[jeff]

Resources:

Free Study Planner + FAR NINJA Notes (Governmental Accounting): https://www.another71.com/cpa-exam-study-plan/

FAR Exam Experience: https://www.another71.com/cpa-exam-forum/topic/far-exam-experience-official-thread

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

[mjp44]

@peetree can you explain your method of using J/E for bonds and capital lease questions? I have gone through 3/4 of my review (everything but governmental and not-for-profit) and I have learned that bonds are my major weakness. Theres a lot to take in with the questions and I usually get all the interest rates screwed up. Any tips/methods on how to approach these questions would be appreciated.

FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)

If it's important to you, you will find a way. If it isn't, you will find an excuse.

[peetree]

@mjp44

Questions about Bonds and Leases have one thing in common. They both try to throw a bunch of numbers at you in the hopes that you'll freak out, panic, and choose incorrectly.

This is how I attack these types of problems.

“On December 31, Moss Co. issued $1,000,000 of 11% bonds at 109. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitled the bondholder to purchase one share of $5 par common stock for $25. Immediately after issuance, the market value of each warrant was $4. On December 31, what amount should moss record as discount or premium on issuance of bonds?”

So you get done reading that and you go, “fuck man all of that and they only want to know the premium or discount on the bond?!?!” So instead of trying to do all the math on your calculator to try to figure out what the premium or discount is, I'm saying just right the journal entry to record the transaction out. It allows your mind to go one step at a time while getting all the necessary information on paper.

I normally reserve at least 5 lines on my piece of notebook paper to record the entry.

Step 1: Identify the bond payable. This is easy right? because its given to us in the question. Remember Bond payable in your ledger will always be recorded as face amount, regardless of what it was issued at.

Our 1 line of the JE

Cr. Bond Payable. $1,000,000

Step 2: How much cash did we receive for this bad boy. Well it says we issued it at “109” so we can multiply our face value to the 109 to get. $1,090,000. We'll debit our cash

*Note, I'll just keep building the JE on my notebook paper*

Dr. Cash $1,090,000

Cr. Bond Payable $1,000,000

Step 3: We have warrants stated in the question, and its telling us the fair value of the warrants but its not telling us the fair value of the bonds. That means we do the warrants only method. (easy to remember because you only have FMV for the WARRANTS) “Each $1,000 bond was issued with 50 detachable warrants” So how many bonds did we issue.

$1,000,000/$1,000 = 1,000 * 50 warrants = 50,000 warrants * FMV of warrants (4$) = $200,000

We'll add the warrants to our journal entry now too.

Dr. Cash $1,090,000

Cr. Bond Payable $1,000,000

Cr. APIC Warrants $200,000

Step 4: Balance your journal entry. Discount of $110,000.00

Dr. Cash $1,090,000

Dr. Discount $110,000

Cr. Bond Payable $1,000,000

Cr. APIC Warrants $200,000

Now my reasoning for doing that for every single problem that relates to bonds is because bond questions can be very tricky. The examiners like to think that by putting a bunch of numbers in front of you, they'll be able to make you panic.

By going through every practice problem writing out the full journal entry, you'll become very comfortable with where to get your numbers and you won't have to pick apart or balance a journal entry in your head to figure out what your answer needs to be. Also by practicing these problems this way, you're essentially practicing how to answer a question like this 4 different ways. What if it asked you what the journal entry to record the warrants was? you already got it covered. What if it wanted to know the cash proceeds? you already have that covered. For me, I wanted to simplify the process of answering these types of questions, level the playing field. I feel by practicing these problems this way. Bonds become easy easy points.

FAR 02/21/13 - 95
REG 07/02/13 - 87
AUD 08/02/13 - 94
BEC 08/30/13 - 85
Ethics Exam - 90

Illinois candidate awaiting his license

Used Becker Self Study | Ninja Audio | Becker Flash Cards | Ninja Notes | Wiley Test Bank

[MCLKT]

Peetree you are a beast!!!!

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[peetree]

…hopefully it turns into a passing score on FAR.

I'm getting pretty nervous here.

FAR 02/21/13 - 95
REG 07/02/13 - 87
AUD 08/02/13 - 94
BEC 08/30/13 - 85
Ethics Exam - 90

Illinois candidate awaiting his license

Used Becker Self Study | Ninja Audio | Becker Flash Cards | Ninja Notes | Wiley Test Bank

[MCLKT]

It will.

So I just listened to a live blog radio broadcast for Yaeger. And Phil mentioned be sure to know Cash Flow and Consolidations.

I think I'm going to need to go back to those early next week.

Does anybody have notes or spreadsheet comparing and contrasting with IFRS/GAAP?

