[jeff]

FAR Resources:

Free FAR Notes & Audio – https://www.another71.com/cpa-exam-study-plan

FAR 10 Point Combo: https://www.another71.com/products-page/ten-point-combo

FAR Score Release: https://www.another71.com/cpa-exam-scores-results-release

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

[jeff]

NINJA Kevin: Battling Flu and Ice Storms … and FAR https://www.another71.com/ninja-cpa-blogger-kenley-3/

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

[jeff]

NINJA Kevin: Battling Flu and Ice Storms … and FAR https://www.another71.com/ninja-cpa-blogger-kenley-3/

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

[sherlockholmes159]

Hi guys, i am gonna take the FAR exam within less than 2 weeks. I have only done the NINJA notes and a few Wiley questions. I know that it's a little bit rush but i really want to get it done as soon as possible. I do have a strong background in financial accounting though. Anybody have any opinion on the time frame. Thanks

BEC (11/02/2013)- 90
AUD (12/06/2013)- 75
FAR (01/04/2014)- 84
REG 69, 74, (waiting for 11/23/14)

[sherlockholmes159]

Hi guys, i am gonna take the FAR exam within less than 2 weeks. I have only done the NINJA notes and a few Wiley questions. I know that it's a little bit rush but i really want to get it done as soon as possible. I do have a strong background in financial accounting though. Anybody have any opinion on the time frame. Thanks

BEC (11/02/2013)- 90
AUD (12/06/2013)- 75
FAR (01/04/2014)- 84
REG 69, 74, (waiting for 11/23/14)

[kels417]

Can someone please help me get a better understanding of this example, which is a Gleim simulation.

On January 1, Year 1, Company C purchased 10 of the $10,000 face value, 10%, 2-year bonds of Company D. The bonds mature on December 31, Year 2, and pay interest annually on December 31. Company C purchased the bonds to yield 12% and classified the bonds as held-to-maturity. The company's policy is to amortize the bonds' premium or discount according to the effective interest method. Information on present value factors is a as follows:

Present value of $1 at 10% for two periods: 0.8264

Present value of $1 at 12% for two periods: 0.7972

Present value of an annuity of $1 at 10% : 1.7355

for two periods

Present value of an annuity of $1 at 12% : 1.6901

for two periods

1. The amount Company C paid for bonds: 96,621

2. The amount of discount on the bonds on January 1, year 1: $3,379

3. The amount of cash interest received by Company C during year 1: $10,000

4. The amount of interest revenue recognized in Year 1 income statement: $11,595

5. The amount of bonds' discount amortized in year 1: $1,595

6. The carrying amount of the bond presented in the Dec. 31, year 1 financial statements: $98,216

I have a hard time understanding why in answer 1, you use the PV for 12%, but multiply the bonds x face x stated rate? Why?

Same for number 3. Why do we use the stated rate for that, but used the 12% rate for computing number 4?

ANSWER:

1. $96,621.  An investment in a bond should be recorded at its fair value (purchase price), i.e., the present value of its cash flows discounted at the market (yield) rate of interest. The present value of the bonds' face amount at maturity is $79,720 (10 bonds × $10,000 face amount × 0.7972 PV factor for a single amount at the market rate), and the present value of the periodic cash interest payments is $16,901 (10 bonds × $10,000 face amount × 10% stated rate × 1.6901 PV factor for an annuity at the market rate). Thus, the total amount paid for the bonds (i.e., their present value at the market rate of interest) is $96,621 ($79,720 PV of face amount + $16,901 PV of interest payments).

2. $3,379.  If the bonds' stated rate is lower than the market (yield) rate of interest at the time of the purchase, the purchase price is lower than the face amount and the bonds are purchased at a discount. The amount of discount is equal to the difference between the face amount of the bonds and the purchase price ($100,000 − $96,621 = $3,379).

3. $10,000.  The annual cash interest is $10,000 (10 bonds × $10,000 face amount × 10% stated rate).

