[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

[IwannabeaCPA2017]

Any way to feel confident to pass this exam? I really don't want any section to lapse. 🙁 I'm keep getting 69-70's on the HW in becker and studying has been slow since I take so long on doing the math questions

[LCS]

Can someone please explain this question:

Goddard has used the FIFO method of inventory valuation since it began operations in Year 1. Goddard decided to change to the weighted-average method for determining inventory costs at the beginning o f Year 4. The following schedule shows year-end inventory balances under the FIFO and weighted-average methods:
Year FIFO WA
1 $45,000 $54,000
2 $78,000 $71,000
3 $83,000 $78,000

What amount, before income taxes, should be reported in the Year 4 retained earnings statement as the cumulative effect of the change in accounting principle?

The answer is $2,000.

Why is the cumulative effect only account for the difference in inventory as of the end of Year 3 instead of the total difference for all the prior years?

[LCS]

Sorry, the answer was $5,000 decrease.

[EStone]

Does anyone have any tricks or ways to help me out with Long term liabilities and Bonds? In school I did fine with these topics. However, on Becker they just find a way to ask the questions in a confusing way and it is difficult for me to make sense of the info.

[JRM]

Took FAR today, MCQ tested several topics. One topic was not more heavily tested than the other. Questions are very very similar to NINJA. It took me 1.5 hours for the first 3 testlets(I spent way too much time on the first set of sims) The last two sim testlets i had an hour for each one. All i know is i nailed the research and hoping I earned enough points on the rest of the sims.

[Lentilcounter]

@ LCS

Goddard has used the FIFO method of inventory valuation since it began operations in Year 1. Goddard decided to change to the weighted-average method for determining inventory costs at the beginning of Year 4. The following schedule shows year-end inventory balances under the FIFO and weighted-average methods:

Year FIFO WA
1 $45,000 $54,000
2 $78,000 $71,000
3 $83,000 $78,000

Keep in mind, these are YEAR-END inventory balances displayed for each year. This is why you use year 3's values in computing the year 4 cumulative effect.

Purchases are the same under both methods. The inventory valuations differ in their treatment of cost of goods sold. The cumulative effect is computed as of the beginning of the year of change which is based on the ending previous year balance. Weighted average recognizes more cost of goods sold than FIFO resulting in an ending inventory that is $5K less than FIFO in year 3. This $5K cumulative effect reduces year 4 pre-tax income by $5K.

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

[Lentilcounter]

@Estone

Bonds can be very tricky. I still can't say that I'm a pro at them. I recommend that you go through all the NINJA bond MCQ and keep Becker open in a separate tab. If you get something wrong, look at the Ninja MCQ explanation and Becker lectures to see what you did wrong. Also, post anything on here that is still bothering you. We will try to help.

@JRM

Hope you passed. I take the beast in exactly one month. 1.5 hours for 3 testlets is pretty quick. I took 2 hours for 2 MCQ testlets last time. Then, I had to do all the sims in 2 hours which was horrible. I am shooting for 1.5 hours on MCQ this time and 2.5 hours on SIMs.

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

[EStone]

Thanks @Lentilcounter

I think the trickiest part for me is just the dates of the bonds which throws me off for how much should be amortized.

[LCS]

@Lentilcounter Thanks for the explanation!

@JRM Did you think the MCQs were similar to the questions from Becker in terms of difficulty?

[lam2848]

Can someone help me out with this question? I don't understand Becker's explanation.

On December 31, Year 1, the Exeter Corporation had property and equipment of $1,450,000 and accumulated depreciation of $500,000. During Year 2, the company acquired an asset for $250,000 in a transaction properly classified as a capital lease. The new asset was used to replace a similar piece of equipment with a historical cost of $200,000 that had been sold for $20,000, resulting in a gain of $10,000. The net book value of all of Exeter's equipment at December 31, Year 2 was $850,000. What was the amount of depreciation expense used in Exeter's Statement of Cash Flows, prepared using the indirect method, to reconcile net income to cash flows from operations?

Answer: $340,000

[Lentilcounter]

@Iam2848

Beginning property and equipment = $1,450,000
+asset purchased of $250,000
– asset sold of $200,000
total = $1,500,000

Beginning A/D = $500,000
– asset sold = $190,000
total A/D = $310K

asset was sold for $20K with a gain of $10K which means asset had value on the books at $10K

$200K original cost – $10K value on the books = $190K in A/D

equipment book value = $1,500K-$310K = $1190K

net book value 12/31/year 2 = $850K, so $1190K-$850K = $340K of depreciation expense

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

[lam2848]

Thank you Lentil! That makes so much more sense than Becker's explanation!

[Lentilcounter]

Based on the stock transactions below, what is the weighted-average number of shares outstanding as of December 31, year 1, that should be used in the calculation of basic earnings per share in financial statements issued on March 1, year 2?

Date Transactions
January 1, year 1 Beginning balance 100,000
April 1, year 1 Issued 30,000 shares for cash
June 1, year 1 50% stock dividend
February 15, year 2 2-for-1 stock split
March 15, year 2 Issued 40,000 shares for cash

I got $183,750 and the correct answer is $367,500.

I get that financial statements are only being issued on March 1, year 2 and the stock split happened before that but it happened after year-end?
I guess I am looking for some kind of rule that says I need to consider stock splits in the period after year-end and before the financial statements are issued in the calculation of BPS. Does this “rule” apply to stock dividends too?

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

[lam2848]

Lentil,

This is how I answered:

1/1/1 100,000 (12/12) = 100,000
4/1/1 30,000 (9/12) = 22,500
6/1/1 (100+30)*.5 = 61,250 (stock dividends are recorded as if they occurred at the beginning of the year)
12/31/1 balance = 183,750

1/1/2 balance = 183,750
2/15/2 183,750*2 = 367,500 (stock splits are also recorded as if they occurred at the beginning of the year)

[Lentilcounter]

@Iam2848

Thanks. I'm good with the calculation. I just want to know why we accounted for the stock split that occurred after year-end? Is it because the financial statements were only issued in March and this was a material event?

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

[Author]

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