FAR Study Group Q1 2017
December 19, 2016 at 6:26 pm #1396517
jeff @ another71.comKeymaster
Welcome to the Q1 2017 CPA Exam Study Group for FAR. 🙂December 19, 2016 at 10:45 pm #1396734
Wow Aren't I early for this Q.. haha. anyways does anyone have any good study tips with bonds? I watched the Demo video on ninja plus and Bob broke the topic down into an understandable way but then when I do becker's questions I dont even know where to begin… I dont got much time left and with 5 chaps to go Im frustrated… luckily govt and nfp won't take that long with the extended weekend/ holiday.
I appreciate the help if anyone can give me some tips to make this topic “click.”
Here's an example: On January 2, Year 1, West Co. issued 9% bonds in the amount of $500,000, which mature on January 2, Year 11. The bonds were issued for $469,500 to yield 10%. Interest is payable annually on December 31. West uses the effective interest method of amortizing bond discount. In its June 30, Year 1 balance sheet, what amount should West report as bonds payable?
based on process of elimination I know A and D cannot be the answer. But I just dont know how to approach. Thanks guys!December 19, 2016 at 11:35 pm #1396761
Spartans92- I also struggled with bonds and pretty much every other chapter. For bonds I kept re-watching the Becker lectures on my commute and writing out the section seems to really be helping me out. I went from scoring 30-40% on mcqs to 70-75%. For bonds make sure you fully understand discounts/ premium and start from there.
The first thing I noticed is that it was issued at a discount and we are using the effective interest method. Since your interest rate (9%) is lower than the market(10%) you have to sell it for cheaper because an investor buying the bonds will want the higher market rate. Notice west co is only receiving $469,500.
with a discount we add back the unamortized discounts to arrive at the face of the bond.
Calculate the interest:
Step 1: 469,500(bond issue price) x 10%(market rate) = 46,950
Step 2: 500,000 x 9%(stated rate) = 45,000
46,950-45,000 = 1,950. Take half since it's the June 30th B/S date. We are left with $975. Since it's a discount we add the $975 back to the 469,500 to arrive at the face.
(c) 470,475December 20, 2016 at 12:50 am #1396793
Mi amor joining the wagon!
I'm a repeater. I hate to join this thread (but I got no choice!) because I already passed FAR in 2014, bummer!
I must admit, when I began my repeat study in AUD in September, I kept looking back and feeling so bitter to ever repeat a section that I already passed. I scored a 75 in 2013 and I was scared that I would not have much luck this time and might fail miserably. But when I passed AUD again with a comfortable margin, I told myself, it wasn't that too bad to repeat an expired pass.
Anyway guys, let's all do it together in this forum. We will conquer this beast!
@Spartan, check this bond thread I created almost 3 years ago. Hope this helps. I am also going to get some refresher of this info because I totally forgot FAR after struggling so bad with REG and BEC alternately.December 20, 2016 at 6:47 am #1396829
Ah its like homecoming in here 🙁 good to see you Spartan, A1 and AmorD…. good luck to all of us!December 20, 2016 at 7:22 am #1396835
I feel like I'm in a Q1 Summer school 😎December 20, 2016 at 9:06 am #1396886
mtaylo24 – how will you tackle FAR and BEC? Do you think we can get it done in Q1?December 20, 2016 at 9:23 am #1396899
I take FAR January 9th. Started Studying November 10th and made it through the Becker material this weekend. I have never taken FAR before so I’m not sure if my study plan will work. But I plan to do 20 Non-Profit/Governmental MCQ’s each day because I had such a hard time learning it and don’t want to forget. Then will build on that and start reviewing other material (Starting right away with leases/bonds) and will re-review material for half of my study time each day and start review on a new topic the next. If anyone else is using Becker/NINJA MCQ’s and wants to swap study tips I’d love to hear what others are doing.December 20, 2016 at 10:04 am #1396943
@a1lessio, I really hope I can get them both done this window. I'm just glad that I'm only focusing on 2 this window, as I did 3 in both Q3 and Q4. I am still brainstorming on the timing, but as far as the strategy, I will primarily work with Gleim, then maybe switch to Ninja as time permits.
