[jeff]

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

[HoosierCPA]

Egan, a minor, contracted with Baker to purchase Baker's used computer for $400. The computer was purchased for Egan's personal use. The agreement provided that Egan would pay $200 down on delivery and $200 thirty days later. Egan took delivery and paid the $200 down payment. Twenty days later, the computer was damaged seriously as a result of Egan's negligence. Five days after the damage occurred and one day after Egan reached the age of majority, Egan attempted to disaffirm the contract with Baker. Egan will:

a.Not be able to disaffirm because Egan had failed to pay the balance of the purchase price.
b.Be able to disaffirm despite the fact that Egan was not a minor at the time of disaffirmance.
c.Be able to disaffirm only if Egan does so in writing.
d.Not be able to disaffirm because the computer was damaged as a result of Egan's negligence.

Explanation
Choice “b” is correct. A minor has a reasonable time after reaching the age of majority to disaffirm contracts. One day after reaching majority is within a reasonable time, and so Egan could disaffirm.

==============================================================

Rail, who was 16 years old, purchased an $800 computer from Elco Electronics. Rail and Elco are located in a state where the age of majority is 18. On several occasions Rail returned the computer to Elco for repairs. Rail was very unhappy with the computer. Two days after reaching the age of 18, Rail was still frustrated with the computer's reliability, and returned it to Elco, demanding an $800 refund. Elco refused, claiming that Rail no longer had a right to disaffirm the contract. Elco's refusal is:
a.Incorrect, because Rail could disaffirm the contract at any time.
b.Correct, because Rail could have transferred good title to a good faith purchaser for value.
c.Incorrect, because Rail disaffirmed the contract within a reasonable period of time after reaching the age of 18. — CORRECT
d.Correct, because Rail's multiple requests for service acted as a ratification of the contract.

(added this 2nd question to give another example, I just think its weird!!)

**this question has always made me scratch my head…just seems wrong! How would a normal business get around this rule? Lets say my son one day walks in buys a computer from best buy–he destroys it, 5 years later he turns 18…he can revoke the contract??? There has to be some way companies can cover their a** from this happening.

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[HoosierCPA]

Gotta love contract law! Hopefully this is an easy one. Under the statute of frauds contracts over a year must be in writing. What about if its exactly a 1 year contract? Writing or no writing? I got one right but made me think about it:

On December 1, Gem orally contracted with Mason for Mason to manage Gem's restaurant for one year starting the following January 1. They agreed that Gem would pay Mason $40,000 and that Mason would be allowed to continue to work for Gem if “everything worked out.” On June 1, Mason quit to take a better paying job, alleging that the contract violated the statute of frauds. What will be the outcome of a suit by Gem for breach of contract?
a.Gem will win because the contract was for services not goods.
b.Gem will lose because the contract could not be performed within one year.
c.Gem will lose because the contract required payment of more than $500.
d.Gem will win because the contract was executory.

Explanation
Choice “b” is correct. As a general rule, under the statute of frauds, a contract that cannot be performed within one year from the time of its making is unenforceable absent proof of its material terms in a writing signed by the party being sued. Here, the contract by its terms could not be performed within a year from the time it was made and Gem cannot prove the material terms of the contract through a writing signed by Mason. Therefore, Gem would lose its breach of contract action.

**I understand the contract was formed in December and the service was a year starting January so it is clearly greater then 1 year but if it started and ended December 1st I would assume it could be made orally?

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[HoosierCPA]

Under which of the following circumstances would an assignment of rights under a contract be invalid?
a.The assignment was made without notice to the obligor.
b.The assignment was made without delivery of an evidentiary document.
c.The assignment was made without notice to the assignee.
d.The assignment was made without the assignor's intent to transfer.– CORRECT

Explanation
Choice “d” is correct. There actually is no requirement that the assignor intend the assignment (contract law is based on objective actions as opposed to intent), but this is the best answer.

**So I found it odd you can have assignment without notice to the obligor (I chose A). So the creditor who is owed money can go ahead and assign someone else to pay and that assignor can subsequently demand payment from the obligor?

Here is what they say about A. “Choice “a” is incorrect. The obligor need not be given notice of the assignment, but of course, it is not effective against the obligor until the obligor is given notice. Thus, if the obligor owed the assignor $100 and the assignor secretly assigned the right, the obligor will be discharged by paying the assignor.” –to me even the explanation even sounds like it shouldn't be allowed!

Side Note: I know I'm blowing up this forum right now. So I apologize. Finally got some time away from the kids and am trying to work through as many questions as possible!

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[aatoural]

Re2pect – thank you for the cclarification i think i was already burnt out at that point

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

[aatoural]

Dtatham- try not to overthink contracts law because I am pretty sure they are just ways for them to stest us on the three ways a minor can ratify a contract. But like you says I am pretty sure there is way more to it. Of course big companies like Best Buy have goof lawyers that work all company contrcts n policies.

But the one with the less than a year contract always spins my head around too.

