[jeff]

Post by Another71.

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

[se7en.14]

On October 1, Year 1, Gold Co. borrowed $900,000 to be repaid in three equal, annual installments. The note payable bears interest at 5% annually. Gold paid the first installment of $300,000 plus interest on September 30, Year 2. What amount should Gold report as a current liability on December 31, Year 2?

solution:

$600,000 × 0.05 × 3/12=$307,500

I'm not sure why $600,000 is used.

Can someone explain to me? Should it always be the outstanding balance used to solve?

Thanks.

[jakeeee]

@Determined CPA – NCI (minority interest) exists when a parent acquires a sub. For example, if a Company purchases 80% of a subsidiary ( (consolidated under the acquisition method)), the remaining 20% will determine the amount of the NCI, whether under it's full goodwill method (GAAP/IFRS) or partial goodwill method (IFRS).

The consolidating eliminating journal entry would include a Credit to Noncontrolling Interest, which would be reported in the equity section of the consolidated financials. This is the entry where you eliminate the Sub's equity (C/S, APIC, R/E), eliminate the parent's Investment in Sub account, and so on.

BEC - July 2014
REG - Aug 2014
FAR - January 2015
AUD - May 2014
Ethics - 3x...

[monikernc]

New to all of this – started studying MCQs today for first exam FAR. Spent the day trying to get a feel for the interface and the wording of the questions. Are these SIMs the same look and feel as those on the exam? How close is the Ninja MCQ experience to the actual exam? Please give me a good comparative response. How many SIMs on actual exam? Thanks.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Determined CPA]

thank you jakeeee – can you give me an example? have you come across a question where the NCI is included?

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.

[excel monkey]

se7en.14

The 600,000 is used because it is the amount that we have outstanding, which is also the amount we have to pay interest on. The current portion includes the principal payment due the next year (300,000) and the interest owed for the last three months of the year (600,000*.05*3/12=7,500). You only pay interest on the outstanding balance, not the original amount of the loan. In this case the 3 payments on made on 9/30 would be:

Year 2 = 345,000 ((900,000*.05)+300,000)

Year 3 = 330,000 ((600,000*.05)+300,000)

Year 4 = 315,000 ((300,000*.05)+300,000)

Each year interest would accrue at year end for 10/1-12/31, and would be included in the current liability portion along with next years principal payment. On 12/31, the company would record a liability for the accrued interest as follows:

Year 1 12/31 = 11,250 (900,000*.05*3/12)

Year 2 12/31 = 7,500 (600,000*.05*3/12)

Year 3 12/31 = 3,750 (300,000*.05*3/12)

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

[monikernc]

On June 30, Huff Corp. issued at 99, 1,000 of its 8%, $1,000 bonds. The bonds were issued through an underwriter to whom Huff paid bond issue costs of $35,000. On June 30, Huff should report the bond liability at:

The answer given is that reported bond liability is: 1000*99*$1000=$990,000

I understand that is the cash amount received because the bonds were issued at a discount.

Why is the liability recognized at the discounted amount and not the face value of the bonds = $1,000,000?

Thanks for your help.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[excel monkey]

The bond liability is reported net of any discount or premium (both are contra-liability accounts).

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

[Anonymous]

So what is a easy way to remember when to remeasure or to translate?

[Determined CPA]

You translate when you have a subsidiary that does business in Pesos (which makes the Peso the functional currency) but reports their financial statements in the US using the dollar (which makes the dollar the reporting currency). To get from Peso's to the dollar for the financial statements, you have to, in essence ‘translate' between the two currencies. The difference goes to OCI.

You re-measure, on the other hand, when a subsidiary buys and sells in the US (making the dollar the functional currency) but reports their financial statements in Peso's (which makes the Peso the reporting currency). In this case, you have to re-measure from the Peso to the dollar. The difference goes to the I/S.

I think that's right.

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.

[jasbeerch]

remeasure – from reporting currency to US dollars(functional currency)

translate – from functional currency to reporting currency (US F/S)

I hope it helps.

[Anonymous]

Ah gotcha, makes sense now. Thank you both!

[se7en.14]

thanks excel monkey

[Determined CPA]

Oak County incurred the following expenditures in issuing long-term bonds:

Issue cost $400,000

Debt insurance 90,000

When Oak establishes the accounting for operating debt service, what amount should be deferred and amortized over the life of the bonds?

answer: 0 – The GASB evaluated these debt issuance costs and concluded that, with the exception of prepaid insurance, the costs relate to services provided in the current period and thus they should be expensed in the current period

But for FASB, wouldn't the bond issue costs be amortized? how about the insurance?

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.

[monikernc]

On December 12, year 1, Imp Co. entered into three forward exchange contracts, each to purchase 100,000 euros in ninety days. The relevant exchange rates are as follows:

Spot rate Forward rate (for March 12, year 2) November 30, year 1 $.87 $.89 December 12, year 1 .88 .90 December 31,year 1 .92 .93

Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp’s specifications. The expected delivery date is March year 2 at which time settlement is due to the manufacturer. At December 31, year 1, what amount of foreign currency transaction gain from this forward contract should Imp include in net income?

a. $0

b. $ 3,000

c. $ 5,000

d. $10,000

I selected B $3000 but the NINJA solution offsets the loss from the purchase commitment of $3000 against the gain from the contract of $3000 to net to A. $0. The solution also provides that the hedge qualifies as a fair value hedge. I have two books Wiley and Lambers with the same question that say the $3000 is correct.

Which is correct? NINJA or Lambers/Wiley?

Thanks.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[titoav15]

What do you guys think of this one…

A depreciable asset has an estimated 15% salvage value. Under which of the following methods, properly applied, would the accumulated depreciation equal the original cost at the end of the asset's estimated useful life?

A.

Straight-line

Incorrect B.

Double-declining balance

C.

Both straight-line and double-declining balance

D.

Neither straight-line nor double-declining balance

I thought DDB ignores salvage value and making the answer correct… explanations for the question as follows:

Under all of the depreciation methods, a depreciable asset is not depreciated past the point that Cost – Accumulated depreciation = Salvage value. Consequently, the maximum amount of accumulated depreciation is Cost – Salvage value. Neither straight-line nor double-declining balance would result in accumulated depreciation equal to the original cost.

BEC: 5/21/14 82! PASSED HALF WAY THERE!
FAR: 4/2/15 80! Almost there!
AUD: 69, 74, 4/3/14 81! PASSED
REG: TBD

[Author]

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