[jeff]

SO I know every test is different but does anyone have any insight on what has been heavily tested recently? I take the exam Monday and I need to narrow my focus….Thanks!

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[lannebrown]

OK so let me start by saying that I have a huge mental block when it comes to bonds. So this will be my third time taking FAR and I really need to nail down specific transactions and events. Including bonds. So here goes.

On December 31, Moss Co. issued $1,000,000 of 11% bonds at 109. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitled the bondholder to purchase one share of $5 par common stock for $25. Immediately after issuance, the market value of each warrant was $4. On December 31, what amount should Moss record as discount or premium on issuance of bonds?

a. $110,000 discount.

b.$90,000 premium.

c.

$200,000 discount.

d.

$40,000 premium.

Explanation

Choice “a” is correct.

Debit (Dr) Credit (Cr)

Cash $ 1,090,000

Discount on bond 110,000

Bonds payable $ 1,000,000

APIC – Warrants 200,000

AUD - 72,85 expires 12/31/15 yikes
FAR - 72,68,76!!!!
REG - 72, NOV 2015
BEC - 67,66,10/24/2015

[lannebrown]

OK so let me start by saying that I have a huge mental block when it comes to bonds. So this will be my third time taking FAR and I really need to nail down specific transactions and events. Including bonds. So here goes.

On December 31, Moss Co. issued $1,000,000 of 11% bonds at 109. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitled the bondholder to purchase one share of $5 par common stock for $25. Immediately after issuance, the market value of each warrant was $4. On December 31, what amount should Moss record as discount or premium on issuance of bonds?

a.$110,000 discount.

b.$90,000 premium.

c.$200,000 discount.

d.$40,000 premium.

Explanation

Choice “a” is correct.

Debit (Dr) Credit (Cr)

Cash $ 1,090,000

Discount on bond 110,000

Bonds payable $ 1,000,000

APIC – Warrants 200,000

So here's why im confused. Why is the discount $110,000? Why is'nt it the difference between the 90,000 and the 110000? I had an awful intermediate teacher in Grad school and i have no idea how I even passed to be honest,so please help me!

AUD - 72,85 expires 12/31/15 yikes
FAR - 72,68,76!!!!
REG - 72, NOV 2015
BEC - 67,66,10/24/2015

[Determined CPA]

lannebrown – you have to account for the warrant before you can determine the discount. The detachable warrant is

1000 * 50 * 4 (market value)

The discount is the difference

If the detachable warrant wasn't there then your logic would work! These questions confuse me too!

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Future Ninja]

@gabe. thanks for posting. I like the PARty thing. I only need to understand one side of it cause I have the tendency to exchange things with each other. I can share mine too.

You know Mr Bond, Jame Bond in Die another day? here it goes: BOND = DIE (Discount in Effective) You know it's a discount because the effective rate is higher than the stated rate.

Another one. Bond Issue Cost = U are my asset (US GAAP), I'll (IFRS) be your deduction (expense) from the cash proceeds.

Hope this helps if I make sense. ^_^.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Future Ninja]

@lannebrown I wish I could help you. Bond, James Bond is my favorite but I hate IFRS. It's just makes my life so complicated. And here's me saying, I wish IFRS questions are all pretest but we all know it will not happen. Anything you wanna know about bonds?

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Ssbknyc]

@lannebrown Simplest way to think about it is the discount is a plug since we know the other amounts in the JE

DR Cash $1,090,000 [Face X Price issued}

DR Discount on Bond [PLUG]

CR Bond Payable [Face]

CR APIC – Warrants [(1000 bonds x 50 detachable warrants) x FV of warrant]

The way i think of it is both the bond and warrants have value. You purchased a bond with Face of 1,000,000 and detachable warrants with market value of $200,000 (total “FACE plus value” $1,200,000) for only $1,090,000. So you essentially purchased them at a discount.

Hope this helps, let me know if i can clarify anything.

Done 08/2014-08/2015

[Ssbknyc]

Taking the exam on November 25, I feel like I went through everything a few times. Not sure where to start for the next week. Any suggestions?

Done 08/2014-08/2015

[mb0363]

Can anyone else answer my question 🙂 it's really bugging me!

BEC - PASS
AUDIT - PASS
REG - PASS
FAR - PASS

[lannebrown]

@SSbknyc actually that makes a lot of sense. Thank you. I never thought of it from that prospective.

AUD - 72,85 expires 12/31/15 yikes
FAR - 72,68,76!!!!
REG - 72, NOV 2015
BEC - 67,66,10/24/2015

[mb0363]

@ssbkmyc I would suggest constant progress tests and reading of material to keep it all fresh. I test on the 25th too. I'm still going through things a second time

BEC - PASS
AUDIT - PASS
REG - PASS
FAR - PASS

[Future Ninja]

@mb0363 – oh my.. im taking FAR this Friday and I forgot the concept behind for your question. Let's wait what others have to say. sorry I can't help you on this one.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Anonymous]

Hey All!

I'm getting a bit confused on Bonds issued between interest dates. I understand that the issuer will credit their bond interest expense to later have it match when the payment comes through, but does the investor make a similar entry on their books? For instance would they debit bond interest revenue on the date of the sale to later have the interest revenue be accurate when the payment comes in? I couldn't find a great explanation in Becker about this. Thanks!

[Ssbknyc]

@CPAlmost

When an investor purchases a bond between interest dates, the accrued interest, is added to the price of the bonds. So the investor pays the price of the bond plus accrued interest.

At the interest payment date the investor will pay the total accrued interest for the period LESS the accrued interest that was already paid when they bought the bond.

Let me know if this makes sense or you want me to clarify.

Done 08/2014-08/2015

[Ssbknyc]

@mb0363 One question asks what is the deferred income tax liability on the BALANCE SHEET and the other is what is the deferred income tax expense on the INCOME STATEMENT.

When calculating for the BS = Cumulative Temporary difference x enacted tax rate

When calculating for the IS = Temp differences x enacted tax rate

I am about 90% sure on this so if anyone wants to give their thoughts, feel free.

I can't study anymore tonight but don't mind helping/researching for anyone that may have a question.

Done 08/2014-08/2015

[Anonymous]

Is it just me or are the Ninja MCQs for governmental accounting extremely difficult? I have less than 60% on those while I am above 80% on the other sections.

[Author]

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