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[peetree]

Transaction || U.S. GAAP || IFRS

Interest Received || CFO || CFO or CFI

Interest Paid || CFO || CFO or CFF

Dividends Received || CFO || CFO or CFI

Dividends Paid || CFF || CFO or CFF

Taxes Paid || CFO || CFO, CFI, CFF

Once you pick a type of reporting for cash flows under IFRS, you have to keep that same one. No switchy switchy.

FAR 02/21/13 - 95
REG 07/02/13 - 87
AUD 08/02/13 - 94
BEC 08/30/13 - 85
Ethics Exam - 90

Illinois candidate awaiting his license

Used Becker Self Study | Ninja Audio | Becker Flash Cards | Ninja Notes | Wiley Test Bank

[MCLKT]

THANKS!

You…. we (FAR fam)… are sooooooo going to pass

🙂

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[peetree]

WHATS GOING ON FAR FAM!

First of all Happy Friday! My girlfriend is aware that I will basically be non-existent as I will be pounding away multiple choice questions all weekend long.

I need to get through my re-work of F8-10 by Sunday, hopefully by Saturday so I can start my progress test marathon and final test run the following week.

Good luck to everyone today and this weekend!

FAR 02/21/13 - 95
REG 07/02/13 - 87
AUD 08/02/13 - 94
BEC 08/30/13 - 85
Ethics Exam - 90

Illinois candidate awaiting his license

Used Becker Self Study | Ninja Audio | Becker Flash Cards | Ninja Notes | Wiley Test Bank

[nolifecpa]

@peetree

i think you have a career at becker or yaeger or whatever review course…good explaination on bonds

REG-65,71,74,73,70,74,79
BEC-60's,60's,69,71,76*,78
FAR-67,66,65,79
AUD-54,60's,65,83*,69,80
*expired

DONE

[peetree]

Thanks @nolifecpa

I always said once I got older, I didn't want to retire. I wanted to teach intro to accounting.

I want to be that crazy old man in a sweater vest yelling at kids about debits and credits.

FAR 02/21/13 - 95
REG 07/02/13 - 87
AUD 08/02/13 - 94
BEC 08/30/13 - 85
Ethics Exam - 90

Illinois candidate awaiting his license

Used Becker Self Study | Ninja Audio | Becker Flash Cards | Ninja Notes | Wiley Test Bank

[WICPA06]

@peetree – you are the man! that explanation of bonds was awesome! I use a similar system for going through stockholder's equity questions which really helps. I'm going to start using this approach with bonds. I feel alright about bonds, but this might make me get to the answer quicker, which could be very beneficial.

I start my final review today with my test in two weeks. Getting down to the final drive. I'm going to avenge the 74 I got last time. Watch out FAR!

BEC - 77 (lost credit), 4/5/13
AUD - 83
REG - 77
FAR - 73, 74, 80! One more to go!!

[Anonymous]

Peetre, really good explaination,, may be I should come for private class with you…which city/state you are in if you don't mind telling?

[MCLKT]

Hey FAR Ninjas,

I was pretty unproductive study-wise yesterday. Trying to close the month and have a TON of work. I was just not in study mode. Now of course I am feeling super guilty. This weekend will be a power weekend for sure. POMODORO, here I come!

I'm wrapping up a review of 1/2 of the material and taking a full blown practice exam Sunday. (I really hope I'm between 65-70'ish.

Next week, I'll finish the other 1/2 review and take a second practice exam. With a goal of 75.

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[peetree]

I'm in the chicagoland area and you can normally find me at the local library (because I can't stay focused at home)

@WICPA06 What is your plan of attack for Equity questions? I'm curious!!

FAR 02/21/13 - 95
REG 07/02/13 - 87
AUD 08/02/13 - 94
BEC 08/30/13 - 85
Ethics Exam - 90

Illinois candidate awaiting his license

Used Becker Self Study | Ninja Audio | Becker Flash Cards | Ninja Notes | Wiley Test Bank

[WICPA06]

@peetree – I just think about it from an entry standpoint, especially for treasury stock transactions either through the par method or the cost method. I go through every entry, so if they give you a question with the issuance details, the buy back details, and resale details, I write out every single journal entry in practice no matter what. They might ask for the ending balance of retained earnings and you would have that. They might ask for the value of treasury stock at the buy back and you have that. By writing out every single journal entry for each practice question, you will have the basics down pat and not just try to memorize each thing.

If you think about equity transactions logically, it really makes sense. Cost method is easy. You record the entry at the cost you paid to buy back the shares and carry that value forward. Any excess after that is plugged to APIC. Par method you always have to note the “par” for common stock and apic at the issuance transaction. The buy back or sell of can never exceed that amount. The plug then is usually towards retained earnings.

BEC - 77 (lost credit), 4/5/13
AUD - 83
REG - 77
FAR - 73, 74, 80! One more to go!!

[Author]

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