[jeff]

Welcome to the Q1 2016 CPA Exam Study Group for BEC.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[monikernc]

Farwars, do not kill the messenger on that last post. It is what it is

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[FAR_WARS]

How naive of me to think it could be just 3. Alrighty then 10 it is.

FAR- 80
BEC- 75
AUD- 78
REG- ?

[monikernc]

Payaza…before the server meltdown last night you asked for help on step down method. See page 7 of this thread. I posted a detailed response about half way down that page.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[payaza2000]

@FAR_WARS

I would know them all. There was a Indian Guy (miles CPA) on youtube who ran his own CPA course that had a really good example of how to understand it; it would be best for visual learners.

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God

[payaza2000]

Can someone conceptually explain working capital requirements for Capital Budgeting? Is this the necessary increase in Working Capital that is required to get a positive NPV?

Also I understand that you discount the cash flows you receive to; today's dollars to get the Present Value of Cash Flows. Do you do the same for the tax shield that you would recieve for depreciation?

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God

[monikernc]

payaza – you have to consider both increases and decreases in working capital. if it is an increase you treat as an outflow. a decrease treat as an inflow.
for taxes you treat the tax savings from depreciation and losses as an inflow and taxes paid on a gain as an outflow.
so, you would discount these the same as any other inflows and outflows
if the problem mentions depreciation but doesn't provide a tax rate you ignore it.

did you look at the step down method on page 7 of this thread? you got it?

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Anonymous]

If monikernc feels that this exam is hard I am doomed…She/he has the answer for every question… Monikernc is right payaza2000. Also we can see the working capital effect in capital budgeting in a company wanting to construct or lease a warehouse bc it is contemplating to expand their sales division. There the working capital can have an effect on the cash OUTFLOWS because they estimate that they will purchase more inventory.

If the questions ask you to consider the tax effect then you consider the depreceation but you have to be sure that you consider the tax depreceation and not the book depreceation. And yes if I have 3,000 net cash inflow in a specific year before depreceation and after I have 3,500 then you will discount the 3,500. Someone correct me if I am wrong.

*Major edit to the post*

[monikernc]

cortes – i still can't get byproducts. i can do the math but don't grasp the concept. and this exam covers way too much material. it is taking me forever to absorb it all. you should see my stack of notes and it is all i have done since early december and i am not on a 3 hour pace yet. i don't feel as clueless as i did a month ago when i rescheduled to late february. i just want a 75 on my first try. anything more is just a bonus. i like answering the questions it helps me grasp it better when i explain it.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Anonymous]

It does help to pinch in to try to explain the answers. I will try to do it more often. Right now I am about to finish Chapter 5 on the Ninja book and in spite of having an average of 75% thru 500mcqs I am finding it very difficult to find any motivation at all. I do not feel any momentum yet and still feel lost. I will keep pushing, its good to have an active study group so I am going to try to take advantage of it.

[payaza2000]

Hey @monikernc I got it thanks. It was a little frustrating last night.

I'll try my best to explain Byproducts (full disclosure I'm not sure I understand it yet) . If I run manufacturing firm and have two products A & B that have Joint Costs of $75,000, and in the manufacturer of A & B I have incidental products (Byproducts) that I sell for $25/unit 100 Byproducts that $2,500 will reduce Joint Cost before I allocate that to Products A or B (regardless of method used to allocate Joint Cost).

@cortes123 Tell me about it, I feel much better with the first part of B3 because I have a 68% average (which should tell you how bad I did on B1-B2).

So guys since you have to consider only cash effects in Capital Budgeting you will disregard book depreciation, and always use Tax Depreciation (since we are only concerned with cash effect).

Can someone explain why the Increase in Working Capital Requirement is increasing the basis of the new machine, equipment? -This is based off Beckers example. Conversely would you decrease the Basis if you decreased your working capital requirement?

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God

[Anonymous]

I have yet to see a situation where I had to calculate the tax basis of an equipment in BEC for capital budgeting purposes but what I remember from REG is that cash outflows for installations, tax payments to get the equipment, moving the equipment, purshasing supplies FOR THE EQUIPMENT increase the tax basis. I think this would be important if they told us to consider the tax effects of the investment and they did not give o us the book value of the equipment and we had to find out what depreciation we would take but calculating first of course the tax basis of the equipment.

That is what comes to mind bc I haven't seen an mcq working that concept.

[monikernc]

Payaza thanks.
Working capital equals current assets – current liabilities. If it increases the company has had to put more investment in the form of current assets into the project. This means more cash or inventory, for example, and these are company resources that are no longer available for other purposes. If it is an increase in a/r then the company waits longer to get paid.
When working capital decreases, current liabilities increase meaning the company is using someone else's money or delaying payment of its own cash and fewer of the company's assets are tied up in that one project.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[monikernc]

Cortes – just keep plugging away everyday. I have had to fight a lack of motivation on bec, too. It just doesn't light the fire the way other sections do. Part of it is the steep learning curve and struggling through so many wrong answers at the beginning but i resolved to do a portion everyday and slowly i am acquiring the skills to tackle this beast. A retake on this one would be a terrible fate. I think slow and steady wins this race. Stick to it!

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[monikernc]

I just realized that when i rescheduled my exam last month for 2/27 it is the day after my ninja mcq access expires. DOH!

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[FAR_WARS]

@monikernc- Probably not a big deal. I would spend that day rewriting notes, flashcards, and the writing portion.

Today I am studying Special Orders and Make or Buy Decisions.

I do not feel confident at all about Variance Analysis from yesterday, but I need to keep adding material so that I can at least make it through everything before my exam.

FAR- 80
BEC- 75
AUD- 78
REG- ?

[Author]

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