BEC Study Group Q1 2017
January 11, 2017 at 11:50 am #1435416
@chasemlewis I'm in the same boat as you (took the exam on 01/07). I had to guess on more questions than I would have liked, but the WC were pretty easy. Only one of them was related to a topic that I'm not too familiar with, but I was able to finish all three with 2 minutes left.January 11, 2017 at 12:06 pm #1435437
Do you remember your WC topics?January 11, 2017 at 12:07 pm #1435440
Yeah, I had plenty of time. I probably left with 45 minutes to go. I left AUD with about 1.5hr to go on the exam.January 11, 2017 at 12:13 pm #1435445
I think it's normal when you don't feel good about how you did after exam. And guessing on some of MCQ is ok too. Maybe those MCQs and one WC were test/sample. You'll pass! Do you remember your WC topics?January 11, 2017 at 12:51 pm #1435472
I take BEC tomorrow and i feel a bit uneasy. any suggestions or advice you guys can give 24hours before exam day and what your day usually consist of?January 11, 2017 at 12:55 pm #1435476
I am trying to review all my notes and remember formulas, ratios. Good luck!!!January 11, 2017 at 1:19 pm #1435523
I am trying to review all my notes and remember the formulas, ratios. Good luck!!!January 11, 2017 at 7:54 pm #1435860
I AM SORRY GUYS THIS IS PRETTY LONG QUESTION, BUT ANYONE KNOWS THE BETTER METHOD TO COME TO THE SOLUTION. IF I TRY THIS PROBLEM DOING IN EXAM, WILL TAKE MY 45 MIN IN QUESTION. 🙁
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% longterm
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 taxdeductible
associated with it, whereas the sale of additional stock will not result in any taxdeductible
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
× 0.40)) ÷ Number of shares
EPS = (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:
9,000) × 0.40)) ÷ 1,000 shares = (EBIT (
EBIT × 0.40)) ÷ 1,500 shares
1,500 EBIT $
600 EBIT + $5,400,000) = 1,000 EBIT 400
300 EBIT = $8,100,000
EBIT = $27,000
Additional Debt Additional Stock
Interest 9,000 0
Tax 7,200 10,800
EPS = Net income ÷ Number of shares outstanding
EPS = $10,800 ÷ 1,000 shares = $10.80 per share
EPS = Net income ÷ Number of shares outstanding
EPS = $16,200 ÷ 1,500 shares = $10.80 per shareJanuary 11, 2017 at 10:52 pm #1436009
new here. Finally decided to take a good shot at CPA studies. I am using 2016 Roger Review and so far I have purchased ninja notes. Putting together a study program for myself now as i want to follow a mix of Roger and Ninja. From the start I can already see that my understanding pace of the material is snail like.January 12, 2017 at 9:38 am #1436199
@SONA-I know this problem by heart!
the answer is 27,000 EBIT will produce EPS 10.80 with both scenarios:
Here is the easiest way I know how to solve it and understand it! if they have 27,000 EBIT, and raise debt at 9%, the interest is 9,000. 27,000-9,000=18,000, less 40% tax, net income is $10,800/1,000=EPS 10.80
If they raise additional shares, then the net income is 16,200 but EPS is now 16,200/1,500 shares=10.80January 12, 2017 at 10:48 am #1436267
Has anyone taken BEC recently and want to share some tips on what to focus on today as I am taking my test tomorrow.January 12, 2017 at 10:50 am #1436270January 12, 2017 at 10:52 am #1436273
Finally i decided to go through the answer choices and decide which gives you the best of all.January 12, 2017 at 12:17 pm #1436342
Testing tomorrow morning. This one scares me more than the others. For some reason, I struggled with the calculations in the MCQs, whereas I excelled in the concepts. Hoping for no calculations tomorrow!January 12, 2017 at 12:47 pm #1436370
can someone please help me with this corporate governance question please? so i picked A, because the question says that there is no formal receiving function and vendors are paid on actual production meaning if the goods were stolen and not shipped then no one will ever know of them right and it would be harder to tell if they were stolen or not shipped because the lack of audit trail. But i don't understand why it's also B and C? why would shortages of production be brought to supervisor's attention because of production shut downs and why would there be decreasing the opportunities for errors to enter the system, wouldn't there be more errors because of the lack of audit trail? thank you!
