[jeff]

Welcome to the Q3 2017 CPA Exam Study Group for BEC. 🙂

Introduce yourselves and let your fellow NINJAs know when you plan to take your BEC exam.

The Five Steps (NINJA Framework): https://www.another71.com/pass-the-cpa-exam/

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

[Anonymous]

@BBHYX I just got to this topic in Gleim under Special Orders in the Absence of Excess Capacity. It's a subunit of Decision Costing (Costing Fundamentals). This question is asked in a different context but the approach is the same.

Answer (d) The requirement is to calculate the benefit or loss from changing credit policy. The benefit is equal to the contribution margin received from the additional sales minus the opportunity cost of having incremental funds tied up in accounts receivable. The benefit from an increase in sales is equal to $144,000 ($720,000 sales × 20% contribution margin).

The interest opportunity cost is equal to 75 days' interest on the variable portion of sales, or
($720,000 × 80%)/360 × 75 × 20% interest = $24,000.

Therefore, the net benefit is equal to $120,000 ($144,000 – $24,000).

[Anonymous]

@BBHYX sorry the answer is (c) for the problem you posted 🙂

[BBHYX]

Hey guys, just wanted to clear something up — variance analysis for costs (materials, labor, overhead) are all based on actual PRODUCTION output, right? not SALES quantities?

Actually, my real question is I am not sure how the different variances we do (efficiency, price, quantity, etc) relate to a flex budget/master budget/actual. Is there any connections?

[kimphan]

Hello,

I have a question regarding to bond.

A bond with face value of $10,000 maturing in 2 yrs pays annual interest of 6 percent. The market interest rate at the time of issuance is 5 percent. The bond price at the time of issuance is:

Yr 1 payment: 600/1.05=$571.43

Yr 2 payment: (600+10,000)/(1.05)^2=9,614.51

Total value = 571.43 + 9,614.51=10,185.94

Is there formula for bonds? What section in Becker discuss about this? Why are we dividing the market interest rate? I can't understand/make sense the calculation above. 2 years and the payout is only $185.94? Please advise.

Kim

[kimphan]

Hello,

I also have another question regarding to IRR.

Heartland has a 7% hurdle rate and a net capital investment of $250,000. After-tax cashflow are uneven and will materialize in the first year immediately upon making the investment and then only at the end of year two a d year three. The after tax cash flows at the end of year two a d three are $108,900 and $98,900 respectively. Present value factors are as follows:

Present value of $1: year 1: 0.9356. Year 2: 0.8734 year 3: 0.8163

Present value of an annuity:

Year 1: 0.9346 yr 2: 1.8080. Yr 3: 2.6243

What is the necessary after-tax cash flow in Year 1 to achieve a 7% IRR?

The answer is $74,155.

Please help me with this question as well. Your help is greatly appreciated.

Kim

[Anonymous]

@kimphan Use the PV of $1 for year 2 and 3 since cash flows for year 1 are unknown and the payments are not annuities (the same amount each year).

Year 2 $108,900 x .8734 = $95,113.26
Year 3 $98,900 x .8163 = $80,732.07

Cash flow for Year 2 & 3 = $175,845.33 – $250,000 initial investment = -$74,154.67

This is how much we will need in Year 1 for net investment to equal net cash flows (using a discount rate/IRR of 7%).

[Anonymous]

@kimpahn I can't make sense out of your bond premium solution either. I thought the face amount and interest payments needed to be calculated separately. Either way, the topic you should search is Bonnd Valuation (how the issuer will record the cash and bond payable on his/her books and subsequent treatment of the interest payments). Treatments differ based on whether they are issued at par (stated rate = market rate), at a Premium (state rate > market rate), or at a Discount (stated rate < market rate).

[Scared-cpa]

Just wanted to come on here and rant for a moment!

I really, really dislike when people I know ask if I am “finally” done with these exams yet. These comments and questions come from people who aren't CPAs or even in the accounting profession so I don't expect them to understand how hard these exams are or why it takes so long. But when they ask if I have ‘finally' passed instead of just asking if I've passed bothers me. It makes me feel like they think I am taking too long because I'm wimping out or being overdramatic. But my boyfriend says he doesn't think they mean that…they're just asking. He says I think everyone is against me, which I do feel to a certain degree. I've felt that way from a young age with most of my family so maybe that's just pouring over into this? I appreciate nice comments, like when family members text my mom and ask if I know my scores yet and say they know I will pass in time, and that they have the utmost faith in me. But it just puts extra pressure on me when they ask if I am finally done yet.

