[jeff]

Welcome to the Q2 2016 CPA Exam Study Group for FAR.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[KJ]

@ MaLoTu…this was the question…

On January 1, Year 1, Dallas, Inc., purchased 80% of Style, Inc.'s, outstanding common stock for $120,000. On that date, the carrying amounts of Style's assets and liabilities approximated their fair values. During Year 1, Style paid $5,000 cash dividends to its stockholders. Summarized balance sheet information for the two companies follows:

Dallas Style
12/31/X1 12/31/X1 01/01/X1
——– ——– ——–
Investment in Style (equity method) $132,000
Other assets $138,000 $115,000 $100,000
Common stock 50,000 20,000 20,000
Additional paid-in capital 80,250 44,000 44,000
Retained earnings 139,750 51,000 36,000

What amount of total stockholders' equity should be reported in Dallas' December 31, Year 1, consolidated balance sheet?

A.
$270,000

B.
$293,000

C.
$362,000

D.
$385,000

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[JT]

@MaLoTu

That effect interest calculation has me stumped. I'll get back to you on that later.

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[MaLoTu]

kanwal … I believe the answer is A and that is because only the parents equity is reported.

[KJ]

MaLoTu..the answer is B. It will include 20% NCI of Style (20+44+51 x 20 % = 23). 270+23 = 293.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[MaLoTu]

@kanwal … ah, I see. That was tricky. The formatting threw me off too … I hate the way copy and pasting appears on the board.

[KJ]

Yeah this was the one I was asking earlier when do we use NCI in calculation for acquisition/consolidated? I guess NCI is used in both B/S for stockholders equity of sub and I/S for income of sub.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[KJ]

Wagner, a holder of a $1,000,000 Palmer, Inc., bond, collected the interest due on March 31, 20X1, and then sold the bond to Seal, Inc., for $975,000. On that date, Palmer, a 75% owner of Seal, had a $1,075,000 carrying amount for this bond. What was the effect of Seal's purchase of Palmer's bond on the retained earnings and noncontrolling (minority) interest amounts reported in Palmer's March 31, 20X1, consolidated balance sheet?

A.
Retained earnings: $100,000 increase; Noncontrolling interest: $0

B.
Retained earnings: $75,000 increase; Noncontrolling interest: $25,000 increase

C.
Retained earnings: $0; Noncontrolling interest: $25,000 increase

D.
Retained earnings: $0; Noncontrolling interest: $100,000 increase

This one is good too for practice as well. Sorry for posting all these questions just trying to figure out this NCI. If I am not wrong on thought process of this question. This transaction will have gain so will affect R/E but not NCI. This is a new question I came across.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[SONA]

Has anyone taken Becker final exam yet?

I scored 57% :/.

Became demotivated.

[MaLoTu]

SONA – try not to worry about that so much. Do some review sets to gain back your confidence. Like maybe 5 questions from each chapter.

[MaLoTu]

OMG, kanwal, I am screwed if I get asked something like that. Seal bought a bond of it's parent and that is why I am lost! I would think it might be A … although I cannot make sense of the fact that Palmer is carrying the bond at 1075 and Seal bought it for 975, I guess this is a gain of 100k in palmer's position.

[thebigguy1992]

Let me just get this straight – are freight in costs included in cost of inventory, and freight-out costs are not included??

[MaLoTu]

freight in is capitalized to inventory and freight out is a selling expense

[MaLoTu]

@Dab – I am pretty sure the effective interest rate is something taught in BEC … if I get time today I will look it up. I do not think it is difficult to calculate … you just have to account for the fact that the issuance cost reduced the the proceeds. Will let you know what I find out.

[JT]

MaLoTu

This problem is one I seen in ninja which is very similar to what you had;

Album Co. issued 10-year, $200,000 debenture bonds on January 2. The bonds pay interest semiannually. Album uses the effective interest method to amortize bond premiums and discounts. The carrying value of the bonds on January 2 was $185,953. A journal entry was recorded for the first interest payment on June 30, debiting interest expense for $13,016 and crediting cash for $12,000. What is the effective interest rate for the debenture bonds?

A. 6%

B. 7%

C. 12%

D. 14%

Correct answer is D.

Effective interest = Carrying value of the bonds × Effective interest rate × Time period

In this case:
•$13,016 = $185,953 × Unknown effective interest rate × 1/2 year
•Effective interest rate = ($13,016 ÷ $185,953) × 2 = 14%

I know its something I learned in school and in BEC but the bond issue cost are messing me up. I tried to apply the formula and incorporate the bond issue cost but cant figure it out exactly.

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[Zyx]

kanwal78, I'm taking on July 2. I wanted to take it on June 10 but I'm far from finishing mcq plus cannot take any time off on that week. I'm pretty paranoid about FAR. I learned from the past when I failed REG and BEC many times that I really have to know and be sure about the concepts. Otherwise, no fluke in this exam. I'm trying to pass at the firt try.

REG: 77 x2
BEC: 81 x3
FAR: 68 retake 10/1
AUD: 8/27

[Author]

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