Why CPA 5 Benefits to become a Certified Public Accountant

Hello, this is Stephanie from IPassTheCPAExam.Com. In this video, I would like to present 5 reasons
why anyone would want to be a CPA  now. First of all, what is CPA? CPA, which stands for Certified Public Accountants,
are finance professionals who have achieved expertise beyond a normal accountant through
advanced education, training and experience. In other words, they are like accountants
attaining the black-belt status.

Now, lets see how an accountant can benefit
from this title. First, prestige and the respect
As someone who manages to pass one of the toughest professional examinations in the
world, you gain the respect from family and friends, together with clients and business
partners. This prestige is going to help you in many
ways in your professional career. Second, higher compensation
I should mention up front that CPAs are paid better.

Robert Half, a global recruiting agency, publishes
annual reports that consistently show that CPAs, on average, earn 10 to 15% more than
their peers. The earlier you become the CPA, the earlier
you get the perks. Third, high demand Another important point is that CPAs are needed everywhere. Government, non-profit organizations and corporations
in all sorts of industries look for CPAs to fill their senior finance positions.

Therefore, it is not surprising that junior
accountants with CPA are preferred when it comes to recruitment and promotion. Fourth, every company needs a CPA! CPAs are also indispensable. With the many new regulations on compliance
after the financial turmoil in recent years, corporate accountability has become the number
one concern for companies and their shareholders. For internal compliance and external publicity,
they will extremely unlikely to get rid of these CPAs in whatever circumstances.

While the demand for CPAs has increased, the
supply is actually decreasing. You may not realize, but many CPAs are baby
boomers approaching retirement age. In fact, according to an AICPA report, 75%
of CPAs in the US are going to retire in less than 10 to 15 years. Lastly, its a matter of survival
Finally, a pressing reason for accountants to become a CPA is that, if you procrastinate,
you will be sorry in 5 to 10 years time when you become a controller or CFO without a CPA title.

You will be essentially forced to take the
grueling exam when you are 40 plus years old or else lose your job. Do you want to take the risk? To learn about how to become a CPA and how to prepare, study and pass the CPA exam, please check out my website or subscribe to my Youtube channel for updates. Thank you for watching, and see you in the next video..

Statement of Cash Flows - Lesson 1

Welcome, welcome to a fun and exciting area
called statement of cash flows. Cash flows, very heavily tested. Very important area,
we are going to probably spend an hour, hour and a half on this right now. In different
sections or different little video clips, but it's going to be a really important area.
You need to understand this, heavily tested on the exam.

Very important for real world,
right? You are out there doing a job. This is stuff we're going to cover both for GAAP
and then at the very end of the section under IFRS and the comparisons and differences.
Alright, statement of cash flows. So we've got our statements. Whose statements are these?
Management's, right? Management is responsible for the preparation for the content, and so
on.

A complete set of financial statements is a balance sheet, income statements, and
statement of changes in stock holder's equity, statement of cash flows, other comprehensive
income, and things like that. So a statement of cash flows is just this.
It talks about how much cash did I have at the beginning of the year burning a hole in
my pocket, how much cash do I have at the end of the year? We are looking at the difference
between the beginning and the end and we are trying to see, what are the ch-ch-ch-changes
in cash? So what it tells me is, how much cash do I have at the beginning, how much
cash do I have at the end? The difference is the increase or decrease in cash.
So let's say for example at the beginning of the year I had $100, at the end of the
year I have $250. That means I've got $150 more cash burning a hole in my pocket. My
job is to figure out, where did this cash come from? As we look at this we are going
to see the cash could come from either operating activities or investing activities or financing
activities.

You are going to see this plus or minus this plus or minus this equals the
net change. So what we are trying to do is say, Hey,
I've got $150 more money in my pocket, where did it come from?" Where did that money come
from? That's the purpose of the statement of cash flows. So what we're going to have
to do is understand, first of all, what is the definition of cash, because we are talking
about the change of cash. The other thing is, we need to define what
these activities are.

The FASB very carefully defined investing and financing. If it's not
investing or financing, what is? Boom, operating. Operating is like the catch-all. If you don't
know where to put it, put it in operating.

So that's what we're looking at as far as
where the amounts are coming from. We've got operating, investing and financing.
FASB carefully defines investing and financing. Everything else is what? Operating. So again,
the key is the change.

?Ch-ch-ch-changes, and face the strain ? Who sang that song,
many years ago? D-d-d-d-David Bowie. Ch-changes, there you go!
Alright, looking at notes it says, "Statement of cash flows is required whenever a company
presents their results of operations". So you provide an income statement you've got
to have a statement of cash flows. The purpose is to provide in-flows and out-flows, sources
and uses.

What is the source of money coming in, what is the use of money going out? Where
did the money come from, where is the money going to? That's our sources and uses.
Now, we talk about cash, right, what is cash? We know what cash is, that's the green stuff
you carry around, makes you popular, gets you friends, and gets you dates, right, you
could buy a date. What is the cash equivalent? Because it's cash and cash equivalents. That's
the first balance on the balance sheet. Cash equivalent is a highly liquid investment with
an original, key word is original, maturity of three months or less.

Highly liquid, original
maturity of three months or less. If you look in your notes it says, "Easily
convertible into known amounts of cash." So it's highly liquid. "And original maturity
of three months or less from the date of purchase". What that means for example, is, original
maturity to you the purchaser.

For example, I have a one year CD. A one year bank certificate
of deposit. I've had it for, it's a one year CD, and I've had it for nine months, eight
months. What is the original to me? One year, it's still an investment.
Example two: You have a one year CD that matures in a week.

I buy it from you, what is the
original maturity to me? A week, so it's like debit cash, credit cash. On the balance sheet
it's kind of a wash, right? It's like, debit cash equivalent, credit cash, but where does
it show up on the balance sheet? Cash and cash equivalents, it's the same line item.
Again, if the original maturity to me is three months or less, cash, cash. If it's longer
than three months, investment cash. So it goes into the investing which would be and
investing activity.

So that's the first thing you need to understand as far as what shows
up there on the statement of cash flows. As I said earlier, there are three different
categories, what are they? Operating, investing and financing. The reason I like to cover
this later in the course is because of the fact that all of this deals with journal entries
that we had to learn. Now we've finally gone through journal entries like making a sale.
Journal entries like equity method, cost method.

We've talked about all these different areas,
deferred taxes. That before we hadn't talked about. Now that
we've covered them, now we can go through and actually look at a statement of cash flows
and have it make some sense because there are so many entries on there. We've got to
figure out how each of these journal entries affects cash and cash equivalents..

New CPA Exam Game Plan

- Hello, and welcome. My name is Roger Philipp
of Roger CPA Review. Today we're gonna talk about
the CPA Exam Game Plan, how to officially and
effectively pass the CPA exam. We're gonna look at
the roadmap to success, and there are several steps
to accomplishing your goal.

Step one, plan your CPA exam journey. Step two, learn the CPA exam structure. Step three, focus on higher order skills. And step four, apply for the CPA exam.

