FAR Study Group Q1 2015 - Page 38

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  • January 26, 2015 at 9:56 pm #654710
    Anonymous
    Inactive

    Yeah. I don't get it. It is definitely a use of cash when it is shown that way. I'm lost.

    January 26, 2015 at 10:00 pm #654711
    Determined CPA
    Participant

    Maybe I'll ask Jeff?

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 26, 2015 at 10:27 pm #654712
    Anonymous
    Inactive

    I am almost positive it is an error. I found the exact same problem in Becker (numbers, names, everything) except the AP was 19,400 as January 1 and 22,400 at December 31. The answer in this case WAS 151,400 because it was a source of cash and you WOULD add the 3,000 instead of subtracting. In the question you showed it would have been 145,400.

    January 26, 2015 at 10:57 pm #654713
    Determined CPA
    Participant

    Yeah, jeff posted that he is going to fix this problem. what a waste of almost an hour! thanks for helping me. at least I can go to sleep tonight knowing I can add and subtract correctly!

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 27, 2015 at 12:00 am #654714
    hunter32
    Member

    Has anyone found the optional MCQ for F7 to be absolutely awful?

    BEC - 80 (Becker)
    AUD - 92 (Becker+NINJA MCQ)
    FAR - 87 (Becker+NINJA MCQ)
    REG - 90 (Becker+NINJA MCQ and Audio)

    January 27, 2015 at 3:05 am #654715
    Determined CPA
    Participant

    I haven't done the optional but ch 7 sucks

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 27, 2015 at 4:00 pm #654716
    Determined CPA
    Participant

    excel – can you help with this?

    On December 31 of the previous and current year, Taft Corporation had 100,000 shares of common stock and 50,000 shares of noncumulative and nonconvertible preferred stock issued and outstanding. Additional information for the current year follows:

    Stockholders' equity at 12/31 $4,500,000

    Net income year ended 12/31 1,200,000

    Dividend on preferred stock year ended 12/31 300,000

    Market price per share of common stock on 12/31 72

    The price-earnings ratio on common stock at December 31 was:

    The price-earnings ratio is P/E = Stock price ÷ EPS (earnings per share).

    The net earnings per common share is $9:

    •($1,200,000 – $300,000) ÷ 100,000 = $9

    Price-earnings ratio:

    •$72 ÷ $9 = $8

    My question is, why do we account for the dividend on preferred stock in this question but not in that question I had posted a few days ago (becker CPA-01198)? I didn't back it out and as a result I picked 6:1.

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 27, 2015 at 4:23 pm #654717
    excel monkey
    Participant

    Dividends come out of retained earnings in the period they are declared, for EPS we don't care when they get paid. Since they are not reported on the income statement, we have to back them out of net income to get income available to common stock holders.

    We subtract the dividend for two reasons in this question, 1) because it was declared during the current year (at least that's how I read it, but the could have been clearer and said declared) and 2) the preferred stock is non cumulative. Even if they declare the dividend on 12/1, and won't pay it until 2/15 of the next year, it comes out of this year, not next year.

    In the problem from a couple days ago, the stock was preferred so we account for that years dividend every year, whether it is declared or not. However, we only back out the current periods dividend. If I remember correctly, the preferred dividend in this problem was 10K. Every year, for EPS, 10K gets deducted from net income. Even if the company hasn't paid a dividend in three years, we only back out the 10K for the current period, not the cumulative amount (30K).

    FAR - 91
    AUD - 88
    BEC - 86
    REG - 79

    January 27, 2015 at 4:36 pm #654718
    Determined CPA
    Participant

    I get the 10k but Im referring to the 16k from the other problem. the problem said ‘paid 16k in preferred dividends during year 2'. and this question above says ‘dividend on preferred stock for year ending…'.

    Im sorry I keep asking the same question but im just not getting it at all.

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 27, 2015 at 4:51 pm #654719
    excel monkey
    Participant

    The 16K was paid in year 2, however, it was accounted for in prior periods EPS. Here's the likely progression for that problem:

    Year 0: no dividend paid – dividend in arrears of 10K disclosed – 10K deducted from net income for EPS

    Year 1: no dividend paid – dividend in arrears of 20K disclosed – 10K deducted from net income for EPS

    Year 2: Dividend of 16K paid – dividend in arrears of 14K disclosed – 10K deducted from net income for EPS

    In the other question, the stock is non-cumulative. They declared the 300K in preferred stock dividends that year, so it gets backed out of net income that year for EPS purposes.

    There's nothing to be sorry about. I'd rather you keep asking until you understand than get to the exam and have 50 questions on EPS and be unsure about how to do them.

    FAR - 91
    AUD - 88
    BEC - 86
    REG - 79

    January 27, 2015 at 5:13 pm #654720
    Determined CPA
    Participant

    Ok I need to print these questions out and put them side by side with your 100 explanations and go through this later. thank you!

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 27, 2015 at 6:58 pm #654721
    CPA squared
    Member

    Equity, Question #: 547

    An entity authorized 500,000 shares of common stock. At January 1, Year 2, the entity had 110,000 shares of common stock issued and 100,000 shares of common stock outstanding. The entity had the following transactions in Year 2:

    March 1 Issued 15,000 shares of common stock

    June 1 Resold 2,500 shares of treasury stock

    September 1 Completed a 2-for-1 common stock split

    What is the total number of shares of common stock that the entity has outstanding at the end of Year 2?

    A.

    117,500

    Incorrect B.

    230,000

    C.

    235,000

    D.

    250,000

    You answered B. The correct answer is C.

    At the beginning of the year, the number of shares outstanding was 100,000:

    •15,000 new shares were issued, giving a new total of 115,000 outstanding

    •2,500 of the 10,000 treasury shares were reissued; adding them to the 115,000 gives a new total of 117,500.

    •A 2-for-1 split doubles the shares outstanding at that point, for a new total of 235,000 (117,500 × 2).

    How is the answer C? Why isn't the weighted-average of the 15,000 new shares, issued on March 1st, used??? I thought the answer would be B since the weight-average would come out to 12,500…. then x 2 for the split (25,000) plus the treasury shares split (5,000) and plus the original outstanding shares split (200,000), 230,000.

    Please someone help!

    Thank you!

    BEC... 68
    FAR... 74,66,85
    AUD... Q4 2015

    January 27, 2015 at 9:46 pm #654722
    Determined CPA
    Participant

    This question isn't asking for the WASCO (as you would see if EPS questions). This question is simply asking how many shares are outstanding. – I think that's why. ive been spending so much time on these questions as well.

    https://www.investopedia.com/ask/answers/12/weighted-average-shares-basic-weight-shares.asp

    Maybe that will explain it better than I can.

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 28, 2015 at 12:38 am #654723
    Determined CPA
    Participant

    I have a general question:

    I know that intercompany transactions get eliminated. However, I remember seeing questions where you account for the minority interest. When do we do that again?

    A - 75
    B - 78 God is good.
    F - 77 Answered prayers.
    R - 84! Done!!

    Paperwork sent - waiting for license!!
    Still on a cloud and in shock. Through God, all things will happen.

    January 28, 2015 at 1:02 am #654724
    kleon52
    Member

    CPA Squared

    You don't use the weighted average for these types of problems. The explanation given is correct.

    I'm using CPAexcel, it never mentioned anything about using weighted average

    REG: 80
    AUD: 82
    BEC: 83
    FAR: 83
    Finished Feb 2015, 5-6months

    Ninja MCQ for AUD, BEC, & FAR

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