[Iggy1985]

Having loads of trouble with investments! I thought both trading and available for sale securities were reported at their fair values whether or not the fair value option is elected. However, according to this Wiley MCQ they aren’t? I get that only the unrealized gain on the trading securities is reported on the I/S and the unrealized gain on AFS is reported in OCI, but shouldn’t the security still be reported at FV?

Clarion had the following investments in its portfolio that were purchased during year 2.

Investment Classification Cost Fair Value 12-31-Y2

Common stock of Company X Trading $100,000 $121,000

Bond of Company Y Available-for-sale $ 96,000 $101,000

Bond of Company Z Held-to-maturity $ 64,000 $ 63,000

On December 31, year 2, the amortized cost of Bond Y was $97,000, and the amortized cost of Bond Z was $63,500. Clarion does not elect the fair value option for reporting financial assets. What amount should Clarion record as an unrealized gain in its year 2 income statement?

$26,000

This answer is incorrect. If Clarion does not elect the fair value option for valuing its financial assets, the rules of ASC Topic 320 apply. Therefore, only the trading security is reported at fair value, and the unrealized gain of $21,000 on Stock X is reported in earnings of the period. The bond investments in Company Y and Company Z would be reported at amortized cost.

FAR - 89 (8/19/14) Wiley TB, Wiley Book, Books from School, Ninja Audio/Notes
AUD - 92 (10/14/14) Wiley TB, Wiley Book, Ninja Audio
BEC - 82 (5/8/15) Mostly Ninja MCQ, sprinkles of Becker lectures and Ninja Audio
REG - (8/14/15)

[M.O.D.]

What is the right answer? 21000?

Trading securities gain should be on I/S but the bond gain in OCI

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Iggy1985]

yes, I understand why the answer is 21,000 but the explanation says only trading are reported at FV when it should be trading AND AFS, no? “Therefore, only the trading security is reported at fair value”

FAR - 89 (8/19/14) Wiley TB, Wiley Book, Books from School, Ninja Audio/Notes
AUD - 92 (10/14/14) Wiley TB, Wiley Book, Ninja Audio
BEC - 82 (5/8/15) Mostly Ninja MCQ, sprinkles of Becker lectures and Ninja Audio
REG - (8/14/15)

[M.O.D.]

Gleim's explanation for the incorrect answer is wrong.

Both trading and AFS securities are reported on the balance sheet at fair value.

HTM are reported at amortized cost. The Gleim answer writer must have thought the AFS bond was an HTM bond like the third holding.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Iggy1985]

That's what I thought! Thanks 😀 Just making sure I wasn't going crazy lol, I wonder how many wrong explanations there are that I DON'T notice >_>

FAR - 89 (8/19/14) Wiley TB, Wiley Book, Books from School, Ninja Audio/Notes
AUD - 92 (10/14/14) Wiley TB, Wiley Book, Ninja Audio
BEC - 82 (5/8/15) Mostly Ninja MCQ, sprinkles of Becker lectures and Ninja Audio
REG - (8/14/15)

[M.O.D.]

Send Gleim an email pointing out their error. (Submit inquiry/feedback), and see what they say.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Iggy1985]

I think I've emailed them 3 times now haha (Wiley) – I just found another thing I think is wrong;

100,000 shares of Stock C. Stock C was acquired on March 1, year 2, for $15 per share, which is 30% of the outstanding stock of C Corporation. On December 31, year 2, the market price of the stock was $16.25 per share. C Corp. had income of $560,000 during year 2 and paid dividends of $80,000 on December 30, year 2.

Equity in income per my calculations is 560,000×30% = 168,000x 10/12 months = 140,000 but they say 168,000 and their explanation even has a typo XD

“Victor's share of net income of Company C: 30% × 560,000+ $168,000”

it told me the 140,000 was wrong and every credit or debit I didnt use was marked wrong cause I didnt put 0 haha man I hate simulations

FAR - 89 (8/19/14) Wiley TB, Wiley Book, Books from School, Ninja Audio/Notes
AUD - 92 (10/14/14) Wiley TB, Wiley Book, Ninja Audio
BEC - 82 (5/8/15) Mostly Ninja MCQ, sprinkles of Becker lectures and Ninja Audio
REG - (8/14/15)

[M.O.D.]

I get that equity is increased by 140 (for equity investee income) and decreased by 80 (for dividends received).

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Iggy1985]

same here. Wiley is stressing me out!

FAR - 89 (8/19/14) Wiley TB, Wiley Book, Books from School, Ninja Audio/Notes
AUD - 92 (10/14/14) Wiley TB, Wiley Book, Ninja Audio
BEC - 82 (5/8/15) Mostly Ninja MCQ, sprinkles of Becker lectures and Ninja Audio
REG - (8/14/15)

[CPA50]

So frustrating! I found wrong answers in two of my other test banks. ARGH!

AUD - 80
BEC - 77
FAR - 80
REG - 80

3 years

+ 16 tests

+ 2 expired sections

= DONE FOREVER!

AUD 88 (expired), 80 retake
FAR 64,69,67,73,67,73,73,73, August 3
REG 75 (expired) September 7
BEC 72, 77

The adventure continues...

[M.O.D.]

Just curious:

How does Wiley compare with Gleim?

I am using Gleim and am overwhelmed with their FAR test bank. And from what people post here, the test banks are very similar because they use the same AICPA released questions.

Why do you need more?

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[SkilletCPA]

@Iggy, regarding your last problem, I actually came across it last night. I agree with you the test bank has an error and fails to take into consideration the partial year ownership. Glad to know that I'm not the only one that caught that. Good luck the rest of the way!

BEC Pass
AUD Pass
REG Pass
FAR Pass

[Author]

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