Now step one, plan your CPA exam journey. And I guess the first thing
you need to do is say, okay, what is my situation? Who are you? Are you a first-time
candidate, someone who's never sat for the exam before? Or you've already passed a part or you're a seasoned candidate where maybe you've studied quite a
bit and haven't passed, or you're on your way to
passing all four parts. For the first-time candidate, the strategy is to sit down and say, okay, what order should I sit for the exam in? Now there's different schools of thought. FAR generally takes the
longest time to prepare for, and it has the most amount of material.

So we recommend starting with FAR first. Then between REG and Audit, I would say if you're just graduating
school or just got out of school and you had an amazing tax teacher or an amazing audit
teacher and you feel like, hey, I feel pretty comfortable with that, then you may wanna start
with Audit or with REG. Depending on that. No matter what part you
take, there's always gonna be topics that you haven't seen in school or you don't remember,
but don't worry about it.

That's our job to teach
you what you need to know. BEC I would say prepare
last because first of all, it has the least amount of material. You still have four hours
for that part of the exam, but also time is not of
the essence as far as taking the exam because there
are fewer multiple choice and fewer task-based problems. Plus the content in BEC is
very general, very broad, so a lot of it you'll see
as you're going through FAR, Audit, and REG.

Now keep in mind, once you pass a part, you keep that for 18 months. So that means you've got 18 months once you've passed the first
part to pass the rest of it. Now for a seasoned candidate,
the strategy would be which part am I already in process of. Let's say, for example, I took a part.

Darn, I got a 72, just
missed it by that much. I would suggest jump back in
and finish that part as well. So let's say you're starting
with FAR, that's great. Same kind of thing, maybe
go to Audit and REG, and then finish up with BEC.

But again, if you took a
part and you came close, what I always tell people
is you seem so close, you just need a little
bit more information, and you too will get through that part. Now what are the study time estimates? Generally per section
we have lecture time, and then we have study and practice time. We also suggest that you
finish up with sample exams. Now as far as the lecture
time, for all of our lectures, it's over 120 hours of lecture.

So for example, it's
about 20 hours for BEC, up to 44 hours or so for FAR. Now we generally suggest that the average successful candidate will
spend about two to three hours of study time for every
hour of lecture time. So let's say you've got 20
hours of lecture in BEC. That means times two,
you've got about 40 hours of study time, so now we're
up to 20 and 40 are 60 hours.

Plus we want you to go
through some sample exams just like the exam pressure
where you're sitting down working through the exam with
a 15 minute actual break, which you now get on the exam. That we suggest doing twice,
which is another eight hours. So you can see where we
suggest about 300 to 400 hours of prep time. Woo, that's a lot of time.

That's not a number we come up with. That's what the AICPA says the
average successful candidate will spend in properly
preparing in order to pass the CPA exam. Now what are some good study strategies? First of all we suggest you build a plan and you stick to it. Now that means you kinda
gotta look at your life and say, okay, where am I in life? What's going on in my life? What is my personal situation, my family, do I have a family, my
work, how many hours, is it busy season, is it slow time? What is my financial situation? Do I have travel plans, family vacations? And so you wanna kinda look
at the schedule accordingly and say what's gonna work better.

Then you wanna incorporate
that into the study planner. So the study planners will
set up a study schedule, whether it's three,
six, nine, or 12 months. So you wanna look at that. And studies have shown
that if you start studying every day, that you're gonna
study at the same time, that it takes less time
to kinda get into it.

So let's say I'm gonna
work all day, get home, have a little dinner, and start studying at seven o'clock at night. Well, the first night it
takes 7:30 you get going, and then 7:20, and then all of a sudden by 7:03, boom, you're being efficient and effective at your studying. Now as far as studying
and choosing a study plan, as I said, we've got a three, six, nine, and 12-month schedule. You can also see that in
a three-month schedule, you're studying like
every day to get through all four parts 'cause you've gotta squeeze 300 to 400 hours in three months.

If you're gonna do the
12-month schedule, for example, you've got some time
off, because now I've got 300 to 400 hours spread among 12 months. So that's something to consider. That would be the first
step to accomplishing your studying goals. Step two, let's learn
the CPA exam structure.

Now on the exam there are four parts. The four parts are Auditing,
FAR, BEC, and Regulation. Each part is four hours in length. This is as of April 1st, 2017.

When I took the exam way back in the day, when I was your age, it was a 19 1/2 hour three day exam twice a
year, six days a year. Now you can take it like 270 days a year, six days a week, you can
take it one part at a time. Auditing has your
planning, internal control, substantive testing, IT, audit reports, reviews, compilations, and so forth. That is the audit portion for four hours.

FAR, that is intermediate
one, intermediate two, advance government, nonprofit squeezed into a fun-filled
four hour adventure. That's leases, bonds,
pensions, deferred taxes, contingent liabilities,
consolidations, foreign currency, translates and remeasurement and so on. Governmental accounting,
nonprofit accounting all in FAR. BEC, we've got corporate
governance, we've got micro, macro economics, we've got IT, we've got operations
management, our favorite area, cost managerial, it's
back, good old variances.

And then finally Regulation,
that would be tax, corporate tax, individual tax, S-Corps, partnerships, estate, trust,
gift, exempt organizations. It would be business law,
and then also professional responsibility and ethics. So that is how your 16 hour
fun-filled adventure is set up. As far as the exam structure,
it is now broken down into five different testlets.

Testlet one and testlet two
are multiple choice questions. Testlet three are task-based simulations. Then you get a 15 minute
break, which is really cool. Back in our day, you
weren't allowed to take, oh, you could take a break,
but the clock kept running.

Now they give you a
standardized break between testlet three and testlet four. We suggest you take that break,
get up, go to the restroom, wash your face, you know, go
to your locker if you need to. Come back in, but allow
enough time to check back in. You gotta get fingerprinted back in so you can sit back down
and finish the exam.

If you're out longer than 15 minutes, (snaps) the clock will start after 15. If you wanna get back and
take only a 10 minute break, you're allowed to, you can start up. Let me also mention, you
are allowed to take breaks between the other testlets, however, the clock will still continue counting. Also they're gonna do a write-up because they're gonna
review all the video footage to make sure you didn't cheat,
you didn't go to your locker, look at books, look at a
cell phone, things like that.

So you are allowed, like
you gotta go, you gotta go. Then you go between testlets
one and two let's say, but the clock will keep running. So the exam itself, multiple
choice, testlet one, multiple choice, testlet two,
then testlet three would be two task-based simulations,
15 minute break, then testlet four and five. That would be three task-based simulations for Audit, FAR, and REG, only two for BEC.

Testlet five would be three TBS for Audit, FAR, and REG, and three
written communication or essays for BEC. So you can see how the
exams are different. They each have different
numbers of multiple choice, anywhere from 31 up to
38 for, for example, Regulation, so there's, you
know, 76 questions on there. Also you'll notice that your
scoring, 50% of your score for Audit, FAR, and REG come
out of the multiple choice, testlets one and two.

The other 50% come out of the other three. For BEC, 50% are multiple choice, 35% are gonna be testlets three and four, which would be task-based
simulations, four of 'em. And then 15% would be testlet five, which is written communication. One of the things, too, we
suggest, is knowing exactly what your countdown
clock should look like, because when you take the exam, you can't wear a watch,
there's no clocks on the wall, it's you against the countdown clock.

