[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

[Spartans92]

do y'all think it is effective to re-watch the lectures or re-read the chapter? I am totally forgetting the material on AFS and trading, held to maturity.. This is sad 🙁 can't recall the material.

BEC- PASS

[Excel14]

Here is the question….

Question: 3 On December 1, Wall Company purchased trading securities. Pertinent data are as follows:

Security. Cost Fair value at 12/31
A. 39,000. 36,000
B. 50,000. 55,000
C. 96,000. 85,000

On December 31, Wall reclassified its investment in security C from trading to available-for-sale because Wall intends to retain security C. What net loss on its securities should be included in Wall’s income statement for the year ended December 31?
A. $11,000
B. $14,000
C. $0
D. $9,000

Answer (D) is correct.

Unrealized holding gains and losses on trading securities are included in earnings, and reclassification is at fair value. Furthermore, “for a security transferred from the trading category, the unrealized holding gain or loss at the date of transfer already will have been recognized in earnings and shall not be reversed.” Thus, the net unrealized holding loss at 12/31 is $9,000 ($3,000 loss on A – $5,000 gain on B + $11,000 loss on C).

My issue with this question, is that we don't analyze anything until 12/31 of the first year, which this is. At that time we made the change from trading to available for sale (Security C), but NOTHING has been placed into earnings before now. The answer is worded such, that we've already taken care of any unrealized losses in earnings, when in reality we have not yet.

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[Excel14]

Never mind. I think I have a better handle on it now. We haven't actually recognized the $11,000 loss on Security C previously, but we are doing it at 12/31 of the first year ( peculiar wording for this question). From 1/1/2 forward, we will treat this security as an AFS, with unrealized gains/losses hitting OCI each period.

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[marqzho]

Spartans92

I always re-watch the lecture. There is no best way to study for everyone but the best way for you.
AFS, Trading, HTM is a relatively easy topic. It can be MCQ or SIMS type question.

Basic concept
AFS and Trading report at Market Value
unrealized gain or loss for AFS goes to OCI
unrealized gain or loss for Trading goes to I/S
Only bond can be classified as HTM
HTM report at amortized cost
remember the reclassification, Alw. If AFS to HTM, OCI for that AFS needs to be amortized.
Classification is based on the intention and ability of the company
permanent impairment loss goes to I/S
make sure to read the question, sometimes it will say the co. elect to use FV accounting option

🙂

REG 90
FAR 95
AUD 98
BEC 84

[marqzho]

Excel14

Glad that you figure it out yourself. For this question, it won't be affected whether we have or haven't already taken care the loss 🙂

REG 90
FAR 95
AUD 98
BEC 84

[Excel14]

@Marqzho:

Yeah, had the answer not included the $11,000 for Security C, then I'd take issue with it! :). As it stands, Gleim was just quoting something within the study unit for trading security transfers to another category, even though it technically hadn't happened yet in this question. Have I mentioned that I hate FAR? Lol

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[marqzho]

sometimes I hate my client, but they bring me $, what can i say :)?

REG 90
FAR 95
AUD 98
BEC 84

[Excel14]

Say….Thank you! 🙂

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[Spartans92]

@marqzhao thanks a lot! That does ring a bell now.. it wasnt too bad when learning it my becker average was in the 70s for the securities questions 🙂 appreciate the help

BEC- PASS

[Claudia408]

changing my question here bc i figured out the other one…

Assume that in acquiring a subsidiary, the parent determined there were several depreciable assets of the subsidiary that had a fair value less than book value. What effect will this fair value less than book value of the subsidiary's assets have on the following accounts in the preparation of consolidated statements?

Answer: Decrease for both depreciable assets and depreciation expense.

Not sure I understand why depreciation expense is decreased… can someone help explain?

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

[SONA]

Thanks for creating FAR Q 2 2016. I am in F-5 of Becker. I bought Ninja MCQ last week for my final review. Sometime really feel like i am forgetting stuff as i go ahead in the book. After, I will be done with F-5 i will take progress test.

FAR-4/28/2016 First Attempt.

[marqzho]

I would think that when you do consolidation and depreciable assets of the subsidiary that had a fair value less than book value, we need to write that down to the F.V. This would decrease the asset value. Since asset value / depreciation basis decrease, it would decrease depreciation expense.

Not so sure:)

REG 90
FAR 95
AUD 98
BEC 84

[marqzho]

–

REG 90
FAR 95
AUD 98
BEC 84

[Operation_CPA]

Glad to say I am starting my final review today (I have around 3 weeks). Not going to lie, It's tough not getting caught up in the minor details, there is so much information. Trying to put together a solid strategy and compile a list of must know topics.

I am re-doing a bunch of the Becker sections & purchased NINJA MCQ. Would you guys agree with my major focus areas? Again, not trying to get caught up in too many minor details.

Governmental / NFP
Bonds / Leases
Pensions
Statement of Cash flows – EPS / Diluted EPS calculations
Treasury Stock – Par value vs cost method
Cost / Equity / Consolidations
Inventory (LIFO, FIFO, etc.)
Like Kind Exchanges
Completed Contract / Percentage of completion Methods
General IFRS vs. US GAAP differences
Impairments

[Claudia408]

@marqzho – ok so since the asset FV must decrease that means it was over depreciated so depreciation expense must decrease as well?

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

[Author]

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