[Anonymous]

Hey everyone,

I’m new here. I’m thinking of taking the FAR at the end of November (it’s my first CPA exam). But I am really unsure about myself. Maybe someone here with some experience can help me out.

I’m using Becker’s self-study. I went through all the sections, read the book, watched the videos, and did the MCQs. I got most of the stuff but some of the details I just didn’t get. Now I’m redoing all the lectures, one lecture per day. I did F1-5, will do F6-7 through the weekend, and the rest next week.

I know a lot of the stuff, but I still don’t feel comfortable. All the little details. I just can’t remember them all.

I’m studying 4-6 hours a day on Becker’s, then I watch YouTube videos on accounting. Seriously. That’s what I’m listening to on the way to and from work. (If anyone wants, I can post a link to Rutgers on YouTube, they have great lectures on topics like leases, NFP, etc., though a bit long.) Whenever I have an extra minute I’m studying. I stooped following news and sports. I have no idea how many people have Ebola, how many people ISIS recently killed, or who’s poised to win the midterms. All I’m doing is studying and studying and studying.

When I’m not studying I get nervous. I feel like I’m wasting my time. When my wife and kids talk to me, I’m getting annoyed.

At night, I dream about leases, bonds, PV, FMV, consolidations, etc.

Anyway, is getting all the little details really important? I’m taking notes when I’m doing the MCQs, see a sample after my post. Are details like the ones I have in the sample really important to remember?

I have a 4.0 GPA, yet still find FAR to be tough. I think the reason is that I have to understand things. If I don’t understand something, it just doesn’t register in my head. FAR, at least the way Becker’s is presenting it, is all about memorization. I don’t understand the logic behind most of the rules (that’s why I like the Rutgers lectures, they “explain” the rules).

Also, I’m getting between 80-95 on my MCQs. I’m comfortable in most areas including NFP. But there are areas I can improve, like pensions. When do I know I’m ready to take my exam?

Thanks for hearing me out. Just having a place to vent and rant makes me feel better….

Good luck all with your studying.

---

Here’s a sample of my notes:

Review Instalment sales F2, like-kind exchanges

Officers’ salaries ARE related parties discourse under IFRS (not GAAP)

10% of liabilities is NOT a measurement used for segment reporting

Form 6-K semiannually foreign private issuers. Unaudited

Accelerated filer 75. LARGE accelerated filer 60

Form 11-K, employee benefit plan. DO include FS of plan

Maintaining goodwill = expense

R&D done by third party on your behalf = expense

Un-mailed checks = do not record

Prototype

Goodwill impairment = reporting unit GAPP, cash generating unit IFSR

Under IFRS, goodwill impairment CV – grater of FV (minus cost to sell) and future cash flows (value in use)

Held to maturity long AND SHORT term bonds = carrying amount (unless permanently impaired)

Foreign exchange gains and losses from AFS “debt” securities = IS under IFRS

******BE CAREFUL WITH THE DATES!!!!!!!!!!!!!!!!!!!!!****

Goodwill created under equity investment is NOT subject to impairment test. The entire investment, however, is

From equity to cost = do NOT restate. Use equity for beginning and cost for end. From cost to equity, restate.

100% of sub dividends are eliminated in consolidation (NCI dividends are debited to NCI)

Actual refinancing of a short term note to long term after BS date before FS release = long term liability

Factoring = AR. Discounting = Notes receivable

Deferred tax liability arising from depreciation = Long term liability

Postdated checks is NOT cash/cash equivalent, neither is cash in sinking bond

Prepaid asset is NOT part of quick ratio

Overdrafts are recorded in liability section. It is NOT cash. (Unless it’s the same bank of a positive balance account and bank can offset the overdraft)

Interest during construction should be capitalized even for own building

Under IFRS an individual assets can NOT be revalued alone. The ENTIRE CLASS must be revalued

Interest on land should NOT be capitalized, unless during construction???????. Architect fees = building. Sewage = land improvement

Group = similar assets. Composite = dissimilar

Impairment loss is recorded in Accumulated Depreciation account

BE CAREFUL WITH THE DATES!!!!!!!!!!!!!!!!!!!!!

EXPENSE IMMEDIATELY capital assets used in r&d (if no alternative use) even if r&d takes more than a year. DO NOT DEPRECIATE

Personal FS = Sttmnt of FINANCIAL CONDITION and sttmnt of CHANGES IN NET WORTH

[Anonymous]

@zubairs, what do you wanna know about bonds? Do you understand Time Value of Money? If so, you understand bonds.

Since a bond with an interest rate of 10% equals the face amount (a 1,000, 10 year, 10% bond is the same as 1,000 today) when the market rate is also 10%, what happens when the market rate goes up? The bond is worth less. No one will lend you for %10 when they can get %11. What's the real value of the bond? The PV of the future payments at 11%.

