[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]

ok i'm waaaayyyyy behind. i only have 120 MCQ sessions mostly consisting of 20 MCQs each… OMG, i'm just sooooo slow!!!

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

[Claudia408]

I always get confused when to use the spot rate versus the forward rate, and what dates am i looking at? Can someone help?

Three companies are doing business with a German entity and, as a result, each has entered into a forward exchange contract on December 18, 20X2, under which each will purchase 300,000 Euros on February 18, 20X3. Relevant exchange rates are as follows:

Spot rate
Forward rate (for 2/18/X3)
November 18, 20X2
$1.27
$1.30
December 18, 20X2
$1.32
$1.25
December 31, 20X2
$1.35
$1.31
February 18, 20X3
$1.37

On December 18, 20X2, Company A entered into a contract to purchase a printing press for 300,000 Euros. The press will be ready, and the company is expected to pay for it, when it is completed on February 18, 20X3. The company entered into the forward exchange contract to avoid having to pay more for the printing press if the exchange rate should increase and is recognized as a cash flow hedge. What amount of foreign currency gain should be recognized in income on December 31, 20X2?

Answer: $0

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

[KJ]

Yesterday I did 4-5 sets of comprehensive MCQ's and I was scoring between 60-75%. I had to really think hard on some of the questions since I covered that material at the beginning when started prepping for FAR. I guess gotta keep hitting em MCQ's as much as you can. If wrong try to understand why it was wrong and go back and read that topic.

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

[Credit Revenue]

Gain on a cash flow hedge is recognized in OCI. That is what is being tested on that question. 90% of the time you use the spot rate for CPA questions. If you are confused just roll with the spot rate. You will get 9 of 10.

A - 79 expires 4/30/16 need a pass on REG
B - 78
F - 80
R - 83!!! Can live again!

[Spartans92]

Claudia, what is the explanation of the answer? All I can think of is it being a cash flow hedge and cash flow hedges are reported in OCI to the extent of effective portion. Ineffective going into I/S. I just don't get the forward, spot rate stuff too.

BEC- PASS

[Claudia408]

Here's the explanation: The contract to purchase the printing press is a firm commitment that is not initially recorded. The increase in the exchange rate from 1.32, when the contract was entered into, to $1.35 at 12/31/X2, an increase of $.03 per Euro, increases the cost of the commitment by $9,000, resulting in a foreign currency loss that would ordinarily be recognized in 20X2. Since the forward exchange contract is a cash flow hedge, however, any gain on it will offset the loss. The forward rate increased from $1.25 to $1.31, resulting in a gain of $.06 per Euro or $18,000, of which $9,000 will offset the loss on the firm commitment. The remaining $9,000 is reported in other comprehensive income such that no foreign currency gain is reported in income.

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

[Spartans92]

What the heck did I just read!!! I am lost but I will just go with whatever I know I guess.. the key was being cash flow hedge.

BEC- PASS

[KJ]

I just did 30 simulations in last 3 hours!! Call me crazy!!!

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]

Out of those 30, there were only about 7 or 8 long ones, few on Authoritative, few J/E, couple on reporting and accounting principles, and couple on GASB.

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]

I am going to call it a night, happy studying (whoever is studying)! See you later today (its already after midnight here)!!

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

[mckan514w]

Just checking in- I was in Spartan's boat yesterday- COMPLETELY unmotivated and distracted- got a whole lot less done than I wanted to but just could not focus. Today. MUST. BE. BETTER! Happy Studying….

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]

n its 20X1 income statement, Cere Co. reported income before income taxes of $300,000. Cere estimated that, because of permanent differences, taxable income for 20X1 would be $280,000. During 20X1, Cere made estimated tax payments of $50,000, which were debited to income tax expense. Cere is subject to a 30% tax rate. What amount should Cere report as income tax expense?

Answer is 280*.30=84 which I get… but why wouldn't you take out the 50 that you have already paid/ been debited to the account? (or would you just simply report it at 84 and then do an offsetting credit to the expense account?) — or am I just overthinking things and getting myself really confused?

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

[Just3Letters]

Mckan,

I may be wrong but I'm pretty sure that estimated tax payments only decrease the taxes payable. You will still have the same actual expense at the end of the year….

Dr. Estimated Tax Expense 50,000
Cr. Cash 50,000

At end of year:

Dr. Tax Expense 34,000
Cr. Taxes Payable (or cash) 34,000

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

[Anonymous]

@Just3Letters

Right, I understand the numbers are from the outside parties. However, my question was why isn't the inventory from outside parties 175,000 – 250,000 instead then? Considering how the 250,000 is a credit from Lamm. An explanation for this would be greatly appreciated. Thank you!! There's the problem once again:

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

[Spartans92]

All these IFRS vs GAAP….way too many differences to even memorize.

BEC- PASS

[Author]

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