FAR Study Group Q1 2017
February 15, 2017 at 6:59 am #1478458
MscfisherParticipantFebruary 15, 2017 at 8:39 am #1478490
Looks like your the day after me mscfisher….. I am pouring everything I have into the next two and half weeks- I MUST MUST MUST pass this damn thing.
Okay just need to talk through a Pension Journal Entry- so when you recognize prior pension obligation you are technically lowering your OCI with a debit because it is an expense/ obligation to the company? Then when you recognize it each period you credit the OCI and debit pension expense?
Example: XYZ company decides to recognize prior service of 500 with an average employee service life of 10 years- so they would recognize 50 in expenses each year… so your JE's would be
DR OCI 500
CR PBO 500
then each period
DR pension expense 50
CR OCI 50
Is this right???? I don't know why this trips me up so bad! thanks!February 15, 2017 at 9:50 am #1478550
mckan this trips me up too but think of the E in DENT as the difference between the PBO and the FV of plan assets…im pretty sure that whatever is in OCI is the funded status of the plan,,,deferred gains/losses…with prior service costs when they implement the change to increase benefits retroactively to the hire date, instead of expensing it all they throw it into OCI and amortize it out based on average service life using Str8 line…where I get confused is: Is this the same account as where they through the additional liability into? and also where do the deferred gains and losses go when there is a difference between the actual return and expected return? would you need to show these separately in the OCI account in order to know how much to amortize yearly for each of them? like how would you know what to amortize for prior service costs yearly and how much for deferred G/L once the corridor approach kicks in?February 15, 2017 at 9:59 am #1478557
All of the liabilities are current liabilities because all will be paid within the next year.
Accounts payable $ 80,000
Bonds payable 300,000
Discount on bonds payable (15,000)
Deferred income tax liability 25,000
This is from a NINJA questionFebruary 15, 2017 at 10:12 am #1478565
hr…there was a discussion a couple weeks back regarding that questionFebruary 15, 2017 at 10:17 am #1478571
Looks like it still hasn't been fix yet. But yeah, DTL/DTA are now all noncurrent.February 15, 2017 at 10:54 am #1478590
ugh @Sticky Nicky – the corridor approach just royally effs me up! I think that you are correct though that the deferred g/l would be kept separate from the prior period as the deferred g/l is not recognized as expense correct?? it is simply used to smooth out any differences between the PBO and the Actual Value. So if you have a period where the market is cranking and the gains exceed the corridor they are deferred and then subsequently recognized during a time of loss so that the PBO remains relatively stable… At least that is my understanding of it… which could be completely wrong- ha 🙂
@hr to echo what everyone else is saying yes- all temporary tax differences (DTL / DTA) are now classified as non-current regardless of when they will revert.February 15, 2017 at 11:12 am #1478596
no if the gains exceed the corridor then amortization of the gain takes placeFebruary 15, 2017 at 11:14 am #1478598
all gains and losses are deferred until that deferred gain or loss reaches the greater of ending PBO or ending FV of PA,,,then the excess is amortized using ave service…amortization of the gain will reduce current years pension cost and vise versa for amortizing the loss…the original deferral of the gain will increase current pension cost and deferral of the loss will decrease it…but i wonder where those deferred gains or losses do to in the mean time…the same account as prior service costs or is it off balance sheet? idkFebruary 15, 2017 at 1:34 pm #1478677
Do any of you take notes as you study and copy your notes regularly?February 15, 2017 at 2:11 pm #1478704
nope…i only write out journal entries and formulas when doing mcqsFebruary 15, 2017 at 2:39 pm #1478713
tweaked out on FAR,,,bout to start foaming at the mouthFebruary 15, 2017 at 2:44 pm #1478718
I thought if a note was less than a year you didnt need to use PV?
On October 1 of the prior year, Fleur Retailers signed a 4-month, 16% note payable to finance the purchase of holiday merchandise. At that date, there was no direct method of pricing the merchandise, and the note’s market rate of interest was 11%. Fleur recorded the purchase at the note’s face amount. All of the merchandise was sold by December 1 of the prior year. Fleur’s prior-year financial statements reported interest payable and interest expense on the note for three months at 16%. All amounts due on the note were paid February 1 of the current year. As a result of Fleur’s accounting treatment of the note, interest, and merchandise, which of the following items was reported correctly?
