FAR Study Group October November 2013 - Page 61

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  • October 2, 2013 at 5:14 pm #476827
    Anonymous
    Inactive

    Double post — now sure why that happens sometimes…

    October 2, 2013 at 5:14 pm #476893
    Anonymous
    Inactive

    Double post — now sure why that happens sometimes…

    October 2, 2013 at 5:18 pm #476829
    ZSRizvi
    Member

    @NYC & DJN

    That makes a lot more sense. I only knew that a liquidating dividend decrease R/E so I was confused about where APIC factors in.

    I have a friend studying architecture in Kansas and she said the same. She is bored out of her mind. Seeing as she's from California, I can only imagine.

    My only source of motivation, and it's a bad one, is that, when I do pass, I can rub it in my relatives' faces who believe in my failure. The day of redemption will be a sweet one.

    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.

    October 2, 2013 at 5:18 pm #476895
    ZSRizvi
    Member

    @NYC & DJN

    That makes a lot more sense. I only knew that a liquidating dividend decrease R/E so I was confused about where APIC factors in.

    I have a friend studying architecture in Kansas and she said the same. She is bored out of her mind. Seeing as she's from California, I can only imagine.

    My only source of motivation, and it's a bad one, is that, when I do pass, I can rub it in my relatives' faces who believe in my failure. The day of redemption will be a sweet one.

    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.

    October 2, 2013 at 5:24 pm #476831
    Anonymous
    Inactive

    @ZSRizvi, after 24 years in Chicago (I moved here from Pittsburgh to do my undergrad at Northwestern and never left) I went down to KC to work for a financial institution that needed something specific done. I now live (and have lived) within a mile of the Sears (forgive me, Willis) Tower for the past 2-1/2 decades. Even being right on the Plaza in KC was a total culture shock to me. Out of sheer and utter boredom I not only decided to sit for the CPA exam but I also bought a new 911 and learned to autocross race it, and had a brief but oddly satisfying fling with a rodeo clown.

    Moving back to a big city was the best thing for me — both safety wise and sanity wise!

    October 2, 2013 at 5:24 pm #476897
    Anonymous
    Inactive

    @ZSRizvi, after 24 years in Chicago (I moved here from Pittsburgh to do my undergrad at Northwestern and never left) I went down to KC to work for a financial institution that needed something specific done. I now live (and have lived) within a mile of the Sears (forgive me, Willis) Tower for the past 2-1/2 decades. Even being right on the Plaza in KC was a total culture shock to me. Out of sheer and utter boredom I not only decided to sit for the CPA exam but I also bought a new 911 and learned to autocross race it, and had a brief but oddly satisfying fling with a rodeo clown.

    Moving back to a big city was the best thing for me — both safety wise and sanity wise!

    October 2, 2013 at 5:44 pm #476833
    NYCaccountant
    Participant

    For direct financing leases, should the I always use the fair value of the equipment to reduce the asset account?

    Or can I use the present value of the lease payments? I just think that assets held for lease are investment property and should always be recorded at fair value. So when I enter into a direct financing lease, I should post something like this:

    Lease Receivable Dr. 200,000

    Equipment Cr 150,000

    Interest receivable Cr. 50,000

    Then I'll have to figure out an effective interest rate to recognize the interest.

    Or I can discount the fair value of the equipment using the implicit rate, but when I take the equipment off my books

    I would still have a portion of an asset on the books. I'm confusing myself! lol. Long story short, say the present value of the payments is 130,000. Entry below:

    Lease Receivable Dr. 200,000

    Equipment Cr. 130,000

    Interest receivable Cr. 70,000

    But the equipment had a recored value of 150,000, so this leaves 20,000 in my equipment account? I'm thinking I should always use the fair value (recorded value) of the equipment in these type of leases. I appreciated the help.

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

    October 2, 2013 at 5:44 pm #476899
    NYCaccountant
    Participant

    For direct financing leases, should the I always use the fair value of the equipment to reduce the asset account?

    Or can I use the present value of the lease payments? I just think that assets held for lease are investment property and should always be recorded at fair value. So when I enter into a direct financing lease, I should post something like this:

    Lease Receivable Dr. 200,000

    Equipment Cr 150,000

    Interest receivable Cr. 50,000

    Then I'll have to figure out an effective interest rate to recognize the interest.

    Or I can discount the fair value of the equipment using the implicit rate, but when I take the equipment off my books

    I would still have a portion of an asset on the books. I'm confusing myself! lol. Long story short, say the present value of the payments is 130,000. Entry below:

    Lease Receivable Dr. 200,000

    Equipment Cr. 130,000

    Interest receivable Cr. 70,000

    But the equipment had a recored value of 150,000, so this leaves 20,000 in my equipment account? I'm thinking I should always use the fair value (recorded value) of the equipment in these type of leases. I appreciated the help.