4. $11,595.  The amount of interest revenue recognized in Year 1 is equal to the carrying amount (fair value) of the bonds on January 1, Year 1, times the effective (yield) rate ($96,621 × 12% = $11,595).

5. $1,595.  The amount of discount amortized each period is equal to the difference between the amount of interest revenue recognized and cash interest received ($11,595 − $10,000 = $1,595).

6. $98,216.  The carrying amount of the bonds on a specific date is equal to the face amount of the bonds minus the amount of remaining unamortized discount. On December 31, Year 1, the face amount of the bonds is $100,000, and the amount of remaining unamortized discount is $1,784 ($3,379 − $1,595). Thus, the carrying amount of the bonds on December 31, Year 1, is $98,216 ($100,000 − $1,784).

Illinois
Becker self study | Becker flashcards | Gleim | self written notes | WTB

AUD - 74, 75 Passed! (Expires 1/2/2014)
BEC - 78 Passed! (Expires 2/6/2014)
REG - 70, 70, 72, 74, 76 Passed!!
FAR - 72, 66, 69, 67

[kels417]

Can someone please help me get a better understanding of this example, which is a Gleim simulation.

On January 1, Year 1, Company C purchased 10 of the $10,000 face value, 10%, 2-year bonds of Company D. The bonds mature on December 31, Year 2, and pay interest annually on December 31. Company C purchased the bonds to yield 12% and classified the bonds as held-to-maturity. The company's policy is to amortize the bonds' premium or discount according to the effective interest method. Information on present value factors is a as follows:

Present value of $1 at 10% for two periods: 0.8264

Present value of $1 at 12% for two periods: 0.7972

Present value of an annuity of $1 at 10% : 1.7355

for two periods

Present value of an annuity of $1 at 12% : 1.6901

for two periods

1. The amount Company C paid for bonds: 96,621

2. The amount of discount on the bonds on January 1, year 1: $3,379

3. The amount of cash interest received by Company C during year 1: $10,000

4. The amount of interest revenue recognized in Year 1 income statement: $11,595

5. The amount of bonds' discount amortized in year 1: $1,595

6. The carrying amount of the bond presented in the Dec. 31, year 1 financial statements: $98,216

I have a hard time understanding why in answer 1, you use the PV for 12%, but multiply the bonds x face x stated rate? Why?

Same for number 3. Why do we use the stated rate for that, but used the 12% rate for computing number 4?

ANSWER:

1. $96,621.  An investment in a bond should be recorded at its fair value (purchase price), i.e., the present value of its cash flows discounted at the market (yield) rate of interest. The present value of the bonds' face amount at maturity is $79,720 (10 bonds × $10,000 face amount × 0.7972 PV factor for a single amount at the market rate), and the present value of the periodic cash interest payments is $16,901 (10 bonds × $10,000 face amount × 10% stated rate × 1.6901 PV factor for an annuity at the market rate). Thus, the total amount paid for the bonds (i.e., their present value at the market rate of interest) is $96,621 ($79,720 PV of face amount + $16,901 PV of interest payments).

2. $3,379.  If the bonds' stated rate is lower than the market (yield) rate of interest at the time of the purchase, the purchase price is lower than the face amount and the bonds are purchased at a discount. The amount of discount is equal to the difference between the face amount of the bonds and the purchase price ($100,000 − $96,621 = $3,379).

3. $10,000.  The annual cash interest is $10,000 (10 bonds × $10,000 face amount × 10% stated rate).

4. $11,595.  The amount of interest revenue recognized in Year 1 is equal to the carrying amount (fair value) of the bonds on January 1, Year 1, times the effective (yield) rate ($96,621 × 12% = $11,595).

5. $1,595.  The amount of discount amortized each period is equal to the difference between the amount of interest revenue recognized and cash interest received ($11,595 − $10,000 = $1,595).

6. $98,216.  The carrying amount of the bonds on a specific date is equal to the face amount of the bonds minus the amount of remaining unamortized discount. On December 31, Year 1, the face amount of the bonds is $100,000, and the amount of remaining unamortized discount is $1,784 ($3,379 − $1,595). Thus, the carrying amount of the bonds on December 31, Year 1, is $98,216 ($100,000 − $1,784).