Weeks 1 – 3(or 4 or 5): Using Gleim, Read a study unit in its entirety, watch audiovisual lecture in its entirety , work all of the chapter MCQs start to finish. Re-work all questions for that chapter until I score at least 80%, then move on to the next chapter. Gleim has 20 subunits (but I'm attacking them based on where I think I need improvement, so I did Ch 18 (Gov't), Ch 15 (Business Combos), Ch 10 (Pensions/Benefits), and today I am working on Ch 9 (Intangibles/Franchise/Software/Prepayments). Sundays will be a refresher, a cumulative study day. This past Saturday, I dropped all of the JEs from the audiovisual lectures into a spreadsheet and converted to pdf. I plan to review these JEs often throughout the week.
Final 3 weeks (final review): Ninja MCQ, Gleim sims, re-reading of the text.
I am still working on the timing and squeezing BEC in, but I think I want to do FAR first since I'm really not connecting with this one.December 20, 2016 at 10:24 am #1396956
Another way to approach this bond problem is to do the necessary journal entry. For me I always start from interest payable or in this case ‘accrued interest payable:
Accrued interest payable 6/12 x .09 x 500,000 = 22,500 (this represents the actual cash that will be paid)
Interest expense 6/12 x 469,500 (carrying amount) x .1 = 23,475
Discount amortization (to the balance sheet) is the difference between these two numbers – 975
Last step is to credit the bond carrying amount 469,500 by the 975 equaling 470,475
Also, need to remember:
Yield > Stated rate = Discount
Yield < Stated rate = PremiumDecember 20, 2016 at 10:30 am #1396971
On topic: just did simulation 17 (Bonds) and scored horribly. The problem involved an investor buying a bond rather than a debtor issuing one.
Lesson learned (according to Ninja): if you are investing in bonds then there is not a separate bond premium or discount account, it is included in the bond investment account.December 20, 2016 at 3:37 pm #1397316
So it has been a while since I last took FAR. Are the computations that long like Becker. I just did 1 question related to pension calculating the periodic pension cost and it took me 10 mins. Heres the question.. I got it right but its very time consuming.
Big Books, Inc. has the following information related to its defined benefit pension plan:
December 31, Year 6:
Projected benefit obligation
Fair value of plan assets
Unrecognized prior service cost
Unrecognized net transition asset
December 31, Year 7:
Projected benefit obligation
Fair value of plan assets
Expected return on plan assets
Big Books makes an annual pension plan contribution of $200,000. The company's employees had an average remaining service life of 20 years on 12/31/Year 6. The company paid benefits of $70,000 in Year 7 and expects to pay benefits totaling $170,000 to retired employees in Year 8. Big Books has an effective tax rate of 30%. The actual return on plan assets was 10%. What would Big Books report as U.S. GAAP net periodic pension cost on its December 31, Year 7, income statement?December 20, 2016 at 3:53 pm #1397339
Heyyyy. I swear – restudying seems so much harder than the first time. I am having trouble focusing on the work. I have time- I am lacking the will to get it done. Do I need a new test bank? The highest I have gotten on NINJA trending before an exam is 74. Should I stick with it or switch? Thoughts?December 20, 2016 at 4:07 pm #1397354
when are you sitting Stilgoin? I ended up getting a new test bank- if for no other reason then I at least feel like I am not spinning my wheels with the same old stuff- call it a mental adjustment if you will. My advice would be if you think you have time to get the benefit of a new testbank do it- but if you are sitting early January then I would stick with the same old same old so you don't “muddle the brain” if you will 🙂 GOOD LUCK!December 20, 2016 at 4:12 pm #1397366
@stilgoin I vote to get a new TB. FOR FAR and BEC Ninja is a good final review tool, but isn't the best to learn on imho. I do however feel that the Ninja questions are completely necessary. Wiley is 150 and Gleim is 250, I think that you may be able to demo them before you buy. I'm personally going to save Ninja for my final review after I am feeling decent w/ Gleim.December 20, 2016 at 4:16 pm #1397367
Jan 18- could push to Jan 30. I lose REG 31st 🙁 I think I am sticking with NINJA- I have never done MCQs to the extent of memorizing them; I always used other methods along with MCQs. I’m up from 59 to 74. I am still insecure, but I just need this one last push! Thanks- good luck to you too.December 20, 2016 at 4:28 pm #1397375December 20, 2016 at 6:15 pm #1397492
I totally agree @stilgoin, this time it so much harder to study! The stuff I learned quick last round is taking me forever, for instance, bond. But things that I totally didnt understand like DTA/DTL is so much easier this time. Guess Reg paid off 🙂
Best of luck to you all.. Mckan and mtaylo!December 21, 2016 at 5:18 am #1397802
Thanks Spartans! Hang in there yourself- and your not alone last re-sit I found it “odd” that I completely struggled with topics that I found easy the first go round and had zero problems with a lot of the ones that I had a hard time with first time.December 21, 2016 at 9:47 am #1397889
I will be taking FAR February 6th. It will be the second time I have taken it. I scored a 74 a month ago. I will also be taking REG on March 10th to hopefully finish these exams before the new test comes along. Good luck studying everyone!December 21, 2016 at 12:16 pm #1397982
Question 29. On January 1, Year 1, Boston Group issued $100,000 par value, 5% 5-year bonds when the market rate of interest was 8%. Interest is payable annually on December 31. The following present value information is available:
Present value of $1 (n = 5) 0.78353
Present value of an ordinary annuity (n = 5) 4.32948
Present value of $1 (n = 5) 0.68058
Present value of an ordinary annuity (n = 5) 3.99271
What amount is the value of net bonds payable at the end of Year 1?
