[jeff]

Welcome to the Q2 2017 CPA Exam Study Group for FAR. 🙂

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

[HoldMyBeerCPA]

Hey all, thanks for the refresher on non-monetary transactions. Didn't know gains were taken under consideration if cash was paid out. Ya'll the real MVPs.

In any case, I have 4 days left…

My scores are as NINJA MCQ scores are as follows.

As you can see, I'm still getting curb stomped in Government/NFP. Other than that I think I'm in pretty decent shape to get a score higher than a 10 🙂

In all seriousness, with how busy I've been at work I'm running on fumes and five hours of sleep per night at this point. I took the next two days off work, but, honestly, I'm not sure how to approach it.

Go all out on a final binge study and complete the NINJA MCQs or just relax and re-charge my batteries before Sunday

[aatoural]

This is the way I solve it. Not using formulas at all because they just confuse me.
Q-1
The problem says Winn is trying to exchange a truck that has a CV of 16,800 for a new truck with FV of 20,500 + cash of 6,000. This means that the deal for him is causing a loss because he is giving away 22,500 (16,800 + 6,000), while he is only getting 20,500 in return. This is how I explain the JE to myself. I gave out my machine so I credit the truck I have to get it out of my books and I give cash on top as well so that is my other credit. My debit is the new asset I acquire and the loss is a “plug”.

Q-2
Here the problem says the old asset has a CV of 12,000 and a FV of 20,000. Thus I have a gain of 8,000 which I only recognize if the boot I will be receiving is in excess of the 25% of the consideration given (which is). My entry then is as above and the new truck is the “plug” figure in this case.

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[aatoural]

@Turbosandwich – If you have any questions on Governmental I can help with post it.

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[mtaylo24]

@aatoural, Sorry to confuse, I actually understand how to get to the answer. I am just having issues with the monetary test. If you calculate it one way its 22%, if you calculate it the next its 29%. It cash/FMV in the first question and cash/(FMV+cash) in the second.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[krstnam]

I really wanted to make sure that I knew how to do non-mon's. BECKER said it was a must know. Three exams, no non-mon questions. LOL

But you know since I said that, you will probably be getting those questions, LOL

[Jj]

@wannafree- thanks for the right up. I just need to look further into FV method as you said it now goes to OCI which is weird.

@mtaylo24- my material says any time a boot is paid no gain is recognized. Is this wrong ? sometimes I feekl like Becker dumbs down the info so much that it teaches the wrong facts. so if you pay the boot, and the boot/FV is over 25% you rec the full gain?

[krstnam]

I did non-mon's the Becker way too.

1. Find the “math” gain. FV old asset – CV old asset = gain (if loss fully recognize)
2. Does it count? (cash received)/(cash received+FMV new machine)=X%
If X is > 25%, it's considered a monetary transaction – follow regular sale rules
If x is < 25% calc the gain
3. X% multiply by $ received. This is your gain.
4. Journal Entry
CR: original Cost old building
CR: gain
DR: accumulated depr on old asset
DR: total cash received
DR: new building, this will be your plug.

[Jj]

@krstnam- what about when boot is paid? becker says not to recognize a gain

[mtaylo24]

Exchanges measured at carrying amount (Gleim)

“If boot constitutes 25% or more of the fair value of the exchange, the exchange is treated as a monetary exchange. Both parties record the transaction at fair value and recognize any gain or loss in full.”

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[Wannafree]

@krstnam I am surprised you didn't see Non MO in three exams.I saw last exam (March ) and had to do calculations.2 much for mCQ.

[Jj]

Here is what Becker says..

Basically once you do the 25% rule, if the boot is under 25% and it lacks commercial substance “If the exchange lacks commercial substance and boot is paid, no gain is recognized.” I'm assuming if its a monetary transaction (over 25%) and its boot paid you still recognize full gain.
If boot is received and its a non-monetary exchange (under 25%), you record the correct % of gain.. this

[aatoural]

Ace Corp. entered into a troubled debt restructuring agreement with National Bank. National agreed to accept land with a carrying amount of $75,000 and a fair value of $100,000 in payment and cancellation of a note (from Ace) with a carrying amount of $150,000. Disregarding income taxes, what amount should Ace report as a gain in its income statement?

A.$0
B.$25,000
C.$50,000 CORRECT
D.$75,000

What am I missing here? The question asks for total gain recognized in IS. What are we assuming the only gain recognized is the $50 from the debt restructuring and not both the $50 of debt restructuring and the $25 in disposal of land?

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[mtaylo24]

@aatoural ummmm, idk, but the answer should be 75k lol

Question: 2 Ace Corp. entered into a troubled debt restructuring agreement with National Bank. National agreed to accept land with a carrying amount of $75,000 and a fair value of $100,000 in exchange for a note with a carrying amount and fair value of $150,000. Disregarding income taxes, what amount should Ace report as a gain in its income statement?
A. $75,000
Answer (A) is correct.
The debtor must recognize a gain as a result of the extinguishment of debt because the carrying amount of the debt is greater than the carrying amount of the asset given. Accordingly, Ace should recognize a total gain of $75,000 equal to the sum of (1) the $25,000 gain on appreciation of the land recognized on its disposal ($100,000 fair value –$75,000 carrying amount) and (2) the $50,000 gain on restructuring for the excess of the carrying amount of the debt over the fair value of the land ($150,000 – $100,000).
B. $25,000
C. $50,000
D. $0

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[aatoural]

That is exactly what I thought it should be. Maybe it is a glitch from Becker. That was Gleim's explanation right @mtaylo24?

Does anybody that uses Becker gets the same results as me on this question from Debt Restructuring on their software? Is Module 6 Chapter 5.

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[Wannafree]

List of two step calculations topic.
Last time in FAR exam ( March ) there were many MCQ questions and at least 1 SIM question required me to do two step calculations e.g. Test of impairment and then calculation of impairment.
This time I want to pass and preparing on all those points where I felt tired in exam.Please help me list the topics/type of problem which require two step calculations.
Your input is appreciated.

[Author]

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