[jeff]

Welcome to the Q4 2016 CPA Exam Study Group for BEC.

If this is your first post in the study group – please post your target exam date (just the time frame to preserve your anonymity), and your past history with this exam (optional, of course).

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

[mtaylo24]

@Farisfun, I feel better than I did before, but I still feel like I forget a bunch of stuff. I get stumped w/ a few of the calcs. You? Which review are you using?

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)

[FARISFUN]

@mtaylo I am currently using Becker and have one more run through of a chapter and then the next two days will probably just be float days where I go through random material I don't feel strong on. More then likely might spend a majority of it on the IT chapter. Seems to be a struggle and seems like there is a lot of different questions they could potentially ask from that chapter.

[mckan514w]

@farisfun I'm actually feeling worse right now than I did first go round- I was (and still am) absolutely stupefied that I failed it. This time there are definitely some concepts that I probably know a little bit better and I have probably hit some concepts a little harder but all it really has seemed to do is make me more confused / harder to keep everything straight / overthinking questions. I am still getting hung up on some of the calcs — will spend tomorrow hitting my “trouble spots” and praying for the best.

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

[FARISFUN]

@mckan514w Yeah I took FAR last quarter and to me at least BEC is harder to prepare for even though FAR was a lot longer

[WVUCPAHopeful]

Hey guys! My exam is next Monday 10/17 and I am still struggling with the costing problems. Any recommendations of things I can do to help? I can do the multiple choice questions about the concepts (ie: what are conversion costs?, what will happen to VC per unit when production increases?, etc), but I am still struggling with the calculations. Help!

This will be my second time taking BEC. I failed with a 74 in August. FML

[Forem004]

Nicky recommended working those problems backwards.

[WVUCPAHopeful]

Thanks, Forem! I am reading through the forum now for other advice. Hopefully this will help me stop panicking in. I still have 5 days. You can learn anything in 5 days, right? 🙂

[RE2PECT]

Just checking in on my fellow BEC strugglers. Man it feels good not studying for this nightmare. I'll admit REG is really tedious with all these rules and exemptions, but it's more interesting to me than all the nonsense BEC throws at you.

What's up mckan514w and mytalo! I was the same way studying for the third attempt. Had no motivation and was all over the place between Ninja, Roger and Wiley. Keep at it and good luck!!

FAR: 75 Roger & Ninja (notes/flashcards/audio/MCQ)
AUD: 73, 81
BEC: 71, retake 8/29
REG:

[mtaylo24]

@WVUCPAHopeful, that's my alma mater! (Not for Accounting). Graduated back in 07 (I'm getting old). What materials are you using? Keep practicing and it should eventually click. Best of luck!

@Re2pect, Thanks bro! I'll probably be in the Reg group Sunday. This whole process is a nightmare!

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)

[mckan514w]

Thanks @Re2pect– pass or fail I am just going to be happy not to look at this stuff for awhile– BEC really makes me miss FAR ha ha ha ha… Good luck with REG- I actually really enjoyed studying for that one (well as much as you can enjoy studying for these things)

@farisfun at least to me the difference between FAR and BEC is that at least with FAR all of the pieces seemingly went together and my brain could go yes this is why I need to be tested on this to be a competent accountant– with BEC my brain just can't make the leap on why I need any of this stuff and none of it goes together it is just random bits of info…. drives me nuts

@wvucpahopeful– the one thing that helps me tremendously with costing is actually understanding the flow of things through the accounts- so your raw materials turns into material used which goes to WIP which produces your COGMFG which goes to End Inventory which produces your COGS…

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

[mckan514w]

Okay I get the reasoning behind the investment part but can anyone help me understand the savings part? WOW between IT and ECON it might be a miracle if I ever pass BEC…

Income and employment tend toward an equilibrium level where:

A.inventory accumulation takes place.

B.inventory depletion takes place.

Incorrect C.aggregate supply equals aggregate demand and intended savings equals intended consumption.

D.aggregate supply equals aggregate demand and intended savings equals intended investment.

Correct Answer: D

If businesses note that their intended investment levels produce too high or too low of inventory levels, the market will not be in equilibrium, since too little or too much has to be purchased. Therefore, until these imbalances are cleared up, the economy will not be in equilibrium. (Note that actual investment does not usually equal intended investment.)