And when you log in and say
I accept, I accept, I accept, and the exam starts, you
see four hours, three-59, three-58, three-50, and your
heart starts beating like oh, my gosh, I should've
started studying sooner. So knowing what the clock should look like makes it much easier. You're gonna get two like
yellow boards or white boards where you can write on both sides. We suggest you write
down the time you expect to finish each testlet.

So testlet one, for example,
an Audit, I'm gonna start at four hours, 45
minutes in or three hours and 15 minutes left, I should be done with the first group
of 36 multiple choice. Then another 45 minutes
in, the second group. And then another 30
minutes in, I'm right at the two-hour mark, that's
when your break should hit. So the AICPA suggests
that the halfway point is right at the end of testlet three.

So when you take your break,
you should be at about two hours, now in some cases,
you may be a little early, an hour 40, some cases,
you may be later at 2:20. But you don't wanna go too
much beyond 2:30 or 1:30 'cause it means you're going too quickly or too slowly in order to get through it. Then as you hit the task-based simulations for testlet four, you've
got three there at about 60 minutes, and then another
three at about 60 minutes. So that's saying roughly about 20 minutes a task-based simulation.

So the way we break it out here is again, you write down your times,
figure out where you need to be. Again, you wanna be at about halfway point by the time you hit your break. But looking at the
multiple choice and saying, okay, I've got 45
minutes for 31 questions, or 45 minutes for 38
questions, you've gotta figure about a minute and a
quarter per multiple choice. We suggest about 15 to 25 minutes for a task-based simulation.

Some of 'em are easier, figure about 15. Some might be like a document review, more detailed simulation. You might need up to 25 minutes for that. Research, one of the task-based
for Audit, FAR, and REG.

Will be at least one will be research, figure about 10 minutes. In BEC you have three
written communications. We figure about 45 to 55
minutes for all three, or about 15 minutes each. So that is kind of the
time strategy we suggest.

Now we have full-length practice exams, and these are the things
we suggest you do. That's why in our study
schedule we said allow at least eight hours for each part before you take the
exam so you can sit down in the exam-like environment,
where you're going through the four-hour exam with a 15 minute break after testlet three, so that
way you kinda get that feel just before you actually
go in and sit for the exam. For step three, focus on
the higher order skills. Now this is something
that came out where the, went out and they talked
to the firms and they said what are newly licensed
two year, second year, the end of their second
year, CPAs missing? And it said they're
missing critical thinking, higher order skills set, the
ability to really analyze the information.

So what they said is they
said, okay, let's look at Blooms Taxonomy of
Educational Objectives. And there's different levels,
the bottom is remembering and understanding, and then application, analysis, and evaluation. They said let's look at these. Up until 2017, the exam was mainly testing remembering and understanding
and application, which are the two bottom ones.

Then they added, you know what, analysis, and for Audit only, evaluation. So as you're going through it says, okay, what are the requirements
for a basic lease? Here they are, boom,
remembering and understanding. What is the calculation to
come up with the journal entry? That would be application. Analysis might say, hey,
here are some variances for BEC cost accounting, are
they favorable or unfavorable? That might be analysis.

And then evaluation would
say using your judgment to draw conclusions about
account receivable confirmations, that would be evaluation. Each exam has a different
breakdown of remembering and understanding,
application, and analysis. But again, to emphasize,
evaluation is only on the Audit portion. Now approaching higher
order skill questions.

What we suggest you do is
skim through the blueprints, and the blueprints are
great, they replace the old CSOs, Content Specification Outlines. And what they do is they
tell you how an area's gonna get tested, but it also shows you what skill level they're looking for. And as a general rule, if it's
remembering and understanding it's multiple choice. If it's application, it could
be either multiple choice or a task-based simulation.

If it is analysis or
evaluation, it's gonna be in the form of a task-based simulation. So what's nice about
the blueprint other than over the CSOs is it'll
show you how the area might be tested, so you
might have analytical procedures and auditing, and
it might be tested more as an analysis level, which
means that's probably part of a task-based simulation. If you see the check mark in
remembering and understanding like IT and Audit, you
can pretty much be assured that it's gonna be more of a
multiple choice type question. So look through, use your
Roger CPA Review Course where we go through the
step-by-step guidance of the higher order skills,
and how we go through and talk about how it
ties to Blooms Taxonomy of Educational Objectives.

We also have special dedicated lessons where we're gonna focus
you in on how to approach the higher order skills, how to approach these things called
document review simulations. Then again, we wanna practice
this higher order skill set by going through the actual problems. Now you'll see in these things called Document Review Simulations,
they have a resource tab, and in the resource
tab, it'll give you like three to maybe six or
seven different exhibits. And these exhibits could be
a letter from the attorney, an invoice, a working trial balance, a depreciation schedule,
an income statement, balance sheet, and so,
so support documents.

They're gonna give you more
information than you need. You have to discern between
what is or isn't important. It's kinda like you're
doing someone's taxes, and they show up with
their shoebox, and they go, "Here, here's a shoebox of receipt. "Have a lovely day, do my taxes." You've gotta go through and discern what is deductible and what isn't, what is useful information,
what is useless information.

That is the purpose of the DRS. Then as you work through the problem, you'll see in the blue,
the different questions they're asking, as you click on that, it opens different options. And you may have four,
five, six different choices. It could be keep the original
tax or delete the tax.

Or one of the other choices. Now how am I gonna figure
out which choice is correct? It's based on the exhibits
in the resource tab. The support documents
that help you to discern what is or isn't important,
what's gonna help me answer the question, by
looking at the support, by looking at the resources. And then when you mark
it, boom, it comes back with a check mark saying yes,
I've addressed this issue, I've addressed this question,
I've answered it completely.

We also have, which is great,
a Homework Help Center, HHC, so while you're doing
your studying, you go, I don't understand why A
is right and B is wrong, you're not on your own,
it's not a self-study, it's a full-study course. Hey, we have CPAs on staff that are here to help you answer that
question, so you can go, oh, now I understand why
A is right and B is wrong. So that's the Homework
Help Center, which is an important way to help make sure that you're thoroughly
understanding the concepts. Step four, apply for for the CPA exam.

Now when can I sit for this exam? As I said earlier, when
I took the exam way back in the day, it was
three days twice a year, six days a year. You can now book it like
a doctor's appointment. I'm gonna take FAR in downtown on Saturday in the morning, boom, you
book the time, the place, the part, you show up and take it. So the testing windows
are generally January, February, and then up through March 10th.

So that's kinda how it goes. So it goes through the different dates. Generally you can take
it January, February, and then the third window
through the 10th of that month, and that's how it goes, it ends up being about 9 1/2 months a year, like 270, 280 days a year. For the 2017 window only,
because it's a new exam that has some changes,
April, May, they're giving the exam, but the window shuts May 31st.

There is no exam in June of 2017. Then July, August,
September, back to the 10th, but here's the big catch. If you take it in April, May,
you won't get your results until August, they won't
release scores till August, I believe, 15, 16, 17 of 2017, because they wanna collect all the exams to make sure that they wrote a fair exam. So because of that, it's
important to realize that if I take it in April or May of '17, I may not get those results until August.

So if your 18 months is,
you know, you're at the risk of expiring, you need
to call your State Board and find out if they're
gonna give you more time. Because if I take it in
April, I'm not gonna know till August if I passed. Well, had I known I
didn't pass, I could've taken it in July. So you need to contact your State Board if your 18 month is expiring
right around that time.

