[jeff]

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

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

[sweazy]

I legit can not grasp the stuff like Holder in Due Course, Drafts, Promissory notes, Negotiability, etc. For whatever reason I dont get it. So maybe coming here and typing it out will help calm me down or maybe someone who has a simple way to remember this stuff can fill in some gaps for me (much obliged), because frankly I'm considering punting this topic even though I clearly see it on the CSO. My general understanding is:

Two types: Promissory notes (two people only) and Drafts (3 people). Negotiable means you have control of the “paper” and can do with it what you want like transfer it to someone else or cash it at the bank. To be negotiable it needs 5 things: (1) signed by the originator, (2) not have any conditions o/s like the paper being subject to another event that still needs to happen, (3) it needs to be money and a fixed amount, (4) you need to have either bearer or order (basically be the one who is in control of it), and (5) it needs to be usable on demand right then and there. HDC: to be HDC means you have unwavering control over the paper and that paper is negotiable. To be HDC you need to have given value for the paper, made the transaction in good faith (key to everything), and no one has any real defense for the paper (it was made materially in error, illegal, made under duress, or discharged in bankruptcy). For liability (who can still owe somebody something in regards to this instrument): The bank (drawee) is the primary liability on drafts while the Maker is primary on a note. Endorsers end up with secondary liability if the primary fails to fulfill, HDCs (current owners of the instrument) can make endorsers pay unless they were endorsed “without recourse.”

This stuff actually seems like more of the mundane, memory-type topics in Reg, and Ive handled the more complex tax and Securities acts stuff fine (IMO), but it's a jumbled mess in my head and when I go to do a set of 30 or so MCQs on freaking Commercial Paper, the questions seem so different than the notes and I cant even get lucky when I guess. For example:

(Back of check)
“Pay to Ann”
[Paul signs]
[Ann signs]
[Mary signs]
[Betty signs]
“Pay George only”
[Susan signs]

Susan, on receiving the above instrument, struck Betty's endorsement. Under UCC, which of the endorsers above will be completely discharged from secondary liability to later endorsers of the instrument?

a) Susan
b) Betty
c) Mary
d) Ann

**I wouldnt even know how to use logic to solve, other than “hmm crossing someone's name out seems like a weak way to discharge them from secondary liability, Maybe the answer is Ann since she was the first one to sign other than the maker. But I suppose after typing this all out, I realize that unless Betty crossed her own name out (unlikely because then Susan would have never signed) Betty would no longer be held liable since the only other person that could have actually crossed that name out would be Susan. I get that logically. Maybe this is helping. Is George now the owner of the instrument and does he have HDC? Seems like logically he has the paper, but it isnt negotiable since it says “pay george only” thus making him not HDC and possibly unable to transfer it to anyone? Or does he now have Order paper with ‘Holder' status only?

/rant

BEC: 77
AUD: 67, 85, 87
FAR: 74, 74, 79
REG: ___

[jolien]

Hi, can anyone help me understand why C is not a correct answer? Why is it not a firm offer? Thank you very much!

The president of Deal Corp. wrote to Boyd, offering to sell the Deal factory for $300,000. The offer was sent by Deal on June 5 and was received by Boyd on June 9. The offer stated that it would remain open until December 20. The offer:

A.constitutes an enforceable option.

B.may be revoked by Deal any time prior to Boyd’s acceptance.

C.is a firm offer under the U.C.C. but will be irrevocable for only three months.

D.is a firm offer under the U.C.C. because it is in writing.

Per key – the answer is B (“To create a contract, the offer must be accepted before a termination of the contract. Under common law, an offer can be revoked any time before its acceptance.”)

[demarcon]

@dtatham10 I'm sure you passed 🙂 put it out there and everything will be ok. I felt like I failed every single exam. They do that to you on purpose.

