[jeff]

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

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

[Josh]

@mtaylo24 When's your exam? Mine's the 9th. I'm almost there; half-way through bonds. It's been a tough month here. I'm still debating whether to start my final review now or after governmental.

[mtaylo24]

@jalls, Haven't scheduled anything yet. Leaning towards early Feb….Im still debating whether I should start throwing BEC in the mix and sit for them both towards the end of the window. I don't think that I'll ever be ready for this section…

Sidenote: I finally got a 90 on leases, gave me the greenlight to move to Derivatives/Hedges (yay). I can't believe how many sessions that took.

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)

[GiniC]

@mtaylo24 and @tarheel83 – please show how you arrived at the correct answer? I'm not getting there by any permutation I try…

[mtaylo24]

@GiniC …

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)

[Anonymous]

Grove Township issued $50,000 of bond anticipation notes at face amount in the current year and placed the proceeds into its capital projects fund. All legal steps were taken to refinance the notes, but Grove was unable to consummate refinancing. In the capital projects fund, what account should be credited to record the $50,000 proceeds?

A. Other Financing Sources Control

B. Revenues Control

C. Deferred Revenues

D. Bond Anticipation Notes Payable

The answer is D. The explanation:

Bond anticipation notes are included as general long-term liabilities. The amount would never be revenue or a deferred revenue as the amount is due to be repaid at some point.

Comment: I've been studying governmental accounting for the last couple of days and thought that the 5 governmental funds – general, special revenue, capital projects, permanent and debt service fund; could not carry longterm debt.

[Spartans92]

Anyone have tips for JE on pensions. Im struggling to understand what account to debit and to credit. I understand the numbers just the accounts are driving me nuts. For instance, to record return on plan asset we have to first DR: Pension Benefit Asset CR: Net periodic Cost and then DR: Def. Tax Expense – I/S CR: DTL

Im not quite understanding the logic. Any help is appreciated.

BEC- PASS

[mtaylo24]

@Spartans

Scenario: You are an employer and can only deposit 75,000 in a plan

1. Deposited 75,000 in a plan

Debit pension expense 75,000
Credit cash 75,000

2. Deposited 100,000 in a plan

Debit pension expense 75,000
Debit ppd expense 25,000
Credit cash 100,000

3. Deposited 65,000 in a plan

Debit pension expense 75,000
Credit cash 65,000
Credit pension payable 10,000

Scenario: Amended plan to improved benefits which is effective July 1 of this year. APBO increased 100,000 due to increase in service cost. Tax rate is 30%

Debit OCI 70,000
Debit Deferred Tax Asset 30,000
Credit OPEB liability 70,000
Credit Deferred tax benefit – OCI 30,000

Scenario:

Service cost 10,000
Interest cost 2,500

Debit Pension expense 12,500
Credit Pension Liability 12,5000

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)

[Spartans92]

@mtaylo, can you possibly explain the reason for the APBO one? why DR: OCI and CR: Def tax benefit? Im sorry if that sounds stupid.. but thats mainly my struggle to understand the account to use.

BEC- PASS

[mtaylo24]

@Spartans I'll give this a shot since I haven't revisited the tax chapter yet. You adjust Oci for pensions when:

1.) net gains (losses) are amortized as part of service cost or
2.) a new determination of a funded status is made.

The APBO one was a new determination of funded status since the plan was amended…

We do the tax JE since that tax rate was mentioned.

You Debit OCI and offset OPEB liability, then you debit deferred tax asset and offset the tax benefit, due to the temporary differnce…

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)

[mtaylo24]

Can someone ‘splain when to use continuing ops vs oci when it comes to the foreign stuff? I keep getting this mixed up…

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)

[Josh]

Bond question anyone?

I'm not sure how to get an answer on this. I'll keep looking at my text. It's probably a journal entry related to exercising warrants?

Roaster Company issued bonds with detachable stock warrants. Each warrant granted an option to buy one share of $40 par value common stock for $75 per share. Five hundred warrants were originally issued, and $4,000 was appropriately credited to warrants. If 90% of these warrants are exercised when the market price of the common stock is $85 per share, how much should be credited to capital in excess of par on this transaction?

A. $23,850
B. $19,350
C. $19,750
D. $24,250

[Josh]

@mtaylor24 perhaps this is a little simplistic. I got it out of my “other” notes. I'm sure I've seen something very similar in Ninja Blitz and Notes on more than one occassion.

“First, a remeasurement adjustment which goes through the income statement
Second, a translation adjustment which goes through the statement of other comprehensive income”

So, is it basically as easy as knowing the difference between a re-measurement and a translation? Even Gleim says that plus a bunch of other stuff in the summary of core concepts.

“Foreign currency translation adjustments are reported in
other comprehensive income” – Thanks for your summaries, Dr. Gleim, et. al.

I'm sure I'll be experiencing the joys of that soon. I once took advanced accounting that covered that. If nothing else, I got the book for reference..

[WANNABCPA]

Anyone else find this exam to be hell to study for? Especially if you don't work with public companies?

[Anonymous]

I've figured out my question by looking up the definition of “bond anticipation note.” Per Investopedia:

DEFINITION of ‘Bond Anticipation Note – BAN'

A short-term interest-bearing security issued in advance of a larger, future bond issue. Bond anticipation notes are smaller short-term bonds that are issued by corporations and governments, such as local municipalities wishing to generate funds for upcoming projects. The issuing bodies use the bond anticipation notes as short-term financing, with the expectation that the proceeds of the larger, future bond issue will cover the anticipation notes. Bond anticipation notes may be used when the issuer wants to delay a bond issue, or if the issuer wishes to combine several projects into one larger issue. Bond anticipation notes are typically payable from the proceeds of the sale of the bonds.

So the moral of the story: the bond anticipation note is a short term debt instrument and thus can be carried by government fund.

[mtaylo24]

@jalls, Thanks, that makes perfect sense. I need to stop ignoring the summaries at the bottom, you would think that would be the only thing worth ignoring, but when they say study everything, you must study everything lol! It actually started to click as the questions began to repeat, but your explanation confirms where I was heading.

I'm done w/ that hedging chapter (ALREADY!?!?!) Moving on to Stockholder's Equity. This should be fun 👎

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)

[Author]

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