[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

[Claudia408]

For this question, I think all $60k is an increase on temporarily restricted net assets. There are restrictions on both donations and at some point will ALL be spent, which would DECREASE temporarily restricted net assets so isn't the full amount temporary? The answer says only $40k is temporary. Can someone please help explain?

MaryLou College, a private not-for-profit college, received the following contributions during year 1:

I. $25,000 from alumni for faculty research. Only $20,000 was actually used in year 1.
II. $35,000 from a donor who stipulated that the donation not be spent until July of year 2.
On the statement of activities for the year ended December 31, year 1, what will be the increase in temporarily restricted net assets?

Donor restricted contributions should be reported as revenue on the date received. These contributions should be reported as temporarily restricted revenues until reclassified and expended. For the year ended December 31, year 1, the $5,000 left from the alumni gift is restricted to research and $35,000 is restricted until July of year 2. Thus, this answer is correct ($35,000 + $5,000 = $40,000).

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

[letsrun4it]

Claudia…

Part I: The 20k in temp restricted net assets was reduced and unrestricted net assets was increased by that amount.

The question is asking FOR THE YEAR what is the increase in net assets. So Yes net assets went up 60 as a result of these 2 donations, but it was then reduced by 20 during the year.

BEC: 85
REG: 74, 78
AUD: 86
FAR: October?

[thekyang]

@taiyab

Thank you so much for helping! I got some concepts clarified.
I had a hard time trying to finish a question in 90 seconds especially if it needs calculation.
My first CPA exam is Far and it's in December! I'm using Roger's review and Wiley textbook MCQ, 2 weeks before the exam will practice loads of ninja mcqs. Hope this works out well!

[taiyab]

@ thekyang

Your welcome! I like to help people as much as I can. Makes me happy!
Roger lectures are amazing…I really enjoy his lectures.
yeah I know solving questions in 90 secs is really tough but only practice will make you perfect.
Btw with Rogers lectures you also get the question bank as well. You can practice full length exams.
Very helpful when taking mock exams . Good Luck for the exam!!

[MMAFEM]

hi,
need help with this question, I dont get what to add and what to subtract to get the final figure…

Martin Co. had net income of $70,000 during the year. Depreciation expense was $10,000. The following information is available:

Accounts receivable increase $20,000
Equipment gain on sale increase 10,000
Nontrade notes payable increase 50,000
Prepaid insurance increase 40,000
Accounts payable increase 30,000

What amount should Martin report as net cash provided by operating activities in its statement of cash flows for the year?

A.
$0

Correct B.
$40,000

C.
$50,000

D.
$100,000

[jeff]

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

[taiyab]

@ MMAFEM

Its not that hard: use indirect method for Statement of Cash Flows

Net Income 70,000

Add back Depreciation +10,000

Minus Increase in AR (20,000)
Minus Non cash Equip gain (10,000)
Minus Increase in Prepaid (40,000)
Add Increase in AP +30,000

Net Cash provided 40,000

There you go!! I hope that helps!!

[taiyab]

Hey Jeff that one is tricky…but i think the answer is 0.

[mckan514w]

Why wouldn't you classify the 6,000 loan origination fee as income? in this question– I understand the journal entry for Dec. 31 to record accrued interest but I guess I am confused on how you would record the original Note…. I was thinking it would be
DR Note Receivable 200,000
CR Cash 194,000
CR Income from loan 6,000

On December 1, 20X1, Money Co. gave Home Co. a $200,000, 11% loan. Money paid proceeds of $194,000 after the deduction of a $6,000 nonrefundable loan origination fee. Principal and interest are due in 60 monthly installments of $4,310, beginning January 1, 20X2. The repayments yield an effective interest rate of 11% at a present value of $200,000 and 12.4% at a present value of $194,000. What amount of income from this loan should Money report in its 20X1 income statement?

A.$0

B.$1,833

CORRECT ANSWER C.$2,005

D.$7,833

Net proceeds of the loan were $194,000 and the effective interest rate was 12.4%. The journal entry to record the December 31, 20X1, accrual of interest would be:

Debit Accrued Interest Receivable 2,005
Credit Interest Income 2,005
(12.4% x $194,000 x 1/12)
The interest income reflects the effective interest rate applied to the net proceeds received. This is an application of the “effective interest” method.

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

[cpac]

Hi, first time poster here. Just took FAR for the second time yesterday. I failed in July with a 65. I had an easy second testlet which made me nervous but the third got more difficult and my SIMs were tough. Hoping for the best. Studied like crazy and I'll be disappointed if I don't pass. I'm gonna study for BEC now, that test is 12/5…

[GiniC]

I'm having a bad day – maybe this is just my brain being dense. What does this question mean by discounting the note two months after issuing it? Is that a way of saying they sold it for less than the face value? (Can't even try to answer the question if I don't understand the question!!!)

“On July 1, Lee Co. sold goods in exchange for a $200,000, 8-month, noninterest-bearing note receivable. At the time of the sale, the note's market rate of interest was 12%. What amount did Lee receive when it discounted the note at 10% on September 1?”

[mckan514w]

@GiniC sorry you are having a bad day… I've had one as well… this whole CPA exam makes me feel stupid… 🙁 in answer to your question yes… discounting a note is the same as selling it for less than face… to calculate the discount amount you take the maturity value times the discount percentage times time left on the bond then to get the actual amount you subtract from the maturity value.

So in the above question the maturity value is 200 (because it is non-interest bearing) that is what he will get when it is paid off.

The discount rate is 10%

And there are 6 months left on the note since it was issued July 1, factored Sept. 1 and due in 8 months.

So your discount rate=200*(.10)*(6/12)-(because interest in annualized)=10
and the amount he got for discounting it would then be 200-10 or 190.

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

[GiniC]

Thanks @mckan514w! FAR is daunting – so much material, so many details! My FAR exam is a month away but I start prepping for AUD this weekend (I delayed FAR, I couldn't cover the topics fast enough). 19 more MCQs in the plan for tonight…

Good luck on your next one!

[stina71223]

CBUCK: did you see the second exam much different than the first? I retake FAR for my second time this week.

[stina71223]

did you see the second exam much different than the first? I retake FAR for my second time this week.

[Author]

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