[jeff]

BEC Resources:

Free BEC Notes & Audio – https://www.another71.com/cpa-exam-study-plan

BEC 10 Point Combo: https://www.another71.com/products-page/ten-point-combo

BEC Score Release: https://www.another71.com/cpa-exam-scores-results-release

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

[thehip41]

Luvthebeach,

I had the same issues with that section.

when I read a question like that, I break it down like this, and this is the question I ask myself:

At the end of the time period given in the question, what is my company doing?

In your example, my company is going to PAY a British company 500,000 pounds on that day.

What does that mean for hedging?

Well on that day, I physically have to have a bag full of 500,000 pounds and I need to give it to some other company.

What kind of hedge puts 500,000 pounds in my hands in 3 months?

That means I need to BUY 500,000 pounds. That's a call. I'm going to purchase the 500,000 pounds today to lock in a good exchange rate. Then I receive the pounds, then I give it to the British company.

Same thing with the example above me.

A foreign company, lets say they are British, owes me 300,000 pounds 2 months from now. We expect the value to fall.

what does this mean for hedging? What is actually going to happen 2 months from now?

Well this British company is going to give ME a bag of money in pounds.

That means I want to SELL 200,000 worth of pounds in the hedging market, ie, PUT option.

Conceptually, it has helped me immensely to try to figure out what I'm doing when the time elapses to figure out if this is a PUT or CALL

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[thehip41]

Luvthebeach,

I had the same issues with that section.

when I read a question like that, I break it down like this, and this is the question I ask myself:

At the end of the time period given in the question, what is my company doing?

In your example, my company is going to PAY a British company 500,000 pounds on that day.

What does that mean for hedging?

Well on that day, I physically have to have a bag full of 500,000 pounds and I need to give it to some other company.

What kind of hedge puts 500,000 pounds in my hands in 3 months?

That means I need to BUY 500,000 pounds. That's a call. I'm going to purchase the 500,000 pounds today to lock in a good exchange rate. Then I receive the pounds, then I give it to the British company.

Same thing with the example above me.

A foreign company, lets say they are British, owes me 300,000 pounds 2 months from now. We expect the value to fall.

what does this mean for hedging? What is actually going to happen 2 months from now?

Well this British company is going to give ME a bag of money in pounds.

That means I want to SELL 200,000 worth of pounds in the hedging market, ie, PUT option.

Conceptually, it has helped me immensely to try to figure out what I'm doing when the time elapses to figure out if this is a PUT or CALL

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[zxiao]

Questions for people who are taking BEC in a few days.

Are you doing more multiple questions or reviewing materials more?

Thanks!

I Can Do This!!!!!

BEC: 89
AUD: 99
REG: 93
FAR: 8/2/2014

[zxiao]

Questions for people who are taking BEC in a few days.

Are you doing more multiple questions or reviewing materials more?

Thanks!

I Can Do This!!!!!

BEC: 89
AUD: 99
REG: 93
FAR: 8/2/2014

[Anonymous]

Jasper International considers cash receipting and cash disbursement processes as part of their risk assessment. The consideration of processes relates to the:

a. Assessment Risk

b. Fraud Risk

c. Financial Reporting Risk

d. Financial Reporting Objectives.

Answer is c., but I thought it would be b. Becker's explanation is that “the determination of what might interrupt a company's ability to present their financial statements in accordance with GAAP is financial reporting risk.” I thought it would be Fraud Risk because cash receipts and disbursement processes can cause theft if they are not adequate. Does anyone have any way of explaining this to me better on why c. is a better option than b.?

[Anonymous]

Jasper International considers cash receipting and cash disbursement processes as part of their risk assessment. The consideration of processes relates to the:

a. Assessment Risk

b. Fraud Risk

c. Financial Reporting Risk

d. Financial Reporting Objectives.

Answer is c., but I thought it would be b. Becker's explanation is that “the determination of what might interrupt a company's ability to present their financial statements in accordance with GAAP is financial reporting risk.” I thought it would be Fraud Risk because cash receipts and disbursement processes can cause theft if they are not adequate. Does anyone have any way of explaining this to me better on why c. is a better option than b.?

