[jeff]

Welcome to the Q3 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

[pharaoh]

@teal geiger – I think the extraordinary still included and it is below/after the Special Items

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[CPYay]

Too… many… MCQs

[cpaMD86]

Tell me about it…I started doing extra Govt questions from the Wiley book too…

FAR: 9/3

[CPYay]

I'm having trouble understanding why I got this wrong. I guessed B. The answer is D.

During the year, Bay Co. constructed machinery for its own use and for sale to customers. Bank loans financed these assets both during construction and after construction was complete. How much of the interest incurred should be reported as interest expense in the year-end income statement?

A. Interest incurred for machinery for own use: all interest incurred; Interest incurred for machinery held for sale: all interest incurred

B. Interest incurred for machinery for own use: all interest incurred; Interest incurred for machinery held for sale: interest incurred after completion

C. Interest incurred for machinery for own use: interest incurred after completion; Interest incurred for machinery held for sale: interest incurred after completion

D. Interest incurred for machinery for own use: interest incurred after completion; Interest incurred for machinery held for sale: all interest incurred

Here's the explanation… Once an asset is complete, and ready for use or sale, then any interest incurred after that is an interest expense, not capitalized.

[pharaoh]

@CPYay – Interest incurred for Equipment/Machinery/Construction for own used during the construction period should be capitalized (To some extent). After completion, interest is expensed.
Construction for others/Held for sale, is all expensed

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[CPYay]

Ah. Yes I recall that now. Thanks Jimmy. It's getting late and I'm 180 MCQs in today. My brain is dying. Can you help with this last one? Then I'm off to bed haha

I guessed C (Correctly), but I guessed because I don't see my calculated answer. I figured x1 interest is $12,000, with $38,000 reducing principal. For x2, interest would be .08 * (150,000 – 38,000). But this isn't an answer option. The answer says first payment reduces principal only???

Frame Co. has an 8% note receivable dated June 30, 20X0, in the original amount of $150,000. Payments of $50,000 in principal plus accrued interest are due annually on July 1, 20X1, 20X2, and 20X3. In its June 30, 20X2, balance sheet, what amount should Frame report as a current asset for interest on the note receivable?

A. $0

B. $4,000

C. $8,000

D. $12,000

The balance sheet needs to include the amount of unpaid interest accrued on the outstanding principal up until the balance sheet date. After the first installment on the principal was made, there was still $100,000 of the debt outstanding for a full year.

[pharaoh]

Yes, I know exactly how you feel, I did 200 MCQs today and my brain is fried too. My big struggle is governmental.

The payment is 50,000 PLUS accrued interest. so the whole 50,000 will be reduced from the principal. So by x2, the balance is 100,000*8%=8,000

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[CPYay]

hahaha… I've seriously missed about 10 MCQs in the past hour because of not paying attention to tiny details like that. I'm seeing what I want to see instead of fully reading the questions.

Government is tough because of the huge amount of variability in the questions. Slowly but surely, we'll get there though.

I'm definitely off to bed before I do more damage. More studying tomorrow! Good luck with the MCQs tonight Jimmy. Thanks for clearing those up.

[Teal]

I'm still mixed up on this. Half the questions I have gotten say that Prepaid taxes is a current asset, but some don't include it as current. How do we know if it is current or non-current (which one would you assume if it didn't say one way of the other?)

FAR (66,68) Aug 26
REG (66) July 25
AUD (66) December 1st
BEC - October 3rd

[pharaoh]

@teal Geiger – Generally you pay in advance for current year taxes, so it is current. It is not common to pay taxes for 2 years ahead.

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[Teal]

@jimmy thanks for your help!

FAR (66,68) Aug 26
REG (66) July 25
AUD (66) December 1st
BEC - October 3rd

[klmrr2]

Everyone has embedded it in my brain that JE are the key to knowing FAR. A friend said this a good reference for the JE needed, but it seems like it is missing some to me? Does anyone know of a site that has a better list or are these journal entries good enough? Thanks!

https://www.principlesofaccounting.com/illustrative%20entries/entrieslist.htm

[Claudia408]

Hi can someone help solve this with a JE?
On June 2, 20X8, Tory, Inc. issued $500,000 of 10%, 15-year bonds at 98.8. Interest is payable semiannually on June 1 and December 1. Discount at issuance was $6,000. Tory uses the straight-line method to amortize the discount, which does not differ materially from GAAP in this instance. On June 2, 20X13, Tory retired half of the bonds at 98. What is the net amount that Tory should use in computing the gain or loss on retirement of debt?

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

[Teal]

@klmrr2 thanks for sharing the website! It doesn't have government JE's, but it looks pretty comprehensive other than that.

FAR (66,68) Aug 26
REG (66) July 25
AUD (66) December 1st
BEC - October 3rd

[pharaoh]

@Claudia408
I think the JE should be

Dr.Bond Payable 250,000
Cr.Cash 245,000 (250,000*.98)
Cr.Discount 2,000 (Amortization is 2,000 for the 5 years, so discount balance is 4,000 and took half)
Cr.Gain 3,000 Plug

Is that the correct answer?

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[Author]

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