FAR Study Group Q1 2017 - Page 83

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  • #1478490
    mckan514w
    Participant

    Looks like your the day after me mscfisher….. I am pouring everything I have into the next two and half weeks- I MUST MUST MUST pass this damn thing.

    Okay just need to talk through a Pension Journal Entry- so when you recognize prior pension obligation you are technically lowering your OCI with a debit because it is an expense/ obligation to the company? Then when you recognize it each period you credit the OCI and debit pension expense?

    Example: XYZ company decides to recognize prior service of 500 with an average employee service life of 10 years- so they would recognize 50 in expenses each year… so your JE's would be

    At recognition
    DR OCI 500
    CR PBO 500

    then each period
    DR pension expense 50
    CR OCI 50

    Is this right???? I don't know why this trips me up so bad! 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

    #1478550
    Sticky Nicky
    Participant

    mckan this trips me up too but think of the E in DENT as the difference between the PBO and the FV of plan assets…im pretty sure that whatever is in OCI is the funded status of the plan,,,deferred gains/losses…with prior service costs when they implement the change to increase benefits retroactively to the hire date, instead of expensing it all they throw it into OCI and amortize it out based on average service life using Str8 line…where I get confused is: Is this the same account as where they through the additional liability into? and also where do the deferred gains and losses go when there is a difference between the actual return and expected return? would you need to show these separately in the OCI account in order to know how much to amortize yearly for each of them? like how would you know what to amortize for prior service costs yearly and how much for deferred G/L once the corridor approach kicks in?

    #1478557
    Holly
    Participant

    All of the liabilities are current liabilities because all will be paid within the next year.

    Accounts payable $ 80,000
    Bonds payable 300,000
    Discount on bonds payable (15,000)
    Deferred income tax liability 25,000
    ——–
    Total $390,000

    This is from a NINJA question

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

    #1478565
    Sticky Nicky
    Participant

    hr…there was a discussion a couple weeks back regarding that question

    #1478571
    Anthony
    Participant

    Looks like it still hasn't been fix yet. But yeah, DTL/DTA are now all noncurrent.

    #1478590
    mckan514w
    Participant

    ugh @Sticky Nicky – the corridor approach just royally effs me up! I think that you are correct though that the deferred g/l would be kept separate from the prior period as the deferred g/l is not recognized as expense correct?? it is simply used to smooth out any differences between the PBO and the Actual Value. So if you have a period where the market is cranking and the gains exceed the corridor they are deferred and then subsequently recognized during a time of loss so that the PBO remains relatively stable… At least that is my understanding of it… which could be completely wrong- ha 🙂

    @hr to echo what everyone else is saying yes- all temporary tax differences (DTL / DTA) are now classified as non-current regardless of when they will revert.

    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

    #1478596
    Sticky Nicky
    Participant

    no if the gains exceed the corridor then amortization of the gain takes place

    #1478598
    Sticky Nicky
    Participant

    all gains and losses are deferred until that deferred gain or loss reaches the greater of ending PBO or ending FV of PA,,,then the excess is amortized using ave service…amortization of the gain will reduce current years pension cost and vise versa for amortizing the loss…the original deferral of the gain will increase current pension cost and deferral of the loss will decrease it…but i wonder where those deferred gains or losses do to in the mean time…the same account as prior service costs or is it off balance sheet? idk

    #1478677
    Holly
    Participant

    Do any of you take notes as you study and copy your notes regularly?

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

    #1478704
    Sticky Nicky
    Participant

    nope…i only write out journal entries and formulas when doing mcqs

    #1478713
    Sticky Nicky
    Participant

    tweaked out on FAR,,,bout to start foaming at the mouth

    #1478718
    Sticky Nicky
    Participant

    I thought if a note was less than a year you didnt need to use PV?

    On October 1 of the prior year, Fleur Retailers signed a 4-month, 16% note payable to finance the pur­chase of holiday merchandise. At that date, there was no direct method of pricing the merchandise, and the note’s market rate of interest was 11%. Fleur recorded the purchase at the note’s face amount. All of the merchandise was sold by December 1 of the prior year. Fleur’s prior-year financial statements reported interest payable and interest expense on the note for three months at 16%. All amounts due on the note were paid February 1 of the current year. As a result of Fleur’s accounting treatment of the note, interest, and merchandise, which of the following items was reported correctly?

    Incorrect A.
    Prior-year 12/31 retained earnings, yes; Prior-year 12/31 interest payable, yes

    B.
    Prior-year 12/31 retained earnings, no; Prior-year 12/31 interest payable, no

    C.
    Prior-year 12/31 retained earnings, yes; Prior-year 12/31 interest payable, no

    D.
    Prior-year 12/31 retained earnings, no; Prior-year 12/31 interest payable, yes

    The cost of the merchandise purchased (and sold by the end of the year) should have been based on the present value of the note used to pay for them, not the face amount. Since the note paid a higher rate of interest than what was required as a yield, the note would have a premium, a higher value than face.

    #1478728
    GiniC
    Participant

    @HRSexton – I used to take notes on note cards while listening to Becker lectures (which made them take twice as long), then I would carry packets of notes around to study and memorize things. I can't seem to make the time for it now, I'm just trying to power through the material. I blame burn-out.

    #1478742
    Sticky Nicky
    Participant

    question: if at 12/31 you have cumulative convertible preferred stock outstanding and have not declared a dividend,,,then on 1/1 all of them are converted,,,do you still owe them the dividends in arrears?

    #1478746
    demarcon
    Participant

    @Sticky Nicky are you asking about it for Diluted EPS or in general? I believe that would be something that would be in the conversion feature contract if the dividends in arrears must be paid upon conversion, or maybe they get a higher conversion value if there are a lot of dividends in arrears.

    Also, on your other question. If it's a no interest Note Payable you don't need to calculate PV. The company paid a premium to borrow the money, though. It'd be like if they paid for a bond to buy inventory.

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