[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

[Ana]

@trc here you go
https://www.another71.com/cpa-exam-forum/topic/potential-far-simulation-topics-straight-from-the-aicpa/

you can read the comments there for how to use it. especially my comments, they're the most important…j/k haven't even passed far 🙁

[kdcpa]

Anyone using Gleim test bank, please advice on how do you study for governmental accounting MCQ? I seem to find them very challenging.

[pearlwings]

I'm going through the non-profit accounting section on Becker right now…I'm super confused about the reclassification journal entries from temp. restricted to non-restricted….
Based on Becker the following journal entries should be recorded to release restricted items:
DR. Temp. restricted Asset Released
Cr. Cash – Temp Restricted

Dr. Cash – Unrestricted
Cr. Temp. restricted asset released.

Can someone help me understand why the journal entries can't just be the following:
Dr. Cash -unrestricted
Cr. Cash Temp restricted

[Katie]

@pearlwings

I had the same issue. I ended up chalking it up to the “Temp. restricted asset releases” being an in-between account that illustrates the event that took place to release the cash. Not sure if this helps, but that's how I ended up remembering and conceptualizing it….

[Wannafree]

@pearlwings ,assume the facts $1000 was received in 2006 with stipulation to purchase a printer.
in 2007 printer was purchased.
JE:
in 2006
Cash ( temp restricted ) DR $1000
Temp Restricted support – Contribution Cr. $1000
In 2007 when printer got purchased. JE
Printer Dr $1000
Cash Cr ( Unrestricted ) $1000

So far so good ,just normal JE except in JE 1 cash is restricted and in JE2 Cash is unrestricted. How it happened ? simultaneously ( when purchasing ) they pass an entry through series of accounts like reclassification out and reclassification in ,just to say hey we have satisfies the restriction condition and this cash is available for spending . Btw cash is cash ,pretend it changes color to unstrstriicted.

so simulatanous entry will be as follows:
Satisfaction of printer acquisition restriction – Temp restricted asset Dr $1000
Satisfaction of printer acquisition restriction – Unrestricted net asset Cr $1000

Now to your question why :Can someone help me understand why the journal entries can't just be the following:
Dr. Cash -unrestricted
Cr. Cash Temp restricted
You did a typo here.Cash temp unrestricted is credited when spent and Cash Restricted is debited when received.But let us assume your correct question would have as follows why not ?
Dr. Cash -Temp restricted
Cr. Cash Unrestricted
Actually Cash is a BS item , reclassification is an IS JE. and also Cash is gone when spent ,so to the extent spent ( reclassified ) it's out of door ,gone.
In summary , receive cash ( restricted DR ,Contribution cr ) ,spend money (regular JE ,Equipment or any thing Dr Cash Unrestricted Cr ),3rd simultaneously pass third entry to transfer cash from restricted to unrestricted.
Becker's have not given good example I think related to intermediary account for reclassification and skipped one step.I hope it will clear confusion.let me know if you still have any doubt , I will try better example .

[IwannabeaCPA2017]

Quick question: for Not for profit when they receive contributions and there are restrictions on it and they receive some type of interest income and the donor stated it has to be used for ongoing services is that Temp restricted asset? because in Becker I have seen both temp and unrestricted.. so now I'm kinda confused which one it is.

[Wannafree]

@wannaCPA2017 , Interest income can be treated in 3 ways depending upon the scenarios.
1.No restriction : free to spend whatever ways , straight unrestricted.
2.Restriction : Even the interest has to be invested to permanent endowment ( rarely happens ) ,restricted.
3.Interest to be used for some purpose like operations , scholarship etc .First temp restricted and then reclassify to unrestricted.You may see my previous post on reclassification.

[Anonymous]

Just sitting down at my desk to start a 3.5 day study binge! 3 weeks until test date so I took a couple PTO days to make sure I stay on track! Bunkered down with my phone on silent, a full pot of coffee and about 1000 questions to look at!

Good luck everyone and I thank all of your in advance for any help you give me/for talking me off the ledge this weekend! WE GOT THIS!

[msquared17]

@CPA the third – that's impressive and inspiring. I've been procrastinating and doing everything except study today. I think I will make a nice hot cup of tea and tackle these mcq's.

I don't post much but I have a feeling that will change soon. The support on this board is amazing. My exam is scheduled for 12/7. I need to complete F8 by tomorrow. If I complete F9 and F10 by next Friday, I will have 18 days left for review.

Good luck to everyone!