Illinois
Becker self study | Becker flashcards | Gleim | self written notes | WTB

AUD - 74, 75 Passed! (Expires 1/2/2014)
BEC - 78 Passed! (Expires 2/6/2014)
REG - 70, 70, 72, 74, 76 Passed!!
FAR - 72, 66, 69, 67

[Anonymous]

you have a certain amount of bonds, they pay out a percentage if that percentage is not equal to the “market rate” you have to make an adjustment to the purchase price.

think about it from the buy side: i want to buy 1 bond. the market rate is 12%, your bond only pays out 10%. Well, if you want to sell me that bond, you have to make it so it is like I am getting 12% so, in practice, you have to sell me the bond for less than $1000.

[Anonymous]

you have a certain amount of bonds, they pay out a percentage if that percentage is not equal to the “market rate” you have to make an adjustment to the purchase price.

think about it from the buy side: i want to buy 1 bond. the market rate is 12%, your bond only pays out 10%. Well, if you want to sell me that bond, you have to make it so it is like I am getting 12% so, in practice, you have to sell me the bond for less than $1000.

[kels417]

Makes sense! Thanks, Darcer.

Illinois
Becker self study | Becker flashcards | Gleim | self written notes | WTB

AUD - 74, 75 Passed! (Expires 1/2/2014)
BEC - 78 Passed! (Expires 2/6/2014)
REG - 70, 70, 72, 74, 76 Passed!!
FAR - 72, 66, 69, 67

[kels417]

Makes sense! Thanks, Darcer.

Illinois
Becker self study | Becker flashcards | Gleim | self written notes | WTB

AUD - 74, 75 Passed! (Expires 1/2/2014)
BEC - 78 Passed! (Expires 2/6/2014)
REG - 70, 70, 72, 74, 76 Passed!!
FAR - 72, 66, 69, 67

[Tncincy]

Bonds Ughhh. I'm geting ready to deal with bonds. I don't know i think I'll need at least two weeks just for that..then on to Government…another two weeks maybe???

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Tncincy]

Bonds Ughhh. I'm geting ready to deal with bonds. I don't know i think I'll need at least two weeks just for that..then on to Government…another two weeks maybe???

It begins with a 75
Been here too long as a cheerleader....ready to pass

[kels417]

I finally got my performance report. Weaker in Frameworks and Standards and Not-for-Profit (which I'm confused about because I feel confident with it) And also weaker for simulations. Comparable for the rest.

What would you all suggest for my last 9 days of studying? My plan was to do as many simulations as humanly possible. I have already done all of the Becker, WTB, and Gleim questions 3-5 times. Have continued to do progress tests in becker and 20-30 mcq from WTB including all study units. Going to try to take a Gleim practice exam this weekend.

Illinois
Becker self study | Becker flashcards | Gleim | self written notes | WTB

AUD - 74, 75 Passed! (Expires 1/2/2014)
BEC - 78 Passed! (Expires 2/6/2014)
REG - 70, 70, 72, 74, 76 Passed!!
FAR - 72, 66, 69, 67

[kels417]

I finally got my performance report. Weaker in Frameworks and Standards and Not-for-Profit (which I'm confused about because I feel confident with it) And also weaker for simulations. Comparable for the rest.

What would you all suggest for my last 9 days of studying? My plan was to do as many simulations as humanly possible. I have already done all of the Becker, WTB, and Gleim questions 3-5 times. Have continued to do progress tests in becker and 20-30 mcq from WTB including all study units. Going to try to take a Gleim practice exam this weekend.

Illinois
Becker self study | Becker flashcards | Gleim | self written notes | WTB

AUD - 74, 75 Passed! (Expires 1/2/2014)
BEC - 78 Passed! (Expires 2/6/2014)
REG - 70, 70, 72, 74, 76 Passed!!
FAR - 72, 66, 69, 67

[Tncincy]

Go crazy on mcq's. Do them till you are dreaming about them. That's what I read anyway. :-))

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Author]

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