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venchlu
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Posted: 21 May 2010 at 16:19 | IP Logged  

This question is from Becker final exam 2 testlet 1-

 

A municipality with a December 31 year-end bills its occupational licenses to businesses in the town on December 15, 20X1.  The license authorizes the business to operate during the year beginning January 1, 20X2.  Discounts are available for payments made prior to December 31, 20X1, however payment is expected no later than January 31, 20X2.  As a result of the billing, the municipality would:

A. Record a receivable and occupational license revenue for the year ended December 31, 20X1.

b. Record a receivable and deferred occupational license revenue at December 31, 20X1.

C, Record a receivable to the extent of estimated collections prior to December 31.

d. Give no recognition to accrued occupational license revenue.

The correct answer is D.

Can someone explain to me why the answer is D? I chose A.

Thanks



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movinghome
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Posted: 22 May 2010 at 00:05 | IP Logged  

Venchlu,

How are you doing with Becker Final exam 1?

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phung80219
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Posted: 22 May 2010 at 00:45 | IP Logged  

My answer was A as well. After a little research I came
up with the following
reasoning for answer D:

The first question to ask is: what type of revenue is
this?

Derived tax revenue
Imposed non-exchange revenue
Government mandated non-exchange
Voluntary non-exchange

Definitions are on page F8-18 (FAR 2010).

I say it is Imposed nonexchange and b(2) in the FAR text
states "Receivables are
recorded when the government has an enforceable legal
claim."

Occupational license is not yet an enforceable claim in
December 20X1. It is an
enforceable legal claim if the license business was to
continue onto Jan 20X2. The
business can decide to stop operations in 20X2 and so
there wouldn't be an enforceable
claim. (Why book revenue and a receivable if there is no
certainty that licenses will
be renewed?)

An exception to this would be property taxes. This is
because someone is going pay
property taxes regardless. Someone is going to own that
real estate next year. And you
know how property taxes work... tax liens, tax lien
sales. Government will get their money.
Therefore with property taxes there is an enforceable
legal claim.

I made all that up. Hope its the right solution!

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venchlu
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Posted: 22 May 2010 at 08:17 | IP Logged  

phung80219 wrote:
My answer was A as well. After a little research I came up with the following
reasoning for answer D:

The first question to ask is: what type of revenue is this?

Derived tax revenue
Imposed non-exchange revenue
Government mandated non-exchange
Voluntary non-exchange

Definitions are on page F8-18 (FAR 2010).

I say it is Imposed nonexchange and b(2) in the FAR text states "Receivables are
recorded when the government has an enforceable legal claim."

Occupational license is not yet an enforceable claim in December 20X1. It is an
enforceable legal claim if the license business was to continue onto Jan 20X2. The
business can decide to stop operations in 20X2 and so there wouldn't be an enforceable
claim. (Why book revenue and a receivable if there is no certainty that licenses will
be renewed?)

An exception to this would be property taxes. This is because someone is going pay
property taxes regardless. Someone is going to own that real estate next year. And you
know how property taxes work... tax liens, tax lien sales. Government will get their money.
Therefore with property taxes there is an enforceable legal claim.

I made all that up. Hope its the right solution!

I have to agree with you. But this question is really a bit overkilled in my opinion...I have found that some questions of F8 and F9 in final exam of becker are really hard ....



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FAR 94
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venchlu
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Posted: 22 May 2010 at 08:20 | IP Logged  

hi movinghome,

I would say i only scored around 75% ..no including any simulations..

But i have practiced final exam 1 second time this week, and the score improved a lot...

Well, don't worry about the score..just try to understand those questions u got wrong...

btw-final exam 2 - testlet 2 is killer...i did even worse compare to final exam 1..



__________________
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