FAR Study Group – Q1 2018 - Page 20

Isn't bonds payable always on the Face value?

if the bonds are retired at 100 the journal entry would be

DR bonds payable 750,000
DR loss on retirement 10,000
CR cash 750,000
CR discount on bonds 10,000

Getting ready for FAR on 3/8/18 (last possible testing date in Q1!) and I'm not sure where I need to be in terms of trending/average score. I'm at a 74% trending, with average of 69%…I'm going to keep at it until Thursday morning…is there a safe zone?

Trying to make this my LAST test!!!

FAR Page 14 the application example: is the $20,000 unrealized gain on equity securities already included in Net Income? Please clarify the explanation of the correct answer as “C”.

Please help. Thanks!

How was the additional 2% derived for the estimated percentage uncollectible?

@Mccpa thank you for at least checking the link. It’s odd that you could not open it. It’s showing 10+ views already. I still don’t know how the estimated percentage uncollectible goes up by 2% in all periods. I just have to keep going though, LOL.

Becker no longer covers partnership accounting in FAR. But the NINJA audio still includes it.
Anyway, it won’t take you over 5 minutes to review this topic. It won’t hurt to at least have a quick refresher of this topic.
https://accountingexplained.com/financial/partnerships/admission-of-a-partner

My weak areas are intercompany transactions, consolidation, etc. I’m still figuring out what else to cram for during these last few days of this testing window.

Hello guys,

I came across a Contingencies SIM on AICPA FAR's sample test I was hoping to get your insight on.

For ease of reference, the SIM is linked here (4 files) and contains the instructions as well as the 2 relevant exhibits:

https://drive.google.com/file/d/13mvkyVN8I_E0tXISh0EXD3IMp10drQjZ/view?usp=sharing
https://drive.google.com/file/d/1UmX80XBaX-NCSgvIGkSrpe7H6Qe7SS_G/view?usp=sharing
https://drive.google.com/file/d/1uC1oRuAj6AXHnKu_uNuHyuDrY_hVuuYk/view?usp=sharing
https://drive.google.com/file/d/19B8lk2-OV6_insFnuFTyNTW6q2j1RrAw/view?usp=sharing

My question relates to the accrual on the Loan Guarantee: If REV already recognized a $150K liability for this loan guarantee in the past (as stated in one of the exhibits), why then doesn't it just recognize another $350K Liability on its Year 3 Balance Sheet? Why does it need to recognize a $500K Liability, which is AICPA's answer?

My guess is that while REV recognized a $150K liability previously on this guarantee, it was not a Loss Contingency Liability. But not that the probability that a Liability has been incurred is Probable (since Sunnytown was unable to pay its loan due on 12/31/Y3) and the Amount is Reasonably estimable ($500K outstanding loan), a Liability for the Full amount must be incurred. So perhaps, the old liability ($150K) would now be debited and a Contingency Liability of ($500K) would be credited in the Y3 Financial Statements.

Appreciate any insight on this.

Thanks!

@Amor. Thanks for the response. The link clarifies this situation.

According to the Article referenced and ASC 460 (you can sign up for free here to get access to FASB codification: https://asc.fasb.org/section&trid=2155911), looks like REV first recorded a noncontingent liability for $150K and after the triggering event (bankruptcy/default of third party) occurred, REV now needs to record a Contingent Liability as the amount is reasonably estimable and payment is probable. In this case, since $150K has already been recorded, I think the company would just reclassify this Liability as Contingent and record another $350K, so all in all, a Contingent Liability of $500K is recorded.

On the same SIM, could you please briefly give the rationale for your answers on:

1) Letter of Credit- I think that since it's actually an Asset there is no need to accrue, but why does REV needed to disclose?

2) Property Insurance Claim- I think that since the deductible doesn't come directly out of REV's pocket (it's just a reduction in future proceeds from the insurance), there is no need to accrue for it, so a disclosure is enough. What's your take?

Thanks again!