[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

[Just3Letters]

Eleuth,

You have the 175 + 250 = 425 from outside parties. That's the easy part.

Then, we see that Lamm sold inventory to Bank at a $50 profit. 50/200 = 25% intercompany profit that needs to be eliminated. Therefore, only 75% of Banks's inventory acquired from lamm is true inventory cost. At year-end, inventory acquired from Lamm is 60. As mentioned earlier, only 75% of that inventory is true cost:

75% * 60 = 45

425 + 45= 470. Does that make sense? Took me a minute to understand!

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

[mckan514w]

North Corp. has an employee benefit plan for compensated absences that gives employees 10 paid vacation days and 10 paid sick days. Both vacation and sick days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days; however, no payment is given for sick days not taken. At December 31, 20X1, North's unadjusted balance of liability for compensated absences was $21,000. North estimated that there were 150 vacation days and 75 sick days available at December 31, 20X1. North's employees earn an average of $100 per day. In its December 31, 20X1, balance sheet, what amount of liability for compensated absences is North required to report?

Okay I know that you don't accrue for sick days so the liability for comp absences would be (150)*(100)–and I realize (now 🙂 ) that the question is asking for final balance which would be the 15,000 but would you debit the compensation account to get there since there is a balance of 21,000 in there?

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]

what is Unrecognized prior service cost versus Amortization of unrecognized prior service cost?

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

[Spartans92]

Claudia, one is basically amortized vs unamortized. The difference is unamortized unrecognized PSC goes into your AOCI which gets amortized to pension expense over the remaining years of service. Whereas, your amortization of unrecognized PSC goes into your pension expense immediately.

BEC- PASS

[Spartans92]

Can someone help simplify call vs put option for me. Becker covered these in derivatives section and I am so confused. Somehow I am not understanding the whole concept.

BEC- PASS

[mckan514w]

Anything specific Spartan?
Essential Call gives the holder the right to buy at a certain price – but are not obligated to do so and a Put gives the holder the right to Sell (put it to the other person is how I was taught a long time ago when I did series 7)—

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

[lolo]

@Spartans92, Thank you that is really helpful. Regarding your question about the difference between call and put option.

In call option you expect that prices will go up, so you plan to buy a call option to buy future “stocks” on predetermined price. to make it clear suppose the current price is 10$ and you expect that it will rise to 12$ or more then you buy a call option on price say 10.5$. which means that this option will enable you from buying a specified number of stocks on that price. at some point of future say that prices went up to reach 13$. then you will go and by on 10.5$ on that price and and resell them in market on 13$.

in put option is just the opposite, He just expects the prices to go down then he buys a put option , lets say on today's price 10$ and the prices at some point dropped to 8$ then you will go to the market and by stocks at 8$ and then resell them using that option on that specified price (at 10$).

Hope that's useful

My Nick name is sunshine, but the fact is I have not been in touch with it since I started this CPA exam! IT HURTS

AUD - ✔ Passed Becker self study!
BEC - ✔ Passed Becker self study!
FAR - ✔ Passed Becker self study!
REG - TBD

[Claudia408]

Spartans – thanks. i'm getting really confused bc i think it's a cost i should be including in PBO. But it wasn't included in this question… what am i missing?

On June 1, 20X8, Ward Corp. established a defined benefit pension plan for its employees. The following information was available at May 31, 20X10:

Accumulated benefit obligation $14,500,000
Projected benefit obligation 12,000,000
Unfunded accrued pension cost 200,000
Plan assets at fair market value 7,000,000
Unrecognized prior service cost 2,550,000

To report the proper pension liability in Ward's May 31, 20X10, balance sheet, what is the amount of the adjustment required?

Answer: With an projected benefit obligation of $12,000,000 and plan assets of $7,000,000, Ward would have a minimum pension liability of $5,000,000. Since Ward already has an accrued pension liability of $200,000, an adjustment to recognize an additional liability is necessary in the amount of $4,800,000.

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

[Spartans92]

I just get so confused with call/put gets combined with hedging. The whole idea of stock price going up or down..I can't determine whether you are making a gain or loss. I have not done too many problems on it so maybe it will click eventually. I am just re-reading notes right now.

That little memory tool did help cuz i wasn't getting whether call was to buy or sell LOL

BEC- PASS

[Spartans92]

Claudia, the question is not including the unrecognized PSC because it is unamortized and should not be accounted for in your pension liability. They going into AOCI and amortized to pension later based on the years of services remaining… Remember any Unamortized PSC, Gain/Loss, and existing net obligation al goes into AOCI. Had it said Amortization of PSC then you would include.

BEC- PASS

[mckan514w]

Do you think if I tattooed pension formulas and govt info to my arm prometrics would notice and make me cover my arms? what if I didn't bring a sweater? I think I am finally getting delusional…

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]

LMAO mckan!! I would say GO BIG OR GO HOME… how about tatting all possible JE over your body? Sounds like a PLAN??

BEC- PASS

[mckan514w]

At the beginning of year 1, a company amends its defined benefit pension plan for an additional $500,000 in prior service cost. The amendment covers employees with a 10-year average remaining service life. At the end of year 1, what is the net entry to Accumulated Other Comprehensive Income (AOCI), ignoring income tax effects? Correct answer is DEBIT OCI 450– why wouldn't it be a credit? Wouldn't you journal Entry be:

DR Pension Expense- 450
CR OCI – 450 ???

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]

LOL Spartan- I might need to save some room on the body for the other three sections!!! 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

[Spartans92]

mckan, could it possibly because when you record the 50,000 reclassifying from OCI to Income statement.
DR: pension cost 50k
CR: OCI 50k — take some out of the AOCI.
The original entry when you amend would be : DR: OCI 500K CR: Pension liability 500k ?? Man I hate JE. Not even sure if this is right.
Refer to F6-14. There is no way I would know all these dang JE. if you're using becker that is.

BEC- PASS

[Author]

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