If not, you don't have to worry about it, just know you're not gonna
hear from the April, May exam until the middle of August. Again, once you pass a
part, you have 18 months to pass the rest, so for
those of us that have already passed a part and our 18 months is expiring soon, you need
to talk to your State Board. Where do we take the CPA exam? We go to a testing
center called Prometrics, and they're located all over the country, all over the world as well. So that's why they're
giving the exam globally.

You can also take the exam globally. When you go to Prometrics,
couple of things. You've gotta bring your
Notice to Schedule with you. If you don't have it,
they won't let you in.

You need two forms of ID, a photo ID. And maybe a credit card,
the names all have to match on all three documents, your NTS, your photo ID, and your valid ID. The other thing is make
sure they haven't expired. If they've expired, they
will not let you in.

Now you do have an on-screen calculator. They give you headphones,
they give you a yellow or white board, double sided, two of 'em, where you can write all over it. If you fill it up, you raise it up, they'll come over and swap it out for you. When you go to Prometrics,
you've gotta check in, you gotta empty your pockets.

Someone said it reminded
'em of going to prison. (Laughs) Not that I've been. But the point is, they check to make sure you don't have cell phones on you, written notes on your
hand, anything like that. Everything you bring
has to go in a locker.

If you're gonna wear a sweater, you cannot take it off during the
exam, you have to wear it the entire time, you can't
hang it over your chair. So dress comfortably
knowing that you can't take stuff off, you gotta
keep all those clothing on, which is probably good
for everybody around you. But the point is, when
you go into the exam, be as prepared as possible,
know what to expect. You can also go to Prometrics in advance, and they could walk you
through and show you what the area looks like and so forth.

When you check in, you're on camera, there are people that
walk around to make sure you're not cheating, cameras everywhere, on surveillance, and so on. So realize you gotta get
fingerprinted, photoed, all of that stuff. Allow about an hour extra when you show up so you have plenty of time to check in, sit down, and take your 4 1/2 hours. It's 4 1/2 because you've
got about five mintues to check in on the screens,
then you've got the exam, plus the 15 minute break,
plus a five minute exit survey that they want you to take.

How do I apply for the exam? In many states, you can go through NASBA. In some states, you go
through the State Board of Accountancy to apply, it's
usually about 100 to $200 for the first time, and
about 25 to 75 for a repeat. Now we suggest, don't sign
up for all four right away, but maybe sign up for two
parts, and they're about $200 a piece, let's say. So you sign up, pay your 100
to $200 in application fee, then you have your transcript sent in, they match 'em up and say
yes you qualify to sit.

Then send the transcripts,
get an ATT authorization to test, which means you have
90 days to pay for the parts you wanna sit for, you select the parts. Then you get your Notice to Schedule. Now an NTS is good in most
states for about six months. Some states, three months,
some states, nine months, like California, and
there's I think a state that is 12 months.

But in most states it's about six months. Now this is important,
you only pay for the parts you plan to sit for within
that window of your NTS, Notice to Schedule. So if it's six months
and you only plan to sit for two parts, pay for two parts. Because if you pay 400
bucks for two parts, great.

If you pay 600 but only sit for two, you forfeited the 200 bucks. But if you wanna add a
part, you can do a new Notice to Schedule for
the repeat fee of 25 to 75 bucks, depending on the state. And you'll get your
Notice to Schedule usually in about three or four days. So the first time you apply,
it takes about four weeks because they gotta check
out your transcripts and everything.

Once they've approved you, to reapply takes a couple of days. So my suggestion, first time,
sign up for maybe two parts, repeat, sign up for one or two parts. That takes about a week. Then you schedule your
exam with Prometrics, then you take the exam, and then you receive your scores, and
you receive the scores based on the Score Release Schedule.

Now the Score Release
Schedule generally is the first 20 days they collect, so January 1st through January 20th, they collect those, grade
'em for about 10 days, and then release 'em. Then they take the next 20
days, six days later, and so on. So that, they kinda release
'em three, four times in a window, that's
normally how it happens. As I mentioned earlier,
for April, May 2017, you will not get your scores until August, the middle of August, August, I think, 16, 17, 18, something like that.

For quarter two, score
release September 22nd. And quarter four, score release December, so you'll see here that
they're kinda holding off on the release because
they wanna make sure that they wrote a proper exam. So those are the proposed
dates for the score release for 2017, you could
also look on a website, you can also call our office. Now what does it take to get licensed? Most states, you need 150
units, not to sit necessarily, but to get certified.

So generally you need 150
units, 225 quarter units. You need to pass the
exam, in a lot of states, you need to pass an ethics
exam, which is a take-home exam. And then you need one to
two years of experience. In most states you need a
year, with anywhere from 1,800 to 2,000 hours,
and that's what you need in order to qualify, that's what you need in order to sit for the exam.

That, my friends, is your game plan for preparing for the exam,
for studying for the exam, for taking the exam,
for getting the results, passing the exam, and
getting your experience in order to qualify to become a CPA. As we always say, if
you study, you will pass with the Roger Method. Study hard and have a
great career in accounting, and thank you very much for your time. (Gentle music).

Macquarie is the best place to study CPA in Australia says Indian student

[Music] Hi, my name is Arjun Sharma. I'm from India and I'm doing Masters in Accounting
CPA exchange here. I choose doing Masters in
Accounting CPA exchange program because I have done my Chartered
Accountancy from India. I think this is the best place
for one to take entry in CPA.

This is the integrated program. Macquaire is the only Uni which provides this program
in Australia. I came here in June 2013. I started my program from July,
so it's been like six months.

The best I have learned
from this Uni, and after coming to Sydney,
is how to balance our life. I think time management is a crucial factor in
everyone's life. In India, I was okay sorts and I was not that much
into time management. But here, time management
is really crucial.

The other thing is the studies. I had to start from scratch,
just go in a subject. I think this is the best thing. I have to refer to case laws.

I have to go in the [?], So all these things
help me in my future. I'm planning to
practicing as a CPSO. I think that's going to help me
when my clients will come to me, they will ask me some questions. I think that's going
to help me a lot.

I'm working as a
financial analyst with a financial firm in Sydney. The work culture here
is totally different. For everything, you
are accountable. There is no supervisor.

There is no lower staff. Everything you have
to do by yourself. I think I got this job because
of two things - because of my accounting degree, the
Chartered Accountancy Degree, plus I am studying in Macquaire. Because my employee is so
much fascinated by Macquaire, he also did his MB
from Macquaire.

When I went to him and
he took my interview, he straight away
said, "All right, you are studying in Macquaire. That's fine, I know
you're a hard worker, so I think that helped me a lot. This is a dream
university I think, because it has got
everything a student wants. A green campus - it's
not a campus basically, it's a green park, I think.

Big buildings and a park. Then you get a quite
big aquatics center, gym, park, theater,
everything is here. I think nothing is missing. Plus the biggest advantage
is, it's close to the city.

It's not too much far. The transport facilities
are very nice. They have got their
own train station, so it's not difficult
to come here. Plus, overall, the
education system, the ranking, they have got five stars just a few
months back in QS.

