FAR Study Group Q3 2016 - Page 4

Viewing 15 replies - 46 through 60 (of 213 total)
  • Author
    Replies
  • #784898
    Anonymous
    Inactive

    kanwal78,

    I am in similar situation, where I allocated 8 – 10 weeks per section, and I would forget by the time I reach the final review section.

    I failed FAR at 69 after putting in 12 weeks, Failed REG at 73 with about 8 weeks, thus I am trying for a schedule that I can manage to understand and remember by exam day.

    I work full time as a consultant with Accounting and financial systems, so I don't really see the full Accounting/Audit/or Tax. So, I struggle to fully understand all of the concepts as well.

    I wish us luck on next round. For me, FAR on 7/12.

    Dlu

    #784899
    jmc0434
    Participant

    @thebigguy1992

    To determine the annual payments of the bond we use the stated rate of the bond and to determine the interest expense/revenue we use the yield rate.

    Ugh… Bonds… I would have gotten this answer incorrect. Could you help me understand a few things?

    1. Is it an ordinary annuity because payments are at the end of the year and not at the beginning?
    2. Did we divide PV because the only information that was provided was the bond amount (the single amount) and not the payments?
    3. If they provided the annual payment amount the PV rate provided would have been correct?

    BEC - 79
    AUD - 89
    REG - 80
    FAR - 7/19/16

    #784900
    Titleistg0lfer
    Participant

    1. Yes it's an ordinary annuity because they are the same payment every year at the end of the year. If at the beginning it would be an annuity due I believe.

    2. Yes that's exactly why, if the annual payments not given you have to back into it by dividing by the pv rate

    3. Yes, you typically use the annual payment times the PV rate

    REG: 84 (10/5/15)
    AUD: 83 (11/23/15)
    BEC: 77 (2/27/16) - The bubble sucks
    FAR: 90 (7/20/16) - AND DONE FOREVER!!!!!

    #784901
    KJ
    Participant

    @ Dlu…I also work full-time, 2 kids and wifey. Gotta give time to them as well even though they are very supportive. My exam is on August 8th. Let's hit it hard to knock out FAR.

    Here is a question for you to practice, Journal Entry one:

    On January 1, year 2, Near purchases 100% of the stock of Far in a transaction that was properly accounted for as a business combination. Items 1 through 3 below represent transactions between Near and Far during year 2. Prepare the eliminating entries in general journal format for each of these transactions.

    1. On January 3, year 2, Near sold equipment with an original cost of $30,000 and a carrying value of $15,000 to Far for
    $36,000. The equipment had a remaining life of three years and was depreciated using the straight-line method by both
    companies.

    2. During year 2, Near sold merchandise to Far for $60,000, which included a profit of $20,000. At December 31, year 2, half of this merchandise remained in Far’s inventory.

    3. On December 31, year 2, Near paid $91,000 to purchase $100,000 of the outstanding bonds issued by Far. The bonds mature on December 31, year 6, and were originally issued at par ($100,000). The bonds pay interest annually on December 31 of each year, and the interest was paid to the prior investor immediately before Near’s purchase of the bonds.

    AUD - NINJA in Training
    BEC - NINJA in Training
    FAR - NINJA in Training
    REG - NINJA in Training
    "Everything should be made as simple as possible, but not simpler" - Albert Einstein

    FAR - August 2016
    AUD - September 2016
    REG - October 2016
    BEC - November 2016

    Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

    #784902
    jmc0434
    Participant

    @Titleistg0lfer – Thank you!

    BEC - 79
    AUD - 89
    REG - 80
    FAR - 7/19/16

    #784903
    Oneday
    Participant

    I came across this on my wiley flash card but im having trouble illustrating this in my mind. Can someone help me understand this better?

    Errors affecting Income:
    Errors (Ending Balance) Current statement Prior statement
    Assets overstated Overstated No effect
    Assets understated Understated No effect
    Liability overstated Understated No effect
    Liability understated Overstated No effect

    Errors (beginning bal – ending balance is correct)
    Assets overstated Understated Over
    Assets understated Over Under
    Liability overstated Over Under
    Liability understated Under Over

    Errors (beginning bal – ending balance not correct)
    Assets overstated No effect Over
    Assets understated No effect Under
    Liability overstated No effect Under
    Liability under No effect Over

    #784904
    thebigguy1992
    Participant

    @titlelist what did you score report look like for a 72? i got a 62 for FAR last window, got a weaker in the first 2 sections, then comparable in the next 2, and then stronger on NFP. weaker in sims and MCQ.

