[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

[StrongMind]

Hi everyone,

I am looking for some motivation and some advice in here.
My FAR exam is schedule for Dec 3. I am just going through my lectures (half way through Rogers lectures ). The plan was to be done with them this weekend and start on MCQs. :/ But I get discouraged some days. Is it still doable to finish it by Dec 3, and do only MCQ for the last 30 days, and have a chance to pass it?
I haven't done any MCQ yet.

Thank you!!!

[cdn]

I got this question wrong- my understanding was that if you received Boot you recognized gain; in this case cash was paid so I am confused why gain is recognized. Can someone help? Thanks.

On January 2, Elbert's Delivery Company and Wanda's Exporters exchanged similar delivery trucks in an exchange that lacks commercial substance. Data relative to the trucks follow:
Elbert's truck
Original cost $10,000
Accumulated depreciation as of January 2 8,000
Fair market value 3,000
Wanda's truck
Book value $15,000
In the exchange, Elbert paid Wanda cash of $10,000. Elbert's Delivery Company should record the new truck at:
a. $8,000
b. $10,000
c. $13,000
d. $12,000
Explanation
Choice “c” is correct. The new truck is recorded at $13,000 on Elbert's books. In this case, the transaction is considered to be a monetary exchange, because the boot ($10,000) exceeds 25% of the total consideration ($10,000 plus $3,000 fair value of the old truck transferred to Wanda). Therefore, both parties to the exchange recognize all gains and losses on the transaction. The journal entry prepared by Elbert follows:
Debit (Dr) Credit (Cr)
Truck-New $ 13,000
Accum. Depre. 8,000
Cash $ 10,000
Truck-Old 10,000
Gain 1,000

[mperez102204]

I take my test on Tuesday. my average trending is 65 and my average (based on last 5 test) is 68 (was 73, but I starting to make really stupid mistakes). I am not going to go any further tonight. I am planning on getting my notes together and look over calculations that I am having problem with. My goal is to review the ninja notes, my index cards, and be able to write my cheat sheet out. I don't want to look at any more MCQ, but should I. I am a little worried I will burn myself out. Oh, by the was the exam is at 12:30 on Tuesday.

Any advice or anything that might have worked in your favor before?

[mperez102204]

@strongmind… I think you are in okay shape. Usually you need to have about 2-2.5 weeks to review for FAR, which is basically hammering MCQ's out until you want to fall over! So, with that said, if you have the review material completed by this weekend, I think you should be okay. Now, if you are using NINJA MCQ, do not be worried if you start out in the 30-40's; this is normal. Although, if you want clarification on a few items, you can get the Blitz. I would ensure that I would take about 200-250 questions a day (even thought I work fulltime). If there was something I got wrong, i made sure i knew why and just didn't memorize the questions. I failed FAR the first time because of lack of planning and personal issues days before the exam. I gave myself about 6 weeks for the retake (my 12 year anniv. is the weekend coming up). So, I got the Ninja notes, MCQ, Audio, and blitz. Now, I can not say for sure that I am going to pass on Tuesday, but I can tell you I feel a lot better then I did the last time i sat.

[Shormila Arefeen]

Hi,

I'm using Becker for FAR and stuck on a simulation of chapter 2. I don't understand the solution for journal entry 8

Part A MK Enterprises, Inc. started business on January, 1, Year 1 and keeps its books on the cash basis of accounting. The trial balance of the company at December 31, Year 1 is as follows:

Selling expenses DEBIT CREDIT

Cash $5,000

Common stock $10,000

Sales 40,000

Cost of sales 20,000

Payroll expense 8,000

Selling expenses 3,000

Administrative expenses 5,000

Small tools expense 5,000

Income tax expense (estimated tax payments) 4,000 (debit)

Other information about MK’s operations:

1. Customers owe the company $20,000 on unpaid invoices at the end of the year.

2. The company has goods with a cost of $12,000 in its warehouse at year end. The company owes its supplier for all of these goods, plus they owe another $2,000 on a prior shipment that was sold during the year.

3. The amount the company shows as small tools is for the principal manufacturing asset of the company. The company depreciates its fixed assets on a straight line basis with a five year asset life. Fixed assets are assumed to be purchased at the beginning of the year.

4. Included in administrative expenses is a payment on the company’s one year general liability insurance policy for $2,400. The policy was purchased and effective on July 1, Year 1.

5. When reconciling the bank accounts for the year, the company discovered that it had received a $500 bad check from a customer. The check was re-deposited and paid in January of Year 2.