Rating, so it's pretty good. The teaching staff, really
they are highly qualified, very friendly, and very helpful. [Foreign] Everything is perfect. If you are planning to, I think
Macquaire is the best option you can choose.

[Music].

How to Pass The 2017 CPA Exam Quickly While Working(How toStudy For CPA Exam) (Part 1 of 3)

Hello how's it going thanks for dropping
by this channel today I know you've come here because you're thinking about
taking the CPA exam or you're looking to pass that CPA exam because it's driving
you nuts well guess what you've come to the right place now I want to let you
know I originally put this video together a few weeks ago and guess what
I when I put the footage together it was over 30 minutes long I like whoa hold up
that's way too much and I don't want to put you through a 30 minute long video
so what I've done is I'm taking this video breaking it into three parts so in
part one which you're about to watch it's going to have five tips in part one
there's 12 tips and off with a few bonus tips there's technical tips in
non-technical tips because in order to the pass the CPA exam you need to know
folks and a lot of this stuff a lot of the non-technical stuff in my opinion is
more important than the technical stuff but with that being said I want to go
ahead and get you guys started in part one I hope you enjoy the video I hope
you find this information helpful and best of luck to you in your journey
hello YouTube Mike here of MK chip I am so excited to be sharing this
information with you today I'm going to be talking about how I passed all four
parts of the CPA exam in less than nine months while working a full time job and
how you can too and that's coming up right now
I am MK The CPA and along with my sidekick chipper we teach people things that you
did not learn in school such as finance investing taxes and more now generally I
talk about financial subjects on this channel but as you guys know if you
follow my videos I often talk about having career and life success now as a
professional CPA and as a tax accountant in real life I am very happy to be
sharing with you how to pass the CPA. Exam I feel like this is a very big
question people have and it's something I struggled with for a while until I
passed it in today's video I have 12 very details very specific
tip how I went about passing that exam these are tips I have shared with my
co-workers and it works if you put it into play it's going to work for you so
that's why I'm so excited to share this information with you today so please
watch this whole video from start to finish it will be worth your time the
information I have to share with you literally and I really really mean this
might save you months or even years of trying to scrub your way through this
exam so please watch this video from start to finish and with that being said
let's go ahead and get started hey guys these tips are going to help
you pass all four parts of the exam there's audit BC. Reg oh and of course there's far my first tip I have for you guys it's
probably the most important and I want to lead off with it and that is you in
order to pass a CPA exam you must be a crazy intentional disciplined focus
there's no substitute there's our there's no review course or anything I
can tell you today that that will take the place of your dedication and your
hard work the passes exam it's new truly and truly not how smart you are i if you
knew my background or not you know that I am not the sharpest tool in the shed
I'm not the sharpest knife in the drawer but it's more about how much time you
will dedicate to studying how much work you're willing to be put in that is
overall going to be the main factor of you passing your exams more than
anything else that is what's going to do it is you stay in this is it I'm going
to do it I'm going to commit to this I. Don't care what it takes I don't care
how much time it takes I'm so serious about this and I'm going to make it
happen that's the kind of intense discipline focus that's going to keep
you coming back at the attacking that task day and studying day after day
after day night after night after night until it's done if your family's telling
you they miss you why are you studying so much if you feel like you're in
prison being a like your own prison like solitary confinement that means you're
on the right track because that means you're studying enough number to
understand what it takes to pass this test
guys this test is hard in fact it's very freakin hard it's one of the hardest
test on the Flannan that's not even a joke I've had attorneys come up to me
and said that the attorneys who've patents taking both the bar exam and the
CPA exam they're saying Mike the CPA.

Exam was harder this isn't some cute
little monkey test that you can play around with this test some freaking I'll be telling you those guys I played
around with this test when I first started with it
and it dominated me dominating my bit one of my biggest regrets in life and
was this test is that I didn't know how much effort and how hard this test
actually was until later on in my life I. Probably wasted a good two to three
years of my life now at the end of this video I'm gonna be showing you my real
scores and you're going to see every time I failed in every kind of path
you're going to see when I started and when I finished but truly what my
biggest regret is not knowing how much I. Actually need to study in order to test
exam so please realize this test is hard you really need to commit to it number
three you need to know why you're doing this this because it's test so hard it
can be very frustrating for many people so you have to have a very strong reason
why I don't know why you're taking this test you but you better know why is it
because you want more money is it because you want to have a better
stability or career do you want to go open your own CPA practice do you want
to be able to provide better for your family whatever that reason is write it
out and put it somewhere you can see it because I can tell you there might be a
day or several days that will come why why you start question yourself why am I
not out with my friends why am I not seeing my family why am i spending so
much time studying so you have to have that strong reason why and keep it out
in front of you and always keep it by you so where you can see it put it on
your fridge put it on top of your notebook whatever you need to do in
order to see it do it that's number three number four understand that
there's a lot of emotional but I still mean emotional struggles with his exam
there's going to be days when you're tired you you've gone to work and you
don't want to study days when you know you just want to do anything but study
and you're mentally drained now the hardest part at least in my experience
was telling my friends and family no because I had to learn to tell them no
and it was very hard because I wanted to see them I said
guys I love you I want to see you but I. Really really just need to commit to
this test I need to do this and what I.

Want you guys to understand now you're
going to try to help them understand what you're going through because
there's a lot of study time required for this test in fact if you use Becker CPA
Review you know they recommend the good 150
hours 200 hours of study before each test but what I need you guys understand
is that they are not going to understand what you're going through most of them
cannot understand how much time that's required for this test so please
understand that they are not going to understand they might be a little
earthed for a while hey why is he spinning wire why is he or she's
spending so much time not hanging out with me and studying for that test why
are they doing that well they just they just can't understand what it takes to
pass this exam number five before you're studying
be ready to study now the reason I say that is most of these CPA exam review
courses are several of them let's say Becker for example has an expiration
date on it so that's why when you're ready to be ready to study
you put that review course if you're not quite ready to study I would hold off
from doing it because what I don't want to happen to you guys is for you to pay
for that and then have it expires because you weren't totally ready to
study there I did some really dumb things and I mean dumb things when I was
trying to take these exams for example I. Decided that I was going to take an exam
before getting the week in before getting married Everage dum dum dum dum dum I ended up
getting this 72 on that exam so but don't worry doesn't in there gets better
so then I decided since it was so smart for me to study while trying to get
married I thought it would also be a good idea for me to study whilst trying
to but for just a house in fact the very house I'm in right now it's okay I still
love your house and guess what buying a home takes a lot of time I ended up
getting the worst score possible I got the 74 it hurts so bad
there was nothing I will tell you guys there is nothing that will hurt more
than a 74 there is nothing that will light a fire under your butt make you
madder than a 74 and all I need to tell you this after I got that 74 I never
failed again be ready to study when you purchase a review course and
really commit to it and just don't don't be trying to do any major life events
because it might really throw you off course and what I would recommend doing
when you start studying i I never scheduled more than two tests at a time
I would recommend trying to knock out one of the harder tests right off the
bat such as rehgar far the first test I. Pass was regulation at least that's what
I did and that's what I would recommend you've made it through part number one
congratulations in part number two we're going to get
much more testicle as we lay out the Nick set of tips so I hope you stick
around for the next part because there's a lot more helpful information coming
your way if you liked the video do not forget to hit that like button before
you leave on this channel we make videos that help you become more successful
with your money and in life and also we cover career videos such as this one so
if you're not already subscribed you know what to do hit that subscribe
button down below so you can do not miss any of our future videos don't forget
guys you can follow me on Facebook and Twitter right over here
alright I will hope to see you part number two and until next time I hope
you have a great week and I'll see you in the next video bye bye.