    BEC - 79
    FAR - 62,73,76
    AUD - 70, 88
    REG - 83
    #784905
    thebigguy1992
    Participant

    @titlelist what did you score report look like for a 72? i got a 62 for FAR last window, got a weaker in the first 2 sections, then comparable in the next 2, and then stronger on NFP. weaker in sims and MCQ.

    BEC - 79
    FAR - 62,73,76
    AUD - 70, 88
    REG - 83
    #784906
    Titleistg0lfer
    Participant

    @thebigguy

    So I got weaker on Governmental, Specific Transactions, and Conceptual Framework

    I got stronger on Financial Statement Accounts

    and Comparable on NFP

    Weaker on both MCQ and Sims….

    I would take these score reports with a grain of salt. I am still hitting everything hard every day on Ninja MCQ this round and hoping for a 75 this time around!

    REG: 84 (10/5/15)
    AUD: 83 (11/23/15)
    BEC: 77 (2/27/16) - The bubble sucks
    FAR: 90 (7/20/16) - AND DONE FOREVER!!!!!

    #784907
    jmc0434
    Participant

    @ThisIsTheYear –

    For the asset section it helps me to understand by thinking of the movement for inventory. Example, if inventory is up (overstated) then that means less expenses (COGS) is hitting the income statement which in turn results in an overstatement of NI. The same vise versa if inventory was understated; if inventory is down then more expenses (COGS) is hitting the income statement which would result in an understatement of NI.

    1. Errors (Ending Balance)

    ** Here only the ending balance is over/understated which indicates the error occurred during the CY activity. We would have to assume the beginning balance is appropriately reflected in the financial statements and as such no adjustments would be necessary to the PY financial statements.

    Current Year: Error Occurred
    – Asset Overstated (inventory) – Inventory Up (over), COGS down (under), NI up (over)
    – Asset Understated (inventory) – Inventory down (under), COGS up (over), NI down (under)

    2. Errors (beginning bal – ending balance is correct)

    ** Here it seems there was an error in the PY statements and a correction to assets (inventory) in the current year.

    Prior Year: Error Occurred
    – Asset Overstated (inventory) – Inventory Up (over), COGS down (under), NI up (over)
    – Asset Understand (inventory) for PY – Inventory down (under), COGS up (over), NI down (under)

    Current Year: Error Corrected
    – Asset Overstated (inventory) – Inventory Down (under), COGS up (Over), NI down (under)
    – Asset Understand (inventory) – Inventory Up (over), COGS down (Under), NI up (over)

    3. Errors (beginning bal – ending balance not correct)

    ** Here the error occurred in the PY statements and has NOT been corrected in the CY. In this case, we would have to assume the only error occurred in the PY statements and the CY activity is properly recorded.

    Prior Year: Error Occurred
    – Asset Overstated (inventory) – Inventory Up (over), COGS down (under), NI up (over)
    – Asset Understated (inventory) – Inventory down (under), COGS up (over), NI down (under)

    Current Year:
    The CY financial statements would be effected once the error is corrected

    For the Liabilities.. this one might be a little more difficult to explain. Maybe think of the flow when you are booking accruals.

    Dr. Expense
    Cr. Accrued Liabilities

    When liabilities are overstated that means you have more expenses hitting the income statement than there should be which will result in an understated in net income. Same vise versa, an understated liability, less expenses are hitting the income statement than there should be which will result in an overstatement of net income.

    1. Errors (Ending Balance)

    ** The error occurred in the CY financial statements so PY statements are correct

    Current Year: Error Occurred
    – Liabilities overstated – Accrual up (over), Expenses up (over), NI down (under)
    – Liabilities understated – Accrual down (under), Expenses down (under), NI up (over)

    2. Errors (beginning bal – ending balance is correct)

    ** Here error occurred in the PY statements and was corrected in the CY

    Prior Year: Error Occurred
    – Liabilities Overstated – Accural up (over), Expenses (over), NI down (under)
    – Liabilities Understated – Accrual down (under), Expenses down (under), NI up (over)

    Current Year: Corrected
    – Liabilities Overstated – Liabilities down (under), Expenses down (under), NI up (over)
    – Liabilities Understated – Liabilities up (over), Expenses up (over), NI down (under)

    3. Errors (beginning bal – ending balance not correct)

    ** Here the error occurred in the PY statements and has not been corrected in the CY as such no effect to the current year financial statements.

