REG Study Group Q1 2017
January 7, 2017 at 5:46 am #1425837January 7, 2017 at 5:49 am #1425839
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.
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.January 7, 2017 at 7:02 am #1425849
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.
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?January 7, 2017 at 7:35 am #1425854
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
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!January 7, 2017 at 10:02 am #1425899
Re2pect – thank you for the cclarification i think i was already burnt out at that pointJanuary 7, 2017 at 10:10 am #1425903
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.January 7, 2017 at 12:52 pm #1426029
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: DJanuary 7, 2017 at 1:19 pm #1426061
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?January 7, 2017 at 1:39 pm #1426089
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!January 7, 2017 at 1:42 pm #1426091
Claudia408ParticipantJanuary 7, 2017 at 1:48 pm #1426094
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.January 7, 2017 at 2:03 pm #1426125
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
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?
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
Less: Adjusted basis of property sold (25,000)
Realized and recognized gain
Choices “a”, “b”, and “c” are incorrect per the above explanation.January 7, 2017 at 3:39 pm #1426215
Potat0eHeadParticipantJanuary 7, 2017 at 3:43 pm #1426221
Estate/Trusts are killing my confidence. Got 46% in GLEIM SIM. Almost everything was wrong.
How do you guys study for that section?January 7, 2017 at 4:03 pm #1426254
@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.January 7, 2017 at 4:28 pm #1426277
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:
Downs and Vick, as a majority of the partners, would have been able to continue the partnership.
the partnership would have continued until the 5-year term expired.
the partnership would automatically dissolve.
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 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?January 7, 2017 at 4:38 pm #1426281
@namstuts – thanks, I am studying for it but is not sticking for some reason.
How did it go?January 7, 2017 at 4:58 pm #1426304
@aatoural I just realized I did one of the SIMs completely wrong! I initially had it right and then something came over me and I THOUGHT a different rule might apply so changed my answers. So I feel like this will completely screw me up, I was counting on SIMs to get me through this time. Oh well… there is always next time.January 7, 2017 at 5:00 pm #1426305
I'm sure this question has been asked dozens of times but a google site search gave me answers from 2009. For REG do we need to have the tax brackets memorized?January 7, 2017 at 5:17 pm #1426316
@namstut – hopefully is not a graded one. You' know those scores can be quite surprising.January 7, 2017 at 5:34 pm #1426328
Hopefully you still pulled it off Namstut!
Guys I need some advice here. I actually made a thread about it, but wanted to see what the regulars in here think. I'm scheduled to take REG on 1/17 and now I'm starting to get the feeling I should push it back. I checked my Prometric and they have open seats on 2/2, 2/17 and 2/28.
I've been doing well using Ninja and averaging 84% since I switched back from Gleim, but still have to finish up ethics and then all the blaw questions. I feel more prepared than last time, but there's still some areas I feel I need to improve on.
Do you think I should reschedule or am I just getting the pre-exam jitters? The few replies I got in the other thread said I should reschedule, but I'm not sure what to do. I feel like if I don't reschedule and I end up failing I'm going to be kicking myself for not taking more time to prepare.January 7, 2017 at 5:43 pm #1426334
@re2pect if you feel like you won't be able to cover ethics and blaw to the point where you are comfortable I would reschedule.
As I mentioned before, we are drilling SIMs and calculations and ignore theory and it WILL be a huge chunk of your MCQs. 10 days is a decent amount of time to cover it, but only you will know whether you are ready or not.January 7, 2017 at 6:08 pm #1426352
@Namstut- I just don't want to feel like I'm rushing through the material. That's what I did for my first REG exam and burnt myself out. If I take a few days to do blaw I still want some time to go back and review tax again.
I know it's weird, but for some reason I like being part of the first score release. I remember someone posting about how you have better chances of passing and I actually passed AUD and BEC that way lol.January 7, 2017 at 6:30 pm #1426362
Got hit with a bad cold this weekend, trying my best to fight through it and study but it's been rough. Should I just rest up and resume when I'm feeling better? My exam is a little over two weeks away and of course I get hit with it on the weekend, my prime study time.January 7, 2017 at 8:47 pm #1426458
Wish you good luck!.
By the way REG SIMS are bit tough. Did the SIMS exam focus on tax area or property transaction?
Thanks,January 7, 2017 at 8:59 pm #1426475
@re2pect – Even though my first time was the end of last November for REG, ethics DO play a big rule on getting that 75.January 7, 2017 at 9:04 pm #1426484
What is the amount of time that working papers should be kept? I got confused here:
For what minimum period should audit working papers be retained by the independent CPA?
A. For the statutory period within which legal action may be brought against the independent CPA. CORRECT
B. For as long as the CPA is in public practice.
C. For the period during which an auditor-client relationship exists but not more than 6 years.
D. For the period during which the entity remains a client of the independent CPA.January 7, 2017 at 9:04 pm #1426485
GLEIM: Audit working papers should be retained by a CPA for a period sufficient to meet the needs of the CPA’s practice and to satisfy the relevant legal standards for records retention. State and federal statutes specify the period of time within which legal action must be initiated to hold a CPA liable, but the auditor may find it beneficial to retain working papers for a longer period. Under the Sarbanes-Oxley Act of 2002, auditors of public companies must retain their audit working papers for at least 7 years. Furthermore, it is a crime for auditors of public companies to fail to maintain all audit or review working papers for at least 5 years.January 7, 2017 at 9:58 pm #1426508
I've been out since my burst of posts this morning! @namstut how was the exam? I'm a little jealous you have it all behind you! I still have yet to apply for my NTS!January 7, 2017 at 10:04 pm #1426514
@jack that's a good problem you posted! The corp will distribute at FMV…however if the debt on the property distributed exceeds the fmv then the liability is what you work off of, in that example 40-25=15 gain to corp. Thanks for posting!
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