[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

[NYCaccountant]

I wonder would it be wrong on the exam though? I guess it makes sense to keep them separate.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

I wonder would it be wrong on the exam though? I guess it makes sense to keep them separate.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[ZSRizvi]

I have a question regarding nonmonetary exchanges.

If an exchange lacks commercial substance, and inventory is traded for inventory, and boot is paid –> No gain recognized. I understand because it facilitates “the sale.”

However, what if inventory is traded for inventory and cash is received…would you still not record a gain? If you were not to record a gain, is it because you won't really have an asset on hand since the inventory will be sold?

BEC (July 2013)
FAR (OCT 2013)
REG (NOV 2013)
AUD (JAN 2014)

The CPA Exam is an opponent that not even the Fellowship of the Ring would want to come across.

I have a long...long...journey ahead of me.

[ZSRizvi]

I have a question regarding nonmonetary exchanges.

If an exchange lacks commercial substance, and inventory is traded for inventory, and boot is paid –> No gain recognized. I understand because it facilitates “the sale.”

However, what if inventory is traded for inventory and cash is received…would you still not record a gain? If you were not to record a gain, is it because you won't really have an asset on hand since the inventory will be sold?

BEC (July 2013)
FAR (OCT 2013)
REG (NOV 2013)
AUD (JAN 2014)

The CPA Exam is an opponent that not even the Fellowship of the Ring would want to come across.

I have a long...long...journey ahead of me.

[Anonymous]

@NYC, I think the deferred tax assets/liabilities should be separate because those will reverse in the future.

[Anonymous]

@NYC, I think the deferred tax assets/liabilities should be separate because those will reverse in the future.

[NYCaccountant]

ZSR when cash is received, you record the asset received at the book value of the asset given up – the boot received. You then recognized a portion of the gain as described in the formula below: This is assuming the transaction lacks commercial substance.

Boot/ (Boot + Fair value of asset received) * Gain on transaction= gain on transaction.

Boot + Fair value is the amount that is compared to the carrying amount of the asset given up.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

ZSR when cash is received, you record the asset received at the book value of the asset given up – the boot received. You then recognized a portion of the gain as described in the formula below: This is assuming the transaction lacks commercial substance.

Boot/ (Boot + Fair value of asset received) * Gain on transaction= gain on transaction.

Boot + Fair value is the amount that is compared to the carrying amount of the asset given up.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[ZSRizvi]

@NYC

I understand those rules; I was asking in particular about inventory though because in Becker it says that inventory traded is just to “facilitate the sale.” And if boot is paid when inventory, specifically, is traded and because it's traded to facilitate the sale, no gain is recorded.

So, I was wondering if you still wouldn't recognize a gain even if boot was received since it's inventory?

BEC (July 2013)
FAR (OCT 2013)
REG (NOV 2013)
AUD (JAN 2014)

The CPA Exam is an opponent that not even the Fellowship of the Ring would want to come across.

I have a long...long...journey ahead of me.

[ZSRizvi]

@NYC

I understand those rules; I was asking in particular about inventory though because in Becker it says that inventory traded is just to “facilitate the sale.” And if boot is paid when inventory, specifically, is traded and because it's traded to facilitate the sale, no gain is recorded.

So, I was wondering if you still wouldn't recognize a gain even if boot was received since it's inventory?

BEC (July 2013)
FAR (OCT 2013)
REG (NOV 2013)
AUD (JAN 2014)

The CPA Exam is an opponent that not even the Fellowship of the Ring would want to come across.

I have a long...long...journey ahead of me.

[Anonymous]

I'm a little confused here…when something is issed at 103, doesn't that mean it's at a premium? Must you record a discount here for it to balance because they are issued with the stock warrants?

On January 1, 2011, HTL Manufacturers issued $100 million of 8% debentures due 2018 at 103 (103% of face value). Accompanying each $1,000 bond were 20 warrants. Each warrant permitted the holder to buy one share of no par common stock at $25 per share. Shortly after issuance, the warrants were listed on the stock exchange at $3 per warrant.

($ in millions)

dr Cash (103% × $100 million) ………………………………….103

dr Discount on bonds payable (difference) …………………….3

cr Bonds payable (face amount) ………………………………100

cr Equity—stock warrants* …………………………………………6

[Anonymous]

I'm a little confused here…when something is issed at 103, doesn't that mean it's at a premium? Must you record a discount here for it to balance because they are issued with the stock warrants?

On January 1, 2011, HTL Manufacturers issued $100 million of 8% debentures due 2018 at 103 (103% of face value). Accompanying each $1,000 bond were 20 warrants. Each warrant permitted the holder to buy one share of no par common stock at $25 per share. Shortly after issuance, the warrants were listed on the stock exchange at $3 per warrant.

($ in millions)

dr Cash (103% × $100 million) ………………………………….103

dr Discount on bonds payable (difference) …………………….3

cr Bonds payable (face amount) ………………………………100

cr Equity—stock warrants* …………………………………………6

[NYCaccountant]

@ Dante you have to give some recognition to the detachable warrants. The purchaser of the bond basically bought a bond from you and warrants. Entry below:

Cash Dr. 103,000,000

Bonds Payable Cr. 100,000,0000

Discount on Bonds Dr. 3,000,000

Additional paind in capital – Warrants Cr. 6,000,000

@ ZSR I think it's the same rules. I'm going to check when I get home, but I *swear* Wiley gave an example dealing with inventory.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

@ Dante you have to give some recognition to the detachable warrants. The purchaser of the bond basically bought a bond from you and warrants. Entry below:

Cash Dr. 103,000,000

Bonds Payable Cr. 100,000,0000

Discount on Bonds Dr. 3,000,000

Additional paind in capital – Warrants Cr. 6,000,000

@ ZSR I think it's the same rules. I'm going to check when I get home, but I *swear* Wiley gave an example dealing with inventory.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[oblio]

Study tidbit from Ninja Flashcard:

Inventory effect on Retained earnings;

Ending inventory over/under = Retained earnings over/under

Beginning inventory over/under = no effect on retained earnings

[Author]

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