CPA Study Group
Team up with fellow candidates and conquer your exams.
what's the difference between answers 2 and 4? On November 30, Year One, a company borrows $1 million from a bank on a seven-month note paying an annual stated interest rate of 6 percent (the prime interest rate on that date). When the note comes due on June 30, Year Two, the company pays the bank the interest and refinances the $1 million with a new seven-month note at the current prime rate. The company and the bank continue to follow this pattern for years: The interest is paid every seven months and a new note is signed for $1 million to refinance the principal. On December 31, Year Five, the latest interest payment and note signing take place. Once again, this note is for seven months. The company will issue its Year Five financial statements on March 4, Year Six. Which of the following is true concerning the reporting of this liability at the end of Year Five? 1 The note should be reported as a current liability in all cases because it is due in seven months. 2 If the company and the bank sign a non-cancelable agreement on March 1, Year Six that states that the note will continue to be refinanced through the end of Year Six, the company must report the note as a long-term liability. 3 The note should be reported as a long-term liability in all cases because there is sufficient evidence that the note will not be paid with cash or any other current asset. 4 If the company and the bank sign a non-cancelable agreement on February 26, Year Six that states that the note will continue to be refinanced through the end of Year Six, the company may report the note as a long-term liability
I just passed FAR on my first try with a score of 82. I used the Wiley study guide which I think did a good job in summarizing and explaining each topic. I also worked all of the included MC questions but they did not seem challenging enough so I followed the advise of one of my accounting professors and signed up for CPA Review for Free and I'm so happy I did. I do not think I would have passed without this resource. The questions here are not only more difficult but also the explanations were more thorough and easy to understand. I worked all of the FAR questions at least once and kept going back over the ones I missed. I spent 3 months preparing and the last month almost exclusively working the questions on CPA Review for Free and working simulations. After using the free version for a couple of weeks I signed up for the premium version and will continue to use it to prepare for the next 3 exams. P.S. I also recommend reviewing the study tips, I found them very helpful. Especially the one recommending to work questions randomly and not by topic. Thank you for providing this great free resource.
Since we are realizing the gain right now, shouldn't we account for the present value of the interest just as we did for the face value of the principal?
In the equity method dividends are removed from the net income in calculating the equity portion of the investment. In this example, Net Income was 90K and Dividends are 30K that equals 60K. But, the answer is based off 90K. Am I missing something in the question? 60K times 30% = 18,000 - 8,000 intangable amortization of database. 10,000K not 19K. Anyone care to explain?