[jeff]

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

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

[Stilgoin]

Rose Co. sells one product and uses the last-in, first-out method to determine inventory cost. Information for the month of January 20X1 follows:

Total Units Unit Cost
———– ———
Beginning inventory, 1/1/X1 8,000 $8.20
Purchases, 1/5/X1 12,000 7.90
Sales 10,000
Rose has determined that at January 31, 20X1, the replacement cost of its inventory was $8 per unit and the net realizable value was $8.80 per unit. Rose's normal profit margin is $1 per unit. Rose applies the lower of cost or market rule to total inventory and records any resulting loss. At January 31, 20X1, what should be the net carrying amount of Rose's inventory?

A.
$79,000

B.
$79,800

C.
$80,000

D.
$81,400

B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, Waiting

Ethics | 93

"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill

“In a world full of critics, be an encourager."

[Scared-cpa]

@waffle_house All of those are good mentions! Thanks! I stuggle with pensions but understand how to calculate them now for the most part, just don't expect me to be able to explain them to you. I learned everything I know about them from Ninja MCQs, so I know what to add/subtract but don't really know much about each account or the JE for them!

I also struggle with know what percent (coupon or market) rate to discount and how to go about discounting them in problems sometimes. I'm getting better with practice but it has always been something I struggle with, even in my intermediate accounting courses. It just never wanted to click for me. Then the JE for them. I know I have to review these because I get confused on whether to record them at face amount or the discounted numbers, and then how to go about the JE for interest. However, I can fill in an amortization schedule like a boss. That makes me feel better, at least.

Bonds and leases in general. I can answer most multiple choice questions on them, but I struggle with JE in them for the same reason I do with discounting.

Jeeze…listing these things freak me out and make me feel less prepared. Is this awful of me to be struggling with? I am doing Ninja sims and they honestly seem to be pretty easy. Usually 90% or better on them unless I misread something. I don't know…I don't want false hope.

@stilgoin Thank you!!!

[Cjsr]

@scared_cpa, it helped me with bonds when I stopped thinking of it as a loan you made to someone, and started thinking of it as a deal. You're buying a deal from them to pay you x amounts at x times, that's the only way that the coupon rate matters. I remember the class where this hit me, on my third go-round with bonds.

BEC. 83. 9 Jan 2016
REG. 83. 30 Jan 2016
AUD. 92. 27 May 2016

Becker FastPass with in-class videos

[Scared-cpa]

@Cjsr That's interesting. I will try that on the next go around with mcq on bonds!

Also, does anyone have a list or know where I can go to get a list of what accounts are remeasured at what rate (historical, average, current) when remeasuring financial statements from a foreign currency to the functional currency? This is one thing I had down pat on my first go around with FAR but I haven't had many questions on this in Ninja so I've forgotten it.

[waffle_house]

Remember is the stated rate is less than the market rate it is a discount and if the stated rate is more than the market rate it will be a premium.

Discount JE:
DR: Cash ((pv of annuity due or ordinary annuity @ market rate % & periods)x (face amount x stated rate))+ (PV of $1(use the market rate %) x face amount)
DR: Discount (difference between face amount and proceeds (this amount gets amortized (increases as you amortize it))
CR: Bonds Payable (the face amount)

Do the same for Premiums but you will receive more cash and credit premium on BP instead of the debit on discount above.

[waffle_house]

@Cjsr

State rate and market rate both matter. That is how you determine the cash proceeds and discount and premium.

[j3cpa]

Can someone help me answer this following question: preferably provide some J/Es on how you come up with the answer? I'm going crazy here….

On December 31, 20X1, Pack Corp.'s board of directors canceled 50,000 shares of $2.50 par value common stock held in treasury at an average cost of $13 per share. Before recording the cancellation of the treasury stock, Pack had the following balances in its stockholder's equity accounts:

Common stock $540,000
Additional paid-in capital $750,000
Retained earnings $900,000
Treasury stock, at cost $650,000

In its balance sheet at December 31, 20X1, Pack should report common stock outstanding of

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[mtaylo24]

^^^^ Correct me if I'm wrong

Answer

540,000-(50,000*2.5) = 415,000

JE

Dr cs 125,000 (50K X 2.5)
Dr APIC 525,000 (Plug)
Cr t.stock 650,000 (50K X 13)

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)

[Scared-cpa]

@waffle_house I did a sim over bonds issued at a premium last night and got 100% on it and this was before I read your explanation! I was very proud of myself lol.

