[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

[mckan514w]

@Claudia408 ha ha ha yesterday was great I was as enthused as one can get and kept thinking “this is soooo much better than studying BEC”– today I am back to “oh CRAP I HATE FAR!- I am so overwhelmed” ha ha ha ha… just so ready for this all to be over….

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

[jeff]

@Alejandro Garcia – I'm not sure why it keeps sending it after unsubscribing. I've considered turning the feature off…not sure how many people use it.

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

[emichelle2321]

@Jeff – another71.com – please don't turn it off! I love this feature

[jonm857]

Becker did not really explain this solution… like at all. Can somebody help me with the math here? Also, I'm not sure if this is book-value method or market value method. Thanks

– – – – – – – – – – – – – – –
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. $90,000 premium.
b. $40,000 premium.
c. $110,000 discount.
d. $200,000 discount.

Explanation

Choice “c” is correct.

Cash – – – – – – – – $1,090,000
Discount on bond – – -110,000
– – -Bonds payable- – – – – – – – -$1,000,000
– – -APIC – Warrants – – – – – – – -200,000

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

[jonm857]

Holy crap… these bonds MCQs are kickin my @ss!

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

[EfrainV24]

I agree, please leave the feature on. I enjoy getting the emails – gives me a break from my workday to see what people are asking and also gives me a little refresher course (with people in plain language) Ha!

[jonm857]

I bet you could just label the emails as “spam” in your inbox and they will go away.

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

[mckan514w]

jonm857 because they gave you the market value of the bonds it is fair to assume that you need to account for them at fair market value. Break it down piece by piece and do your journal entries…

So you issued 1,000,000 bonds at 109 thus you got 1,090,000 in cash
DR Cash 1,090,000
CR Bonds Payable 1,000,000

Then you have the warrants that you need to account for so first determine how many bonds were issued 1,000,000 worth of bonds at 1,000 each so you issued 1,000,000/1,000 1,000 bonds each bond has 50 warrants that are worth FMV of $4 so 50*1,000*$4=200,000 so add this to you JE's

DR Cash 1,090,000
CR Bonds Payable 1,000,000
CR APIC Warrants 200,000

1,200,000-1,090,000 gives you a discount of 110,000 to balance.

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

[jonm857]

@mckan

Thanks! That was definitely helpful

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

[mckan514w]

Bonds- about the only thing I got first go round 🙂

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

[Ariah]

Just took FAR, my Sims were okay but MCQ I am not sure what to expect. I may have done ok if I didn’t get tricked, so not sure…Overall, little bit of everything, very important to remember how the stuff works.

[emichelle2321]

@Ariah – thinking good thoughts for you! Are there any other tips you can give those of us taking it this quarter??

[Ariah]

@emichelle2321 – thanks!. Learn the basics and don't forget that stuff. Burn your self with repeated mcqs.

[mperez102204]

Black Co. requires advance payments with special orders for machinery constructed to customer specifications. These advances are nonrefundable. Information for 20X1 is as follows:

Customer advances balance December 31, 20X0 $118,000
Advances received with orders in 20X1 184,000
Advances applied to orders shipped in 20X1 164,000
Advances applicable to orders canceled in 20X1 50,000

In Black's December 31, 20X1, balance sheet (statement of financial position), what amount should be reported as a current liability for advances from customers?

Incorrect A.
$0

B.
$88,000

C.
$138,000

D.
$148,000

Can anyone help be figure out why the answer is B and not A. Here was my thoughts, the advances are not refundable, so why would the deduction be made for the $50,000 advance on cancelled items?Gosh, the answer is probably so obvious…….

[mckan514w]

JUST finished doing this yesterday! (and yay I know it 🙂 )– when you are doing accrual you can not recognize revenue until service has been performed thus advances are liabilities until this time. In the above case the advances are non-refundable which means revenue will either be recognized
1. when order is performed or
2. when order is forfeited– i.e. I cancel the order my deposit is non-refundable, thus the company is under no obligation now to make the product and they may keep my money.

So in the above question the company will recognize the deposits as revenue when the order is shipped and / or when the order is canceled by the customer

Thus Beg. Balance 118
+ new orders 184
– applied to orders shipped (164)
-orders canceled (50)
= 88

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

[Author]

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