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

    October 2, 2013 at 5:46 pm #476835
    ZSRizvi
    Member

    I think Kansas would be a nice place to “de-stress” in because there are probably more rural areas and scenery, as opposed to where I live (SF). People who like the outdoors would most likely enjoy it more.

    At first, I though my lack of sleep was making me hallucinate when I read about the fling with the rodeo clown. LOL. That is definitely a story to tell to the kids.

    Chicago is a beautiful city although I'll admit that I did hyperventilate when I went up on the Sears Tower. I think that's when I realized that I'm afraid of heights ahahah.

    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.

    October 2, 2013 at 5:46 pm #476901
    ZSRizvi
    Member

    I think Kansas would be a nice place to “de-stress” in because there are probably more rural areas and scenery, as opposed to where I live (SF). People who like the outdoors would most likely enjoy it more.

    At first, I though my lack of sleep was making me hallucinate when I read about the fling with the rodeo clown. LOL. That is definitely a story to tell to the kids.

    Chicago is a beautiful city although I'll admit that I did hyperventilate when I went up on the Sears Tower. I think that's when I realized that I'm afraid of heights ahahah.

    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.

    October 2, 2013 at 5:56 pm #476837
    Anonymous
    Inactive

    Leases. Direct Finance: Are we looking at a lessee or lessor?

    Start with the easiest Lessor: Cost Basis = Fair Value (lessor makes a profit from interest)

    Dr Lease receivable

    Cr Asset Sold

    Payment: If you previously accrued the interest receivable.

    Dr Cash

    Cr Lease receivable

    Cr Interest income

    Lessee I need process my thought carefully:

    Dr Asset

    Cr PV Liability

    Interest journals as normal .i.e. Interest expense, and payable

    October 2, 2013 at 5:56 pm #476839
    Anonymous
    Inactive

    @NYC, I'm a little confused by your question; are you entering in to the agreement as lessee or lessor? If lessee then you would have a payable, not a receivable, yes? Also, will you “OWNS” it at the end? If so, wouldn't it be PV not FV? (Sorry–maybe I'm not reading this right… )

    EDIT: Eliabraham and I were posting at the same time.

    ALSO EDITED because I initially addressed my answer above to the wrong person. I hope my reading comprehension is higher on the exam than it is here today!

    @ZSRizvi, I used to work on the 51st floor of the Sears Tower. You can see FOREVER up there! I haven't been out in the clear plexi boxes they hung off the side yet, but I love stuff like that. (Yes, I'm a bit of a thrill seeker, LOL.) And for me, being in situation with no/little stress is very stressful! I need to be pushed. Going on a “do nothing” beach vacation for me is pure torture.

    October 2, 2013 at 5:56 pm #476905
    Anonymous
    Inactive

    @NYC, I'm a little confused by your question; are you entering in to the agreement as lessee or lessor? If lessee then you would have a payable, not a receivable, yes? Also, will you “OWNS” it at the end? If so, wouldn't it be PV not FV? (Sorry–maybe I'm not reading this right… )

    EDIT: Eliabraham and I were posting at the same time.

    ALSO EDITED because I initially addressed my answer above to the wrong person. I hope my reading comprehension is higher on the exam than it is here today!

    @ZSRizvi, I used to work on the 51st floor of the Sears Tower. You can see FOREVER up there! I haven't been out in the clear plexi boxes they hung off the side yet, but I love stuff like that. (Yes, I'm a bit of a thrill seeker, LOL.) And for me, being in situation with no/little stress is very stressful! I need to be pushed. Going on a “do nothing” beach vacation for me is pure torture.

    October 2, 2013 at 5:56 pm #476903
    Anonymous
    Inactive

    Leases. Direct Finance: Are we looking at a lessee or lessor?

    Start with the easiest Lessor: Cost Basis = Fair Value (lessor makes a profit from interest)

    Dr Lease receivable

    Cr Asset Sold

    Payment: If you previously accrued the interest receivable.

    Dr Cash

    Cr Lease receivable

    Cr Interest income

    Lessee I need process my thought carefully:

    Dr Asset

    Cr PV Liability

    Interest journals as normal .i.e. Interest expense, and payable

    October 2, 2013 at 5:57 pm #476841
    ZSRizvi
    Member

    @NYC

    Is there a specific problem that gives you that scenario? As in, here's an asset's FV and then the PV of the lease pmts; give the J/E?

    Direct financing leases are recorded at the FV of the asset given up (sold). If you use the PV of the lease pmts, it would also include interest, right? Wouldn't that overstate the value of the asset?

    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.

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    Replies
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