Full Breakdown of CPA Earnings - How Much I Made with a CPA Link Through Email Marketing

What's going on guys it's Brian from BG
meeting innovation and today I want to bring you some great content if you're
new to the channel it's full of digital marketing tips
ecommerce insights and really step-by-step how-to content for any
aspiring entrepreneur that wants to make money online so if you're new to the
channel go and hit that subscribe button so you don't miss anything and with that
being said we're just gonna jump right in alright guys so this is going to be the
you know much-anticipated follow-up to yesterday's video I got a lot of emails
and questions essentially asking me if I. Was going to do a follow-up video to
that to show you know how many click throughs how many opens how many leads
and essentially targeted emails I. Generated from it and the profit overall
so here it is I broke it all down for you and I'm gonna go through it with you
right here to show you how much I made yesterday ok and the entire process if
you're not sure and you're not familiar with the video I'm talking about I'll
drop that up in the right hand corner right now so you can check that out I
suggest going ahead and checking that video out so you can watch it and really
understand the process that I went through to essentially market a CPA link
to targeted emails and how I make money that would literally take you through an
entire process I have an entire course on that I talked about but that video
will pretty much give you the gist of you know the process so you understand
where we're at then you can come back and you can obviously check this video
out so you know and you understand the numbers that I'm breaking down this
video is essentially for all the people that watch yesterday's video and wants
to know you know how many leads I pulled how many opens and clickers and all the
numbers and then obviously how much profit I made so what I did is I broke
everything down for you and I'm simply gonna go through it right here with you
now I'm not gonna pull out my max bounty account for a bunch of different reasons
a it has a bunch of the other um you know links and niches that I market to
and if you know anything about CPA. Marketing or you know even affiliate
marketing just in general you'll know that if I show the niches that I'm
marketing to and have success in that will essentially create competition
around those and while I am definitely trying to help you guys I'm a lot of
those niches to market a lot of my stuff to because they're very profitable so
everybody's got to go through that initial process of basically figuring
out what works for them what doesn't what niches are profitable and what
niches aren't and really what links and offers give you the most bang for your
buck and convert the best so I literally did a random one yesterday I'm gonna
break everything down for you I used five accounts on it total and
here we go with all the numbers like I.

Said if you haven't checked that video
out go ahead and check that out that will pretty much bring you up to speed
on what so yesterday you saw me go through a eh
which is essentially atomic email hunter and overnight that pulled 43,560 one
emails around the targeted keyword phrase paid surveys so what I did is I
had a CPA link obviously and I wanted to figure out you know keyword emails I'm
sorry emails around the targeted keyword of paid surveys so I could market my CPA
paid survey link to those people so I. Pulled out forty three thousand five
hundred 661 emails in total from a eh I. Sent emails to all of those emails using
five accounts total okay I broke it down evenly between five accounts all those
were G suite accounts with GMS on each one of those out of all four hundred
forty three thousand five hundred sixty-one emails that I generated and
sent emails to using that email template from yesterday 6870 of those people
actually opened the email that means that you know almost 30-some thousand
didn't even open it yet yeah now there's a bunch of different reasons why some of
them might not have gotten it or you know had the chance to open it yet
some of them might thought I've thought it was spam a lot of them might not have
been delivered which is a huge problem with this type of method but as you see
and when I go through the numbers more and through the process the power in
this is in the number so it's in the the potentiality of sending a vast array of
emails and numbers out into you know the market and essentially getting a low
conversion rate which is something I'm about to talk about now
so six thousand eight hundred seventy people open that email out of those six
thousand eight hundred seventy people that actually opened it about eighteen
hundred roughly clicked through which essentially means they click the link
one or two of the links that I posted in there they read through and click the
link which means they were extremely targeted and they wanted to find out
more however of the eight hundred rough people that click through to the actual
landing page only five hundred and sixty three of those people actually submitted
their which means I got 563 leads total out of
the 43,000 561 emails that I sent yesterday which is a meager 1.2 9 %
Conversion rate in total now that is horrible you know that that's horrible
for a lot of different reasons now that might improve you know in a day
or two as more and more people potentially open the email and click
through it this is only overnight so I. Gave it roughly about is lawn or 24
hours I sent the emails yesterday probably about like I want to say it was
like 9 or 10 I don't know the exact time I could go check that but so what more
people might click through more people might obviously you know convert but
right now we're sitting at a 1.2 9% 563 Leads I just checked my account so the
Commission on that link was 160 for every person I got to sign up through
that link it was 160 563 people signed up through that link that pay me a
commission of 160 which turned out to be a total Commission of 980 $900 sorry in
80 cents total on 563 leads so that is what the Commission I earned yesterday
now the cost to do that if you haven't checked out any of these other videos
obviously they'll be linked in the other video that I did you know yesterday go
ahead and check all the amount this will break down you know how to get G suite
accounts how to get G masked accounts literally everything that you need to
know is in that video however the total cost to send all these emails was broken
down right here that I broke that down for you here because a lot of people
always ask me you know how to get the G.

