[jeff]

Welcome to the Q2 2015 CPA Exam Study Group for REG.

“Death and Taxes” – Individual Tax for the CPA Exam

Posted by Another71 on Monday, November 24, 2014

Free NINJA: https://www.another71.com/cpa-exam-study-plan/

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

[willpassby2014]

On July 1, Silk, Inc., sent Blue a telegram offering to sell Blue a building for $80,000. In the telegram, Silk stated that it would give Blue 30 days to accept the offer. On July 15, Blue sent Silk a telegram that included the following statement: “The price for your building seems too high. Would you consider taking $75,000?” This telegram was received by Silk on July 16. On July 19, Tint made an offer to Silk to purchase the building for $82,000. Upon learning of Tint’s offer, Blue, on July 27, sent Silk a signed letter agreeing to purchase the building for $80,000. This letter was received by Silk on July 29. However, Silk now refuses to sell Blue the building. If Blue commences an action against Silk for breach of contract, Blue will:

A.

win, because Blue effectively accepted Silk’s offer of July 1.

B.

win, because Silk was obligated to keep the offer open for the 30-day period.

C.

lose, because Blue sent the July 15 telegram.

D.

lose, because Blue used an unauthorized means of communication.

I AM CONFUSED . DID BLUE NOT SEND A COUNTER OFFER ON JULY 15 . SO IN EFFECT SILK BECOMES OFFEREE. AM I CONFUSING IT TOO MUCH

BEC Passed
FAR Passed
AUD Passed
REG Passed

[Anonymous]

haha i just saw that one yesterday! apparently it wasn't a counteroffer, but an inquiry, according to the explanation

[Anonymous]

Why must Mac prove that they relied on the FS? I thought if it was just negligence being proven, then reliance was not necessary. It seems that this is a case for gross negligence; however, I thought gross negligence always meant “reckless disregard” or “willful” acts. Anyone have some insight?

Beckler & Associates, CPAs, audited and gave an unqualified opinion on the financial statements of Queen Co. The financial statements contained misstatements that resulted in a material overstatement of Queen's net worth. Queen provided the audited financial statements to Mac Bank in connection with a loan made by Mac to Queen. Beckler knew that the financial statements would be provided to Mac. Queen defaulted on the loan. Mac sued Beckler to recover for its losses associated with Queen's default. Which of the following must Mac prove in order to recover?

I. Beckler was negligent in conducting the audit.

II.Mac relied on the financial statements.

a. Neither I nor II.

b. II only.

c. I only.

d. Both I and II.

Explanation

Choice “d” is correct. Although a CPA generally is liable to third parties only for fraud or constructive fraud (gross negligence), where the CPA knows that the third party will be relying on the audit, the CPA can be liable to the third party for mere negligence (the CPA owes the third party a duty of care since the third party is an intended beneficiary of the engagement). An action for gross negligence requires both reliance on a misstatement and negligence.

[Anonymous]

I'm doing ok. I agree that the blaw questions are so tricky! I have 50 more questions remaining in R8 until I'm done with Becker mcq 2x.

[Anonymous]

@willpasby2014 what is the answer?

[willpassby2014]

Thanks anjanja….contracts is confusing me….may be i am not good at it

BEC Passed
FAR Passed
AUD Passed
REG Passed

[Anonymous]

Once an undisclosed principal becomes known to the third party, the third party can elect to hold either the agent or the principal liable for breach of contract. Why after becoming a disclosed principal would the agent still be held liable?

[Anonymous]

DPD516,

I have a chart in my notes, under negligence it says plaintiff must prove that they reasonably relied upon the information. But I got the impression that the foreseen party doesn't need to prove reliance.

From wikipedia: The “foreseen” or “Restatement Standard” approach was established by the American Law Institute’s (ALI) Second Restatement of Law of Torts. With this approach the auditor is liable to all third parties in which their RELIANCE is foreseen even if the auditor doesn't know the third party.

[Anonymous]

I guess that makes sense because why would a bank who gave a loan to a company based on its audited financial statements be able to sue the CPAs if the bank had not relied on that information, causing them to suffer a loss? Makes sense. Sometimes I need to actually think about it instead of reciting the rules. BLAW ugh

[Anonymous]

I don't know, “thinking” doesn't seem to work that well for me, I find that responding to certain key words like some pavlov's dog is way more effective with 90% of questions

[Anonymous]

When there has been no performance by either party, which of the following events generally will result in the discharge of a party's obligation to perform as required under the original contract?

a

Accord and satisfaction and mutual recission. – correct ???

b

Accord and satisfaction.

c

Mutual recission.

d

Neither accord and satisfaction nor mutual recission.

[Anonymous]

I guess I automatically would have said accord and satisfaction, because I know that results in the discharge of both parties' obligations. I guess I'm less familiar with what “mutual rescission” really means.

That's confusing. Do you know the answer?

[Anonymous]

Answer is A

in my notes it says accord and satisfaction – performance of the substituted duty is the “satisfaction” that discharges the original duty. How would it apply if there has been no performance by either party?

mutual rescission is literally what it means I guess, from my notes: “the parties are restored to their original position”

[jstay]

yeah dont get confused with those terms

accord and satisfaction – new contract, same parties

rescission – restores parties to original position

novation – same contract, new party

also be familiar with surety terms such as subrogation, contribution, etc

[Anonymous]

jstay, so do you agree with answer A

[Author]

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