[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

[Anonymous]

@Ana – I appreciate your note, but I am completely lost. I don't even know which charts you are referring to (F6-43??) and honestly, don't even really know the stuff you are saying. I just can't seme to grasp this stuff and feel like I am going to need an eternity to understand it.

[Ana]

@cpa3rd ok no prob. start from scratch. do you know the PUFER acronym from Becker? in regards to derivatives and hedging, only Effective Cash Flow Hedge goes to OCI. That's the E from PUFER. So by default everything else goes to the income statement. On the income statement it'll be either realized or unrealized. Good so far? and yes F6-43 chart is great.

[Jen-J]

Updated on the FAR thread. A huge thank you for the suggestions to request scratch paper and to use the authoritative literature. Glad FAR is over after 3 months of studying! On to Audit, maybe I'll see a few of you over there.

[Ana]

Thanks for updating, good luck Jen. Use the AL on Audit too!
Did you follow the blueprint?

[Jen-J]

Ana – no, I didn't. I think I skimmed it, but by the time it was available I was nearly done studying.

[Sturg]

Can anyone explain why this is the correct answer. Govt accounting makes no sense at all…

The Dunstown County general fund received a notice of a federal grant award for an expenditure-driven (reimbursement) grant in the amount of $1,000,000. Included with the notice was an advance of $250,000. During the year, the County incurred $400,000 of qualifying eligible grant expenditures, and no additional money had been received from the grantor.

What would be the amount of intergovernmental receivables reported by the general fund at the close of the fiscal year?
A.
$0
B.
$150,000
C.
$600,000
D.
$750,000

Answer: The receivable would equal the difference between the amount of the advance and the revenues of $400,000 (the amount spent on qualifying expenditures).

Revenues $400,000
Less advance received (250,000)
———
Intergovernmental receivable $150,000
=========

Huh???

[Jen-J]

Sturg – they've only earned 400K of the grant, and they've received 250K so far. The receivable is the difference.

[Recked]

I believe its only revenue/receivable when the conditions of the grant are met.
It is a reimbursement grant, so it would be counted as revenue/receivable when spent on the qualifying reimbursable expenditures.
They spent 400k which will all be reimbursed, but to date have only received 250k of the 400k.

I THINK if it were just a general purpose grant with no restrictions then the full 1mil would all be booked when granted, regardless of when received.

Notes from my book.
Revenues accrued for:Property taxes (+60 days)
Grants – unrestricted -approved
Restricted(When spent)
Hope this makes sense. I also had some trouble with Gov't, so I started the chapter over from the beginning, the second time through helped it stick in my head. Good luck.

[Anonymous]

PLEASE BREAK DOWN (IN LAYMENS TERMS) WHAT THIS QUESTION IS ASKING?

Clark Co. had the following transactions with affiliated parties during 20X1:

Sales of $60,000 to Dean, Inc., with $20,000 gross profit. Dean had $15,000 of this inventory on hand at year-end. Clark owns a 15% interest in Dean and does not exert significant influence.
Purchases of raw materials totaling $240,000 from Kent Corp., a wholly owned subsidiary. Kent's gross profit on the sale was $48,000. Clark had $60,000 of this inventory remaining on December 31, 20X1.
Before eliminating entries, Clark had consolidated current assets of $320,000. What amount should Clark report in its December 31, 20X1, consolidated balance sheet for current assets?

Consolidated current assets before eliminations $320,000
Less intercompany profit on remaining inventory
purchased from Kent (Note 1) 12,000
——–
Adjusted consolidated current assets $308,000
========
Note 1: Computation of intercompany profit:
Gross profit rate = $48,000 / $240,000 = 20%
Gross profit in inventory = 20% x $60,000 = $12,000
Note also that since Clark owns less than 20% of Dean, Inc., and does not exert significant influence, the gross profit from the sale to Dean does not require elimination.

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[Lentilcounter]

@born to win

The question is asking about the amount of current assets to be shown on the consolidated financial statements of Clark company who owns all of Kent but only 15% of Dean.

Clark has intercompany sales with its subsidiaries. The problem gives you the consolidated current assets before elimination entries. So, all you need to do is eliminate any intercompany profit between Clark and Kent and subtract it from that number.

If the question is why? It is my understanding that elimination entries don't come into play unless the parent company owns more than 50%.

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

[Anonymous]

@Lentilcounter Thank you so much! That explanation is what I needed.

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[Sturg]

Thank you ReckedRacing, that makes sense. There was never anything in my study material about reimbursement grants so it was totally foreign to me. So its a revenue when money is spent…?

[Recked]

Careful with your wording.
It's a revenue when the restriction on the grant is met. The restriction on this grant is that it be spent on qualifying things.
There could be other restrictions, such as time, or the money could have been spent, but not on qualifying things.

[Anonymous]

@Ana thanks for your response. I decided to take yesterday off to enjoy some football, so I am just seeing your response. I think that's helpful. I do understand the PUFER mnemonic from becker, I guess I didn't completely realize how it was tied into the section 6 in Becker. Thanks for the help, I will try to work through some of this stuff!

[CoastalJuan]

Just scheduled FAR for 12/4/17. Used to use Gleim, but they are getting expensive. Debating over Scout or Sniper. Anyone have any preferences? Is the audio, book, and Bisk worth it?

[Author]

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