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

[Claudia408]

can someone explain why the buyer who defaulted in paying for the computer would have remedy available to him?

Drew bought a computer for personal use from Hale Corp. for $3,000. Drew paid $2,000 in cash and signed a security agreement for the balance. Hale properly filed the security agreement. Drew defaulted in paying the balance of the purchase price. Hale asked Drew to pay the balance. When Drew refused, Hale peacefully repossessed the computer.

Under the U.C.C. Secured Transactions Article, which of the following rights will Drew have?
A.Redeem the computer after Hale sells it.

B.Recover the sale price from Hale after Hale sells the computer.

C.Force Hale to sell the computer.

D.Prevent Hale from selling the computer.

Answer: D

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Lashifty]

Can someone explain BLAW PMSI in inventory with the 2nd holder filing gets priority?

Here is the book example: On March 1st, First bank loans Acme money and takes a security interest in Acme's inventory. First bank files finance statement. On April 1, Second bank promises to loan Acme $10,000 to purchase cattle feed. For Second Bank to have priority over First Bank, Second Bank must a financing statement and notify First Bank before Acme gets the feed.

Why would Second Bank get priority over First Bank?

[Namstut]

Aaaand I am Done with REG at least for now!

I don't know how I feel about the exam this time around but I do not feel better than the last time I walked out of Prometeic.

There were no surprises, once again, very consistent with Becker. SIMs were very reasonable too and also very much in line with Becker SIMs. I wasn't sure on a few things in each testlet and I ran out of time on the research question but there is no time to stress about it – I am off into the FAR universe…tomorrow…after a very heavy drink tonight! 🙂

I will catch you all on the score release date of February 7th if you are taking REG before January 20th.

@dtatham10, I hope to see you there!

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Claudia408]

@namstut – did you use Ninja for your review? also, did you find the MCQs were harder than your previous attempt?

I took Reg in December and the MCQs were so tricky whereas the SIMs were so straighforward.

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Namstut]

@Claudia408 I used Becker both times but I did use Ninja audio before my first attempt.

There were a few tricky MCQs but I would not say they were harder than Becker's.

The problem is that there is so much material and the question can be on a minor detail that was brushed off during the study. Those are the ones that usually get you, not the calculations since those we pretty much beat to death before the exam, and specially on this board.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[jack yassa]

Good luck folks for those that took the exam,
This question regarding the Corp basis REG3-44
Why he uses Liability and never mentioned that per book. Book rule is
FMV
<Basis>
========
XXX

Question CPA-04763
Aztec, a C corporation, distributed an asset to Burn, a shareholder. The asset had a fair market value of $30,000 and
was subject to a $40,000 liability, assumed by Burn. The asset had an adjusted basis of $25,000. What amount of
gain must Aztec recognize?
a. $0
b. $5,000
c. $10,000
d. $15,000
Explanation
Choice “d” is correct. When a corporation distributes assets to a shareholder, the corporation recognizes a gain as if
it had sold the asset. The gain is calculated as follows:
Amount realized – greater of FMV of asset = $30,000 or the amount of liability assumed by the
shareholder 40,000
Less: Adjusted basis of property sold (25,000)
Realized and recognized gain
15,000
Choices “a”, “b”, and “c” are incorrect per the above explanation.

[Potat0eHead]

@namstut my name speaks for itself 😄

Hope you had a success today!
Question, studying with Becker, would you recommend focusing more on the questions that they provide or more spend time reading the textbook and videos?
Thanks!

[aatoural]

Estate/Trusts are killing my confidence. Got 46% in GLEIM SIM. Almost everything was wrong.

How do you guys study for that section?

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

[Namstut]

@aatoural, all I will say is DO study for it! I took REG today.

@Potat0eHead LOL!! And considering that I failed my first one I am probably not the best person to ask how to study. But I would not do the video more than once. Video, book, MCQs, MCQs, MCQs, SIMs, and back to the book for sections that do not stick.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[brittany lutz]

Downs, Frey, and Vick formed the DFV general partnership to act as manufacturers' representatives. The partners agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that the partnership would not terminate for five years. After the fourth year, the partners agreed to terminate the partnership. At that time, the partners' capital accounts were as follows: Downs, $20,000; Frey, $15,000; and Vick, $10,000. There also were undistributed losses of $30,000. If Frey died before the partnership terminated:

Incorrect A.
Downs and Vick, as a majority of the partners, would have been able to continue the partnership.

B.
the partnership would have continued until the 5-year term expired.

C.
the partnership would automatically dissolve.

D.
Downs and Vick would have Frey's interest in the partnership.

The answer is C via reference 4262.08

Wiley REG business structure notes state:
Partnership Dissolution:
Partnership does NOT automatically dissolve upon:
withdrawal of a partner or death or bankruptcy of a partner.
Remaining partners with majority vote may continue partnership. Individual partners have right to withdraw. Withdrawing partners may be in breach of contract.

Doesn't this Wiley segment contradict the answer and reasoning to this question?

[Author]

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