,000 | John Wiley and Sons, Inc ISBN 978-1-119-05680-5 (Part 1) WILEY CMAEXCEL LEARNING SYSTEM EXAM REVIEW 2016: SELF-STUDY GUIDE Part 1: Financial Reporting, Planning, Performance, and Control Page: 88 Alignment modified Dr Income tax expense Dr Deferred tax liability Cr Income tax payable GAAP amount Difference IRS amount Page: 98 If the remaining 6,000 shares are reissued for $8 per share: Dr Cash 44,000 48,000 Dr Additional paid-in capital –treasury stock 4,000 Dr Retained earnings 6,000 2,000 Cr Treasury stock (6,000 × $9/share) 54,000 Par (or stated value) method In this method, treasury stock is recorded at par value and additional paid-in capital is debited for the amount in proportion to the original issue price Page: 99 The journal entry for the reacquisition of 10,000 $1 par shares (originally sold for $8 per share) for treasury stock at $9 per share would be: Dr Treasury stock 10,000 Dr Additional paid-in capital in excess of par 70,000 Dr Retained earnings 10,000 Cr Cash 90,000 If 4,000 treasury shares are reissued at $10 per share: Dr Cash 40,000 Cr Treasury stock (4,000 × $9 $1/share) Cr Additional paid-in capital—treasury stock in excess of par Page: 101 Dr Cash ($20/share × 1,000 shares) Dr Paid-in capital—stock options Cr Common stock ($8 × 1,000 shares) Cr Additional paid-in capital—common stock ([$20 – $4] 4,000 36,000 20,000 4,000 6,000 8,000 16,000 18,000 1,000 shares) Page: 104 Journal entry for the 30% stock dividend (large stock dividend): Dr Retained earnings 10,000 30,000 Cr Common stock dividend distributable 10,000 30,000 (100,000 shares × 10% 30% × $1 par/share) Dr Common stock dividend distributable 10,000 30,000 Cr Common stock 10,000 30,000 4.24.2017 | Page | John Wiley and Sons, Inc ISBN 978-1-119-05680-5 (Part 1) WILEY CMAEXCEL LEARNING SYSTEM EXAM REVIEW 2016: SELF-STUDY GUIDE Part 1: Financial Reporting, Planning, Performance, and Control Page: 109 Total estimated gross profit on the contract would be ($11,250,000 – $10,000,000) = $1,250,000, so 25% of this amount, or $312,500, is recognized as gross profit the first year Also, during the year the company billed the customer $2,250,000 and received $1,875,000 in payments Page: 111 The current-period loss (based on the example above) is calculated in Figure 1A-42, continuing from the long-term construction contract illustration previously discussed Figure 1A-42 Computation of Recognizable Loss in Current Period Cost to date (12/31/Year 2, assuming $2,500,000 was incurred in Year 2) $4,315,680 $5,000,000 Estimated costs to complete (revised) 3,231,716 6,000,000 Estimated total costs $7,547,396 $11,000,000 Percentage complete: ($4,315,680 / $7,547,396) (5,000,000/11,000,000) 57.2% 45.45% Revenue recognized in Year 2: ($6,660,000* × 57.2%) – $1,665,000† 2,144,520 2,300,625 ($11,250,000* × 45.45%) – $2,812,500† Costs incurred in Year 2,797,360 2,500,000 Loss recognized in Year $(652,840) $(199,375) *(Contract price × 45.45%) - revenue recognized in Year Revenue recognized in Year on project † Cumulative revenue recognized up to Year on project (computed in prior discussion) Page: 112 Dr Construction expense Cr Construction in progress Cr Revenue from long-term contracts 2,797,360 2,500,000 652,840 199,375 2,144,520 2,300,625 Section C: Performance Management Topic 3: Performance Measures Page: 371 Question 1C1-CQ2216 Page: 372 Question 1C1-CQ18 The financial statements show a $3,000 loss for a job that was budgeted to show a $6,000 profit Actual (purchased and used) Budget d The flexible budget variance was $900 unfavorable favorable Section D: Cost Management Topic 5: Business Process Improvement Page: 504 Please remove “product testing” from inclusion as a prevention costs Please make note that product testing is an appraisal cost 4.24.2017 | Page | John Wiley and Sons, Inc WILEY CMAEXCEL LEARNING SYSTEM EXAM REVIEW 2016: SELF-STUDY GUIDE Part 1: Financial Reporting, Planning, Performance, and Control ISBN 978-1-119-05680-5 (Part 1) Essay Exam Support Materials Page: 527 Correction to LO s Should be No not No 55: “…as outlined in Auditing Standard No 55.” Page: 648 Question 1D-ES03 The last sentence on the page beginning “Without this planning and…” should be “Without this planing and…” Note: Planing is a manufacturing process applicable to the scenario Page: 681 Under Answer B: occurrences of “gross margin” need to be replaced with “gross profit” Page: 691 Answer to Question 1D-ES03 Table A.1 Split-Off Value Total should be $1,300,000 $1,350,000 Page: 692 Answer to Question 1D-ES03 Table A.2 Split-Off Value Total should be $1,350,000 $1,300,000 Answers to Section Practice Questions Page: 739 The other available answer choices are incorrect Note that the flexible budget variance includes all variable costs variances (material, direct labor, and variable overhead) as well as the fixed overhead budget variance is the variance between the actual results and flexible budget amount, which equals $900 unfavorable 4.24.2017 | Page | John Wiley and Sons, Inc ...ISBN 978 -1- 119 -05680-5 (Part 1) WILEY CMAEXCEL LEARNING SYSTEM EXAM REVIEW 2 016 : SELF- STUDY GUIDE Part 1: Financial Reporting, Planning, Performance, and... 4.24.2 017 | Page | John Wiley and Sons, Inc WILEY CMAEXCEL LEARNING SYSTEM EXAM REVIEW 2 016 : SELF- STUDY GUIDE Part 1: Financial Reporting, Planning, Performance, and Control ISBN 978 -1- 119 -05680-5... $ 400,000 | John Wiley and Sons, Inc ISBN 978 -1- 119 -05680-5 (Part 1) WILEY CMAEXCEL LEARNING SYSTEM EXAM REVIEW 2 016 : SELF- STUDY GUIDE Part 1: Financial Reporting, Planning, Performance, and

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