Suites how to get the GMs is how much
they are and really if it's worth it now this is monthly this I literally earned
in one day this is the cost to me monthly to keep these accounts open now
I have I think is it a I want to say it's eight accounts it might only be
seven I'm not on percent sure one of them is my BG media innovation account
which I used to send out all my business emails the other one is there there's
six yeah I think it is only seven actually sorry guys so I have seven
total G suite accounts one of them is my BG media innovation account and six of
the other ones I essentially use to do this process now I don't do it every
single day I used to do it a lot more but I still do it quite often May
a couple times a month to generate some income the total cost to send out all
those emails from five accounts monthly was broken down right here so five G
sweet accounts are for ninety five apiece so four ninety five times five
equals $24.75 A month for five G suite accounts now you need G miss on those G
suite accounts so you can send these mass email templates out individually so
five G mass accounts on top of a G suite account are eight ninety five apiece you
multiply that by five and you get forty four seventy-five a month so my total
cost per month for these five accounts that I used even though I have more but
I didn't use the other one was $69.50 When you add those up so sixty nine
fifty per month to keep these five accounts revolving and you know being
able to be used so 6950 a month that's not that much in the grand scheme of
things when you consider that you're making you know commissions of about
nine hundred bucks it's not that bad whatsoever the total profit after all
that here it is guys so sixty nine 50/30 I took that and I roughly divided by
thirty to get the cost per day on those accounts so that was two dollars and 32
cents roughly per day for five accounts and then I made a commission of nine
hundred and eighty dollars yesterday so we can assume that if I were to continue
to do this every single day roughly I. Could earn about nine hundred bucks a
day this is my total profit after everything I kind of wanted to break
this down I've never actually broken it down before because I don't look at it
like this I simply pay for the G Suites and I use
them whenever I use them and I just know that it's profitable so I never actually
break the numbers down like this but I. Wanted to do a follow-up video so you
guys understand the process the total cost that you can potentially incur
which are right here broken down for you and what you can expect as well as how
much you can earn you know what your conversion rate potentially could be and
so on and so forth I wanted to break this down so I get a lot of questions on
this this is a great great way to make money and if you haven't checked out my
CPA course I'll link that in the description it'll be the first link in
the description the second went link will be a similar course to that it's my
email and affiliate marketing course they're both roughly the same just a
little bit different approach the one basically sends affiliate links which is
slightly different way to approach it to cold leads like we just did this what
I'm demonstrating right here is CPA that will be the first link that the
affiliate marketing course will be the second link so feel free to grab them if
you want as always there are only $10 for you but right here is not where you
stop actually so I go over this in the course it's remarketing so I made nine
hundred bucks a day roughly two cold leads but the real money is made on the
back end so actually the money is made you know when you continue to remarket
back to these lists so what do I mean by that this is my BG media innovation
account I don't actually send you no mass emails out to cold leads from this
account anymore because this is my business email but let's just assume
that I you know sent that that mass email out through GMS on this account
last night so what would i do to remarket back well come down here to
campaigns and you can obviously see you got clicks your bounces your opens and
granted this is not something I used to mass email like I've demonstrated but
let's just pretend for a fact for a second that it is what I would
essentially do is I'd come to the campaign that I just sent which
potentially could be this one and what I. Would do is I would essentially go
through and see who opened it now whoever opened and click through I might
save them I might use email extractor and Paul those or email exporters sorry
which is a free download at Google Chrome app that you can get and also
something I talked about in depth in my courses what I would do is I'd scrape
all those emails from the people that opened it and I'd put them back in a new
email list and then I would go and send this a similar campaign out I would save
that email list and just not use it for a little while now I would generate
emails around a similar campaign maybe instead of using the keyword paid
surveys I would use the keyword you know online survey or something like that and
generate a new list and then I would send another mass email out to them and
maybe I would get you know 2,000 click throughs that time and then I would save
those 2,000 click throughs and then I.

Would add those 2,000 click throughs
from that keyword to these 1,800 click throughs from this keyword and I'd
remark it back to that list eventually as I built it up that's remarketing the
real money is made through the remarketing because your
you already built an established relationship with that person they've
seen your email before they've obviously clicked through they've obviously
clicked through sorry or clicked through I can't speak and then you know they
have a potential to essentially go through and you know make you more
Commission so you want to continue to save these people that are opening and
clicking through your emails it's that that way you can remark it back to them
later just make sure that you keep it within the same niche you don't want to
read that market back you know paid surveys to somebody that's like you know
just something random like baseball baseball enthusiast or something like
that but I hope that you guys like this video
I wanted to break down everything for you the numbers obviously I'm not gonna
show you my max bounding account like some people were requesting I talked
about why I don't do that in the course if you're looking for you know examples
of my earnings from the course I do actually go through that slightly in the
course so you can see them but I'm not going to show you the nation in which I
target because when I open up my max bounding account and show you the
numbers it will show you all my earnings not just these earnings and it will also
show you all the campaigns and most importantly the actual links that I'm
using so I'm not gonna show you the exact you know Nisha and leads and I'm
using because it essentially it just creates you know competition that's not
necessary I learned that the hard way by showing that in other courses and
they're not gonna make that mistake again but hope you guys like this video
I think there's a lot of value and a lot of cool stuff involved here there's a
lot of potential to make money doing this like I said if you're interested in
this grab one of those courses in the description there are only $10 for you
there's so much money to be made through email marketing if you know how to do it
correctly so like the video it obviously helps the channel grow comment and
subscribe and I will see you guys tomorrow and I'm actually not gonna do
the announcing of who won the the course today I'm gonna actually just pin the
name because I've been noticing that there's a strong drop off you know when
I actually announced it if you if you're not the winner so I'm just gonna pin
today's winner is the first comment if you see that you're the winner on any of
the videos up until 30 at the 31st email me to claim your free course and
with that being said I will see you guys tomorrow.

FAR Exam Leases

We're now going to talk about leases, accounting
for leases. And leases is an area that tends to bother people as well because leases and
bonds have a lot of similarities in that theyre present value techniques, theyre dealing
with amortization of things like discounts, premiums, or in this case, a lease liability.
What is a lease? A lease is where the lessor conveys the right and risk of ownership to
the lessee. It's kind of like..., I remember back when I started in public accounting,
a lot of kids would get a new job, and go, Woo-hoo! I got to new job. Im going
to go lease a convertible BMW so I can impress my friends.

What is the benefit of a lease?
You can buy a nice car... Rent or lease a nice car without actually having any money
to own it. But what we're looking at here are different types of leases. Were talking
about an operating lease, a capital lease and so on, but it says here, A lease is
a contract which conveys the right to possess and use the lessor's property for a specific
period of time in return for periodic cash payments.

Our goal is to recognize the substance
over form. It may be a true rental operating lease or a purchase and sale which transfers
all the rights and risks of ownership which is considered a capital lease, also, a non-operating
lease from the lessor standpoint. This is covered by ASC 840. So, in looking at a
lease, we're talking about two different people, the lessor and the lessee.

As I said, in the
past we have lessor, lessee, offeror, offeree, consignor, consignee, bailor, and bailee and
so on and so forth. So, let's look at the two different parties. Here we have a lessor
and a lessee. Again, the lessor leases it to the lessee.

Now, from the lessor standpoint,
we have an operating lease. We also have a non-operating lease. From the lessees standpoint,
we have an operating lease and a capital lease and now, notice, we don't call it operating
and capital here, its operating and non-operating. Here, from the lessee, its operating and
capital.

Now, on the exam, they love to test capital lease a lot, a lot, a lot because
in the real world, what's happening? Well, in the real world, usually you are leasing
an asset. So, is it operating lease, like a true rental, or is it a capital lease versus,
it's not normal or not usual that youre auditing the leasing company because the leasing
company would be more on this side. So, that's what we're looking at, lessor, and lessee.
Now, let's start out with an operating lease because its easy and it matches both of
them. An operating lease is just a true rental.

It's like your apartment. Every month what
do you do? You debit rent expense, credit cash, you debit rent expense, credit cash.
Do you debit the building on your balance sheet? No. Do you pay executory costs called
taxes insurance and maintenance on the building? No. Do you depreciate the building? No.

So,
all you really have is rent expense. Now, you could have prepaid rent, an asset. You
might be late on your rent, called a rent liability, rent due. So, you could have a
prepaid or a payable, but you don't show the asset on your balance sheet.

You're not depreciating
the asset. Basically, it is a true rental. So, if you look in your notes, for an operating
lease, it says the lease with the rights and risks ownership do not transfer, it is considered
a true rental. Alright, from the lessor standpoint, the lessor's the guy that owns it.

They depreciate
the asset. They paid the direct lease cost, like commissions, legal fees. They pay executory
cost, yellow in this word because you need to remember them. They are known as taxes,
insurance and maintenance.

Those are executory costs. So, in an operating lease, the lessor's
paying these. A lease bonus...If you paid one up front, then that would be deferred
and amortized over the life of the lease. Rent received in advance is considered unearned,
so, in other words, if there's any rent in advance, that would be unearned until it's
actually earned.