[maffs]

Park Corp.’s equity accounts at December 31, Year 4, were as follows:
Common stock, $20 par $8,000,000
Additional paid-in capital 2,550,000
Retained earnings 1,275,000

All shares of common stock outstanding at December 31, Year 4, were issued in Year 1 for $26 a share. On January 4, Year 5, Park reacquired 20,000 shares of its common stock at $24 a share and retired them. Immediately after the shares were retired, the balance in additional paid-in capital was
A. $2,590,000
B. $2,510,000
C. $2,430,000
D. $2,470,000
Answer (D) is correct.
The 20,000 shares of common stock that were reacquired and retired were originally issued for $520,000 (20,000 shares × $26). Of this amount, $400,000 (20,000 shares × $20 par) should have been credited to common stock, with the remaining $120,000 ($520,000 – $400,000) credited to additional paid-in capital. The 20,000 shares were reacquired for $480,000 (20,000 shares × $24). To record the purchase and retirement, $400,000 should be debited to the common stock account, with the remaining $80,000 ($480,000 – $400,000) debited to additional paid-in capital. Thus, the additional paid-in capital following the retirement of the shares should be $2,470,000 ($2,550,000 – $80,000).

—————————————-
For buyback, I have
Debit treasury stock for $480,000 (20,000 * $24)
Credit cash for $480,000 (20,000 * $24)

However for retirement, I have
Debit common stock for $400,000 (20,000 * $20 par)
Debit APIC – CS for $120,000 (20,000 * $6 from original issue)
Credit treasury stock for $480,000 (20,000 * $24)
Credit PIC – retirement of treasury stock for $40,000

In the previous thread, they debited $80,000 instead (20,000 * $4 from reacquistion).
However, aren't you always supposed to debit the original amount of Common Stock and APIC-CS from original issue?
Or is this simply just cancelling the terms out (APIC-CS $120,000 – PIC-retirement of treasury stock $40,000 = $80,000)?
Thought these were technically considered separate but maybe because it is asking about the full balance in additional paid in capital afterwards?
($2,550,000 – $120,000 + $40,000).

[gguzman]

I can't conceptualize why lifo for perpetual is different from lifo periodic. I know how to do it for a problem, I just have a feeling that not nailing the concept down is going to screw me over.

I am able to work out that when calculating EI for periodic, you simply apply the oldest goods to ending inventory, as ending inventory has an inverse relationship with inventory when it comes to LIFO . For perpetual I must use cost of goods sold and work with the direct relationship COGS has with LIFO and apply the newest goods (last in) to COGS.

Why? Is it because of the nature of the transactions?

[Anonymous]

@msquared17 thanks! Despite what my scores look like in my signature, I have had A LOT of procrastinating! I have taken every test more than once and have been at this for over 5 years. I have one shot to pass FAR before BEC expires, and then REG expires in June 2018. I'm so close I can taste it! I need to get this thing done so I can go back to living my life. My test is Dec 10 at the latest possible time that my testing center offers. I am maximizing study time this go around to give myself the best possible chance!

[Anonymous]

I find this question to be very unfair – am I missing something?

“Gains and Losses on the purchase and resale of Treasury Stock are reflectred in:
A. I/S and APIC Accounts
B. APIC Accounts
C. Common Stock Accounts
D. APIC and Retained Earnings”

The “correct” answer per Becker is D. I think this is bogus though! Gains are never in retained earnings, under any circumstances. Why would they ask this question like this? In my opinion, the only choice that includes BOTH Gains and Losses as noted in the question, is APIC.

Am I missing something?

[Anonymous]

I find this question to be very unfair – am I missing something?

“Gains and Losses on the purchase and resale of Treasury Stock are reflected in:
A. I/S and APIC Accounts
B. APIC Accounts
C. Common Stock Accounts
D. APIC and Retained Earnings”

The “correct” answer per Becker is D. I think this is bogus though! Gains are never in retained earnings, under any circumstances. Why would they ask this question like this? In my opinion, the only choice that includes BOTH Gains and Losses as noted in the question, is APIC.

Am I missing something?

[Jen-J]

gguzman – LIFO periodic allows you to essentially sell items you haven't bought yet – say you have a sale in a store on 12/10, but you have new items delivered to the store on 12/15, and you use a month as your period – LIFO periodic lets you sell that phantom inventory from the 12/15 delivery to your 12/10 customer and use its cost of goods in your COGS calculation. That's why you can just figure COGS using the oldest inventory as the remaining inventory. (This is obviously not possible in real life because you would have to have sold some of your older inventory because you didn't physically have the newer inventory to sell yet. But hey, that's LIFO.)

LIFO perpetual doesn't let you sell anything before you buy it – you are selling the specific units that were most recently acquired before that specific sale date, so you can't sell the 12/15 units until on or after 12/15. Does that help?

LIFO periodic vs LIFO perpetual inventory system

[Author]

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