[jeff]

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

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

[Mscfisher]

@mckan514 i find that spots tend to open up from time to time especially at 2am. Lol. Keep looking

[mckan514w]

lol- planning on it- I could in theory drive to another test center but man I have gotten rather superstitious about the one I have passed 3 at! ha ha ha ha….

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

[Mscfisher]

@mckan i an the SAME way. I drove an he to go to another testing center and failed!!!lol

[Anonymous]

Been studying leases all day. Ask me any question, I'm now an expert!

[Operation_CPA]

Mobe Co. reported the following operating income (loss) for its first three years of operations:

….Year 1……$ 300,000
….Year 2……(700,000)
….Year 3……1,200,000

For each year, there were no deferred income taxes (before Year 1), and Mobe's effective income tax rate was 30%. In its Year 2 income tax return, Mobe elected the two year carry back of the loss. In its Year 3 income statement, what amount should Mobe report as total income tax expense?

Can someone help me with this? I thought the answer would be $240,000. I assumed they would only carry back the loss to the extent the profit was in Y1, and carrying forward the remaining loss to Y3. The answer is $360,000, so they didn't carry any of the remaining loss forward…which ok I can see that BUT where do they apply the remaining loss if the company is in their first 3 years of operation?

Thanks.

[mckan514w]

If I am not mistaken this is one of those questions where you have to understand what they are looking for (i.e. they are just trying to F-ck with you)- your tax expense does not change whether you have Deferred Tax Assets, carry-forwards or what not… you would still have to recognize an expense for the full amount… then the adjustment or i.e. what you pay would be reflected in tax payable…. so here in Year 3

DR Tax Expense 360,000 (1,200,000*.30)
CR Deferred Tax Asset 120,000 (what is left of the tax benefit)
CR Tax Payable 240,000– what they will pay in taxes…

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

[Spartans92]

@operation, sometimes I think we tend to think too much. At first I thought the answer would be 150k. Heres my understanding

Year 1:
DR: income tax refund 90k (300k * 30%)
DR: DTA 120k (400k which is 700 loss offset profit 300 * .30)
CR: Income Tax benefit 210k

Year 3:
DR : income tax expense 360k (1,200,000 * .30)
CR: DTA 120k
CR: Payable 240k

With that said I thought the 210 tax benefit will offset the 360k expense = 150k. But since its asking for expense do we ignore the tax benefit?? Sorry don't mean to steal your thunder.. Just wanna throw another potentially “wrong answer” thinking out there.

BEC- PASS

[EfrainV24]

Hello all – this is my second shot at FAR (got a 71), I was going back and forth on when I should retake the test as well. Unfortunately, we're in the middle of our 10K so I can't see myself having as much time as I would like to study until early February so I scheduled it for mid February. Now as far as the studying part goes, I've been pretty unmotivated, haven't looked at material since I took my test almost 3 weeks ago. Need to get started again. Good luck to all!

[Spartans92]

Haha well Mckan, I should have refreshed before I started typing. Thanks man! That help cleared up.
My question.. I got the answer right but for the wrong reason :/

On January 2 of the current year, Kine Co. granted Morgan, its president, compensatory stock options to buy 1,000 shares of Kine's $10 par common stock. The options call for a price of $20 per share and are exercisable for 3 years following the grant date. Morgan exercised the options on December 31 of the current year. The market price of the stock was $45 on January 2 and $70 on December 31. Using an acceptable options pricing model, Morgan determined that the fair value of the options granted was $30,000. By what net amount should stockholders' equity increase as a result of the grant and exercise of the options?

This is what I simply did: 1,000 x $20 option call price = 20k. Thats the answer but then becker gave a Sh*tload of explanation I cannot comprehend. Can someone simplify this?

BEC- PASS

[Mscfisher]

@spartan I think the clue in the question is the fact that they said they elected to carry back not to carry it forward so they can carry back the lost for 2 years I think it is so the current income tax expense doesn't have anything to do with what they recouped from carrying back their loss. This is just my guess I had a similar question in my book and it said to focus on what the expense is now not what they end up paying. Hope that helps

[j3cpa]

The following information relates to a company's year-end inventory:
Inventory cost $910
Selling price of inventory $1,000
Normal profit margin 10% of selling price
Current replacement cost $740
Cost of completion and disposal $100
Under IFRS, what is the company’s year-end inventory balance?

I get NRV at $900 vs Market cost of $740. How come the correct answer is $900? under IFRS, isn't it Lower of NRV vs Cost?

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

[mckan514w]

@spartan I will try to simplify so when the company issued the stock options they need to record a deferred compensation expense- which will be equal to current market price (50) less exercise price (20)

so:
DR: Deferred Stock Compensation 30
CR APIC- stock options 30

When the options are exercised the recorded APIC for stock options will need to be reversed so:
DR Cash 20
DR APIC Stock Option 30
CR Common Stock 10 (number of shares x par)
CR APIC 40 (plug)

Thus your total shareholder equity will increase 10+40-30 or 20.

(I suppose another very down and dirty way to do it would be just a straight Common 10 APIC 10 for a total of 20 which is the option price) 🙂

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]

@j3cpa you are correct that IFRS is lower of NRV or Cost– (not market cost but what the inventory cost)– so here cost is 910 and NRV is 900 the 740 represents market

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

[Anonymous]

Does anyone know how fussy the exam is with journal entries? Context: I just did simulation 8 in Ninja re capital leases and on the second journal entry I entered:

Obligations under capital leases 8,480 dr
Lease expense 270 dr
Cash 8,750 dr

Evidently the Ninja software wanted:

Lease expense 270 dr
Obligations under capital lease 8,480 dr
Cash 8.750 cr

The entries are identical would post to the general ledger the same but the order is different. Would I get full credit on the exam? I think so, but I'm freaking out.

[Spartans92]

It has been a while since I took FAR.. Is the actual exam as long as becker questions.
Porter Co. began its business last year and issued 10,000 shares of common stock at $3 per share. The par value of the stock is $1 per share. During January of the current year, Porter bought back 500 shares at $6 per share, which were reported by Porter as treasury stock. The treasury stock shares were reissued later in the current year at $10 per share. Porter used the cost method to account for its equity transactions. What amount should Porter report as paid-in capital related to its treasury stock transactions on its balance sheet for the current year?

A question like this is simple but it took me about 5 mins to solve because I did all the J/E. Anyone have a way to approach these type of questions? Im afraid I will run out of time come exam day.

BEC- PASS

[Author]

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