[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

[kdcpa]

Please suggest how do you prepare for pension accounting.

[Meshach]

Hey man got another question.
6 At the current year end, Claxon Co has undertaken impairment tests on two machines. The following information is relevant: Cost Useful life Age Fair value Costs of disposal Value in use Machine 1 $450 000 10 years 4 years $300 000 $15 000 $260 000 Machine 2 $250 000 15 years 3 years $230 000 $35 000 $198 000 At what carrying amount should machinery be recognised in the accounts of Claxon Co?
A $455 000
B $468 000
C $470 000
D $498000

I got C, 470. Ended up taking the higher values. Machine 1 – 270 and Machine 2 – 200. After they're both depreciated. The textbook gets B 468. How come for machine 2 it takes the lower amount of 198, which is its value in use?

[JRM]

@lentilcounter Just realized I said i spent 1.5 hours on the first three I meant Just the MCQ portion. and then the first sim testlet was around 30min. But it should be much less since that one has the research question. (well im assuming everyones first sim has the research, I am not sure).

@LCS yes very similar to becker and ninja MCQ. Except some of becker questions have huge paragraphs. Did not experience this on the exam. (mostly 3-4 sentence questions). Also I had more questions with calculations.

[kdcpa]

@Lentilcounter, in the depreciation example, $340K should be accumulated depreciation amount, right?
Please correct me if I am wrong.

[Lentilcounter]

@KDcpa

$340K in depreciation expense. The question is asking for the depreciation expense.

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

[kdcpa]

@Lentilcounter in your example, NBV of equipment $1190000 and NBV at the year-end is $850000, and therefore depreciation is $340000. I got confused because of the wordings.

[Lentilcounter]

@KDCPA I apologize for the confusion. I'll try to be clearer in my answers.

@Meshach

This looks like an IFRS question dealing with impairment testing of a long-lived asset other than goodwill.

Machine 1 cost = 450,000
Machine 1 useful life = 10 years
Machine 1 age = 4 years
Machine 1 fair value = 300,000
Machine 1 disposal costs = 15,000
Machine 1 value in use = 260,000

carrying amount of machine 1 = 450,000/10 years = 45k a year x 3 years = 180k
450k-180k=270K

fair value less disposal costs = 300k-15k = 285k
value in use = 260K

For IFRS, you take the greater of fair value less disposal costs or value in use, which is 285K in this case. Since 285K is more than 270K, asset is not impaired and use 270K as the carrying amount.

Machine 2 cost = 250,000
Machine 2 useful life = 15 years
Machine 2 age = 3 years
Machine 2 fair value = 230,000
Machine 2 disposal costs = 35,000
Machine 2 value in use = 198,000

carrying amount of machine 2 = 250k/15 years = 16.67K*3 years = 50k
250k-50k = 200k

fair value less disposal costs = 230k-35k= 195k
value in use = 198k

you take the greater of fair value less disposal costs or value in use which is 198K and compare it to the carrying amount. The asset is impaired because
200k is more than 198. Write-down the asset to 198K which is the new carrying amount of machine 2.

200k+198k = 498k which is the answer they gave you

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

[Yahmon]

@Lentil

The general rule is stock splits and stock dividends are accounted for as if they occurred at the beginning of the period presented up to when the financial statement is presented. The shares issued for cash wouldn't be part of the calculation as it happened after the financial statement was issued.

FAR 8/20/15 - Passed 77
AUD 10/10/15 -
BEC TBD
REG TBD

[Lentilcounter]

@yahmon

Thanks.

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

[gguzman]

Back from isolating. Finally accepted I failed and came up with a new plan.

Here we go.

[msbond28]

I took a two year break. Passed Ref and Aud. Starting over with FAR, what am I doing? I am on Part 1 M1

B Waiting
A 76 -Ex. November 2014
R 60, 68, 76
F TBD

Yeager, Ninja Flash, Becker, Wiley Test Bank.

[JJK94]

Hey guys,
Im confused on a question where whether consolidation to be followed or equity method,Please help….The question follows:
On January 1, year 2, Sharp acquired 70% of Axe co. for $870,000 cash. The fair value of Axe Co. was $1,200,000. The book value is lesser than the fair value by $50,000 owing to the change in the fair value of property, plant and equipment. Goodwill is impaired by 20% during the year and PP&E is depreciated over 10 years using straight-line method. The company incurred $50,000 legal fees and $35,000 general and administrative fees related to this acquisition. The company exercises significant influence over Axe Co. In year 2, Axe Co. reported earnings of $100,000 and declared and paid dividends of $30,000.
Since its more than 50%,i treated it as consolidation,but the answer key provided the calculation as if it is equity method.Is tat bcoz of the “significant influence” term used in the question?

[Lentilcounter]

@JJK94

What exactly is the question asking you? Also, what is the right answer? “Significant influence” is an important term. I've seen its application in problems where the investor owns less than 20% of the investee but because the company has significant influence , equity method is applied.

I'm scratching my head though for your question.

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

[Andria – Another71]

BEC Test Your Might! Please answer in the thread to be eligible to win.

HiYa!

[DonSoap]

If you had to rank how important each chapter is in FAR or how difficult each chapter is, how would you do it?? I'm taking Far 10/31 and am through F3, trying to make sure I allocate time the best way possible.

Thanks!

[Author]

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