Try it. Say you borrow 1,000 for one year and you'll pay 10%, you'll pay at year end 1,100. What's 1,100 next year worth today? If the market rate is 10%, it's 1000 (1000/1.1). If the market rate is 11%, what's 1,100 next year worth today? 991 (1100/1.11).

And if the market rate goes down to 9%, the bond is worth more, it's worth 1009 (1100/1.09).

Since bonds aren't printed every day, they don't change the interest rate of the bond. When you buy a bond, you'll get WHAT IS STATED ON THE BOND. For a ten year, 10% bond, you'll get 100 yearly and 1000 at the end, even if the market rate changes.

What will change is the price you pay for the bond. You won't pay (or lend to the issuer) 1000, you'll pay the value of all the payments. In our example, you'll pay 991 when the market rate is 11%, and 1009 when the market rate is 9%.

However, on the books the issuer will record what's on the face of the bond, a bonds payable of 1000.

Now let's see how a 11% will look. He got cash 991 so he will debit cash 991, the liability will be 1,000 (you record what the bond says).

DE: Cash 991

CR: Bonds Payable 1,000

Where is the 9 dollar difference? The $9 is a discount. He sold the 1000 bond for only 991. So he will debit a discount account.

DE: Cash 991

DE: Bond Discount (BD) 9

CR: Bonds Payable (BP) 1,000

In reality, he only borrowed 991, so his liability is really only 991. So the discount is a reduction to the BP account. His NET liability is 1000 BP minus 9 BD.

The same is true if the market rate went down. He will get 1009. His JE will be

DE: Cash 1009

CR: Bonds Payable 1000

Again a difference of 9 dollars. In reality he owes 1009. So he will debit a premium account

DE: Cash 1009

CR: Bonds Payable (BP) 1000

CR: Bonds Premium (BPR) 9

His real liability is 1009, so the $9 premium is a liability. 1000 BP plus 9 BPR is 1009.

At the end of the year he is going to pay what's stated on the bond 1,100. If the market rate was 10%, 1,000 will be payment of the liability and 100 interest. But when there's a premium or discount, what's the real interest he's paying?

Let's see. How much 991*.11? 109. Remember when the market rate is 11%, his liability is only 991. So his real interest expense is 109. But he is only paying 100 cash for interest.

DE: Interest Expense 109

CR: Cash 100

That's why he will credit the the discount account.

DE: Interest Expense 109

CR: Cash 100

CR: BD 9

Then he'll pay 1000, and debit BP and credit Cash.

The same is true when the market rate is 9%. He will pay cash 100 for interest, but what's the real interest expense? 1009*.09=91. That's his interest expense.

DE: Interest Expense 91

CR: Cash 100

Where's the other 9? It's a reduction of his liability of 1009. So he will debit BPR

DE: Interest Expense 91

DE: BPR 9

CR: Cash 100

Then he'll pay 1000, and debit BP and credit Cash.

In short: instead of having an interest expense equals to the cash he pays (which will be true when the market rate equals to the stated rate) he will have a higher or lower interest expense, and he'll have to debit or credit the premium or discount.

This is for a one year note. For longer notes, he'll have to do the same thing every year. Figure out the real interest expense (it's NOT the same as cash paid if the market rate is NOT the same as the bond rate) and credit cash for the cash he paid. The difference goes to a premium or discount.

The easiest way to do this is by starting with cash. You always know what the cash payment or the cash received is.

I hope this helps.

[CPAfit]

@aaa111 I really love the way you're explaining the whole thing from the start. The problem I face is that I know the basic concept on most topics but as soon as they start messing with dates and other details i usually start to get mcqs wrong.

Can you do exchange of assets (with commercial substance and without)

AUD - 82
BEC - 78
FAR - 78
REG - 83

HIYA!

NH Licensed CPA - Jun 2018

[Rocky123]

I have trouble understanding the nonmonetary exchanges too.That would really be helpful. Thanks.

The tallest oak in the forest was once just a little nut that held its ground.

AUD-PASS
BEC-PASS
REG-PASS
FAR-PASS

Rocky123, CPA

[Anonymous]

Nonmonetary exchanges are rather simple. Think of it this way: If I give you a Galaxy Note 3 and you give me a Galaxy Note 3 and they are both in the same condition, did anything really change? I had a Galaxy Note 3 before the transaction and I have a Galaxy Note 3 after the transaction. I’m in the same position. Now what if I give you an iPhone and you give me a Galaxy, did anything change? You bet! I got a much, much better asset, a Galaxy! So I had a gain. (Sorry iPhone fans, but iPhone sucks.)

That’s nonmonetary exchanges in short. If there’s a real change (it has economic substance), there’s a transaction and we can realize a gain. If there’s no real change (it lacks economic substance), there’s was no transaction and you can’t realize a gain.