6. The company estimates that 1.5% of its sales will eventually be uncollectible.

7. The company pays its employees on a weekly basis 7 days after the end of the pay period. The last paycheck date for the year was on December 31st. The weekly payroll of the company is $1,300.

8. The company’s tax rate is 25%. There were no non-taxable transactions made by the company

Solution for J/E 8:

Cash basis pretax income (from trial balance) (1000)….???? how do i get this amount???
J/E 1: Sales 20,000
J/E 2: Cost of sales (2000)
J/E 3: Small tools 5000
J/E 3: Depreciation expense (1000)
J/E 4: Administrative expense 1200
J/E 6: Bad Debt expense (900)
J/E 7: Payroll expense (1300)
Taxable income 20000
Income tax expense 20000*0.25 = 5000- estimated payment 4000= 1000 income tax payable.

The solution for journal entry 8 says there's a pretax income of (1000). How do I get this pretax income of (1000) from trial balance?

Thanks in advance

[taiyab]

@thekyang

See in the 1st year interest under Straight Line Method will be higher as a result the amortization will also be higher for which the bond CV will be higher compared to Effective Interest Method.
For the 2nd Qstn:

Carrying value of the bond: 1,000,000 – Discount 94,000 = 906,000

Coupon 8 % – 1,000,000 X 0.08 X 1/2 (6months) = 40,000

EI 10% = 906,000 X 10% x 1/2 = 45,300

CV at Dec 31st = 906,000 + (45,300-40,000) = 911,300

Bingo!! I hope that solves your question.

[mckan514w]

@Claudia408
The two balance sheets are showing the combined transaction of the purchase of the remaining 10% interest in Baker. So on Ables end when the transaction took place they
DR Investment 4,000
CR Cash 4,000

And with Baker it was
DR Cash 4,000
CR Common Stock 4,000

You are now consolidating the balance sheets and need to eliminate any intracompany transactions… because essentially the cash you spent to buy the stock is now your anyway. Think of it this way two people are married and with individual bank accounts. The husband gives the wife 200 which he draws out of his account and she deposits into her individual account… he is 200 poorer and she is 200 richer but at the end of the day their combined net worth is still the same.

So here you need to back out the 4,000 spent to acquire the remaining 10% of stock this will reduce your assets.. by 4,000 to eliminate the purchase transaction this brings your assets to 660,000-4,000=656,000
And then you adjust your Stockholders equity to eliminate the other end of the transaction taking out the 4,000 which will then give you combined liabilities of 230,000 and Stock Holder Equity of 426,000 for total balance of 656,000

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 – thanks for the explanation! makes sense now. “You are now consolidating the balance sheets and need to eliminate any intracompany transactions”… i guess i coulda just thought of this as eliminate the 4,000 from the total stockholders equity 430,000-4,000=426,000

you sound pretty ready for FAR already! when do you take it?

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

[mckan514w]

ugh not ready at all for FAR- its going really slow…. right now scheduled for first of December but may be pushing that back…to January- the frustrating thing for me right now is I am actually remembering and getting right the things I struggled with last time (like inter-company eliminations) meanwhile I am struggling with “basic accounting” (like how to write off a bad debt) ha ha ha…. when do you sit? Its coming up isn't it?

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 – taking it in 1 week, Halloweenie! which review course do you use?

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

[lilitvar]

Good luck to you Claudia, I took FAR a week ago, I know how frustaring the last days can get because the material is so overwhelming. Dont forget to eat up the govt and not-for profit mcqs until you know them by heart, other than that I would say my feeling is any topic could come up.
I hope you spook away your Haloweenie FAR!

[mckan514w]

ha ha ha forgot you were taking it halloweenie!! Scare the s-t out of it for us! I'm using Roger's and Ninja concentrating a whole lot on Ninja for the retake as I felt last time that Roger's was way easier than both the Ninja MCQ's and the actual exam. Your Becker aren't you?

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]

lilitvar – thank you! i know Govt & NFP make up a good chunk and i'm working on it now. still averaging high 60s for Govt but seem to do well with NFP. how do you think you did?

mckan – i used Roger and Ninja MCQ and now i'm circling back with Wiley Qs bc i've seen Rogers 2x now and finished all of Ninja but haven't hit review phase. Ninja has a lot of random left field Qs that frustrate me.

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

[Claudia408]

does anyone here have the Wiley Test bank? I need help on one of the DRS SIMs that have to do with inventory.

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

[StrongMind]

@mperez102204 Thank you for the your feedback, and good luck on your next exam!!!
I will try to get this done this weekend. 😉 i need to lol

[Author]

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