Prior-year 12/31 retained earnings, yes; Prior-year 12/31 interest payable, yes
Prior-year 12/31 retained earnings, no; Prior-year 12/31 interest payable, no
Prior-year 12/31 retained earnings, yes; Prior-year 12/31 interest payable, no
Prior-year 12/31 retained earnings, no; Prior-year 12/31 interest payable, yes
The cost of the merchandise purchased (and sold by the end of the year) should have been based on the present value of the note used to pay for them, not the face amount. Since the note paid a higher rate of interest than what was required as a yield, the note would have a premium, a higher value than face.February 15, 2017 at 3:07 pm #1478728
GiniCParticipantFebruary 15, 2017 at 3:43 pm #1478742
question: if at 12/31 you have cumulative convertible preferred stock outstanding and have not declared a dividend,,,then on 1/1 all of them are converted,,,do you still owe them the dividends in arrears?February 15, 2017 at 3:47 pm #1478746
@Sticky Nicky are you asking about it for Diluted EPS or in general? I believe that would be something that would be in the conversion feature contract if the dividends in arrears must be paid upon conversion, or maybe they get a higher conversion value if there are a lot of dividends in arrears.
Also, on your other question. If it's a no interest Note Payable you don't need to calculate PV. The company paid a premium to borrow the money, though. It'd be like if they paid for a bond to buy inventory.February 15, 2017 at 4:11 pm #1478763
demarcon,,,thank you! also just in general with the conversion,,,dividend in arrears dont effect EPS bc EPS is for the current period onlyFebruary 15, 2017 at 4:19 pm #1478773
@Sticky Nicky I don't think there is any hard and fast rule about it. It's just in the agreement that is signed. I know for our company that before any stock transaction can take place the preferred shareholders have to get their dividend. There's nothing on the books for a dividend in arrears until it is declared, it's just a note in the financial statements.February 15, 2017 at 4:23 pm #1478779
that must mean your company has noncumulative preferred stocks outstandingFebruary 15, 2017 at 4:30 pm #1478785
@Sticky Nicky our preferred shares are cumulative and convertible. You don't accrue a liability for any dividends in arrears until a dividend is declared. It's always just a footnote disclosure. You could never declare a dividend, and you'd never owe it. So it can't be a liability.February 15, 2017 at 5:12 pm #1478809
ahhh i c nowFebruary 15, 2017 at 6:30 pm #1478842
Stupid day at work…take one day off and everything goes to hell. I need to just go ahead and put the rest of my PTO in because I'm going to fail (AGAIN!) if I keep going to that place…smh!February 15, 2017 at 6:58 pm #1478854
yeah well you could have broken a damn crown like I did from biting on a damn pen from thinking too damn hard on these effing MCQ's – and yes the ink did go everywhere- chalk up dental expense to my tally on the CPA exam not to mention more pain and suffering- needless to say this afternoon was a complete loss….February 15, 2017 at 7:28 pm #1478869
^^^^Well damn! You're right, it can always be worse!February 15, 2017 at 8:35 pm #1478907
hahah mtayloFebruary 15, 2017 at 8:44 pm #1478910
Lol. I think I'm starting to develop carpal tunnel from writing all these notes. Hopefully this is the last week I ever have to study for this exam and my wrist can get better…
I was thinking about this today.. If someone has a cast on their arm during the exam, do you think the prometric people do some heavy search to make sure it's for real and not a way to hide notes? Hahah not that I'm planning on it.February 15, 2017 at 9:51 pm #1478943
i hear they are starting to make candidates bend, lift, and cough nowFebruary 15, 2017 at 10:45 pm #1479000
Kauf Co. had the following amounts related to the sale of consignment inventory:
Cost of merchandise shipped to consignee $72,000
Sales value for 2/3rds of inventory sold by consignee 80,000
Freight cost for merchandise shipped 7,500
Advertising paid for by consignee, to be reimbursed 4,500
10% commission due the consignee for the sale 8,000
What amount should Kauf report as net profit(loss) from this transaction for the year?
C. $14,500 CORRECT
Explanation: The sale was for $80,000, but a 10% commission of $8,000 was paid, so the net revenue was $72,000. The cost of the goods sold was 2/3rds of cost and freight of $72,000 and $7,500 (2/3rds of $79,500, or $53,000). The gross profit would be $72,000 less $53,000, or $19,000. The net profit is gross profit less the advertising of $4,500, thus $14,500.
My issue here is that I have no clue how you are supposed to know that the freight is part of CoGS an not a selling expense. I was under the impression that Freight-in is CoGS and Freight-out was a selling expense. But the question does not tell you if this was freight cost being shipped to consignee or not. Unless shipping paid to ship to the consignee is also considered CoGS… I am so lost here.February 15, 2017 at 10:59 pm #1479003
the first sentence tells u its all related to consignment inventory..all costs to get it to sales destination is cogsFebruary 15, 2017 at 11:00 pm #1479007
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