[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/

AUD - 79
BEC - 80
FAR - 76
REG - 92

Jeff Elliott, CPA (KS)
NINJA CPA | NINJA CMA | NINJA CPE | Another71

[Jen-J]

Iwannabeacpa2017 – the first question is asking for the activity in the “uncollectable accounts expense” account (income statement), not the balance in “allowance for uncollectable accounts” (balance sheet). I've always called them bad debt expense and allowance for doubtful accounts, so the similar wording is definitely tricky!

(In case anyone cares about the math…) If you were to process 40K in A/R writeoffs during the year as a debit to allowance for uncollectable accounts and a credit to A/R, that would leave the balance in allowance for uncollectable accounts as a debit of 10K in an account that has a natural credit balance. You'd have to debit 10K to uncollectable accounts expense and credit 10K to allowance for uncollectable accounts to bring the allowance back to zero. The other 24K is the 8% of the ending 300K in A/R, which is a debit to uncollectable accounts expense and a credit to allowance for uncollectable accounts. (I totally had to do T accounts with the allowance, expense, and A/R accounts to make that clear for myself.)

The second question is asking for allowance for uncollectable accounts (balance sheet).

AUD: 87

BEC: 90

FAR: 93

REG: 84

CPA license issued September 2018

[IwannabeaCPA2017]

@Jen, dang that just help simplified the whole thing! It makes more sense now believe it or not!! Thanks a lot and Pawn maker too!
On the side note: just got an email from Nasba about the 2018 changes.. One word: F**K!! If I can't pass now what makes me think I will pass when Excel is incorporated, I suck at Excel!! Im just praying to pass before 2018 with 1 window left in case I fail.

Man all these exam changes are def making it harder to pass. 🙁

BEC- PASS (Expiring in DEC 2017)

REG- PASS (Expiring Feb 2018)

AUD- PASS (Expiring Oct 2018)

FAR- 65, 60, 59, 77!!! -GOD BLESS

If I can do it, anyone can do it!

 

[Pawn Maker]

This is confusing, does anyone know how to approach this. If you have a consolidated group of entities that is using the equity method, how do you setup the eliminating entries. In the first question the answer states that the income and dividend effects are reversed throughout the year to keep the investment at its beginning balance. In the second question though it states the exact opposite, that the income and dividend effects are reversed by the consolidating worksheet.

Parco owns 100% of its subsidiary, Subco, which it acquired at book value. It carries its investment in Subco on its books using the equity method of accounting. At the beginning of its 2009 fiscal year, the investment in Subco account was $552,000. During 2009, Subco reported the following:

Net Income $42,000
Dividends Declared/Paid 12,000

There were no other transactions between the firms in 2009.

In preparing its 2009 fiscal year consolidated statements, which one of the following is the amount of the investment eliminating entry that Parco will make as a result of its ownership of Subco?

$552,000

$582,000

$594,000

$606,000
You Answered Correctly!
The amount of an investment eliminating entry is the balance in the investment account as of the beginning of the period being consolidated. In this case, that was $552,000. If the parent uses the equity method to account for its investment in the subsidiary, the entries it makes during the year are reversed so that the investment account has its beginning of the year balance.

If a parent uses the equity method on its books to carry its investment in a subsidiary, which one of the following current year entries (made by the parent) must be reversed on the consolidating worksheet?

Income from Subsidiary Dividends from Subsidiary

Yes Yes

Yes No

No Yes

No No
You Answered Correctly!
When a parent uses the equity method to account for its investment in a subsidiary, the parent will recognize on its books during the year its share of the subsidiary's income (or loss) and its share of dividends declared by the subsidiary. Therefore, in the consolidating process, those entries (and any other equity-based entries made by the parent) must be reversed so that the elements that make up those entries (revenues, expenses, etc.) can be individually recognized on the consolidating worksheet and the consolidated financial statements.

AUD: 82
BEC: 80
FAR: 68, 81
REG: 67, 86

[Pawn Maker]

Well it appears that the first question is incorrect. After looking at both Roger's book and Wiley's they both state that when consolidating under the equity method the equity method increases and decreases in the investment must be backed out on the consolidation worksheet.

AUD: 82
BEC: 80
FAR: 68, 81
REG: 67, 86

[Lentilcounter]

Polk Co. acquires a forklift from Quest Co. for $30,000. The terms require Polk to pay $3,000 down and finance the remaining $27,000. On March 1, Year 1, Polk pays the $3,000 down and accepted delivery of the forklift. Polk signed a note that requires Polk to pay principal payments of $1,000 per month for 27 months beginning July 1, Year 1. What amount should Polk report as an investing activity in the statement of cash flows for the year ended December 31, Year 1?

Cash payments to purchase equipment are outflows from investing activities. The $3,000 down payment is an investing activity outflow.

The $27,000 financed and the principal payments are financing activities.

I agree with the first part of the answer's explanation. My question is about the $27k. Isn't this a non cash activity? If so, I think the explanation should specifically say “non-cash financing activities of $27K”. I understand that if the problem said the note was financed from an unrelated party and Polk received cash, it would be shown in the financing activities section of the CF statement. However, this is not the case, right?

