[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

[Claudia408]

Bond Issuance costs include:
printing and engraving of the bond certs
legal & accounting fees
underwriter commissions
promotion costs (printing prospectus)

so the Bond payable does not include the underwriter fees

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Claudia408]

Here's a messed up consolidation question:

On January 1, 20X5, Polk Corp. and Strass Corp. had condensed balance sheets as follows:

Polk Strass
Current assets $70,000 $20,000
Noncurrent assets $90,000 $40,000
Total assets $160,000 $60,000

Current liabilities $30,000 $10,000
Long-term debt $50,000 –
Stockholders' equity $80,000 $50,000
Total liabilities and stockholders' equity $160,000 $60,000

On January 2, 20X5, Polk borrowed $60,000 and used the proceeds to purchase 90% of the outstanding common shares of Strass. This debt is payable in ten equal annual principal payments, plus interest, beginning December 30, 20X5. The excess cost of the investment over Strass’ book value of acquired net assets should be allocated 60% to inventory and 40% to goodwill. On January 1, 20X5, the fair value of Polk shares held by noncontrolling parties was $10,000. On Polk’s January 2, 20X5 consolidated balance sheet, current assets should be?

Answer: 102,000

I had on freaking clue how to start thinking of how to get the answer. Am I going to have to accept this is a difficult level question (IMO) and I'm just gonna have to guess!?!?

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Claudia408]

@marqzho – in your opinion, from someone who scored 90 on FAR, tell me it's a messed up question even you think it's difficult!!?? lol

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[marqzho]

Of course it is difficult. I remember this question. It is a group of questions and asks for 3-4 things. Roger has a class lecture explained this one and the other one about COGS. Excellent illustration! I watched that one three times at least.

And the part where it asks for the Current Liability is very tricky!

REG 90
FAR 95
AUD 98
BEC 84

[mckan514w]

Thanks Claudia I KNEW there was something that was taken out–

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]

OMG @ Claudia's Question. I will definitely need to give it a try when i review consolidation/acquisition! Theres several concept tied in one in that question.

BEC- PASS

[mckan514w]

Damn I was just short on Claudia's question and had to go back to Roger's video for help…missed it by one step—grrrrr
I am getting super worried about time on the exam- it seems like it is still taking me forever to pull the concepts out of the head and apply them…

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

[Claudia408]

Why do I add the FMV of warrants here?

On July 28, Vent Corp. sold $500,000 of 4%, eight-year subordinated debentures for $450,000. The purchasers were issued 2,000 detachable warrants, each of which was for one share of $5 par common stock at $12 per share. Shortly after issuance, the warrants sold at a market price of $10 each. What amount of discount on the debentures should Vent record at issuance?

500,000+20,000-450,000=70,000

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[mckan514w]

Claudia I think

DR Cash 450
CR Warrants 20
CR Debentures 500

Discount thus equals 70

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

[PraiseTheLord]

Please ignore….can't find a button to delete…..The copy paste didn't work very well so the question below is hard to read…sorry

I am getting 3 Special Revenue funds as a major funds based on the criteria below…Fire Dept, Parks and Grants but the solution is NINJA says zero and below is the explanation. Can someone help explain please? Thank you!

Funds Assets Liabilities Revenues Expenditures
—————— ——– ———– ——– ————
Total governmental 485,680 55,180 402,776 316,572
10% governmental 48,568 5,518 40,278 31,657
Total enterprise 1,384,069 506,153 139,559 90,921
10% enterprise 138,407 50,615 13,956 9,092
5% overall test 93,487 28,067 27,117 20,375

None of the special revenue funds met or exceeded both the 10% and 5% criteria.

The following information is applicable to the funds of Fronk County.

Expenditures
Funds Assets Liabilities Revenues Expenses
————— ——– ———– ——— ————
General fund $118,211 $15,647 $203,151 $136,554
Special Revenue Funds:
911 Emergency 4,581 310 4,354 3,194
Fire District 38,550 3,173 35,393 28,220
Parks 15,087 818 16,081 11,729
Grants 10,495 10,495 24,929 24,022
Hotel/Motel Tax 816 816 3,002 2,158
Capital Project Funds:
20X0 Sales Tax $ 66,719 $11,288 $ 11,424 $ 40,115
Sales Tax CIP 4,206 326 762 900
Roads 1 0 60 13
Parks 99,621 8,276 704 35,748
Schools 125,472 3,724 102,771 32,715
Corrections 1,038 18 61 212
Library 883 289 84 992
Total Governmental:
$485,680 $55,180 $402,776 $316,572
Enterprise Funds:
Water/Sewer $1,346,318 $505,531 $136,634 $ 82,855
Airport 24,993 76 1,053 1,443
Golf 3,418 129 955 1,060
Fairgrounds 3,280 0 656 275
ISP Services 6,060 417 261 5,288
Total Enterprise:
$1,384,069 $506,153 $139,559 $ 90,921
How many of the special revenue funds would be considered major funds?

A.
0

B.
1

Incorrect C.
3

D.
5

BEC 79
REG 79
AUD 87
FAR 88

[KJ]

Can someone confirm if I am missing anything for Permanent Differences? I know there are few others but most common are:

Purchase of life insurance for employees and income derived from such insurance
Meals and Entertainment
Municipal bond interest
Penalties and Fines
Special dividend received deduction

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

[Just3Letters]

Can somenody please help me understand the differences between the types of governmental “Non-Exchange” transactions?

A. Imposed
B. Voluntary
C. Derived
D. Government Mandated

I really didn't pick up these subtle differences listening to Tim…

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Anonymous]

Selected data for two subsidiaries of Dunn Corp. taken from December 31, Year 1 pre-closing trial balances are as follows:

Banks Co. (DR) Lamm Co. (CR)

Shipments to Banks $ – $150,000

Shipments from Lamm 200,000 –

Intercompany inventory
profit on total shipments – 50,000

Additional data relating to the December 31, Year 1 inventory are as follows:

Inventory acquired
from outside parties $175,000 $250,000

Inventory acquired
from Lamm 60,000 –

At December 31, Year 1, the inventory reported on the combined balance sheet of the two subsidiaries should be:

a. $425,000

b. $435,000

c. $470,000

d. $485,000

I know how to get the elimination entry of $15,000 but I'm not sure I understand why we add 175,000 + 250,000 + 60,000 if the 250,000 is a credit entry? Wouldn't it be 175,000 + 60,000 – 250,000?

Can someone please help me with this?!

[Claudia408]

Kanwal – what about Fed income tax payments?

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Claudia408]

Just3 – merely definitiions here:

Derived – self assessed (sales tax, income tax, hotel tax, motor fuel tax)
Imposed – taxes not derived from a transaction (property tax, fines, forfeits, special assessment)
Government – one level of govt provides fund to another to be used for specific purpose (federal grant)
Voluntary – willing party transaction (unrestricted grant, voluntary donations)

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Author]

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