[jeff]

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

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

[mckan514w]

Okay also looked it up in my Rogers material– looks like it is part of the “changes” for 2017…

The journal entry upon issue of a bond will essentially remain unchanged. BIC will be the actual costs incurred, the bond payable will be recorded in its face amount, accrued interest payable will be recognized if the bond is issued between interest dates, cash will be increased for the net proceeds, and the amount required to balance the entry will be recognized as the discount or premium:

Cash – (% face + accrued interest BIC)
BIC
Discount (plug)
Bond Payable – (Face)
Accrued interest payable – [face x (stated rate) x (time since last interest paid)]
Premium – (plug)

Once initially recorded, however, the BIC and the discount or premium will be combined to be treated as a net discount or premium and an effective interest rate will be determined such that the present value of the principal and interest payments to be made will be equal to the net proceeds, excluding any accrued interest payable.

In future periods, interest expense will be calculated by multiplying the carrying value of the bond by the effective interest rate for the time since the last interest payment was made. The difference between that amount and the interest payment will be the amortization of the net discount or premium.

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

[Sticky Nicky]

mckan your JE is totally wrong…liabilities such as Bond Payable are credits. not debits.

The JE for issuance of a $1000 bond at 102 would be

DR Cash 1020
DR BIC 5
CR Bonds Payable 1000
CR Premium 25

Then after the first year it would be this (depending on the rates)

DR Interest expense
DR Premium
CR BIC
CR Cash

BIC would increase interest expense upon payments

[Sticky Nicky]

there are 3 changes for 2017 and BIC isnt one of them.. The changes are switch to equity method prospectively, Deferred taxed are all non current, and inventory is Lower of cost or NRV except LIFO and retail method since those are unacceptable under IFRS.

[Sticky Nicky]

i looked it up BIC is a contra liability account and is amortized using effective interest method or SL if the diff is immaterial.

[Sticky Nicky]

i was also wrong in a previous statement. Amortization increase over time,,,i think i said decreases. .Either way Roger says that usually exam questions wont address BIC or accrued interest payable. If it does it will tell you what method is used to amortize it. And it does reduce the carrying value of the bond. So if you have 1000 face and a 100 discount with 10 BIC then carrying value would be 890.. But like i said earlier BIC would increase interest expense when realized.

[mtaylo24]

My book says it should be amortized over the term of the debt using the interest method, or straight line if it isn't materially different, but they expense the entire thing in the example provided (WTH!)

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]

my brain hurts…

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

[Sticky Nicky]

mtaylo my Roger book also says that i could be expensed immediately if its immaterial. So i guess you have to read the question for clues indicating what to do with it. I doubt you will see it and if you do maybe one easy question regarding it.

[mtaylo24]

Yeah, I have one question where it is expensed completely and another where it is amortized. They mention that the company amortized via straight line method in the question.

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)

[r_f_94]

When a bond is issued at a discount and BIC becker shows the JE as DR: Cash DR: Discount and BIC (as a one line entry) CR: Bond Payable. Then the discount and BIC get amortized over the length of the bond together. I guess what I am confused on is when issuing a bond at a premium with BIC would the entry just be reversed? DR: Cash CR: Premium and BIC (as a one line entry) CR: Bond Payable or would you issue the bond and use the JE DR: Cash DR: BIC CR: Premium CR: Bond Payable. That is where the confusion came on how to amortize both the BIC and the premium if using the effective interest method.

[Nick M]

Is anyone FAR MCQ broken? I keep trying to do custom and it generates random questions. Deleted cookies and browsing history :/

FAR 8/10/14 - 75
AUD 10/15
BEC - 8/31/15 83
REG - TBD

[GiniC]

@HRSexton – that explains why you're moving so much faster than I am – I do a chapter's worth of lectures, then do the MCQs for that chapter before moving on to the next. I'll spend the last two weeks before my exam pulling it all together by doing the sims for all ten chapters, then going through the Final Review lecture set (I got them for free by being the teacher assistant during my live FAR class). I was trying to finish BEC and take that exam for the first half of the FAR course, so I didn't keep up with the class – hence the need to repeat now!

[monicasanta]

Hi everyone…need help with Cash flow statement in governmental accounting (proprietary fund) please….Does anyone know why the “Gain on disposal of fixed assets” is not subtracted from operating income? Also, becker says proprietary fund cash flow statement should only use DIRECT method, why in question, it’s using the indirect method????

Please help…thanks!!

Durban Township's Water and Sewer Fund had $40,000 in operating income and a total change in net assets of 150,000. The Water and Sewer Fund also had the following transactions either derived from a comparison of current and prior year Statements of Net Assets or displayed on the current year Statement of Activities:

Increase in current assets other than cash including amounts due from other funds for water services $ 30,000
Increase in current liabilities including the current portion of bonded indebtedness of $25,000 50,000
Depreciation expense 70,000
Gain on disposal of fixed assets 2,000
Cash flows from operating activities would reconcile to what amount?
Choice “c” is correct. Cash flows from operating activities would reconcile as follows:

Operating Income $ 40,000

Less: Increases in current assets other than cash (30,000)

Plus: Increases in current liabilities (net of current portion of bonded debt) 25,000

Plus: Depreciation 70,000

Total $ 105,000

[Holly]

@Ginic okay, I was hoping you would look at my Becker simulation question for chapter 6.

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

[Holly]

I'm about to start statement of cash flows, which if that isn't enough, I see @monicasanta asking questions about governmental cash flows! We have to learn this twice?!?!

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

[Author]

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