[jeff]

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

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

[monicasanta]

Equity method question PLEASE HELP!

Did becker change the answer of the below question this year? When I searched the explanation online, all the sources give 230,000 as the answer (they add 10% x 300k), while becker has 200,000. Should we use equity method and add 10% earnings from sub even though it becomes 30% on the last day of the year?

Pare Inc. purchased 10% of Tot Co.'s 100,000 outstanding shares of common stock on January 2, Year 1, for $50,000. On December 31, Year 1, Pare purchased an additional 20,000 shares of Tot for $150,000. There was no goodwill as a result of either acquisition, and Tot had not issued any additional stock during Year 1. Tot reported earnings of $300,000 for Year 1. What amount should Pare report in its December 31, Year 1, balance sheet as investment in Tot?

a. $170,000

b. $230,000

c. $290,000

d. $200,000

Explanation

Choice “d” is correct: $200,000 investment in Tot at December 31, Year 1.

Rule: When two or more purchases of stock cause ownership in an investee to go from less than 20% to more than 20%, the cost of acquiring the additional interest in the investee is added to the carrying value of the investment and the equity method is adopted as of the date that significant influence is acquired and going forward. On December 31, Year 1, the total carrying value of the investment in Tot is $200,000 ($50,000 original investment + $150,000 cost of additional shares to acquire significant influence). Pare will use the equity method starting on December 31, Year 1, and will add its share of Tot's earnings to the investment in subsidiary beginning in Year 2.

Thanks!!!

[Holly]

@mtaylo24 I just noticed you plan on testing 4 days apart??!

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

[Holly]

@monicasanta yep that was one of the changes listed in the v1.3 update

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

[mtaylo24]

@Hrsexton, Unfortunately yes. BEC # 4 on 2/24 and FAR # 3 on 2/28. Hoping to beat the stupid 10 week wait for next window.

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)

[Holly]

May the force be with you! I don't know how you're making it; I study too many hours in a day and I'm mushy.

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

[monicasanta]

@HRSexton
thanks!

[Anonymous]

Hello everyone,

First time posting here. I just took FAR on 1/27 last Friday in Richmond, VA for my first attempt at a part of the CPA exam. I've been using Gleim. Very challenging exam. I felt good about maybe 60% of the MCQs, 20% I narrowed down to two answers and then the other 20% I flat out did not know likely because I did not put a ton of time into a few areas. I had 2 hours for the simulations and I answered 4 out of 7 of them within 30 minutes because it was topics I am very strong on. Then I spent the last 90 minutes on the other 3 trying to get them as close as I could to what I thought was the answer. Very interesting experience. Hope I passed would not be fun taking it again in April and then not finding out my score until August like I likely will for REG if i pass FAR. I definitely think there's a good chance that I passed but it wouldn't surprise me at all if I failed.

[AR]

Help about updates – LCNRV, DTA-DTL only Non-current, and Prospective application of equity method in step acquisition – are they being tested in 2017 Q1? Or do they kick in with the new test format? I also read about change in recognition of bond issue/acquisition cost- any input about this change will be highly appreciated.

Thank you in advance.

[GiniC]

@HRSexton (and anyone else studying with Becker) – I received a response to my clarification request about which of the 2016 book versions to study:

“If you are taking the CPA exam in Q1 of 2017 you need to focus on the V1.3 version. The software should prompt you for to upgrade from V1.2 to V1.3. The updates from the V1.2 to the V1.3 are few. You can find the specifics on the student website at the following web address:

https://mybecker.secure.force.com/MyBecker

You can also print off the updated textbook pages to replace the old ones.”

This matched what I thought I read before the 2017 update took center stage. If you have the V1.2 book, I recommend going to that link – the updates are just a couple of pages in F3 and one paragraph in F6. I just taped them into my book and now I match the lectures.

[GiniC]

@HRSexton – if you look up “Statement 109” it is listed as a superseded statement. I am sending in that question that refers to Statement 109 to see if they just missed it when they were updating to V1.3.

As for seeing your previous questions, you still can, but I had to get someone at Becker to explain to me how.
. . Go to the Becker site (https://mybecker.secure.force.com/MyBecker) and
. . Click “Sign in” up at the very top of the page
. . Use the same credentials that you use for the course
. . Click “Community and Support” near the upper right
. . Choose “Updates and Academic Support” from the menu on the left side of the page
. . Click “Cases” from the options across the top of the new screen (just above “Welcome”)
. . When the page comes up, you have to click “Go” next to the option box that says “My Cases” to see your prior questions and answers.

You can also go to the “CPA Exam Status” option on the top of the page to fill in your exam progress, scheduled tests, etc. Becker will send you a “Good luck” message the week before your exam, and check back when your score is due to see how you did. This is how they collect their statistics on course success.

[monicasanta]

Hi everyone..could someone please explain why we do not subtract the gain on sale of trading securities for the below CF question? In indirect method, I thought we usually subtract all of the gains? Why is it different this time?

Thanks a lot!!!

Twin House Inc. reported net income of $753,000 for the current year-ended December 31. Twin House’s financial statements reflected the following information:

Depreciation expense = $150,000

Gain on sale of trading securities = $6,000

Goodwill impairment = $75,000

Decrease in accounts receivable = $48,000

Increase in inventory= $33,000

Decrease in trading securities = $50,000

Increase in available-for-sale securities = 62,000

Increase in accounts payable = $70,000

Decrease in taxes payable = $15,000

Dividend paid = $200,000

Dividend received = $27,000

What should Twin House report as net cash provided by operating activities on the statement of cash flows, assuming that Twin House classifies the proceeds from the sale of the trading securities as an operating cash inflow?

a. $1,119,000

b. $1,092,000

c. $1,030,000

d. $892,000

Explanation

Choice “b” is correct. Based on the information given, operating cash flow must be calculated using the indirect method:

Net income $ 753,000

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation expense $ 150,000

Goodwill impairment 75,000

Gain on sale of trading securities (6,000)

Changes in current assets and liabilities:

Decrease in accounts receivable 48,000

Increase in inventory (33,000)

Decrease in trading securities 50,000 ???

Increase in accounts payable 70,000

Decrease in taxes payable (15,000)

Total Adjustments 339,000

Net cash provided by operating activities $ 1,092,000

[Mscfisher]

@monicasanta
The gain of 6,000 was subtracted. The 50,000 is just the decrease in an asset because it was sold. So you add the 50,000.

[mckan514w]

@monicasanta just to add to what MScfisher said- remember your starting point of the CF statement and its purpose which is Net Income and to show it relates to ending cash balances so you need to reverse out anything that contributed to an increase in NI and subtract out anything that took away from NI- so gains on sale of assets would be subtracted and losses would be added back in.

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]

@GiniC I get – ALERT!There was a problem logging in from eComm. Please contact the helpdesk. When I click Updates and Academic Support. The struggle

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

[Holly]

@Ginic where are you now with studying? I'm crawling along, but 3/6 will come fast.

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

[Author]

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