[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

[Operation_CPA]

Basic question here – what is the general rule for AFS and Trading securities? Is this correct?

Trading – unrealized gains and losses stem from changes in FV –> I/S
AFS – gains and losses stem from changes in FV –> OCI

I understand in the Becker text that they are reported at FV, but when working the MCQ's I am not seeing the same consistencies. I got most of them correct but this one threw me off from what I remember reading.

Q1:

……………………………Market value
………………….Cost……..12/31/Y2….12/31/Y1
Trading………150,000….155,000…..100,000
AFS……………150,000…130,000…..120,000

What amount should Tyne report as unrealized gain (loss) in its Year 2 income statement?

Correct answer = $55,000, which makes sense because its dealing with trading securities (I/S) and the changes in FV = 155-100.

However, the next question applying the same concept it does not work.

Q2:
……………………………Market value
………………….Cost……..12/31/Y2….12/31/Y1
Trading………150,000….155,000…..100,000
AFS……………150,000…130,000…..120,000

What amount should Tyne report as net unrealized loss on available-for-sale marketable equity securities at December 31, Year 2, in accumulated other comprehensive income on the balance sheet?

Correct answer = 20,000 (I put 10,000 apply the same principle as before) What am I missing? Trying to figure out when to utilize the cost amounts this way I can apply it to the other basic problems in the passmaster.

Thanks in advance everyone.

[Spartans92]

@operation, my take is for Q1 it is asking for just the unrealized gain or loss so you simply look at the Yr1 balance to Yr 2 balance which is a 55k increase. But Q2 is asking for “NET” unrealized G/L which you have to factor in the cost. So the cost to Yr 1 balance was a loss of 30k but then Yr 1 to Yr 2 had a gain of 10k. So the Net (30-10) is 20k Net Loss. Same concept apply to Q1 works too I guess had they ask Net amount as well.

BEC- PASS

[Spartans92]

I am so tired of reading already and most time I don't understand what they are saying without an example provided. Is it necessary to even read everything word for word?

BEC- PASS

[Operation_CPA]

@Spartans92

Makes sense, thank you. All the more reason to read these Q's extremely carefully. So for the most part I should generally be looking for changes in FV unless the question asks for the “net,” in which case I will have to utilize the cost in my calculation. Noted!

[yicao74]

West, Inc. made the following expenditures relating to Product Y:
Legal costs to file a patent on Product Y
Production of the finished product would not have been undertaken without the patent
$ 10,000
Special equipment to be used solely for development of Product Y
The equipment has no other use and has an estimated useful life of four years
60,000
Labor and material costs incurred in producing a prototype model
200,000
Cost of testing the prototype
80,000
What is the total amount of costs that will be expensed when incurred under U.S. GAAP?
a.
$340,000
b.
$295,000
c.
$350,000
d.
$280,000

The correct answer is A instead of C. My question is why the patents should be capitalized?The patents is developed internally, The becker book writes: the internally developed intangible assets should be expensed.

BEC 10/03/15 75
FAR 01/04/16

[Nessie]

The answer is “a” 60,000 + 80,000 +200,000…Not quite sure what you are asking?

REG Aug 20/15: 88
AUD: Feb 29/16: 80
FAR: Jun 10/16: 80
BEC?

Becker self-study, Becker Final Review & NINJA MCQS

[yicao74]

why the 10,000 patent cost is capitalized? According to the becker book, the patent developed internally should be expensed. Therefore, my answer is 10,000+60,000+80,000+200,000=350,000 .

BEC 10/03/15 75
FAR 01/04/16

[samer]

@yicao74
Goodwill developed internally should be expensed.
Patents are capitalized, if the company files a law suite and wins it then you also capitalize legal expenses paid.
if they loose the lawsuit, then they expense both the patent carrying amount and legal expenses incurred.

[Spartans92]

hey, is partially participating (preferred stock) important? I am unsure if anyone can give me an answer but becker doesn't really provide examples but few on fully participating which is simple. Should I bother the partial participating?

BEC- PASS

[Hank Scorpio]

Cyan Corp. issued 20,000 shares of $5 par common stock at $10 per share. On December 31, 20X1, Cyan's retained earnings were $300,000. In March 20X2, Cyan reacquired 5,000 shares of its common stock at $20 per share. In June 20X2, Cyan sold 1,000 of these shares to its corporate officers for $25 per share. Cyan uses the cost method to record treasury stock. Net income for the year ending December 31, 20X2, was $60,000. On December 31, 20X2, what amount should Cyan report as retained earnings?

A.
$360,000

B.
$365,000

C.
$375,000

D.
$380,000

I thought under the cost method Treasury Stock was a contra equity.

FAR - 10/3/16
BEC - 69 - 10/31/16
AUD - November 2016
REG - December 2016

[Hank Scorpio]

Sorry. The correct answer is A above. I was thinking it was C because of the entry to buy back the treasury stock, and then reissue some (including APIC).

FAR - 10/3/16
BEC - 69 - 10/31/16
AUD - November 2016
REG - December 2016

[Claudia408]

not sure i have this straight about inventory – is the weighted average and periodic methods the same or two different methods?

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

[Spartans92]

Claudia Weight Average is separate from periodic. Periodic is an inventory system associated with Fifo and Lifo. Weight average is another method. Theres 3 (Fifo, Lifo, Weighted Average) for valuing inventory.

BEC- PASS

[samer]

@claudia:

Weighted Average, FIFO AND LIFO are different methods to measure the per unit cost that is being sold.
Weighted average = Total cost/no of units
LIFO = the cost of the unit sold now is equal to the purchase price of the last unit

On the other hand, Periodic and Perpetual systems accounts for what inventory we have on hand
Perpetual: You have up-to-date inventory count, every time u sell a unit it is reduced from the stock (COGS entries is posted as well)

Periodic: when you sell a unit no change in inventory, at the end of the period you have to do a physical count to calculate COGS.

So, basically you compare Periodic VS Perpetual and LIFO VS FIFO VS Weighted Average.

[hanygameel]

Can any one help me to solve this MCQ ?
Thanks fro advance

Company A acquired 30% of Company B’s voting rights on January 1, Year 1, and accounts for its investment using the equity method. On January 1, Year 2, Company A sold 60% of its investment in Company B for $150,000. The carrying amount of the investment on January 1, Year 2, before the sale was $210,000. The fair value of the retained investment after the sale was $100,000. What gain or loss, if any, on the disposal of the investment was recognized in the Year 2 income statement prepared under IFRS?
A. Gain on disposal of $40,000.
B. Gain on disposal of $24,000.
C. $0
D. Loss on disposal of $60,000.

[Author]

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