[jeff]

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

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

[notanauditor]

I just took FAR this morning so I wanted to share my experience with it. The MCQs and the first sim testlet are pretty manageable. Some of the MCQs that were challenging for me not because they were tricky or tough but just long and time-consuming to calculate. For this reason I almost spent 2 hours on all the MCQs because I had to force myself to double check my answers if it involves more calculations lol…However though there were plenty of easy conceptual ones so make sure you are familiar with the basics of every topic. I had 4 DRS ones which I agree with some folks here that they weren't difficult once you go through all the documents etc. I actually felt at ease as I saw more DRS coming in. One thing I found helpful is to calculate the needed adjustment or to determine whether it's a debit or credit first and then quickly go through all the options to eliminate the wrong ones. It could be just 1 or 2 you are picking from at that point given they gave me 5-7 options for each question. I saved a bunch of time doing that.

Also weird enough I didn't get lots of gov/NFP ones so thank god.

Research was pretty easy. I think what really caught me off guard was sims that are in a real life scenarios or industries that I just have no experience with at all. So assuming I know all the knowledge and how to do the JE, it could be frustrating when they throw industry jargon and specific ways to recognize revenue at you and all of a sudden it doubles up the time…I would say definitely leave at least 1 hour and 45 mins for the last 2 testlets.

I hope this helps since y'all helped me so much!

[CPAIN2K17]

@beantown it stands for credit-adjusted risk free rate I think

[CPAIN2K17]

@beantown credit adjusted risk free rate is used to calculate accretion expense. Here is a ninja MCQ on it:

At the beginning of the year, the carrying value of an asset was $1,000,000 with 20 years of remaining life. The fair value of the liability for the asset retirement obligation was $100,000. At year-end, the carrying value of the asset was $950,000. The risk-free interest rate was 5%. The credit-adjusted risk-free interest rate was 10%. What was the amount of accretion expense for the year related to the asset retirement obligation?

Correct A.
$10,000

B.
$50,000

C.
$95,000

D.
$100,000

You are correct, the answer is A.

Changes in the value of a liability for an asset retirement obligation must be measured by applying an interest method of allocation using a credit-adjusted, risk-free interest rate. Accretion expense would be:

$100,000 × 0.10 = $10,000

[CPAIN2K17]

@wannafree here is an example on capitalized interest, is that what you're looking for?

https://accountinginfo.com/study/ppe/int-cap-ex03.pdf

[Jj]

Thanks! @cpain2k17

[Anonymous]

hey @jia2705 thanks for sharing. How much did you prepare for sims before going into the test? What percent of MCQ's did you cover in your study material?

thanks

[CPAcandidate3]

Can someone explain why this deferred income tax liability is considered a current liability on the balance sheet? I thought all deferred income tax asset/liabilities were classified as non-current on the balance sheet.

Bake Co.'s trial balance included the following at December 31, 20X1:

Accounts payable $ 80,000
Bonds payable, due 20X2 300,000
Discount on bonds payable 15,000
Deferred income tax liability 25,000

The deferred income tax liability is not related to an asset for financial accounting purposes and is expected to reverse in 20X2. What amount should be included in the current liability section of Bake's December 31, 20X1, balance sheet (statement of financial position)?

Incorrect A.
$365,000

B.
$390,000

C.
$395,000

D.
$420,000

[mtaylo24]

Thats wrong….that question was never updated in Ninja

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)

[Jj]

Why

[mtaylo24]

the deferred tax liability should now be non-current because of the q1 2017 changes.

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)

[Jj]

Sorry I didn't read the question when I posted I though you were talking about the aro question

[CPAIN2K17]

Who wants to give it a shot? 🙂
Getting this question on the exam would make my heart drop lol

On December 31 of the previous year, Jason Company adopted the dollar-value LIFO retail inventory method. Inventory data are as follows:

LIFO Cost Retail
Inventory, 12/31 previous year $360,000 $500,000
Inventory, 12/31 current year $0 660,000
Increase in price level for current year 10%
Cost to retail ratio for current year 70%

Under the LIFO retail method, Jason’s inventory at December 31 of the current year should be:

A.
$437,000.

B.
$462,000.

C.
$472,000.

D.
$483,200.

[mtaylo24]

Is it a?

500,000 * 1.1 * (360/500) = 360,000
**100,000 * 1.1 * 70% = 77,000
360,000 + 77,000 = 437,000

**100,000 layer = (660,000/1.1) – 500,000

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)

[CPAIN2K17]

Yes it is! Nice job! I had no clue how to solve it lol

[mtaylo24]

I always take a long pause everytime i see that one lol

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)

[Author]

Replies