[thehip41]

Bird:

I feel like this if was an AUD question, B would be right. It would be an internal control question.

However, since its not, the question is asking a higher level question.

It's not asking “what” could go wrong with CD and CR, it's asking “if” something goes wrong with those, what's the risk?

Risk is the Financials are wrong.

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[thehip41]

Bird:

I feel like this if was an AUD question, B would be right. It would be an internal control question.

However, since its not, the question is asking a higher level question.

It's not asking “what” could go wrong with CD and CR, it's asking “if” something goes wrong with those, what's the risk?

Risk is the Financials are wrong.

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[Anonymous]

@thehip41

I had a feeling that what I studied for Audit might interfere with my understanding in this question… I think I see what you are saying though, and that c. is right for the BEC section. I will look at problems from the “higher level” that you are talking about instead of the audit level. Thanks for the insight!

[Anonymous]

@thehip41

I had a feeling that what I studied for Audit might interfere with my understanding in this question… I think I see what you are saying though, and that c. is right for the BEC section. I will look at problems from the “higher level” that you are talking about instead of the audit level. Thanks for the insight!

[KiwiCPA]

Bird

I think that the question makes the assumption that internal control is ok and that the transactions are either recorded incorrectly or not recorded at all (human error).

I'd agree with thehip41's answer.

Reg 82; FAR 75; AUD 91; BEC 11/9/13; result due - 11/22/13

[KiwiCPA]

Bird

I think that the question makes the assumption that internal control is ok and that the transactions are either recorded incorrectly or not recorded at all (human error).

I'd agree with thehip41's answer.

Reg 82; FAR 75; AUD 91; BEC 11/9/13; result due - 11/22/13

[Qlad]

Hi guys,

cud someone pls explain how to solve this question….in easy english words…thanks

A co. currently has 1000 shares of common stock outstanding with 0 debt. It has the choice of raising additional $100000 by issuing 9% longterm loan or issuing 500 shares of common stock. The company has 40% taxrate. What level of EBIT wud result in same EPS for 2 financing positions?

A. EBIT (18000) wud result in (7.20) EPS for both.

B. EBIT 27000 wud result in 7.20 EPS for both.

C. EBIT 27000 wud result in 10.20 EPS for both.

D. EBIT (10800) wud result in (7.92) EPS for both.

The answer is C.

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[Qlad]

Hi guys,

cud someone pls explain how to solve this question….in easy english words…thanks

A co. currently has 1000 shares of common stock outstanding with 0 debt. It has the choice of raising additional $100000 by issuing 9% longterm loan or issuing 500 shares of common stock. The company has 40% taxrate. What level of EBIT wud result in same EPS for 2 financing positions?

A. EBIT (18000) wud result in (7.20) EPS for both.

B. EBIT 27000 wud result in 7.20 EPS for both.

C. EBIT 27000 wud result in 10.20 EPS for both.

D. EBIT (10800) wud result in (7.92) EPS for both.

The answer is C.

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[UCMCPA]

Qlad.

You have two options for financing; equity of debt. Issuing equity will raise your common shares outstanding. Debt interest is deductible, so we have to account for that.

If you were to issue more stock. You have 27,000 EBIT (earnings before interest and taxes) x (1-.4) = 16,200. Now, initially you only had 1,000 shares, but we chose to issue more shares increasing it to 1500. Therefore 16,200 / 1500 = 10.8

If you were to issue debt. You have 27,000 EBIT – INTEREST on the debt b/c it's deductible. 100,000 x .9% = 9,0000 = 18,000 in earnings after interest. Take 18,000 and subtract out the tax (1 -.4). 18,000 x .6 = 10,800. Because we didn't issue more shares, use the original amount of 1,000. 10,800 / 1000 = 10.8 EPS

FAR - 84
AUD - 94
REG - 86
BEC - 86

[Author]

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