D. $110,638December 21, 2016 at 7:50 pm #1398300
The answer is B. In the spirit of full disclosure, I have done this before. Is this Gleim?
100,000 x .68058 = 68,058
100,000 x .05 = 5,000
5,000 x 3.99271 = 19,964
68,058 + 19,964 = 88,022
For end of year, add back amortization.
88,022 x .08 = 7,042
88,022 + 2,042 = 90,064
Dr Cash 88,022
Dr Discount on B/P 11,978
Cr Bonds Payable 100,000
Dr Interest Expense 7,042
Cr Amortization of Discount 2,042
Cr Interest Payable/Cash 5,000December 21, 2016 at 8:16 pm #1398327
^^^Correct! And it is Gleim 😎 I like your answer explanation better btw!December 21, 2016 at 8:27 pm #1398342
I’m trying to do those JEs. 🙄 lolDecember 22, 2016 at 9:05 am #1398534
Hi everyone! FAR is my last section, and the sheer amount of material is daunting! I've done well with Becker so far so I'm sticking with it. I do add to it by digging through my textbooks and looking things up online when the review materials gloss over details. I'm giving myself plenty of time to get through the material – I have to wait for a new NTS after my current one expires 12/30, but I'm thinking of testing in early March.
Here's hoping for good scores this round!
GiniDecember 22, 2016 at 11:32 am #1398645
I get stilgoin's explanation. But the wording of the question would have thrown me off during an actual exam. In the JEs, I see the credit of $100,000 to account “Bonds payable,” but I see no debit later on that would create a “net” “Bonds payable”. So – this means I shouldn't think of this as a question about ledger accounts. OK, but I would spin my wheels on this or just immediately pick C. But in the real world, suppose my boss said, hey, if we paid that off now, how much should it be, I'd get it. Just frustrated trying to figure out what the question is. This could be the difference between another 74 and a 75.December 22, 2016 at 5:50 pm #1398974
Need some opinions on how I'm progressing. I Read a chapter of the text first and then hit the mcq for that chapter, which takes me plenty of sessions. I try to do the chapter in order first, then I hit 20 question sessions until I hit 80%. It took me until 1 am to do this yesterday for the bonds chapters yikes! Does this sound like a solid starting gameplan? Also, at what point do I stop and go back for older chapters? In at 1467 questions w/ 50% average. So far I've done since last Thursday's score release:
Friday – Govt Accounting
Sat – Skip to write out JEs for entire text
Sunday – Business Combos
Monday – Pensions
Tuesday – Intangibles/Software/Franchises/R&D
Wednesday – Bonds/PV/Notes Payable
Today – NFPDecember 22, 2016 at 6:42 pm #1398984
Darn – they caught me two different ways on this one. First I missed “net” – so my first response was C – you always record the Bond Payable at face value. Then I latched on to “par” – if bonds are issued at par, there is no premium or discount – so nothing to amortize. Took me a while to recognize that they didn't mean “issued at par” by writing “$100,000 par value”. My textbook didn't use this phrasing…
Grrrr… I know the concepts, they always catch me with wording!!!December 22, 2016 at 6:53 pm #1398989
@mtaylo24- Sounds like a really ambitious schedule – I couldn't cover that much so fast, it would all blur!
My learning style forces me to write things down to learn them thoroughly, so I follow parts of Jeff's plan – write out notes (I use cards I can carry around to quiz myself at work and while running errands). I also have to stop videos and dig into topics that were summarized. It takes longer to review, but I can usually get at least 70% of the MCQs correct on the first try.December 22, 2016 at 7:28 pm #1398999
“net bonds payable” equals “carrying amount”? Is this what we're saying?
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