[HoosierCPA]

@demarcon I think it's a toss up so I'm not ruling out a pass like I did the last exam! My breakdown was easy-hard-med/hard? on the mcq's. I felt like I was able to spot a lot of the tricks they were trying to throw at me. I probably could have studied b-law a little bit more, I think it may have cost me a question or 2. The one silver lining in the sims is all the answer boxes were independent of each other, last exam I missed a number that fed into many other numbers so it killed me. I am fairly certain I missed a section of 1 sim that I would never have missed if I wasn't pressed for time (completely my fault). I spend all night tossing and turning thinking about those 3 answers alone!. There was one completely foreign sim so I just made up my own rule in my head and went with it, if I just so happen to get lucky then I can salvage some points. I had 1 sim that was identical to a prior exam (or at least the structure was, not sure if the $'s were identical) so I think I got that. The research took way more time then it should have, I am pretty sure I ended up getting it but I just kept searching the wrong things and it killed my time. Because of the time crunch I didn't get time to go back and review my answers with the AL, last exam I almost spent a half hour on review! Oh yeah, and I had one more sim that was manageable as well. So 3 of the 6 sims weren't bad, it's the other 3 that are scaring the hell out of me, if I got through them at a 50% clip then I would be happy. If only you could give me about 20 of your REG points–that would be great 😉

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

[RE2PECT]

@dtatham10- I'm sure you did better than you think and the fact that you felt the sims weren't as bad this time is a good sign. DRS's can be a pain and very time consuming with all the extra documents they give you. I haven't had one on an exam yet so you know I'll be seeing one this time. At least you can somewhat guess an answer instead of having to calculate it like all the other ones. Either way you did everything you could and it's out of your hands now. Just enjoy the time off and pray for the best come score release.

@jack yassa- Business interest expense is deductible by the partnership, but investment interest expense flows through to the partner's K-1 as a separately stated item since it can be used to offset investment income. I had trouble grasping that also, but seeing it a bunch of times in mcq's helped me with it.

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

[HoosierCPA]

@re2pect @demarcon One thing that has always gotten under my skin is the monitor size in the 2 testing centers I go to. They are wide screens but the test is chopped down on the sides to keep the dimensions proportional. The problem with this is it makes it nearly impossible to work with split screen on the sims. Do you guys run into the same issue? It takes me twice the time to go through sims with an additional tab because I spend so much time flipping back and forth.

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

[cpaMD86]

The DRS questions I've experienced lagged the system every time I switched, and went through the documents. It was very annoying.

@dtatham10 I am sure you pulled it off. Like @re2pect said, your description of the SIMs is a good sign.

FAR: 9/3

[HoosierCPA]

@cpamd yeah the DRS I had was a little different then was I'm used to seeing. It wasn't a MCQ type DRS you had multiple documents and had to manually plug numbers. Made it that much more time consuming!

And we will see on my exam–I really thought I would walk out of the exam and with the thought phew I'm finally a CPA but I felt like the exam beat the shi* out of me and it may have won :/. Only time will tell!

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

[Fk]

With Regard to Insurance proceed and Premium which should be included and excluded in Individual and C Corp do any body has a list of that.

[demarcon]

@dtatham10 I never do split screen. Even when I practice SIMS at home on an ultrawide monitor. I look at all the answers, jot down notes and then flip back and forth. I'd give you 20 of my points if I could :). I still gotta hope and pray that I get a 99 on FAR to get the award. I'll be happy with a 75 though 😉

I have 2 days left. I don't want to study anymore.

[HoosierCPA]

@demarcon that's a good way to practice, hindsight 20/20 I should have been studying the same way. I get in a bad habit of studying with a blank excel sheet which makes calculations a breeze but doesn't give you a good idea of the time it actually takes to crunch numbers on more complicated sims.

2 days till you get your sanity back! Keep on grinding it out..might be the difference between a 95 and a 99! Or even a 74-75..but I'm willing to put money on it that you won't be teetering around the pass/fail mark. I am pulling for you to get the 99 and the award! Good luck!

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

[demarcon]

@dtatham10 I use excel when I do MCQs too. and I write out all my JEs in excel. I know it's gonna be a rude awakening when I start doing FAR on the scratch paper.

[jack yassa]

@dtatham10

Question please!

13. Loss of $25,000 on a rental property that the
taxpayer manages part-time (taxpayer's modified AGI is
$110,000)

How much is Taxable and how much deductive?
And how is that he is active enough for the 25K rule deduction?

Thanxs man

[Anonymous]

In the current tax year, Blake Smith provided more than half of the support for his cousin, niece, and a close family friend. Blake lives alone and sends a monthly support check to each person. None of the individuals whom Blake supports has any income or files a tax return. All three individuals are U.S. citizens. Which of the three people that Blake supports can he claim as a dependent on his tax return?

a. None
b. Cousin
c. Niece
d. Family friend

[Anonymous]

dtatham for sure you did well. I know you mastered the concepts. I took it on Feb 13th and totally disappointed. I don't want to think about it . Will wait for the results.

[Author]

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