Why is this impotent? Because a company can make artificial profit. Let’s go back to the Galaxy for Galaxy transaction. Let’s say that my Galaxy cost me 100 and I depreciated half of it. My BV is 50. Now if the Galaxy has a FV of 70 (which, of course, I can’t realize as long as there’s a sale), I can just exchange it with you for your Galaxy and realize the gain. JE

DE: Your Galaxy 70

DE: Accu. Dep. 50

CR: My Galaxy 100

CR: Gain 20

Ain’t I smart?

GAAP says no. We can’t do that. There was no real sale here. You must record the new Galaxy for the BV of the old. JE

DE: Your Galaxy 50

CR: My Galaxy 50

This is the basic concept.

Then it gets a bit complicated. What happens if there’s cash involved as well. Say your Galaxy’s FV is 80 and mine is 70, so I’ll give you my Galaxy plus 10 dollars. Again, it lacks economic substance so you can’t record a gain. You just record the new Galaxy for the BV of your Galaxy plus the amount paid. JE

DE: Your Galaxy 60

CR: My Galaxy 50

CR: Cash 10

What will happen if you receive cash? You can record a gain. How much gain? It depends if the cash is big part of the transaction. If it is 25% or more of the total value you receive, you recognize the full gain. In our example, if you get 30 plus his Galaxy (FV 70), the cash is 30% of the transaction (cash 30/by FV 70 + cash 30), you recognize the full gain. JE

DE: Your Galaxy 70

DE: Cash 30

CR: My Galxy 50

CR: Gain 50

If, however, the cash received isn’t a major part of the deal, you recognize only a partial gain. The total gain is the potential gain * cash received/ total assets received. In our example, say you’re getting his Galaxy plus 10. So you’re getting 70 FV of his Galaxy plus 10 = 80. 10/80 =.125. That’s less than 25%. Your potential gain is 30 (80 received – 50 BV of your Galaxy), so your gain is 3.75 (30*.125). JE

DE: Your Galaxy 43.75 (PLUG)

DE: Cash 10

CR: My Galxy 50

CR: Gain 3.75

This JE is a bit complicated at the first glance. But it’s not. We have all amount but the debit for Your Galaxy. We start with cash, we know it’s 10, we also know MY Galaxy has a BV of 50, and we figured out the gain of 3.75. The only thing that’s left to do is figure out how much we should record Your Galaxy for. It’s the difference between the debits and the credits, 50+3.75-10=43.75.

One more thing: you always record a loss.

In short: ALWAYS record a loss. Never record a gain if you paid cash. If you received cash, you can record a gain (the 25% rule).

[Tripp11]

@aaa111 – You'll be thankful for those journal entries you keep writing down the day of the exam. Great job!

AUD - 93
BEC - 80
REG - 86
FAR - 83

[Anonymous]

Ha you should pass FAR no problem. I over prepared a bit for my first exam too. Now hopefully I didn't slack off on FAR too much.

[yourmomsaCPA]

I'd go take the exam ASAP. You can start studying for Aud and take it Jan 2nd. Get this thing over with. You and a wife and kids. I promise you'll pass with all that you've done so far. Hell, I took REG and never made higher than a 65 on the practice tests.

FAR - 87 2/18/14
AUD - 84 4/2/14
REG - 87 7/23/14
BEC - 78 8/26/14

I'm finally an *official* CPA - TX

[Tux]

aaa111 – Are you providing answers to others' questions without looking at your notes? If so, you're amazing!!

I fully support you wanting to feel thorough in your preparation and not commit too soon.

I'm that way too.

playonwards had good advice about your schedule possibly leading to burnout before this is all done. You'll have to pace yourself. Get some rest!

Also, I don't know how long you've been studying for FAR but remember that once your 18 month clock starts, you'll have to fly through the other exams. Make sure that you can take each following exam within the following test window, which will give you about 3 months to study for each – max 4 months.

Kimboroni has good point, too, about scheduling for end of Nov. Those spots will fill up FAST. If you're studying this much, I assume your schedule is flexible, so just be prepared to take whatever spots are available, or possibly drive to a neighboring town to test.

You're doing great, aaa111!

Good luck.

P.S. No matter how much you study, be prepared for questions that will throw you off and come out of left field…..

I was thoroughly prepared for FAR. It was my first CPA exam. The very first question stumped me – big time. I had no idea what they were asking or how to answer the question. I sort of froze and immediately thought – “I'm in over my head.” I thought I was doomed.

BUT, I just guessed, flagged it, and moved on. Overall, the exam got better after that. Maybe that was a pre-test trial question. I don't know. It made my heart skip a beat, but I kept my cool and made sure to keep my focus through the other questions.

Bottom line – don't let things like that throw you off, or increase your anxiety to the point where you forget everything you've learned.

FAR - 86 - 2/27/14
AUD - 75 - 5/29/14
BEC - 80 - 8/31/14
REG - 89 - 2/27/15
Praise Jesus! I'm done!!

Study resources:
Becker
Wiley test bank

[Author]

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