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

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 1 inputs: The fair value hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities.
Level 2 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 3 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

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selling price
selling price

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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
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 ($1.5 million/15 5 years)
Total
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$ xxx
xxx
$ xxx

(12,000)
xxx
$ xxx

$ 100,000
300,000
$ 400,000
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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

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

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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

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
2,797,360
2,500,000
Loss recognized in Year 2
$(652,840)
$(199,375)
*(Contract price × 45.45%) - revenue recognized in Year 1 Revenue recognized in Year 2 on project.
† Cumulative revenue recognized up to Year 1 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
1. Please remove “product testing” from inclusion as a prevention costs.
2. Please make note that product testing is an appraisal cost.
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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. 5 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.

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