[jeff]

Free Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/

Free CPA Exam Survival Guide: https://www.another71.com/cpa-exam-survival-guide/

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

[jstay]

i guess, but does the fv option take into account appreciation?

i didn't think it did (double check to make sure)..the fv option will report the appreciation as part of income and report on I/S

[jpowell31]

@jstay you still got a few weeks – you'll be fine! and your clock hasn't started. mine is up and my exam is next week. and yep i feel you there is luck in these exams…sometimes it's heavily weighted on just a couple of topics and you'll bet my luck is always getting my weak topics.

i'm just using Becker as well. i do have Ninja audio as i need something else to fill in gaps. some of it is filler and very basic, though so it just helps me have a bigger picture, i think..

[jpowell31]

just think of it like trading securities

[jpowell31]

& remember that it's the effective portion of CF hedges in OCI – the effective portion still goes to the IS.

[jpowell31]

and by that. i mean the ineffective portion goes in the IS lol

[rosssumner15]

Hi, this is my first post, but I spend time reading posts and you guys help me a lot. I am going to take better advantage of this by starting to post more because I think it will help. But with my first post, I was hoping someone could help me out. I am preparing to take FAR in October. I took it in Feb and I had been studying so long (planned on taking in Nov but had some family emergencies causing me to miss, then took another job in Jan) that I failed badly. I decided to take BEC to change up the material. I am currently using Becker, and while I have some free time at work I use cpareviewforfree.com and just work MCQ. I had this question below, and I thought it was pretty straight forward, but I got it wrong…

A company buys 20 percent of another company on January 1, Year One. The investor is trying to determine whether to use the equity method for this investment or assume the shares are only available for sale. The fair value option is not being used. During Year One, the investee reported net income of $200,000 but only paid cash dividends of $50,000. If the equity method is deemed to be appropriate, how much more income will the investor recognize for Year One than would have been recognized if the shares are assumed to be available for sale?

A $10,000

B $20,000

C $30,000

D $40,000

With the equity method, I take 20% of the net income, and subtract 20% of the dividends to come up with $30,000 that the investor should recognize. Then to find how much more that would be than the cash method, I subtracted $10,000 from $30,000 to come up with $20,000 more income. I got it wrong because, in the explanation, they did not take away the 20% of dividends from the net income realized in the equity method. Isn't that wrong? Shouldn't the answer be $20,000?

Thanks for your help!

FAR - 67-85
BEC - 75
REG - 78

[Anonymous]

I'm reviewing FAR with Becker self study, & can't seem to understand F3 page 9. Available for sale securities… Can anyone help with this? I'm not sure where $25,000 came from in year 2, for security GHI. THANKS!

[Anonymous]

@Ross — Is the answer (A)?

[jpowell31]

@ross – welcome – i didn't really get on this forum until my 2nd attempt at REG and it's been much easier on my wellbeing!

for the equity method dividends aren't recorded as income just as a “withdrawal” so the dividend amount reflects a change in your investment in the subsidiary but not the income earned in the subsidiary. The journal entries help (I had to look this up so thanks for this as i need to make this stick as well as i would've done the same as you if i saw this question!):

DR investment in investee ($200k x 20%)

CR Equity in investee income ($200k x 20%)

DR Cash ($50k x 20%)

CR investment in investee ($50k x 20%) –> not income but the balance of your investment

@Delreese – see the small notes at the bottom of the example –> loss = the FV – cost (165-190= $25k loss) – these numbers are at the beginning of the example on the first page. or am i misreading your question?

[HopefulCPA0601]

am i correct in the following:

board designated funds under govt acctg = unrestricted assets

board designated funds under nonprofit acctg = no change in restriction or rev/ex; no required reportable event – aka nothing changes

BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE

Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ

[CPA50]

Hi all! I'm starting to freakout about the little things.

Accounting for changes: Are there TWO or THREE methods?

I just took a sample SIM where they had Prospective, Retrospective and Retroactive? I'm having a hard time wrapping brain cells around that? I got the Retros all backwards. Is one for errors?

Any clarification from anyone???

AUD 88 (expired), 80 retake
FAR 64,69,67,73,67,73,73,73, August 3
REG 75 (expired) September 7
BEC 72, 77

The adventure continues...

[D C]

The answer is D. 200k * 20% = 40k.

Under equity method dividends are not an income statement item, only B/S. So you don't include them in your “investment income”

B/S

Beg Bal of Investment

+ Equity Share of NI

– Equity Share of Div

– Amort. of any FV above NBV (don't have any here)

= End Bal of Invest

I/S

Investment Income:

+ Equity share of NI

-Amortization

Do not include divs.

B - 80
A - 71, 67, 77
R - 71, 77
F - 72, 77
DONE!!
Becker Self-study all the way! Did use Ninja Notes & Audio for FAR.

[HopefulCPA0601]

@cpa50:

change in principle: retrospective, adjust beginning RE

change in estimate: prospective

change in entity: retroactive, restate prior financials

errors: restate prior periods, fix your mistakes

BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE

Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ

[jpowell31]

@cpahopeful – what do you mean by board designated under govt? it's been “committed”? (as opposed to restricted….etc.)? i guess this is just for funds and it may come under unrestricted on govt wide FS – in this case isn't it just determined by th donor? if it's not restricted by the donor then yes it'd be classified as unrestricted.

board restricted under NFP is also restricted because it assumes the board can just change their mind any jolly old time.

@CPA50 haha i know…it's those thing that seem so obvious that trip me up as well! i think retrospective would mean changing beginning retained earnings to reflect the change as though it changed in prior periods and retroactive would mean actually restating comparative statements (which you do for a change in error)….i think?

[D C]

@DelreeseM

Since they sold the AFS GHI in year 2, they have to reverse out the 25k loss in value that was put in OCI from year 1.

Y1 JE (dropped in value from 190k to 165k)

DR: Unrealized loss on AFS (OCI) 25k <–put in OCI

CR: AFS Valuation Acct $25k

Y2 JE: They sold it for $175k this year… (this is an actual realized loss of 15k 190-175)

DR: Cash $175

DR: Realized Loss $15k (I/S)

CR: AFS GHI $165k

CR: Unrealized loss (OCI) $25k <—reversal out of OCI…

B - 80
A - 71, 67, 77
R - 71, 77
F - 72, 77
DONE!!
Becker Self-study all the way! Did use Ninja Notes & Audio for FAR.

[Author]

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