    Prior Year: Error Occurred
    – Liabilities Overstated – Accural up (over), Expenses up (over), NI down (under)
    – Liabilities Understated – Accrual down (under), Expenses down (under), NI up (over)

    Current Year: Not Corrected
    No effect on the current financial statements because the PY error has not been corrected. Once the error is corrected then it will have affect on the CY financial statements.

    I hope this helps and makes sense!!

    BEC - 79
    AUD - 89
    REG - 80
    FAR - 7/19/16

    #784908
    Oneday
    Participant

    Jmc0434//

    Thank you so much for the detailed answer..! Im am very impressed and thankful that you explained it so well!

    I just have one thing that's keeping me from grasping this…

    Why does overstated inventory means COGS is less?
    According to this formula, shouldn't it be the opposite?

    COGS = Beg inventory + net purchases – Ending inventory
    (If inventory is higher, according to this forumla, COGS should go up as well…)

    Or do I need to think about this in a different way?

    Thank you.

    #784909
    thebigguy1992
    Participant

    . Which of the following items is included in accumulated other comprehensive income or loss?
    A. Unrealized gains and losses from the ineffective portion of a derivative properly designated as a cash flow hedge.
    B. Unrealized holding gains or losses on securities classified as trading securities.
    C. A reduction of shareholders' equity related to employee stock ownership plans.
    D. Prior service costs not previously recognized as a component of net periodic pension costs.

    anyone have a good explanation for why the answer is D and A? Cash flow hedges go to OCI, thats why i thought it would be included in accumulated OCI

    BEC - 79
    FAR - 62,73,76
    AUD - 70, 88
    REG - 83
    #784910
    Anonymous
    Inactive

    thebigguy1992,

    I think the answer is D only.

    For A, the “effective” porting will be recognized in OCI, which rolls to AOCI, but not the “Ineffective.” It hits earnings.

    B & C are not correct.

    I think that is the answer.

    #784911
    Anonymous
    Inactive

    kanwal78, is this correct?

    On January 1, year 2, Near purchases 100% of the stock of Far in a transaction that was properly accounted for as a business combination. Items 1 through 3 below represent transactions between Near and Far during year 2. Prepare the eliminating entries in general journal format for each of these transactions.

    1. On January 3, year 2, Near sold equipment with an original cost of $30,000 and a carrying value of $15,000 to Far for
    $36,000. The equipment had a remaining life of three years and was depreciated using the straight-line method by both
    companies.

    Elim Entry:

    Dr. Gain 21
    Cr. Dep exp 4
    Cr. Equip 6
    Cr. Acc Dep. 11

    2. During year 2, Near sold merchandise to Far for $60,000, which included a profit of $20,000. At December 31, year 2, half of this merchandise remained in Far’s inventory.

    Elim Entry:

    Dr. Sales 60
    Cr. Inv 10
    Cr. COGS 50

    3. On December 31, year 2, Near paid $91,000 to purchase $100,000 of the outstanding bonds issued by Far. The bonds mature on December 31, year 6, and were originally issued at par ($100,000). The bonds pay interest annually on December 31 of each year, and the interest was paid to the prior investor immediately before Near’s purchase of the bonds.

    Elim Entry:

    Dr. Gain 9
    Cr. R/E 9

    My test is tomorrow, so all the butterfly bug is showing up. LoL.

    God, I hope to pass with 77.

    #784912
    jmc0434
    Participant

    @ThisIsTheYear –

    Thank you!

    The formula you are using is fine either way it'll get you the same answer. It might help to plug in and make up numbers.

    Beginning Inventory
    + Purchases
    = Subtotal
    – COGS
    = Ending Inventory

    So lets say we had a Beginning inventory of 1,000, purchases of 500, and ending inventory of 200. COGS is $1,300

    Beginning……………..1000
    + Purchases……………500
    = Subtotal…………….1500
    – COGS (squeeze)….(1300)
    = Ending Inventory…..200

    Now lets say Ending Inventory was overstated by 300.

    Beginning………………..1000
    + Purchases……………..500
    = Subtotal……………….1500
    – COGS (squeeze)……(1000)
    = Ending Inventory……..500 (=200+300)

    Now, we see COGS $1,000 which means it is understated by $300

    Hope this helps. This test is a beast!

    BEC - 79
    AUD - 89
    REG - 80
    FAR - 7/19/16

Viewing 15 replies - 46 through 60 (of 213 total)
  • You must be logged in to reply to this topic.