A company controller is concerned that parts may be stolen because there is no formal receiving function (that is, receiving slips are not filled out). Production raw materials are moved from rail cars directly to the production line, and vendors are paid based on actual production. Which of the following comments correctly portrays the current process?
Goods can be paid for only if they have been used in production. Stolen goods or goods not shipped will not be paid for.
There is less handling of goods received, thereby decreasing the cost associated with processing goods received as well as decreasing the opportunities for errors to enter the system.
Shortages of materials in the system will be brought to a supervisor's attention because of production shutdowns.
All of the answer choices are correct.January 12, 2017 at 1:52 pm #1436654
I just took BEC today and i honestly don't know how to feel. I wrote down most of the formulas before i started the exam and i didn't really even need them. I would say i had mostly conceptual based questions than computational and i didn't have a clear read on if each testlet were getting difficult.
I'm Praying for a 75!!! and trying not to think too much into it knowing that this was the last shot at BEC before exam changes. Now it's enjoy the weekend and on to REG.January 12, 2017 at 1:57 pm #1436696
Thanks for your reviews on the exam you took today.January 12, 2017 at 4:31 pm #1437237January 12, 2017 at 6:35 pm #1437387
Hi guys! I recently graduated in Fall and had been studying for FAR before I realized I probably wouldn't make it in March/got discouraged:(
I'm now wanting to start with BEC – I sent my transcripts end of December 2016/They've received my payment is it possible/reasonable to try to make it before the changes?
(Sorry if this isn't the place for this I'm new to the forum)January 12, 2017 at 6:42 pm #1437396
Do you have an NTS yet? Your only opportunity to test would be end of February or any open March dates (if available). Either way, you'd need to start studying ASAP. You could do it though. I am testing REG on March 7 and I will start studying this weekend. Depends on how much time you can commit and how dedicated you are.January 12, 2017 at 6:50 pm #1437404
No I haven't received my NTS yet! That's why it may be risky to start studying now and hope it comes in time. I'm not sure how the testing availability works doing it last minute etc/how quickly dates fill upJanuary 12, 2017 at 6:50 pm #1437407
What state are you in?January 12, 2017 at 6:54 pm #1437416
CA!January 12, 2017 at 6:57 pm #1437419
You're probably not going to get it. I am in CA too. I submitted my transcripts and payment in June. Took them 8 weeks to approve me. From that point of approval to being able to sit for my exam took another ~2 weeks. I sat for FAR on 8/26.
You can check https://www.prometric.com/en-us/clients/cpa/Pages/landing.aspx for seat availability though (it's a link under “Optimizing Schedule” paragraph). This way you can study and once you get your NTS you can lock in one of the open dates in March.January 12, 2017 at 8:52 pm #1437504
.January 13, 2017 at 1:38 am #1437624
@samantha09 If you are almost sure they'll let you take the exams, I would say start studying ASAP. You submitted your application in December therefore you might be able to make it for this testing quarter. It took about 8 weeks to hear from them. we have until March 10 to test. Good luck! Go Cali!!…. and the rest of the states lolJanuary 13, 2017 at 2:24 pm #1440146
Just took BEC.
Ouch.January 13, 2017 at 2:50 pm #1440185
@CPYay-please elaborate (without any specific exam dislosures):)January 13, 2017 at 2:58 pm #1440197
Haha of course.
First teslet was easy. Nothing I didn't expect. Second was from Mars. I don't even know what happened. Third was mixed. So I clearly sucked on the second one. Written responses were manageable.
Formulas and IT knowledge are paramount. This test can encompass anything from the material, so just have a broad knowledge base. Not sure how much detail I can provide other than that.
Oh… also don't drink a glass of water and a Redbull before sitting for three hours.January 13, 2017 at 3:02 pm #1440204
Got it! hearing other people's experiences really helps! How did you do with the time allotted? I am so scared to get bogged down on some stupid MCQ and not have enough time for WC-when you say manageable-the topics were something you could BS about? Some Ninja ones are seriously bazaar (Plan on reading them all this weekend!)
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