[jeff]

Welcome to the Q1 2016 CPA Exam Study Group for FAR.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[nib]

friends ,

it is difficult for me to remember appropriation and encumbrance from govt chapter .
1) definition of both
2) when to dr or cr .

any mnemonic or trick to remember it .

please share .

[Claudia408]

I totally went about this question the wrong way, and I don't really understand Wiley's explanation. Can someone simplify what's going on here and list out the calc? The whole equity method is throwing me off…

Bart, Inc., a newly organized corporation, uses the equity method of accounting for its 30% investment in Rex Co.'s common stock. During 2005, Rex paid dividends of $300,000 and reported earnings of $900,000. In addition:

The dividends received from Rex are eligible for the 80% dividends-received deduction.
All the undistributed earnings of Rex will be distributed in future years.
There are no other temporary differences.
Bart's 2005 income tax rate is 30%.
The enacted income tax rate after 2005 is 25%.
Bart elected early application of FASB Statement No. 109, Accounting for Income Taxes. In Bart's December 31, 2005 balance sheet, the deferred income tax liability should be

ANSWER: 9,000

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[marqzho]

Step 1 :
In equity method, you do this:
Dr. Investment (900*30%) 270
Cr. Equity in Earning 270

Dr. Cash (300*30%) 90
Cr. Investment 90

So in your book, you have a income of $270
and in your tax, you have a income of 90

Step 2:
Put it like this:
Book income 270
Difference (180)<——-
Tax income 90

Step 3, of that 180 difference, 80% will never get taxed under dividends-received deduction. So the remaining 20% * future tax rate of 25% will create a deferred tax liability of = 180*25%*20% = 9

Dr. Tax Expense 14.4<- Plug
Cr. Deferred tax liability 9 (180*25%*20%)
Cr. Current tax liability 5.4 (90*30%*20%)

Step 4 (optional for your own study) let say all earning are distributed next year.
you will have
Dr. Cash 180
Cr. Investment 180

Dr. Deferred tax liability 9 (target = 0)
Cr. Current tax liability 9 (180*.25*.2)

Total Tax expense for two year is $14.4
Total tax liab. for two year is $14.4
No more deferred tax liability
So we balance 🙂

REG 90
FAR 95
AUD 98
BEC 84

[nib]

hello friends,
pls share mnemonics or easy trick to remember treasury stock – cost method and par method .

[Sbirge24]

Bin

Unfortunately there isn't a trick. Don't over think it, just use your common sense. If its par, you know stock is always counted at Par or original cost to the company and Cost is what you re-purchase it for on the open market. If purchase for less, reduce APIC first then Retain Earnings if you have to

Repetition is the best approach in my opinion

[KJ]

I want to make sure I am understanding this right. Cash Equivalents are never reported on Statement of Cash flows because they have 3-month or less maturity.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[nib]

Friends ,

it is difficult for me to remember appropriation and encumbrance from govt chapter .
1) definition of both
2) when to dr or cr .

any mnemonic or trick to remember it .

please share .

[Claudia408]

what happened to the common stock issued for cash here? i don't think it was taken into account in calculating the answer, why?

Timp, Inc. had the following common stock balances and transactions during 20X6:

1/1/X6 Common stock outstanding 30,000
2/1/X6 Issued a 10% common stock dividend 3,000
7/1/X6 Issued common stock for cash 8,000

12/31/X6 Common stock outstanding 41,000

What were Timp’s 20X6 weighted-average shares outstanding?

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[marqzho]

30000*12/12
+
3000*12/12 (as if it was issued at the beg of the yr)
+
8000*6/12 (outstanding for 6 mos.)
=
37000 weighted-average shares outstanding

REG 90
FAR 95
AUD 98
BEC 84

[Claudia408]

thanks marqzho – roger's calc was way more complicated!

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Claudia408]

marqzho – how do you pick up on this stuff so quickly! ugh, it's so much!

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Claudia408]

doesn't this problem look like they gave you the weighted shares already so you wouldn't have to do that calc? what clue is the problem would make you think it wasn't?

Ian Co. is calculating earnings per share amounts for inclusion in the Ian's annual report to shareholders. Ian has obtained the following information from the controller's office as well as shareholder services:

Net income from January 1 to December 31 $125,000
Number of outstanding shares:
January 1 to March 31 $15,000
April 1 to May 31 $12,500
June 1 to December 31 $17,000

In addition, Ian has issued 10,000 incentive stock options with an exercise price of $30 to its employees and a year-end market price of $25 per share. What amount is Ian's diluted earnings per share for the year ended December 31?

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[marqzho]

For diluted Step 1
find basic EPS.
(net income – pfd div)/wtd. avg cs outstanding
(12500-0)/15000*3/12+12500*2/12+17000*7/12
=7.9365

Step 2
check if those convertible stock option/ pfed stock/ bond are dilutive or anti dilutive.
In this question, mkt price is $25 and exercise price $30. So unless the employee is moron, no one will exercise the stock option. Therefore we can ignore the stock option in calculating the diluted EPS

Ans = 7.9365

The question doesn't give you wtd avg. and you still have to calculate it.

REG 90
FAR 95
AUD 98
BEC 84

[nib]

hello friends ,

i am unable to understand following question + answer .

mcq :
In preparing Chase City's reconciliation of the statement of revenues, expenditures, and changes in fund balances to the government-wide statement of activities, which of the following items should be subtracted from changes in fund balances?

A.Capital assets purchases
B.Payment of long-term debt principal
C.Internal service fund increase in net position
CORECT ANSWER D.Book value of capital assets sold during the year

Explanation

GASB requires a summary reconciliation between fund financial statements and government-wide financial statements. To adjust the total changes to governmental fund balances to the total change to the government-wide net position, additions and subtractions are needed. Capital asset purchases and payments of long-term debt principal would be considered expenditure reductions of governmental fund balances and would be added back, as asset acquisitions are not considered an expense reduction of net position. In preparing government-wide financial statements, internal service fund assets and liabilities would be added to those of governmental activities, requiring an addition, not subtraction, to net position. When capital assets were sold, the entire sales price would have been an increase to governmental fund balances, but only the gain on sale would be an addition to net position. Therefore, the book value of capital assets sold during the year is the only item requiring a subtraction to reconcile to the changes in net position.

[MaLoTu]

I just bought NINJA notes for FAR (will be testing in April) … does anyone have them? I am thinking about just spending a day or 2 writing them out completely one time then reverting back to Becker and see how I can mesh the 2 together.

Any suggestions?

[Author]

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