[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

[Anonymous]

Same here I hear you on that one!!

[Anonymous]

Sunday 8 days away…

Kill or be killed

[Anonymous]

Can someone ‘splain the logic in this question?

On incorporation, Dee, Inc., issued common stock at a price in excess of its par value. No other stock transactions occurred, except treasury stock was acquired for an amount exceeding this issue price. If Dee uses the par value method of accounting for treasury stock appropriate for retired stock, what is the effect of the acquisition on the following?

A.
Net common stock: No effect; Additional paid-in capital: Decrease; Retained earnings: No effect

B.
Net common stock: Decrease; Additional paid-in capital: Decrease; Retained earnings: Decrease

C.
Net common stock: Decrease; Additional paid-in capital: No effect; Retained earnings: Decrease

D.
Net common stock: No effect; Additional paid-in capital: Decrease; Retained earnings: Decrease

Correct answer is B

I'm putting numbers to this problem and I can't see what I'm doing wrong. Here is my interpretation:

Original entry: assume 100 shares issued at $10 with par $1

Cash 1,000 dr
Common stock 100 cr
APIC 900 cr

Entry to record the treasury shares: assume $12 share

Treasury stock (common) 100 dr
APIC 900 dr
RE 200 dr
Cash 1,200 cr

What am I doing wrong? Thanks

[Anonymous]

Think I just figured out the question, it asks for the change resulting from the acquisition not both of the transactions. It helps to read the question thoroughly – duh

[Spartans92]

Whats a good way to approach cash to accrual or vice versa questions. Heres one:
Young & Jamison's modified cash-basis financial statements indicate cash paid for operating expenses of $150,000, end-of-year prepaid expenses of $15,000, and accrued liabilities of $25,000. At the beginning of the year, Young & Jamison had prepaid expenses of $10,000, while accrued liabilities were $5,000. If cash paid for operating expenses is converted to accrual-basis operating expenses, what would be the amount of operating expenses?

I thought it was 135k. Increased in asset is good so I added and increased in liability is bad so I subtracted. But then seemed to be wrong. Answer is 165k. If anyone could give some tips, I appreciate it. Thanks

BEC- PASS

[Anonymous]

MAn I am having trouble understanding Changing from Cost to Equity Method. then Step acquisitions are also confusing me.

[Porma Fierles]

Same. Frankly I just don't understand the Financial Statement Accounts category all together.

[Anonymous]

I just know ill get tested on this To equity from cost and from equity to acquisition and acquisition to equity…

Its one page in the becker book I think I most def want to know

[Anonymous]

@Spartans92

Converting cash op expenses of 150,000

starting point – cash op expense 150,000
Beg prepaids will be expensed in current year 10,000
End prepaids will be deferred to next year (15,000)
Beg accrued expenses already been expensed (5,000)
End accrued expenses expensed in current year 25,000
Accrual operating expenses 165,000

[mtaylo24]

Geez, been away all weekend (4hr drive)…did about 180 mcqs on the side tho, but im finally home ready to get it in for Fridays rematch! Gleim and Ninja on deck, Lets get it!

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[Anonymous]

@ mtaylo24 Sounds like a plan. Let's hash it out with some questions in here. I'm plowing through FAR now hoping to be ready by early January.

[Anonymous]

So when bonds are issued by the SUB and the WS entry for the next year is being prepared you credit . Does this sound right?

Debit Bonds Payable
DEbit NCI
Debit Premium
Credit Investment in bonds

[Anonymous]

Why do you debit NCI instead of RE in WS entry next year when the parent buys back the bonds that sub issued? Sounds like something they would love to stab you in the back with in a SIM or MCQ

[mckan514w]

been down and out with the stomach flu- talk about FAR literally making you want to barf 🙂 — this is not boding well for Friday…. so not ready

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

[Anonymous]

Been working on EPS today and was good until I saw this question:

A firm has basic earnings per share of $1.29. If the tax rate is 30%, which of the following securities would be dilutive?

A. Cumulative 8%, $50 par preferred stock

B. 10% convertible bonds, issued at par, with each $1,000 bond convertible into 20 shares of common stock

C. 7% convertible bonds, issued at par, with each $1,000 bond convertible into 40 shares of common stock

D. 6%, $100 par cumulative convertible preferred stock, issued at par, with each preferred share convertible into four shares of common stock

The answer is C with this explanation:

Dilutive securities reduce earnings per share. To determine dilution, a conversion basis must be stated. Each 7% $1,000 bond yields $49 ($70 – 30% tax) of earnings after tax. The conversion increases the number of shares by 40. The earning per share on the converted bonds is only $1.225 (49/40) thus diluting the basic earnings per share of $1.29.

I don't follow the logic. It says each bond yields $49 of earnings after tax. Isn't each bond incurring interest expense of $49 net-of-tax, not earnings?

[Author]

Replies