[Biff-1955-Tannen]

TL;DR – Will I be clueless as to how to fill out the simulations?

For those of you that have FAR Ninja MCQ, its simulation #20.

For those of you that don’t have it, the simulation goes like this. It gives you information about investments you bought throughout a few years. It gives you their values at year end, and the companies net income for the years.

It gives you a section to do 4 journal entries under the fair value method, and another section to do 4 journal entries under the equity method for the exact same dates.

In the first year you only have 10% stock ownership, but in year 2 you purchase another 20% to enable the equity method.

The problem gives virtually ZERO guidance on how you’re supposed to do the journal entries. So you don’t know if you’re supposed to only fill out he first two journal entries in the fair value method section, put no entries for the other two journal entries and switch over to the equity method section and fill out the last two journal entries. Or if you’re supposed to for some reason fill out the entire fair value method as if you didn’t purchase enough to account for it as equity method, and also fill out the equity method as if you were accounting for it as equity method from the beginning.

This simulation was actually the latter.

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[CPA2BEE]

This SIM sounds like worst case scenario on an exam, you might get one of this caliber but they all won't be like that. I doubt you'll get anything that vague on the exam, but it is likely one or two may not be crystal clear. There is usually a “No entry required” selection for these types of questions. My advice would be never leave anything blank unless they specifically tell you to.

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[EuroAddict]

When I read posts like this it makes me so glad I am done. I recall doing a practice SIM like the one you mentioned. If I recall, it's not all that tricky, just long winded and as soon as you look at it you want to quit.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[Excel14]

@Biff:

I'm studying the Equity Method now, and if I'm thinking correctly, once you've subsequently purchased enough of the company to enlist the Equity Method, you would go back and apply it retroactively to Yr 1, as if you had significant influence all along. So you'd apply the Equity Method for the 10% in Yr 1, and then for the 30% in Yr 2. In another words, apply the Equity Method for both years, and do the journal entries accordingly.

Someone correct me if I'm wrong here.

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[Biff-1955-Tannen]

@Excel14

You're right that if you're changing to the equity method, its applied retrospectively as if it was always the equity method. But this simulation has you fill out two different sections. One as if the equity were never adopted, and another as it should be with the equity method applied retrospectively. So it looks like this kind of…

Entries under the Fair Value Method
6/30/X0 journal entry
12/31/X0 journal entry
12/31/X1 journal entry
12/31/X2 journal entry

Entries under the Equity Method
6/30/X0 journal entry
12/31/X0 journal entry
12/31/X1 journal entry
12/31/X2 journal entry

And you have to fill both sections out for whatever reason.

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Biff-1955-Tannen]

Oh and thanks for the responses. It's good to hear this is a worse case scenario and probably won't be this vague

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Excel14]

@Biff:

I'm not looking at it, so I can't say for sure, but maybe you don't fill out the FV entries and put zeros there? That would stand to reason, if you're retroactively applying the Equty Method. You are right, some clear instruction would be awfully helpful.

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[Biff-1955-Tannen]

@Excel14 the solution is to fill out both sections for all dates

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Author]

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