Cry baby moment over.

On a positive note, I feel like I am doing pretty good in final review and my exam isn't until the 8th. I'm still not doing great with formulas but I am working on it. I'm making flash cards to hopefully memorize key formulas and I am going to study WC formats. How is everyone else doing? 🙂

[BBHYX]

@Summer I understand your frustrations. I've been studying full time all summer since graduation, and a friend checks in on me on facebook messenger every few weeks to ask what I'm up to. When my answer is always “studying for the CPA” she's just like “still?” which really annoys me. I'm sure she doesn't mean any harm by it and doesn't even realize her comment is kind of offensive to me. I am already moving at a fast pace by studying full time (4 exams in about 4 months) and feel stressed enough as it is. People not taking these exams really just don't understand, so I avoid talking about it to them as much as possible.

Do you mind sharing how you are going about your review? I am almost through the material, and thinking about review has me freaking out a bit because there are so many random topics in BEC and I have no idea how I am going to remember it all. Are you going chapter by chapter? Rereading? Reworking MCQ?

[Scared-cpa]

@BBHYX I agree, your friend probably means nothing by it but it can be annoying. I had a friend message me on LinkedIn asking how I was doing. We hadn't talked in several months so he made the comment that I've probably dominated this certification by now. I felt so tiny being like, nope, still working on it lol. I'm sure he didn't mean anything by it. I mean, if I pass both of these exams next month (hope to God) then that will be 9 months start to finish from passing my first to the last exam. That's only half the 18 months which is pretty good to me given I was studying through grad school. But to most people, that's a super long time to be studying!

For final review I am doing what I do on all exams I have passed thus far: Ninja MCQs until I trend 85. Normally by the time my exam date rolls around and I am trending 85, I'm about 200 questions shy of hitting the review phase. I've yet to actually hit the review phase for any section I've studied for. However, on the two exams I've passed, I've been averaging 70 and trending 85 when I sat and passed so I am using this as my “golden rule.” It's what I did for REG, as well, so I'm hoping it works. I'm just scared it will be the outlier since I have yet to take and pass a section on my first attempt (I didn't use Ninja on either first attempt). Right now I have around 300 or so questions unseen (I think) and trending 82. Once I have seen all the questions once and start reworking the questions I missed last time, trending goes up real fast. This is the highest my percentage has been before I start redoing questions so I am hoping that's a good sign. I couldn't imagine doing all of these exams in such a short period of time. The fatigue would kill me! The hardest part, I'd imagine, is not really knowing if your study plan is effective since you are moving on to the next section before you get a score for the section you sat for. However, it seems like you know what you're doing since you passed your first exam already. I'd say consider that review as “golden” and repeat the same process for the other three sections.

[kimphan]

@JustEss, I really appreciate your help. You've made the IRR problem so easy to follows and understand. Good luck on your test. Mine will be on 9/7 and I am in a panic mode now!!!

Kim

[kimphan]

Hello,

Which of the following is an example of expansionary fiscal policy:

A. A decrease in the required reserved ratio.

B. An increase in discount rate

C. A decrease in government spending

D. A decrease in taxes

The answer is D which I agree. I am not sure why A is wrong though. Lowering the required reserve ratio would increase money supply which belong to expansionary fical policy right?

Kim

[Grasshopper]

Changing the reserve is expansionary monetary policy not fiscal policy.

[kimphan]

Thanks Grasshopper. I got all these terminology mixed up.

Kim

[kimphan]

I have another question that I hope you will explain it better than Becker.

BC Corp budgeted production at 6000 units and charged $42,000 to its factory overhead account. BC applies variable OH at $3 per direct labor hour and assumes that each unit takes one direct labor hour to produce. The company applied $40,000 of its OH to work-in-process based on 5000 hrs. If the company actually required 5,500 hrs to produce 5,000 units, what was the total OH variance and to what extent did volume variances contribute to or offset that variance

Answer: Total OH var ($2000) volume var ($5,000)

I really appreciate your help.

Kim

[Author]

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