[jeff]

@h0wdyus

Incorrect

The answer is B. Comparable sales.

“The use of comparable sales is not an income approach to valuation of a business, it is a market approach. Under the comparable sales approach, the value of a business is determined by comparing it to other entities with comparable characteristics for which the value is more readily determinable.”

This was a tricky one

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[stoleway]

MOD…Your reasoning is right tho….this is the reason why I want to finish this exam and avoid these confusions..lol

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Mass-CPA

[GoVPI]

Which of the following principles is not included in the AICPA's Trust Services framework?

A Processing Integrity & Ethical Analysis

B On-line Privacy & Availability

C Processing Integrity & Confidentiality

D Security & Availability

BEC 8/14/14 - Passed
Graduated from college 12/13/14
AUD 8/31/15 - 74. Retake - Passed
REG
FAR

[stoleway]

@CPAin14

I would go with A- because I don't recall AICPA trust service listing ethical analysis as part of the framework. The rest looks good to me.

REG -63│ 84!!
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Mass-CPA

[GoVPI]

Correct!

Lenit Corporation recently acquired widgets from a company in the country of Becktle where the currency is the romtag. Each romtag is currently worth $.40 and Lenit must pay 100,000 romtags in 60 days (value of $40,000). The treasurer for Lenit believes that the value of the romtag is going to go up over the next 60 days so that a more valuable currency will have to be paid and money will be lost. What action is the treasurer most likely to take?

A Acquire a forward exchange contract that allows the company to buy 100,000 romtags in 60 days for exactly $.41

B Sell the widgets in the U. S. as quickly as possible even if they must be sold at a loss

C Enter into a contract to sell 100,000 romtags in 60 days for $.39

D Begin production of widgets in the U. S.

BEC 8/14/14 - Passed
Graduated from college 12/13/14
AUD 8/31/15 - 74. Retake - Passed
REG
FAR

[stoleway]

I will choose A because Lenit is on Payable end of this transaction and the underlying amount and currency is denominated in romtag, therefore it is wise for Lenit purchase a 60 day forward call option to hedge this transaction

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
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Mass-CPA

[GoVPI]

Correct again!

Examples of confidential data are:

A Transaction details, engineering details of products, and names of the board of directors

B Engineering details of products, legal documents and customer lists

C Business plans, banking information, and corporate financial statements

D Inventory or other account information, company's confidential details of operation, and the website address

BEC 8/14/14 - Passed
Graduated from college 12/13/14
AUD 8/31/15 - 74. Retake - Passed
REG
FAR

[stoleway]

B?

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AUD- 75!
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Mass-CPA

[stoleway]

You have been recently hired as the CEO for company A, and you're currently in the process of interviewing two suitable candidates for the Controller and CFO position, which of these executive is required to respectively perform the record-keeping function and the custody of financial records function?

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Mass-CPA

[Anonymous]

I would say controller.

[stoleway]

controller- record-keeping

CFO- handles the custody aspect

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Mass-CPA

[Anonymous]

Hi guys – new to the thread – testing for BEC at the end of August!

[stoleway]

Hi Arushi…welcome to the team:)

Question. A little bit tricky

The Bread Company is planning to purchase a new machine which it will depreciate on a straight-line basis over a 10-year period. A full year’s depreciation will be taken in the year of acquisition. The machine is expected to produce cash flow from operations, net of income taxes, of $3,000 in each of the 10 years.; The accounting (book value) rate of return is expected to be 10% on the initial increase in required investment. The cost of the new machine will be

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Mass-CPA

[M.O.D.]

My reasoning:

initial price (increase in investment) x .1 (accounting return) = 3000

initial price = 30,000

Assuming cash flow from operations includes the depreciation expense.

Otherwise, we need to know the tax rate to calculate net income.

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)

[stoleway]

MOD….its 15,000

The solution subtracted 10% of depreciation from the after tax net income which I think is stupid because depreciation is always factored into net income.

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Mass-CPA

[M.O.D.]

I agree that depreciation is usually in net income (according to GAAP).

But they say operating income (which might not include it)

In any case, it should be 10% of the machine they subtract not 10% of the income.

Price x 1. = 3000 – .1 x price (for depreciation)

thus:

.2 x price = 3000

price = 3000/.2 =15000

However this assumes taxes are not a factor. But to determine net income they are a factor. They say operating income is reduced by taxes. Well, net income (including depreciation) should be reduced by taxes as well. So we need to know the tax rate.

Let's say tax rate is 40%

Then operating income before taxes is:

3000/.6 = 5000

(5000- .1 x price) x .6 (net income) = price x .1

5000 = .267 x price

price = 18,727

Where did you get this problem from?

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)

[Author]

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