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

[mckan514w]

I'm calling time on the studying have a feeling I will be DOA tomorrow but Ive done all I can do this go round… also feel like I am coming down with a cold which is just super effing great. Good luck to everyone the quarter- I'll come back and update when I'm done…

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

[Forem004]

The answer says we need two issues of the 110 to maintain the needed balance. How do we know that?

The Frame Supply Company has just acquired a large account and needs to increase its working capital by $100,000. The controller of the company has identified four alternative sources of funds:

Pay a factor to buy the company's receivables, which average $125,000 per month and have an average collection period of 30 days. The factor will advance up to 80% of the face value of receivables at 10% and charge a fee of 2% on all receivables purchased. The controller estimates that the firm would save $24,000 in collection expense over the year. Assume that the fee and interest are not deductible in advance.
Borrow $110,000 from a bank at 12% interest. A 9% compensating balance would be required.
Issue $110,000 of 6-month commercial paper to net $100,000. (New paper would be issued every six months.)

[mtaylo24]

@McKan513w Best of luck tomorrow! I'm still over here grinding.

I smashed through mad Gleim questions in review mode, was kind of scary how fast I was flying through (restarted ch 1 last night around 11 and I'm on ch 8 of 20), so I jumped back to Ninja so I could actually do some guessing and work some problems. I'm only averaging 58 on Ninja with 450 more questions to go, so I have plenty of work to do.

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)

[mtaylo24]

Could we get a better answer explanation lol!

A company currently has 1,000 shares of common stock outstanding with zero debt. It has the choice of raising an additional $100,000 by issuing 9% long-term debt or issuing 500 shares of common stock. The company has a 40% tax rate. What level of earnings before interest and taxes (EBIT) would result in the same earnings per share (EPS) for the two financing options?

A. An EBIT of $27,000 would result in EPS of $10.80 for both.
Incorrect B. An EBIT of $27,000 would result in EPS of $7.20 for both.
C. An EBIT of – $18,000 would result in EPS of $(7.20) for both.
D. An EBIT of – $10,800 would result in EPS of $(7.92) for both.

You answered B. The correct answer is A.

Management has the choice to obtain financing through either debt or equity. Debt will have tax-deductible interest associated with it, whereas the sale of additional stock will not result in any tax-deductible item since dividends are not considered to be a deductible expense.

The raising of funds through taking on additional debt will result in a lower EAT (earnings after taxes) due to the $9,000 of interest expense ($100,000 × 0.09); however, the number of shares will remain at 1,000.

The raising of funds through selling additional common stock will result in a higher EAT since there will be no interest expense; however, since there will be more outstanding shares, the net income will be divided into smaller “pieces of the pie” in relationship to the stockholders.

EPS calculation for use of debt financing:

EPS = (EBIT – Interest – ((EBIT – Interest) × 0.40)) ÷ Number of shares
EPS = (EBIT – $9,000 – ((EBIT – $9,000) × 0.40)) ÷ 1,000 shares

EPS calculation for sales of additional common shares:

EPS = (EBIT – (EBIT × 0.40)) ÷ Number of shares
EPS = (EBIT – (EBIT × 0.40)) ÷ 1,500 shares

The solution for when EPS is equal under each of these financing options can be determined by setting the two above equations equal to each other and solving for EBIT:

(EBIT – $9,000 – ((EBIT – $9,000) × 0.40)) ÷ 1,000 shares = (EBIT – (EBIT × 0.40)) ÷ 1,500 shares
1,500 EBIT – $13,500,000 – (600 EBIT + $5,400,000) = 1,000 EBIT – 400 EBIT
300 EBIT = $8,100,000
EBIT = $27,000

Proof:

Additional Debt Additional Stock
—————- —————-
EBIT $27,000 $27,000
Interest 9,000 0
——- ——-
EBT $18,000 $27,000
Tax 7,200 10,800
——- ——-
$10,800 $16,200
======= =======

Additional debt:

EPS = Net income ÷ Number of shares outstanding
EPS = $10,800 ÷ 1,000 shares = $10.80 per share

Additional stock:

EPS = Net income ÷ Number of shares outstanding
EPS = $16,200 ÷ 1,500 shares = $10.80 per share

Note to self:

9,000 * 1,500 = 13,500,000
9,000 * . 4 = 3,600 * 1,500 = 5,400,000
13,500,000 – 5,400,000 = 8,100,000
8,100,000 / 300 = 27,000

*1500.4 = 600
1500-600-600=300???

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)

[Author]

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