[jeff]

Welcome to the Q3 2017 CPA Exam Study Group for FAR. 🙂

Introduce yourselves and let your fellow NINJAs know when you plan to take your FAR exam.

The Five Steps (NINJA Framework): https://www.another71.com/pass-the-cpa-exam/

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

[Anthony]

@FAR_SUCKS I have come across on some sims, but not all sims on the real exam can be vague as hell. Makes you wonder what are you trying to ask me?

[hopingtogetFAR]

@vinti It took me a minute to think about that question, but I believe that it is answer B because the 8,000 would be reflected on the Statement of Activities and the question ask about the statement of fiancial position.

@Far_sucks Yes, I've had that issue on both mock exams I've taken. I take my exam tomorrow, so I will let you know if I had a similar problem with understanding.

[hopingtogetFAR]

@determinedCPAer Your answer to @vinti makes more sense than the answer I tried to give.

[Vinti]

@determinedCPAer ohh I see, the word “designated” is confusing me. Thanks for explaining well.

@hopingtogetFAR thanks you too for replying.

[hopingtogetFAR]

I'm taking this beast tomorrow. Anyone have tips, tricks, etc. for what I should do today? I'm reading over my notes and the book. Anything else? Should I still be completing MCQ? This is my first test, so I have no idea what to expect or what to do.

[QueenCPA]

@hopingtogetFAR

Relax, pray, have a good night rest and do something fun – will ease the nerve.

IMO, at this point, not so much difference can be made.

[DeterminedCPAer]

@hopingtogetfar

I'd say do light reading or review of notes. You don't want to confuse yourself right now. I'd review book and notes on things you have been unsure on this whole time. Get a good dinner and get a good nights rest.

[setmefree]

can someone help me with this question, not sure why he sold the half of the bond still include the 15,000 dividend in the 30%
Lee, Inc. acquired 30% of Polk Corp.'s voting stock on January 1, 2004 for $100,000. During 2004, Polk earned $40,000 and paid dividends of $25,000. Lee's 30% interest in Polk gives Lee the ability to exercise significant influence over Polk's operating and financial policies.
During 2005, Polk earned $50,000 and paid dividends of $15,000 on April 1 and $15,000 on October 1. On July 1, 2005, Lee sold half of its stock in Polk for $66,000 cash.
What should the gain on sale of this investment in Lee's 2005 Income Statement be?
$16,000
$13,750
$12,250
 YouAnsweredIncorrectly.
The $13,750 answer considers only the earnings and dividends for 2004, the first year of the investment. The carrying value for this answer is: $100,000 + .30($40,000-$25,000) = $104,500. One half that amount yields $52,250. The resulting gain would be $66,000- $52,250 = $13,750.
The correct answer is $12,250, which considers the earnings and dividends for both years. The carrying value of the entire investment at the date of sale equals:
$100,000 + .30[$40,000-$25,000 + .5($50,000)-$15,000] = $107,500. The gain, therefore, equals: $66,000-.5($107,500) = $12,250

[Radez]

I think ASC 323-10-35-36 addresses this point. Basically, if your ownership of your equity method investment decreases to the extent that you no longer have significant influence you stop applying the equity method prospectively, but you won't adjust the carrying amount for activity up until that point. Therefore you would still consider the April 1 dividend of 15k when calculating the carrying value at the time of the disposal.

[DeterminedCPAer]

@setmefree I agree with @radez, you own 30% and significant influence up until June 30, 2005. You own 30% of the 15K dividend on April 1 and the $25K in earnings (50K during the year, assume earned evenly and divide by 2 to get first six months).

Looking forward, if the question asked what would be reported on Dec 31, 2005, your balance sheet would have investment in Polk account of 53,750. You would own only 15%. The dividend on October 1 would be 2,250 and it would appear on income statement as dividend income. You would not book any earnings for the remaining $25K in the second half.

[setmefree]

@radez @DeterminedCPAer, thank you so much, it clears out my confusion

[nolan1868]

First attempt at the beast tomorrow, and haven't taken any of the other exams before. Does anyone have any good pacing strategies? I'm worried about moving too slow through the exam and not being able to finish.

[Wannafree]

@nolan1868 , based on my previous attempt,this is what I do to .
1.Will read the question and try to finish it in 1.30 minutes (max ) if not move on to next question.If I would finish the 33 questions and still under 45 minutes than I will try to finish those questions which I missed earlier.Again I will try all those can be finished in 50 minutes.I would submit the testlet.If did good than I would get tougher questions in testlet 2 ,again same strategies but will allocate 10 minutes more.
If testlet 3 has any question which I can see is a big trap ( too long like prepare consolidated FS or Govt wide recon or any items with IFRS and US GAP both transaction with 1 millions emails I will just say talk to you latter and move on.So after skipping 1 testlet if I can solve 7 SIMs ,I would still feel comfortable to pass.

[falvio]

Does anyone have an easy way to think of consolidation of interco sales and such?

[setmefree]

PLEASE HELP!!! taking my first exam on monday but still extremely confused about how to determine is annuity in advance or ordinary annuity. In the question, it said lease a mechine on Dec 30, and the annual rental payable on Dec 30, wouldnt that be annuity in advance. Im not sure what im missing

On December 30 of the current year, Haber Co. leased a new machine from Gregg Corp. The following data relate to the lease transaction at the inception of the lease:

Lease term 10 years
Annual rental payable at the end of each lease year $100,000
Estimated life of machine 12 years
Implicit interest rate 10%
Present value of an annuity of $1 in advance for
10 periods at 10% 6.76
Present value of an annuity of $1 in arrears for
10 periods at 10% 6.15
Fair value of the machine $700,000

The lease has no renewal option, and the possession of the machine reverts to Gregg when the lease terminates. At the inception of the lease, Haber should record a lease liability of:

A.
$0

B.
$615,000

C.
$630,000

Incorrect D.
$676,000

You answered D. The correct answer is B.

This lease qualifies as a capital lease because the lease term of 10 years exceeds 75% of the asset’s useful life of 12 years (10 > 0.75 × 12 = 9). When a lease is considered a capital lease, then the lessee capitalizes the lease property and recognizes a lease obligation for the present value of the minimum lease payments.

The minimum lease payments here are the $100,000 a year at the end of each year, and their present value is 100,000 × 6.15 (present value of an annuity in arrears or ordinary annuity, for 10 periods at 10%). Thus, the answer is $615,000:

100,000 × 6.15 = $615,000

[Author]

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