[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for BEC. 🙂

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

[A1lessio]

My exam is in one week and I'm working 10-11 hour days. Not sure how I'm gonna pull this one off.

AUD (08/02/2016)

[mtaylo24]

@A1lessio, Congrats on passing FAR! I'm right there with you. Been studying my ass off for both, but I am way more interested in FAR and keep treating BEC like a side-chick. I'm starting to identify my weak areas though, so I plan on working those throughout the week, then sit next Saturday. I need to study the WCs too (dang!) Good luck next week!

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[A1lessio]

@mtaylor – thank! Passing far is a huge relief and I'm treating bec the same exact way. I plan to do all of the cost accounting stuff this weekend. 12 hours a day, sat and Sunday, then IT and Econ chapters during the week.

AUD (08/02/2016)

[mtaylo24]

Sounds like a plan, ECON killed me today and Wednesday. I should be hitting some cost tomorrow as well as capital budgeting (FUN!?! not really), to go along with all of the FAR that I'm studying. I'm obviously a glutton for punishment.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[A1lessio]

Two exams at once sounds really rough. I wish I had tips for FAR but I don't. It was so awful. They can literally test you on anything. Just don't get discouraged mid exam and say “f**k this” and rush to finish no matter how bad you think you are doing. I felt like I was guessing the whole 3rd testlet and was so antsy, I just wanted to get the hell out of there. For the sims don't panic. I think you you just need to get 40-50% correct on the sim and you're ok. It's impossible to get 100% correct. Just take a step back, read the sim and try your best even though it feels like straight up guessing. I had a DMS and I panicked and went blank, but after taking the time to read it and go through the tabs I think it was the easiest sim. It's a pretty awful 4 hours…

So I started my review this morning and I don't think a week is enough time. I found a spot for March 8th (out of state, does that matter?) which I might take instead and request the day off work. This would give me an additional weekend of studying which is huge. I may take a becker practice test mid week and If i score anywhere between 65-70% sit for the actual and if I score below 65 cough up the +$55 plus and take it the 8th. What do you guys think?

AUD (08/02/2016)

[mtaylo24]

Do it! I was in the same position last week, actually was scheduled for BEC yesterday and FAR this coming Tuesday, but I broke down and spent the 35 (x2) and rescheduled. I'm feeling much better about both already so it was completely worth it!

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mperez102204]

Hey all. I am preparing to take the exam on 3/10. Currently reviewing when I can, but time is limited because of unexpected death in the family. I am being murdered by the material. Avg 62 and trending 66. I work full time, but took off the week of the exam… should I reschedule?

[Jsn3004]

Assuming that exchange rates are allowed to fluctuate freely, which one of the following factors would likely cause a nation's currency to appreciate on the foreign exchange market?

A.
A relatively rapid rate of growth in income relative to other countries that stimulates imports and depresses exports

B.
A high rate of inflation relative to other countries

C.
A slower rate of growth in income relative to other countries, which causes imports to lag behind exports

D.
Foreign real interest rates that are higher than domestic real interest rates

Correct Answer: C

I'm confused because if imports lag behind exports, that means exports are greater than imports.

So if 100 dollars= 100 pounds, and then 120 dollars=100 pounds, then imports will lag behind exports. But if that were the case, how would that mean that the nation's currency is appreciating on the foreign exchange market if the value of the U.S. dollar isn't worth as much as before. I'm assuming that means that it's just more desirable to now since people can buy more dollars for the same amount of pounds as they did before. Can someone please clarify this for me?

[Anonymous]

@Jsn3004

Yes, the question is basically asking which scenario makes a currency more desirable.

A) A relatively rapid rate of growth in income relative to other countries that stimulates imports and depresses exports.
This is incorrect since a rapid rate of growth in income and imports means the economy is doing well and that country's goods will be expensive – NOT desirable
B) A high rate of inflation relative to other countries
This is incorrect because inflation means prices will be high so that country's goods will be expensive – NOT desirable
C) A slower rate of growth in income relative to other countries, which causes imports to lag behind exports
This is correct because a slow rate of growth in income and exports means the economy is not doing well and that country's goods are cheap – DESIRABLE
D) Foreign real interest rates that are higher than domestic real interest rates
This is incorrect because you want a high return – if other countries are offering higher rates, yours is NOT desirable

[Jsn3004]

@cim1042 Thank you. If this is correct, it appreciates on the foreign market because it is more desirable, even though it can't buy the same amount of foreign goods as it could before.

Consider a world consisting of only two countries, Canada and Italy. Inflation in Canada in one year was 5%, and in Italy 10%. Which one of the following statements about the Canadian exchange rate (rounded) during that year will be true?

