[jeff]

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

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

[Cruzer]

@cdn Answer: D.
Exchange has commercial substance so you know you need to record new asset at FMV of asset given up (which is 45K in this case). Just do the JE on this one to help out:

Van (new) $50,000
Van (old) $30,000
Cash 5,000
Gain 15,000

The problems with cash get confusing as hell when there is/isn't commercial substance.

[norseman88]

@Cruzer How are you determining that the transaction has commercial substance?

[norseman88]

@Namstus – Yea not to happy with it, but have to try because of the changes and delays. Throwing up the failmarry! I have 26 days to study for FAR. Got through the 10 chapters in 21 days. I'm thinking I might need two bottles.

[RE2PECT]

@mtaylo24- I feel like it could go either way. At least I didn't put all 0's on the sims and leave the research blank like last time lol.

FAR: 75 Roger & Ninja (notes/flashcards/audio/MCQ)
AUD: 73, 81
BEC: 71, retake 8/29
REG:

[norseman88]

@CDN I think the answer is A $0. I view this transaction as lacking commercial substance. There is no significant impact on future cash flows.

[Cruzer]

@cdn @norseman88

The configuration (risk, timing and amount) of the future cash flows of the asset received differs significantly from the configuration of the future cash flows of the asset transferred.

In Dahl's case, this criteria is met because the configuration of the future cash flows associated with the asset received (a new van) differs significantly from the future cash flows of the asset surrendered (the old van and cash).

[Namstut]

Someone who just took FAR today posted about their experience. I am not sure if there are any disclosure violations on the OP's part, but I don't think there would be any on my part since I didn't take the test and it's “what he/she said” kind of thing. The point is – the OP had 3 testlets on Government. That's 20% of the exam!

I think at this point in the game I have to pick and choose my battles and spend my study time more efficiently. Well, first I need to get off the internet and actually study, but that's another story…

Anyway, If you look through each category in the Content Specification Outline in Becker you will notice that Conceptual Framework includes a lot of governmental topics, and this section is up to 23% of the exam. Plus Gov and NFP alone are 12% of the exam each. This is a large portion of the exam so everyone's comments about FAR being a CPA exam on GOV make sense.

I can't keep ignoring the facts so I am switching my gear and hitting GOV and NFP SIMs. I am all over the place with my scores on these two topics so at least I will feel comfortable in 2 out of 10 chapters in Becker. 🙂 I hope I am not making a huge mistake.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[norseman88]

@Cruzer – The exchange was for the exact same amount of FV with minimal difference in timing and small effect on risk, as some cash was paid. Where are you seeing this significant change in configuration?

[mtaylo24]

@namstut, Govt, NFP, and Conceptual Framework is the key to passing this thing. There is a slim likelihood that you will see everything else in between. More than likely one or two questions. That's why there really isn't too much of a point of getting bogged into the details spending a day or two on taxes, bonds, and pensions. There are like 700 questions in section 2 on Ninja LOL vs 100/200 in ever other section.

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)

[Namstut]

Thanks @mtaylo24! I think this will make the last several days before the exam less stressful. It's a lot easier to zoom in on 2 or 3 topics.

And I just came across the disclosure post. I might have violated the disclosure rules as well. Sorry peeps! I take full responsibility for it. I wish we could remove our own posts.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Cruzer]

@norseman88 This question is tricky because you have to use assumption (when they state “old van” they are stating an asset that is “older” than the “new van.” Essentially, cash flows generated from receiving a new van would generate more cash flows then having an older van. I missed this questions first time around as it is not super clear.

[norseman88]

@Cruzer – Right on! Another BANANA LAND question. Cause I would make the assumption that if the FV are so close already, the older van is probably a nice Mercedes Van and the newer Van is probably a Toyota. Both are going to depreciate at around the same value and the FV is already close together……

In the future, I hope this is what they mean by higher order skills! certainly can tell the question wasn't written with them.

[cdn]

@ norseman88 – you asked the same question as me.


@cruzer – are there kind of key points that I should assume it has commercial substance- ‘trick' to get it?

[norseman88]

@CDN If they say van for van, no commercial substance. If they say new van for old van, commercial substance.

Check out this question:

Amble, Inc. exchanged a truck with a carrying amount of $12,000 and a fair value of $20,000 for a truck and $4,000 cash. The fair value of the truck received was $16,000. At what amount should Amble record the truck received in the exchange under U.S. GAAP?

a. $12,000
b. $9,600
c. $16,000
d. $13,600

Choice “b” is correct. $9,600. The question indicates that Amble exchanged a truck with a carrying amount of $12,000 and a fair value of $20,000 for a truck with a fair value of $16,000 and cash of $4,000. Note that the exchange is for the exact same fair value of $20,000. Therefore, it is reasonable in this question to assume that the exchange lacks commercial substance under U.S. GAAP. When a nonmonetary exchange lacks commercial substance, the general rule is that no gain or loss is recognized and the book value approach is used. However, in this question, cash/boot is received and a proportional part of the gain is recognized (the $4,000 cash is 20% of the total consideration of $20,000, and the realized gain is $8,000, so $1,600 of the realized gain is recognized and $6,400 of the realized gain is not recognized).

Maybe if one truck was pink and the other was metallic black, it would have commercial substance, since there isn't high demand for pink trucks. But on the other hand, maybe there is low supply if pink trucks???

[cdn]

@norseman88 – got it, but isn't Amble paying cash not getting it?

[Author]

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