[jeff]

Welcome to the Q4 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

[Ana]

@Iwannabe Thanks for that. I can't say it's all altruistic. I want to be done so bad and if I can help others on their questions hopefully I can learn as well and get those 2 extra points I need to pass.
Regarding MCQ's, I'm not redoing the questions for each chapter (I did do that the 2nd time around for my test). I'm doing them all mixed together in groups of 10-33 with progress tests. Doing them all together is far more realistic for the exam. However, if I find I'm very weak in a certain area (ahem inventory) I will go back and try some from that chapter and review the book. What I'm really concentrating on this time are SIMS.

[Ana]

@wannafree – LCS is right.
See F1-45 3.3.3
Once management decides to dispose of the component, assets within the component are no longer depreciated or amortized.

Also, the loss is calculated from the beginning of the year.

[Ana]

@Lentilcounter I'm still thinking about the earlier question about translation gain. Didn't the MCQ have an explanation? It's driving me crazy.

We both agree that, “the effective portion of a cash flow hedge goes into OCI and the ineffective portion goes into earnings on the IS.” But maybe that question isn't about a cash flow hedge at all and about translations. Otherwise, choice C makes no sense. Choice C is the opposite of the earlier statement.

However, both translation gain and loss goes to OCI. I'm so confused on this question.

[Andria – Another71]

Test Your Might: FAR – NINJA MCQ

Post your answer in the facebook thread for a chance to win a NINJA Sniper Package (Book, Notes, Audio, Videos, MCQ/SIMS, Audio, & Flashcards – $197 Value)

One winner will be randomly chosen on Friday. HIYA!

[Lentilcounter]

@Ana

Here is the explanation given by Ninja.

“Both of the items involved, the translation loss on the investment in the subsidiary and the partial hedge through the borrowing of euros, are items that will be reported in other comprehensive income. Since one is a gain and the other is a loss, the net effect of both is reported in other comprehensive income. ”

I'm thinking the keywords indicating that this is cash flow hedge include “partial hedge through the borrowing…”

This is from Becker F1-M7.
“Foreign currency translation adjustments and gains and losses on foreign currency transactions that are designated as (and are effective as) economic hedges of a net investment in a foreign entity are reported as a component of other comprehensive income.”

So Becker's answer correlates with Ninja. I think now that “Effective” and “ineffective” are different from “perfect” in the context of a hedge.

BEC = 72 (6/08/16)
FAR = ?
REG = ?
AUD = ?

[Lentilcounter]

Here is another question that stumped me.

On June 2, 20X1, Tory, Inc., issued $500,000 of 10%, 15-year bonds at par. Interest is payable semi-annually on June 1 and December 1. Bond issue costs were $6,000. On June 2, 20X6, Tory retired half of the bonds at 98. What is the net amount that Tory should use in computing the gain or loss on retirement of debt?
A.

$249,000
B.

$248,500
C.

$248,000
D.

$247,000

Bond issue cost related to bonds retired = 1/2 of $6,000 = $3,000
Bond issue cost amortized by 06/02/X6 = 5/15 of $3,000 = $1,000

Face amount of bonds retired (1/2 of $500,000) = $250,000
Less unamortized bond issue costs ($3,000 – $1,000) = 2,000
Bond carrying value prior to retirement $248,000
(Used to compute gain or loss on retirement) ========

Would the initial carrying value of this bond be $494K ($500K-$6K)?
Also, why did Ninja amortize the $6K bond over straight-line method? If you look at Becker B5-M4 under section 4.7 for bond issuance costs, it says
“bond issuance costs are amortized as interest expense over the life of the bond using the effective interest method”.

BEC = 72 (6/08/16)
FAR = ?
REG = ?
AUD = ?

[kdcpa]

Why did we not deduct the allowance for uncollectible accounts while calculating total assets considering it was included in the assets?

When preparing a draft of its Year 6 balance sheet, Mont, Inc., reported assets totaling $875,000. Included in the determination of this amount were the following:
Treasury stock of Mont, at cost, which approximates fair value on December 31
$24,000
Idle machinery
11,200
Cash surrender value of life insurance on corporate executives
13,700
Allowance for uncollectible accounts
8,400
At which amount should Mont’s total assets be reported in the December 31, Year 6, balance sheet?
A. $851,000
Answer (A) is correct.
Treasury stock is recorded in the equity section, not as an asset. Machinery is classified as property, plant, and equipment even if it is idle. The cash surrender value of life insurance is a noncurrent asset. Accounts receivable are reported net of any allowance for uncollectible accounts. Thus, the allowance for uncollectible accounts is properly included in the determination of total assets. Consequently, the only item not properly included is the treasury stock. The total assets equal the sum of liabilities and equity. Thus, they should be reported at $851,000 ($875,000 – $24,000).
B. $850,100
C. $842,600
D. $841,700

[Jen-J]

@kdcpa – the question is asking what doesn't belong in the assets section, which is the treasury stock. Everything else does belong in the assets section and is already accounted for in the $875,000.

[Lentilcounter]

Exactly. It is giving you the reported assets amount and all of the stuff that went into that balance. It is then asking you to process that information and see if anything doesn't belong there.

The allowance for doubtful accounts is already factored into the reported assets number.

BEC = 72 (6/08/16)
FAR = ?
REG = ?
AUD = ?

[kdcpa]

@Jen J and @Lentilcounter thank you for explaining. The wording of the question becomes tricky here. I got that allowance has already been deducted from AR.

[kdcpa]

Please share your suggestion regarding ninja audio for the last week of the exam. Has anyone used it for the last week revision?

[IwannabeaCPA2017]

@lentil, I def need to refresh myself on Bonds but I thought BIC are added into the carrying value, isn't it? That question from becker?? Im so lost already.. Can someone do the JE?

[jonm857]

LIFO.

Unlike FIFO, LIFO periodic Ending Inv. & COGS DOES NOT = perpetual Ending inv. & COGS.

However, I just noticed in a LIFO problem that Cost of Goods Available For Sale (COGAFS) is the same for periodic and perpetual.

Will LIFO COGAFS always be the same for periodic and perpetual?

B - 81
A - 87
R - 73
F - July 5th

[ellejay]

@lentil, I am horrible at bonds and haven't studied them very deeply yet but I am using Yaeger and my book says

“Amortization of bond issuance costs are to be reported as interest expense. The amortization is done on a straight-line basis, over the life of the bond.”

As far as the numbers go, I'm unsure. I think bond issuance costs are recorded in a contra account so maybe carrying value is still technically $500,000 if you don't include that account?

[Ana]

@lentilcounter I completely misread the answer in your first post! I thought the book answer was C. Choice A makes total sense.
Effective, ineffective, and perfect are all different scenarios. However, it really doesn't have bearing on this question since this is in regards to foreign translation adjustments. Translations, whether gain or loss (F in PUFER), goes OCI. And that's why the answer is A. Let me know if I can try to explain further.

[Author]

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