[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

[Jen-J]

Kara – if you're studying 60 hours a week, that's completely different from my situation. You may not need 2 full weeks of review given how many hours that would be.

[IwannabeaCPA2017]

@lentil, your explanation was very helpful. Thanks!! Another question, here is the original.
Gray Co. was granted a patent on January 2, 20X1, and appropriately capitalized $45,000 of related costs. Gray was amortizing the patent over its estimated useful life of 15 years. No impairment losses were recognized. During 20X4, Gray paid $15,000 in legal costs in successfully defending an attempted infringement of the patent. After the legal action was completed, Gray sold the patent to the plaintiff for $75,000. Gray's policy is to take no amortization in the year of disposal. In its 20X4 income statement, what amount should Gray report as gain from sale of patent?

My question is had they taken amortization in the year of disposal do I capitalized the 15k over 12 years (remaining useful life) so the total amortized expense would be then 12k (year 1- year 4) + 1250 legal fees for successful defense? So total gain would then be 28,250? That is derived from 45000 – 12000 (year1-year4) = 33000 CV + 15 legal expenses- 1250(capitalized in year 1 had they taken amortization) = 46,570 then 75000 – 46750.. I'm just trying to tweak the question so I actually understand the question.. Thanks!

[Lentilcounter]

@IwannabeaCPA2017

Yes, I think you are correct. See below for my proof.

Scenario 1 (given problem)

$45K/15 years = $3K a year amortization

2001, 2002, 2003 = 3 years x $3K = $9K of amortization as of 01/01/20×4

$45K-$9K+$15K= $51K capitalized cost of the patent in 20×4

sale price of patent = $75K – $51K capitalized cost of the patent = $24K gain on sale

Scenario 2 (amortization in the year of disposal)

$51K capitalized cost/12 years = $4.25K amortization in year 4

$51K-$4.25K = $46.75K

$75K-$46.75K = $28.25K

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

[Lentilcounter]

@CPWAT

Where did you see this NFP question? Wiley? Ninja? Becker? Gleim? I'm not following the answer either and so I am trying to look it up.

Below two transactions incurred in year 2 of a NFP and the question is asking me what the program expense is on the statement of activities.

Interest payment on short-term bank loan in Year 2 1,000

Principal payment on short-term bank loan used for
program services in Year 2 20,000

The answer is 1000 instead of 21000.

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

[kara]

Jen J:

Yes, it is so much! Any tips you have noticed on how to remember everything? lol I feel like its so much to remember!

[Ana]

@lentil are you studying/practicing sims at all? do you study topics that you were tested on last 3 times?

[Tim]

@CPWAT @lentilcounter

The principal payment lowers the note balance. It is not an expense, program or otherwise, and it doesn't decrease net assets.

Journal entry is:

Note payable 20k
Cash 20k

[Lentilcounter]

@ana

Yes and yes. My goal is to get through all 143 sims in the Wiley test bank for FAR.
I wish I was smart enough to remember the major topics I was tested on the last 3 times.

My FAR scores have ranged from 62 to 68, with 64 under the new format. I weak in MCQ and sims so I have just studied it all.

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

[Anonymous]

Anyone else struggling with the Intercompany eliminations? I feel like I will never understand when to include gross profit for inventory.

[Ana]

@cpa the third. yes!!! I finally have it down. but took me too long. too long to pass last time. get it down, you'll need it.

[Anonymous]

@Ana – do you have any tips? I'm using Becker and I think I know it, but I feel like there are so many parts that are assumed.

Dividends paid eliminations feel like they give a different answer every time…

[Ana]

@cpa3rd gosh I wish I had a simple way to remember it all and pass on the trick. I had more trouble with inventory, cogs, and revenue than dividends. I also use Becker so what I did was go through the MCQ on that topic until I got them all right. Thankfully there aren't that many questions on it. Then do the Skills Practice video and exercise. I literally took a screenshot of the video in the Skills Practice that has Gearty as a buff guy and Olinto as a wimpy guy with all the calcs and journal entries written around them. Even now I have to refresh my memory on it bc even though I get it conceptually the calcs get tricky. I also use Ninja mcq and haven't come across it there.
For dividends I think generally you only report what the consolidating company paid, disregard the sub.

[Ana]

@lentil I remember all my sims. I keep redoing those topics. One of the released sims from 2017 that I knew I had nailed has been released. Just my luck they would release a sim that I actually understood. I've gotten the same sim twice over my 3 tries too.

[Anonymous]

Maybe it's because I've had a long day and am feeling extra annoyed, but am I only one who thinks Becker only explains 80% of the reason why answers are right/wrong?

For instance, I have been working on intercompany. EVERYTHING I read for 20 questions says “Eliminate the Sub equity.” One of the last questions I get wrong due to eliminating the sub equity, and it now mentions the NCI piece. It's infuriating, because if the note was “Eliminate the Sub equity less the NCI” I'd know it. I feel like they intentionally leave stuff out…

[Ana]

yup I feel that way too. it's probably bc they can't explain every little divergence from the general rule in the book or else it's by 10x longer. but it's annoying for sure. luckily I don't feel that the test mcq is tricky. I think it's straightforward and asks about the general rules 90% of the time.

[Author]

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