@Jeff?

Anyone?

BEC = 79

AUD = 79

FAR = 84

REG = 86

Prayer + AICPA blueprints = my success

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

[ellejay]

Hi Everyone, I am scheduled to take FAR (my first section) on 11/22. I'm starting trade receivables today. Studying has been going slow because I'm a mom to two kids and I work full time, but I will have about three weeks left after I finish the review course to just pound out MCQs and SIMs. I hope that helps me pass. Right now I am only getting 60's (and some 50s) on the tests I am taking, so I'm pretty nervous!

AUD - NINJA in Training
BEC - NINJA in Training
FAR - 63
REG - NINJA in Training

FAR - 63, rematch February 2018

[Anonymous]

Hospital, Inc., a not-for-profit organization with no governmental affiliation, reported the following in its accounts for the current year ended December 31:

Gross patient service revenue from all services provided at the established billing rates of the hospital (note that this figure includes charity care of $25,000) $775,000
Provision for bad debts 15,000
Difference between established billing rates and fees negotiated with third-party payors (contractual adjustments) 70,000

What amount would the hospital report as net patient service revenue in its statement of operations for the current year ended December 31?
$665,000
$690,000
$705,000
$735,000

Do you know why 15000 of Bad debt is included in calculation of Net patient service revenue?

The formula I believe is : Gross patient service revenue – provisions for contr adj (not charity) = net patient service revenue.
Bad debt is subtracted after to calculate performance indicator.

[Jen-J]

CPACAL – provision for bad debt is part of the subtraction in the formula for net patient service revenue when the services are provided prior to the assessment of the likelihood of payment. It changed a few years ago (which makes sense considering how much of the revenue as reported is uncollectible for a variety of reasons.) I happen to work in that industry which is how I knew that, we have some really oddball income statement detail lines, like here's all the amounts we say that people owe us, and here's all the reasons we'll be lucky to see half of it…

AUD: 87

BEC: 90

FAR: 93

REG: 84

CPA license issued September 2018

[Anonymous]

@Jen J Thanks! I'm surprised that BD exp is part of the Net patient service revenue. Rodger mentioned a few times that BD is operating expense.

[IwannabeaCPA2017]

quick question guys, is the cost of removing a shed on piece of land included in land cost or building? Also, if there is proceeds from the sale of scrap that is included in land, right? Thanks!

BEC- PASS (Expiring in DEC 2017)

REG- PASS (Expiring Feb 2018)

AUD- PASS (Expiring Oct 2018)

FAR- 65, 60, 59, 77!!! -GOD BLESS

If I can do it, anyone can do it!

 

[Lentilcounter]

Removing the shed would be added to the land cost. Proceeds from the sale of scrap would reduce the total cost of land.

Anyone else, correct me if I am wrong?

BEC = 79

AUD = 79

FAR = 84

REG = 86

Prayer + AICPA blueprints = my success

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

[IwannabeaCPA2017]

Thanks Lentil! I really wish there was a way the AICPA could let us log on and review our exams or something. Maybe at like prometric etc if they were afraid of leaking the exam. Some questions I got on the exam wasn't even covered on the study material even if it were it was some small topics you wouldn't even have known since it was so “small.” I guess I'm just stressing myself too much over this exam. To those taking it this weekend, Good luck!! A tip I can give is make sure you give yourself plenty of time on the SIMS!

BEC- PASS (Expiring in DEC 2017)

REG- PASS (Expiring Feb 2018)

AUD- PASS (Expiring Oct 2018)

FAR- 65, 60, 59, 77!!! -GOD BLESS

If I can do it, anyone can do it!

 

[Esai]

Hey all, can you help me with this AICPA released problem (they have no explanations with the answers)

The following information relates to a company's year-end inventory:
Inventory cost
$910
Selling price of inventory
$1,000
Normal profit margin
10% of selling price
Current replacement cost
$740
Cost of completion and disposal
$100
Under IFRS, what is the company’s year-end inventory balance?
The answer says $900

But when I do it I get:
Cost: 910
VS
NRV: 900
RC: 740
NRV-Profit: 800

So COST: 910 vs MARKET: 800 (floor)
So come up with 800. What am I doing incorrectly?

AUD: 97
FAR: 72, 84
BEC: 88
REG: 2017-Q4

[Lentilcounter]

For US GAAP Fifo and IFRS, you follow lower of cost or NRV. NRV is selling price less cost of completion and disposal which is 900. Cost is 910. You take the lower which is 900. The approach you are taking looks like lower of cost or market which is used for US GAAP LIFO and retail methods.

BEC = 79

AUD = 79

FAR = 84

REG = 86

Prayer + AICPA blueprints = my success

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

[Esai]

man I'm burnt out lol, I just realized it was IFRS and not LIFO.
Thank you

AUD: 97
FAR: 72, 84
BEC: 88
REG: 2017-Q4

[Author]

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