[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for FAR. 🙂

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

[mckan514w]

and with that i hear the dinner bell- thank god for delivery!!! Will check that answer in the morning so let me know!!!

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mtaylo24]

@mckan You got it dude 😉

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[NYaccountingstudent]

For the sims,

-If a journal entry area has 10 lines is it most likely going to be 10 lines? or is there a very high chance i only need to use 4 and i should leave the rest blank

[Cruzer]

anyone else listen to Bob go on and on about Govt accounting? Felt like he taught me everything just in my commute to and from work this week.

[NYaccountingstudent]

@cruzer ive tried listening to audio when im in the gym or in the car but i just drift off and stop paying attention to the audio

[mckan514w]

@NYaccountingstudent- I don't think I have ever had a SIM that had an “extreme” number of entries / and entries that are blank. I think each portion has had like 2, 4 or 6 lines… and for one I remember vividly because I came home and checked on it- it had 6 lines two of which were left blank- I am assuming they were trying to trip me up with recognizing a gain / loss on the transaction in which there wasn't one and that is honestly from what I can remember the most lines I had ever encountered- which was why I looked it up.

The instructions are pretty clear in saying you may or may not use all lines…

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Holly]

I listen to Becker audio and it's helpful. I think next test I'll skip sitting through lectures in the beginning, and save that for when I'm driving, etc.

BEC - 79
REG - 85
AUD - 5/27/16

[Mscfisher]

Does anyone have a good understanding of when to use the spot rate versus the 30 day forward rate or 60 future rate. I keep getting these examples wrong because I don't know what to use the math is obviously very straightforward.

On September 1, 20X1, Brady Corp. entered into a foreign exchange contract for speculative purposes by purchasing 50,000 deutsche marks for delivery in 60 days. The rates to exchange $1 for 1 deutsche mark follow:

09/01/X1 09/30/X1
——– ——–
Spot rate .75 .70
30-day forward rate .73 .72
60-day forward rate .74 .73
In its September 30, 20X1, income statement, what amount should Brady report as foreign exchange loss?

A.
$2,500

B.
$1,500

C.
$1,000

Incorrect D.
$500

[mckan514w]

@mscfisher-

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mckan514w]

@mscfisher- if the answer is C- 1,000 I can explain it- 🙂 if not nope I am as clueless as you are despite reading and working through these numerous times- but I “think” I may have it down so let me know!

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Mscfisher]

It is c. Explain away:-)

[mckan514w]

Hot Damn!!! 🙂

Okay I think all of this is correct:

this is for Speculation so it is considered a Fair Value Hedge- which is done for either speculation or for transactions where there is a “firm” / signed contract in place- example I have bought computers from Asia- due in Yen- but will not pay for them for 60 days. So I sell Yens on open market.

The physical item (the computers) need to be measured Spot-to-Spot on each reporting date. So spot rate when contract was signed and spot rate at reporting date. Then Spot reporting date to Spot at payment date.

The Contract / hedged item / Forward Contract needs to be based on forward amounts. So in the above example when you enter into the contract you are 60 days out- so you would use the 60-day forward rate on that date… so 9/1 forward rate in 60 days so .74 at the end of the reporting period- there are only 30 days left in the contract so you would use the 30 day forward as of 9/30. or .72

.72-.74=.02 X 50,000= 1,000 loss

So remember Fair Value- physical item = spot
forward contract forward based on date you are measuring and time left on contract.

also if it helps Spot is the current rate- you want it “on the spot” meaning right now.

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mckan514w]

Conversely if this was a cash-flow hedge- non-speculative currency or one where you are hedging against a future purchase (i.e. I have ordered computers from China to be delivered in thirty days with payment due in 60– note the difference- I have not bought them yet)

These transactions are spot to spot… at each recording date.

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Mscfisher]

@mckan514. Ah ha! I like that explanation now let me see if I can apply it to some other questions thank you!

[mckan514w]

Hope all of it is correct @ms- but I seemed to get my MCQ's right yesterday after reviewing and nailing the above down- hopefully someone will correct if anything is wrong!!!

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Author]

Replies