[jeff]

Welcome to the Q4 2016 CPA Exam Study Group for FAR.

If this is your first post in the study group – please post your target exam date (just the time frame to preserve your anonymity), and your past history with this exam (optional, of course).

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

[jonm857]

So in this entry, we first bring 3 months of interest expense to a credit balance so that it offsets with a full 6 months of interest expense later on, which would leave 3 months of interest expense remaining debit balance. But why? I guess I'm not understanding why we don't just credit bond interest revenue if we are adding it to the sale price?

B - 81
A - 87
R - 73
F - July 5th

[OdellBj]

@forevercpa what study guide did you get the answer from? I only ask because I found the same question on course-hero and the answer was $310,000

[nouiy]

1.Hospital, Inc., a not-for-profit entity with no governmental affiliation, reported the following in its accounts for the current year ended December 31:

Gross patient service revenue from all services provided
at the established billing rates of the hospital (note
that this figure includes charity care of $25,000) $775,000
Provision for bad debts 15,000
Difference between established billing rates and fees
negotiated with third-party payers (contractual adjustments) 70,000

What amount would the hospital report as net patient service revenue in its statement of operations for the current year ended December 31?

A.$665,000

B.$680,000

C.$705,000

D. $735,000

The answer is A. Nongovernmental not-for-profit hospitals deduct charity services, bad debt, contractual adjustments, and policy discounts from gross patient service revenues to determine net patient service revenues.
$775,000 – $25,000 – $15,000 – $70,000 = $665,000

2.Terry, an auditor, is performing test work for a private not-for-profit hospital. Listed below are components of the statement of operations:

Revenue for charity care services $100,000
Bad debt expense 70,000
Net assets released from restrictions
used for operations 50,000
Other revenue 80,000
Net patient service revenue (includes revenue
related to charity care) 500,000

What amount would be reported as total revenues, gains, and other support on the statement of operations?

A.$460,000
B.$530,000
C.$580,000
D.$630,000

The answer is B. Total revenues, gain, and other support will include the following:

Net patient service revenue $500,000
Less Charity care 100,000 $400,000
——–
Other revenue 80,000
Net assets released from
restrictions used for
operations 50,000
——–
Total $530,000
========

Charity care does not qualify for recognition as revenues in the financial statements. These are services provided without expectation of payment. The bad debt expense would not affect the patient service revenue reported by a private not-for-profit hospital. In contrast, uncollectible patient accounts would reduce patient services revenues reported by governmental hospitals.

Question 1 includes bad debt but question 2 does not. I'm confused what is correct. Can anyone help me please?

[jpowell31]

it is taking me AGES to get through this material. i'm only 1/6 chapters with chapter 2 being a beast (Ninja). if i can get through it with questions end of this weekend I'd be lucky (and MAYBE have a chance). i should be able to take this in this window and I'm really struggling… thought I'd complain to anyone in general 🙂 @jon how are you coming.. sorry I'm no help to anyone right now, I'm not deep enough in.

[cdn]

Question: I started studying for FAR and was wondering is IFRS heavy tested on FAR? Any experience you guys had? Thanks

[jonm857]

@capri

Yeah anything in that book is fair game.

B - 81
A - 87
R - 73
F - July 5th

[lilitvar]

Hey guys,

Took FAR for the first time yesterday, it was quite tough., especially the second testlet was insane. Had a DRS which took me like more than 30min to complete and not even sure if I got it right. I hope I pass, so I dont ever have to open FAR materials again 😉

@capri1032 – i had a lot, I mean a lot of questions which involved IFRS, even in sims, so I wouldnt overlook it. i wish i had paid more attention to that part when preparing…make sure to know major differences.

Wishing everyone good luck in upcoming tests, hang in there!

[cdn]

THANKS @lilitvar and @jonm857

[jonm857]

I'm having a hard time seeing the light on this problem for “warrants only method”… Why do we debit “discount on bonds payable” for a bond that was issued at a premium?? I'm leaning toward the explanation of “well, where else are you going to put it?” But I still don't got a warm fuzzy on this one.

B - 81
A - 87
R - 73
F - July 5th

[Stilgoin]

It is because the warrants are a separate security and combined with bonds payable make the bond worth more than the premium plus the bond. The difference is reported as a discount. If you have Ninja Plus, Bob does an excellent job of explaining this concept. 😉

B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, Waiting

Ethics | 93

"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill

“In a world full of critics, be an encourager."

[Claudia408]

can someone please explain why the 2,000,000 revenue bond is not included in the govt wide statement of net position? my understanding is that govt wide stmt of net position includes all govt activities PLUS internal funds. so since the answer confirms the revenue bonds are indeed a proprietary fund, does it mean that the revenue bonds are enterprise?

Blue Township has a number of outstanding bond issues that include a $4,000,000 general obligation bond that financed City Hall, a $2,000,000 revenue bond that financed upgrades to the water treatment plant, a $1,000,000 special assessment bond for sidewalks, and a $3,000,000 general obligation bond used for streets and roads. Revenues of the water fund, a proprietary fund, are expected to pay off the revenue bond. What should Blue Township report as long-term liabilities in the governmental activities column of the government-wide statement of net position?

Answer:The obligations of the proprietary fund, the revenue bonds of $2,000,000, should be shown as a fund liability. The other bonds should be shown in the government-wide statements as a liability relating to governmental activities, but not shown in the fund statements. The general obligation debt consists of the $4,000,000 and $3,000,000 general obligation bonds as well as the special assessment bonds of $1,000,000. Special assessment debt is usually an obligation of the general government, although some costs may be defrayed with special assessments.

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

[mckan514w]

@claudia408 I ***think**** it IS reported on the statement of net position however I believe it would be reported under the “business activity” column as rather than under the “governmental activity” column like the question asked because enterprise funds are run like a business whereas the only things that should be reported under governmental activities are those things that related directly to the government and / or internal service funds.

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]

I am not understanding why B is wrong. I thought that prior period corrections were adjustments to retained earnings not comprehensive income? and that Comprehensive income would include Net Income less dividends paid….

One of the elements of a financial statement is comprehensive income. Comprehensive income excludes changes in equity resulting from which of the following?

A. Loss from discontinued operations
B. Prior period error correction Incorrect
C. Dividends paid to stockholders
D.Unrealized loss on investments in marketable equity securities classified as available-for-sale
You answered B. The correct answer is C.

Comprehensive income per SFAC 6, Elements in Financial Statements, encompasses all changes in equity of a business resulting from transactions with nonowners. Specifically:
It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners
Based on this, dividends paid to stockholders would not be included in computation of comprehensive income.

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]

mckan – ahh yes you're right! i kept missing the word govt activities! duh!! thanks. 🙂

enjoying studying for FAR again?

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

[Alejandro Garcia]

Does anyone know how to get rid the email thread that keeps getting sent to me for this forum? I've already hit the unsubscribe button and I continue to get emails about FAR.

[Author]

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