[jeff]

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

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

[A1lessio]

Stilgoin – Yeah it was a Becker example, I have definitely seen a question where they ask you to calculate the effective interest rate. Am I confusing market rate with effective interest rate? My train of thought is that because we have the inclusion of bond issuance cost the market rate is not 12% but actually higher at 12.58%

Also, Becker users – no one is using that new 2017 format until 2017 Q2 right?

AUD (08/02/2016)

[mtaylo24]

Lol McKan. Whats the strategy after you make it through the Gleim guantlet leading to your test day? You going through it again or switching to Ninja?

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)

[mckan514w]

Gleim is seriously kicking my A$$ Mtaylo- and I am seriously beginning to worry if it is teaching me anything or just confusing what I already know. I am halfway through it right now and I think the plan is to try and finish it up by next week and then hit Ninja until exam 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

[Stilgoin]

Market rate is set, but bond issuance costs make the actual (effective) rate higher. The market rate is 12%. What it actually costs the buyer is 12.58%.

Your thinking is correct, except don’t confuse those words. The market rate is given. The effective rate can be given or calculated and depends on total dollars the buyer pays.

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."

[A1lessio]

Took the first Becker practice exam and got 68% (mcq 61% x .6 & sims 78% x .4)

AUD (08/02/2016)

[AR]

Hi all,
Is acquisition of an asset through a capital lease a non-cash financing or investing activity?

Thanks!

[mckan514w]

@AR I think interest payments would be operating and principal portion would be financing….

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]

Can anyone help me with journal entries here? I understand the question and the answer- and even the journal entries after the payment is made… what I want to know is what would the purchaser record when he buys the property?

On July 1, Year 4, Ran County issued realty tax assessments for its fiscal year ended June 30, Year 5. The assessments are to be paid in two equal installments. On September 1, Year 4, Day Co. purchased a warehouse in Ran County. The purchase price was reduced by a credit for accrued realty taxes. Day did not record the entire year’s real estate tax obligation, but instead records tax expenses at the end of each month by adjusting prepaid real estate taxes or real estate taxes payable, as appropriate. On November 1, Year 4, Day paid the first installment of $12,000 for realty taxes. What amount of this payment should Day record as a debit to real estate taxes payable?

(answer by the way is 8,000)

So it would be real estate XXX
Cash XX
and then a 4,000 discount- how would this be classified– tax expense/ tax payable?
Additionally how would he record the tax bill that he just “inherited” with the property? Would the full amount go to Payables then an off-set of the 4? (Not sure I am making sense here 🙂 Just basically wondering how the tax bill would be recorded upon purchase!!!) Thanks!

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

[AR]

@mckan514w You are right, but these are both cash portions of the transactions. I meant when you enter a capital lease and acquire an asset, how is this transaction reported in the supplementary information to SCF – financing or investing? The cash payments of the interest and principal can come at a later date, right.

[mckan514w]

I still think it would be financing because in actuality you are not investing in the asset- if there is a transfer of title at the end of the lease or a BPO then it reverts to you at that time otherwise it remains technically an asset of the owner. Because its not like you can sell the asset- you can cancel the lease but you can not enter into an agreement to sell it resulting in a gain / loss….

But honestly that is my best guess my brain is BEYOND fuzzy today…

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'm sorry if y'all have already answered this question recently; this forum moves so fast! Isn't Becker doing an update today?

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

[AR]

@mckan514w thanks I was leaning towards financing too.

As for your question, the 4000 accrued taxes are recorded as CR to tax payable at the time of purchase. And the 12000 cash paid in Novmber will include DR to tax payable of 8000 – July to October, and rest will be prepaid tax.

[mckan514w]

LOL AR was just coming back on to repost never mind on my question I just figured it out- like I said brain is super fuzzy today. 🙂 Thanks for your reply!!!

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

[Stilgoin]

@AR

Statement of Financial Accounting Standards No.95
SFAS No. 95, Statement of Cash Flows, while recognizing the significant impact of non-cash investing and financing activities on the cash flows of a company, concludes that information about non-cash investing and financing transactions should be reported in related disclosures and not in the body of the statement itself. Quoting from the statement:

“Noncash transactions commonly recognized in financial statements include conversion of debt to equity, acquisition of assets by assuming liabilities including capital lease obligations, . . . Those transactions result in no cash inflows or outflows in the period in which they occur but generally have a significant effect on the prospective cash flows of the company” … (SFAS No. 95, para. 70)

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."

[Stilgoin]

https://www.investopedia.com/exam-guide/cfa-level-1/financial-statements/cash-flow-direct.asp

I thought this was handy. I struggle with reconciliation of the Stmt of CFs

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."

[Author]

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