I test Friday and I have exactly 214 questions that I have not answered correctly before I hit review stage. Instead of worrying about completing those, do you think I should just do a mix created by the ninja software from now on to keep a comprehensive understanding of all the material instead of just focusing on these few trouble areas? These 214 questions are within 3 of the 5 sections tested, so I have none left to complete in NFP and Conceptual Standards. Unfortunately I won't be able to do too many today – will be out of the house for most of the day. I'm hoping to complete at least 50 or 60 today, though. And then 100 or more tomorrow and a lot of sims as well as writing my cheat sheet to study the morning before the exam.

[mckan514w]

Okay this question is making me feel very dumb why are you adding the 17.5 if it already been included?

Under East Co.’s accounting system, all insurance premiums paid are debited to prepaid insurance. For interim financial reports, East makes monthly estimated charges to insurance expense with credits to prepaid insurance. Additional information for the year ended December 31, Year 2, is as follows:

Prepaid insurance at December 31, Year 1 $105,000
Charges to insurance expense during Year 2
(including a year-end adjustment of $17,500) 437,500
Prepaid insurance at December 31, Year 2 122,500

A. $420,000
B. $455,000
C. $332,500
D. $437,500

Answer (B) is correct.
The company debits prepaid insurance for all insurance premiums paid and credits the account when it charges insurance expense. Thus, total debits equal insurance premiums paid. The asset account had total credits (charges to expense) of $437,500 but increased by $17,500 ($122,500 ending balance – $105,000 beginning balance). Consequently, total debits (premiums paid) must have been $455,000 ($437,500 total charges to insurance expense + $17,500 increase in the asset account).

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

[A1lessio]

I have a pretty basic question that I can't figure out regarding bonds. If Market rate is 12% and bond is issued for $926,395 BUT there are 20,000 in bond issue cost then the effective interest rate is 12.58%

My question is how do we get to 12.58%?

AUD (08/02/2016)

[Mscfisher]

@stilgoin
I'm going to pick C 80,000

10 units were sold. 8000 @8.20 and 2000 @7.90 which makes 8.14 per unit for the cost.
Since replacement is 8 and nrv is 8.8 and floor is 7.8 i guess market is the $8/ replacement cost. So lower of market or cost would be 8.

The remaining inventory is 10000 x 8 = 80,000

[mtaylo24]

@McKan, You forgot the punch-line “What was the total amount of insurance premiums paid by East during Year 2?”

This is one, where you would just be better off T'ing (word?) out. Don't let the wording throw you off.

Prepaid expense account (Can't think of a good way to T so I will use algebra)
105,000 (BB) + x (Premiums Paid) – 437,500 (Expensed) = 122,500 (Ending Bal)
105,000 + x = 560,000
x = 455,000

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)

[Stilgoin]

The effective tax rate is total tax divided by total money, but usually they give you the effective tax rate in the problem. Is this a Becker question?

On December 31, Year 1, Kristi Corporation issued a 10 percent $1,000,000 bond due in five years. Interest is due on June 30 and December 31. The yield or market rate is 12 percent and the bond sold for $926,395. Bond issuance costs of $20,000 were incurred. The effective interest rate is 12.58 percent.

DR Cash 906,395
DR Discount and BIC 93,605
CR B/P 1,000,000
* $93,605 = $73,605 discount + $20,000 bond issuance costs

“The inclusion of bond issuance costs and bond discount/premium in the calculation of the carrying amount of the bond results in an effective interest rate for the bond that differs from the market rate. The effective interest rate is used to determine the interest expense for the period as the bond discount/premium and bond issuance costs are amortized. The effective interest rate must be disclosed in the footnotes.”

B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, Waiting

Ethics | 93

"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill

“In a world full of critics, be an encourager."

[mckan514w]

LOL oh yes Mtaylo I forgot the punchline- I mean seriously isn't this just a TON of laughs! ha ha ha ha. Thanks for writing it out I don't know why the wording on this one throws me so much…. UGH.

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]

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