[Q2] FAR Study Group 2014 - Page 109

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    Topic
  • February 6, 2014 at 9:58 pm #183478
    jeff
    Keymaster

    I’ve had a few requests for April/May Study Groups…March will be here before you know it.

    In order to take an early April exam, you should begin studying…now. 🙂

    Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

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  • March 28, 2014 at 2:43 am #562135
    Anonymous
    Inactive

    The 2 fundamental qualitative characteristics are relevance and faithful representation. Faithful representation is free from bias (neutral)

    March 28, 2014 at 2:46 am #562136
    NJPRU
    Member

    Relevance & Faithful Rep (I believe the freedom from bias is Faithful Rep).

    Interest Expense (DR) 4200

    Premium (DR) 800

    Cash (CR) 5000

    AUD: DONE
    FAR: DONE
    BEC: DONE
    REG: DONE

    IM GOING TO BE A CPA!!!!!

    March 28, 2014 at 2:46 am #562137
    jrosen92770
    Participant

    Ok the 105 means the bond sold at a premium. The premium will offset the interest expense for the semi annual payment correct? Is the maturity date necessary to complete the question?

    BEC - 5/26/2013 75
    REG - 8/31/2013 82
    AUD - 11/24/2013 74, 2/9/2014 92
    FAR - 5/25/2014 85

    NY CPA

    March 28, 2014 at 2:46 am #562138
    NJPRU
    Member

    oops. i didn't see the 6 months part!

    AUD: DONE
    FAR: DONE
    BEC: DONE
    REG: DONE

    IM GOING TO BE A CPA!!!!!

    March 28, 2014 at 2:47 am #562139
    jrosen92770
    Participant

    Can you all explain the bond answer if correct.

    BEC - 5/26/2013 75
    REG - 8/31/2013 82
    AUD - 11/24/2013 74, 2/9/2014 92
    FAR - 5/25/2014 85

    NY CPA

    March 28, 2014 at 2:52 am #562140
    NJPRU
    Member

    The premium is 100,000 x 105 (or 1.05) which gives you 105,000

    Your interest expense is 105,000 x Market of 4% = 4200

    Your cash paid for interest on the face of the bond = 100,000 x 5% = 5000

    The difference is the amortization of the premium of 800.

    but this is for a full year as I didn't see the 6 months part until it was too late. lol

    AUD: DONE
    FAR: DONE
    BEC: DONE
    REG: DONE

    IM GOING TO BE A CPA!!!!!

    March 28, 2014 at 2:52 am #562141
    Anonymous
    Inactive

    I keep forgetting you guys are sitting in May. The amortization table might be a little ambitious in your early studies. Sorry about that. I keep practicing those so I can make sure I have them down. The table would look like this

    Payment # 1

    Paid Amount = 100,000 * .025 = 2,500

    Interest Expense = 105,000 * .02 = 2,100

    Premium Amortization = 2,500 – 2,100 = 400

    Bond Premium = 5,000 – 400 = 4,600

    Carrying amount = 105,000 – 400 = 104,600

    Except they would go across as columns then use the new carrying value to calculate the next interest expense, while the paid amount will always be 2,500 at each payment period.

    March 28, 2014 at 2:54 am #562142
    jrosen92770
    Participant

    If the non-controlling interest equals $100,000 or 10%, what is the FV of the subsidiary under the Full Goodwill Method.

    BEC - 5/26/2013 75
    REG - 8/31/2013 82
    AUD - 11/24/2013 74, 2/9/2014 92
    FAR - 5/25/2014 85

    NY CPA

    March 28, 2014 at 2:57 am #562143
    NJPRU
    Member

    I started solving for June 30th and got that answer then continued with Dec 31 just for practice! Thanks for that Mom!

    This has been a great night for both Goodwill, Franchise Acc, and R&D for me, plus a break for review of other stuff!

    Thanks for your help guys – I'm going to sleep now. Still not feeling too well.

    Have a great night and good luck!

    AUD: DONE
    FAR: DONE
    BEC: DONE
    REG: DONE

    IM GOING TO BE A CPA!!!!!

    March 28, 2014 at 2:58 am #562144
    Anonymous
    Inactive

    @JRosen–The difference between the payment amount and the expense will be your premium amortization. You deduct the premium amortization from the initial premium of 5,000 to get your balance in the premium account. You also deduct the premium amortization from the initial carrying value of 105,000 to get your new carrying amount. At the end of the payments your premium account will be $0 and your carrying value will equal face value of 100,000. The JE at the payment date will be

    DR Premium on Bond $400

    DR Interest Expense $2,100

    CR Cash $2,500

    March 28, 2014 at 3:00 am #562145
    Anonymous
    Inactive

    I am awful at Goodwill method, but I'm going to go with $1,000,000 for the FV = 100,000/.10

    March 28, 2014 at 3:00 am #562146
    jrosen92770
    Participant

    Why the market rate x $105k for expense?

    BEC - 5/26/2013 75
    REG - 8/31/2013 82
    AUD - 11/24/2013 74, 2/9/2014 92
    FAR - 5/25/2014 85

    NY CPA

    March 28, 2014 at 3:01 am #562147
    Anonymous
    Inactive

    I hope you feel better NJPRU!

    March 28, 2014 at 3:01 am #562148
    jrosen92770
    Participant

    You are correct…

    BEC - 5/26/2013 75
    REG - 8/31/2013 82
    AUD - 11/24/2013 74, 2/9/2014 92
    FAR - 5/25/2014 85

    NY CPA

    March 28, 2014 at 3:01 am #562149
    Anonymous
    Inactive

    You only use the stated rate to get the payment amount. You use the market rate in your present value tables and to get interest expense.

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