[jeff]

Welcome to the Q2 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

[mckan514w]

@Amor D

I **think**** You need to close out your MFG account… so if it is not material it would be

DR WIP XXX
DR FG XX
DR COGS XX
CR MFG Overhead XX

and if it is material then it would just be
DR COGS XX
CR MFG Overhead XX

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Anonymous]

Thanks again, @Mck.

So if it were OVERAPPLIED, do we just reverse those DR and CR entries?

[Kmay89]

@Amor D, I agree with mckan514w in that you have to credit the Manufacturing Overhead account to close out the under/over applied, but I think they got the entries backwards. If it was not material you would debit COGS, but if it is material, that's when you would have to do the extra work of allocating it between the different accounts. Think of it like if it's not material then the cost is greater than the benefit of trying to allocate it between accounts.

BEC- 93
FAR- 9/6/2016
AUD- 10/7/2016
REG- 11/21/2016

Wiley CPAexcel Self Study & Ninja supplements

[Anonymous]

Thanks @Kmay.

Can you show here the JEs? I am not really sure what you meant by or which entries were posted backwards. Once I see the entries formatted in DR or CR or in a T-Account, I will be able to understand the logic better.

[Kmay89]

@Amor D the debits and credits were correct, they just had material/immaterial mixed up.

So to close out MFG OH if it IS material:

DR WIP XXX
DR FG XX
DR COGS XX
CR MFG Overhead XX

And to close out MFG OH if it is NOT material:
DR COGS XX
CR MFG Overhead XX

BEC- 93
FAR- 9/6/2016
AUD- 10/7/2016
REG- 11/21/2016

Wiley CPAexcel Self Study & Ninja supplements

[Kmay89]

And yes the journal entries I just posted are for if it was underapplied, but if it was overapplied you would reverse the entry and debit the overhead account instead.

BEC- 93
FAR- 9/6/2016
AUD- 10/7/2016
REG- 11/21/2016

Wiley CPAexcel Self Study & Ninja supplements

[Anonymous]

Thanks, Kmay! I now understood it in full. I appreciate both of your (& Mckan) help.

[mckan514w]

Okay with this mornings news about Britten leaving then EU and Cameron resigning and the pound crashing it brought me back to econ…. So the brattish pound is depreciating correct? This means the USD is appreciating…. England's exports will be cheaper their imports more expensive and demand for their domestic goods will be higher while demand for their money/ currency will be lower. This will drive them into a recessionary state however improve/ lower their trade deficits because exports will be higher than imports.

Meanwhile- here in the states England's imports will be cheaper than OUR exports, increasing our imports, decreasing our exports which would then lower our demand for domestic goods while increasing our demand for imports. Our dollar has risen so it has appreciated making demand for it increase and our trade deficit will grow because we will be importing more than exporting.

Is all of this correct?? I am doing this from memory in HOPES that maybe some of this economic stuff has stuck…. If anyone wants to chime in and let me know how I did it would be appreciated :-)….

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Spartans92]

Don't think I have mastered all the Econ stuff..but that sounds right to me!! YAY. This is the best way to show whether you understand the concepts or not. I LOVE it! I am trying to apply the same idea to tax haha (for individual part). Mckan, I think you got BEC in your bag. Best of Luck!

BEC- PASS

[mckan514w]

From your mouth to prometrics/NASB/AICPAs ears Spartan!!! and THANKS for chiming in… and YAY I think I got it right….

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[aatoural]

mckan that sounds good to me! Thats a good idea to help understand it. These kinda problems I solve them doing the same thing, I look like a crazy person talking to myself. hahaha

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[mckan514w]

ha ha ha aa- my husband came downstairs as I was trying to explain cost of capital to my living room pillow- I think he is about to have me put away on insanity charges…. glad to know I am not alone!

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[aatoural]

Can somebody explain in their own words all the differences between IRR, WACC, hurdle rate, etc. And when are they soupossed to be overlapped? Thanks!!!!!

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[Spartans92]

I hate those formulas and still dont know what they are except what the book says LMAO. IRR is when NPV = 0. it is one of two ways to measure profitability. WACC is used for discounted cash flow basically to see how a firm finances its asset.. the amount of debt and amount of equity. This is also the required return. Essentially, when a question says required return, hurdle rate, WACC.. these are the same percentage. I dont know if this was helpful. LOL. I guess my biggest problem is I just do enough to know how to compute these numbers and not take the time to understand the logic.

If anyone can add more I am also interested to know the logic behind. 🙂

BEC- PASS

[mckan514w]

Okay so IRR is when your cash inflows from investment equal your outflows- essentially it is your break-even point of NPV. Your hurdle rate is basically the required rate of return the company expects from the investment also used as the discount rate. So assume you are financing a new building and you have a required rate of return of 7%- this means you MUST make at least 7% on this investment for it to be “worth it” to you– you must essentially clear this hurdle to be profitable… the hurdle rate is typically your weighted average cost of capital. So what this is saying is that right now without investing in anything your current holdings (capital structure) is averaging a return of 7% – so in order to invest in a new project you will want something that will earn you more than what you already have in capital.

If your IRR is lower than your hurdle rate (required rate, WACC) then essentially your NPV of future cash inflows will be lower as well so the investment is not worth undertaking…. If your IRR is higher than your hurdle… then so will your NPV of future cash flows be higher- thus it makes sense to undertake the investment. If it is equal then you are indifferent..

So use the above you have a WACC of 7% you want to invest in the above mentioned building. You calculate that your IRR will be 8% – remember this is the point at which NPV outflows equal inflows… so you have made 1% higher than your required rate so it is worth investing in…. however if your IRR was 6% then you will lose on the investment (or make less than what you require)…

Does this make sense????

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Author]

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