A.
The Canadian dollar will appreciate by 5%.

B.
The Canadian dollar will depreciate by 5%.

C.
The Canadian dollar will depreciate by 15%.

D.
The Canadian dollar will appreciate by 15%.

Correct Answer:A

This seems to go against the previous question. I see why the Canadian dollar will appreciate by 5 percent. Because a person using Canadian dollars can purchase more Italian dollars now as opposed to before. I don't see how this answer is consistent with the previous answer. Is it because it says that the Canadian dollar will appreciate in general, and in the other question it asked what would cause the currency to appreciate in the foreign exchange market?

[Jsn3004]

@cim1042 Thank you. I guess that makes sense because all the other countries will be buying that currency because they can get more for the same amount of dollars as they did before, which makes it more desirable on the foreign exchange market. I had another question that confused me because the answer seemed to be inconsistent with the last question.

Consider a world consisting of only two countries, Canada and Italy. Inflation in Canada in one year was 5%, and in Italy 10%. Which one of the following statements about the Canadian exchange rate (rounded) during that year will be true?

A.
The Canadian dollar will appreciate by 5%.

B.
The Canadian dollar will depreciate by 5%.

C.
The Canadian dollar will depreciate by 15%.

D.
The Canadian dollar will appreciate by 15%.

Correct Answer: A

This answer makes sense to me. The Canadian dollar can buy more of the Italian dollar using the same amount of Canadian dollars that it could before. Therefore the Canadian dollar will appreciate. Makes sense to me. Like if a country wants to improve the balance of trade they would DEVALUE their currency (opposite of appreciate). So if 100 dollars= 100 pounds, then the U.S. would devalue the currency (110 dollars=100 pounds). That would devalue/depreciate the currency.

The thing is, isn't this inconsistent with the last question? Or are those two totally different questions. Was that because the previous question was asking which will cause the currency to appreciate on the foreign exchange market, while this question was just asking about general price levels and didn't include the foreign exchange market? Idk I seem to be a bit confused.

[A1lessio]

jsn3004- I think it's a chain reaction type deal. If the US is lagging behind foreign countries US goods are cheaper to these foreign countries because their currency is worth more and can buy more US goods. As these foreign countries continue to buy US goods, the US economy strengthens from all the exports and from acquiring this higher valued foreign currency. As a result the US currency appreciates. With this logic:

A. – I don't see how having a lot of imports will increase the value of the US currency. You're buying goods with a stronger dollar which in turn boosts up foreign economies and makes them stronger(higher currency appreciation)
B. – Inflation – no one would buy our overpriced goods
D. – I don't really know, but it just sounds wrong.

I hope I'm right.. not sure I would have gotten this correct.

mperez102204 – I am so sorry for the loss in your family. No! Don't reschedule, March 10th just give it all you got before the changes. A week off will help tremendously. Since your scoring 65% which is good, I would focus less on mcqs and use these next few days to write out sections or sub sections which will bump you up over 70%. Anything that is hazy or you don't really get I would go though it. For me I'm spending the whole day writing out parts of B2 which is profit analysis, marginal analysis, forecasting and projection, etc. I'm taking my time and making sure it really clicks.

Changed my exam to the 6th, 2 more days of uninterrupted studying.

AUD (08/02/2016)

[Anonymous]

@Jsn3004
The question is asking about inflation. Canada's inflation rate is 5% and Italy's inflation rate is 10%. Remember, inflation makes a country's currency undesirable (depreciate) because inflation means prices of that country's goods will rise, so demand for that country's currency will decrease, since people don't want to pay more.
Since Italy's inflation rate is 5% higher than Canada's, this means Italy's is 5% undesirable/depreciates or Canada's is 5% more desirable/appreciates.

[Jsn3004]

cim1042 I actually understand that question. It makes sense, since one could use the same amount of Canadian dollars to purchase more Italy dollars.

My question was if that question was inconsistent with the original question I asked, “Assuming that exchange rates are allowed to fluctuate freely, which one of the following factors would likely cause a nation's currency to appreciate on the foreign exchange market?”

Which the answer was, A slower rate of growth in income relative to other countries, which causes imports to lag behind exports.

Because in this question, The Canadian dollar can buy more Italy goods with the same amount of Canadian dollars, so it appreciates, that makes sense.

But the first one said that imports lagged behind exports (Export>;Imports), then it appreciates in the FOREIGN EXCHANGE MARKET, but not in general?

Is the difference between those two questions that one is asking about the foreign exchange market and the other isn't?

I hope this post made sense.

[Anonymous]

The following information is taken from Wampler Co.'s contribution income statement:
Sales $200,000
Contribution margin 120,000
Fixed costs 90,000
Income taxes 12,000

What was Wampler's margin of safety?

How would I answer this using the
Sales – M.O.S = Breakeven Sales and Breakeven Sales = Variable Costs + Fixed Costs formulas?
(no ratio answers please)
Answer is 50,000.
I keep getting 30,000.

[Author]

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