Security deposits...If they're non-refundable, refundable. Unearned rental
payment to recognize, yellow in the word, uniformly over the lease term. What does that
mean? It's kind of like free rent. Let's say, for example, we have a 5-year lease, and they
want to charge us $10,000 a year, but what they say to us is, they say, Look, if you
move in and sign a 5-year lease, I'll give you 6 months free rent? Okay.

Then what
is this really costing us? Well, it's really costing us what? In the first year, 5,000
then 10, then 10, then 10, then 10. It's costing us $45,000. So, our cash payments are going
to be 10, 10, 10, 10, 5, but were supposed to recognize it uniformly, which means equally.
So, what we have to do is you say 5 into 45 is 9000. So, we're going to recognize 9, 9,
9, 9, and 9...That's 45.

Sounds German...Nein, nein, nein, nein, nein, right? So were
going to hit 9, 9, 9, 9, 9...Theres your 45,000. That's what I mean by uniformly, and
that goes on both sides. The person recording the income 9, 9, 9, 9, 9. That's what GAAP
says.

The person paying it, same thing, 9, 9, 9, 9, 9. So, that's going to be uniformly.
From the lessees standpoint, it says lease rent expense is recognized uniformly, which
I just said. Lease bonus is considered an asset, an amortized straight line over the
lease term. Any leasehold improvements, we talked about that in the PP fixed assets section
and also in the intangible section.

I said there if you leased a building, and you built
the closet, that household improvement would be amortized over the shorter of the lease
term, 8 years or the legal life, 10 years or the useful life. So, let's say the closets
going to live 10 years, but I'm only leasing it for 8, do it the shorter 8. But let's say
there's a 4-year bond...Renewal option, likely youre going to renew. So, 8 plus 4 is 12
versus 10, do it the shorter, 10.

Alright, disclosure. What do you have to disclose?
The financial statements, general description the lease, the amounts that are due each in
the next 5 years and the aggregator total beyond 5 years. Okay. So, that is called a
what? Thats called an operating lease.

So, as you look at that operating lease, notice
operating, operating, thats from both sides, lessor, lessee, talked about it here, buh-bye,
buh-bye. Now, let's talk about whats heavily, heavily tested, which this one is called the
capital lease. Now, what is a capital lease? Substance over form, and substance...It's
a purchase and sale, even though in form it looks like a rental. So, with substance over
form, it is where it looks as if its a purchase even though it's called a lease.
So, substance over form says, Hey, in this case, you're going to recognize both an asset
and a liability at the present value of the payments.

So, if I'm going to lease this
building for the next 5 years, then, as we learned in bonds, I'm going to have to present
value those payments. Well, how do I know if its a capital lease? There's 4 requirements
under GAAP. What are they? T-T-B-P-O-75 or 90, T-T-B-P-O-75 or 90, T-T-B-P-O-...Woo!
What does that mean? T-T, T-T means title transfers. If title transfers, if you get
the pink slip to the Porsche by the end of the lease term, you're going to own it, you
have an asset today.

If there's a B-P-O, what is that? If there's a bargain purchase option,
you can buy the asset for a bargain at the end of the lease term, less than its expected
fair value. Then, the Porsches were 30 grand at the end of the leas, you can buy it for
100 bucks. You think you're going to buy it, GAAP, if youre going to own it, thats
called a BPO, bargain purchase option. You've got T-T-B-P-O-75 and 90.

Whats 75? That
says that the lease term is greater than or equal to 75% of its useful life. Now, thats
useful life at inception of the lease. And then 90 says the present value minimum lease
payments greater than or equal to 90% of the fair market value at inception. Let me write
that so you can read it.

What does at inception mean? It means at inception of the lease,
when you first start the lease. So, what are they? T-T-B-P-O-75 or 90, T-T-B-P-O-...And
I run into people years later and they go, Hey, Rog Philipp! T-T-B-P-O-75..., So
it's something youll remember forever, for the rest of your life, for the rest of
your days on this Earth. So, thats T-T-B-P-O-75 or 90. Those are the requirements.

You just
have to meet 1 of the 4, and you debit asset. If you don't meet any these, then what? Its
an operating lease. So if you dont meet these, its an operating lease, which means
all you have is rent expense. If you meet one of these 4, you, the lessee, will debit
asset and credit liability obligation under capital lease.

So, that's what we're doing
here as far as looking at all these items. Alright. So, as we go through it T-T-B-P-O
means title transfers, bargain purchase, 75 means three quarters of its life, 90% of the
value. Now, if its TT or BPO, you're going to own it.

Who should depreciate the asset?
Well, in all of these cases, who depreciates the asset? The lessee. But let's see how long.
If it's TT or BPO, you're going to depreciate it since youre going to own it over the
useful life. If its 75 or 90, you're not going to own it. It says lease it for three
quarters, then give it back.

So, in that case, you're going to do it over the shorter of
useful life or legal life. So, the shorter of useful life, legal, useful life, its
going to live 10 years but its an 8-year lease, then do 8 years. So, here, if its
TT or BPO, useful life. So, let's say its an 8-year lease but it can live 10.

If its
going to live 10, you're going to own it, do 10. Here, it's a 10-year asset, but youre
leasing it for 8. At the end of 8, you give it back, then you only depreciate it over
8. So, that's what we're looking at.

If you meet any one of the 4. What if you meet all
4? You're going to own it. Then do these. So, that T-T-B-P-O-75 or 90.

Now, TT makes
sense...Title transfers, you get the pink slip, debit asset. BPO makes sense. Youre
going to buy it for a bargain, get the pink slip, debit asset. 75, Three quarters of its
life.

Makes sense. Now, I mentioned at inception. So, youve got to have at least 75, but
then there's a special rule that if youre in the last 25% of its useful life, you cannot
use criteria 3 or 4? Why not? Because, let's say, its a 10-year life, but youre in
year 8. So, if you're in year 8 that means there's only 2 years left.

Lets say Im
going to lease it for 2 out of the 2 years. Im leasing it for a 100% of its remaining
life. But guess what? Im in the last 25% of life, you cant use it. So, again, if
youre in the last 25% of life, you can only use T-T-B-P-O, not 75 or 90 because there's
really not much left.

Why not? They figure most of the economic benefits have already
been used up, so just use TT or BPO. Alright. Now, what does this mean? 70...N-n-n-n-n-...75...L...Makes
sense... Present value MLP.

Whats MLP? Minimum lease payments. So, if you are paying
at least 90% or more of its minimum lease payments, then you debit asset. So, let us
look at our notes, and you'll see here it says, capital lease lessee. What are the 4
criterias? We've got T-T-B-P-O-75 or 90, T-T-B-P-O-75 or 90.

It says, If the beginning
of the lease falls in the last 25%, then don't use criteria 3 or 4. Now, as far as hitting
this, it says, The lessee will record the lease at the lower of. So, when we record
the lease, we're going to record the new asset at the lower of, and we have a couple of options.
So, record the new asset
at lower of either fair market value or present value minimum lease payments. So, its present
value minimum lease payment never to exceed fair market value.

Now, what does the minimum
lease payment include? It includes, let's say, for example, you have a beautiful 80
foot yacht, and I want to lease it. So I go, How much for that yacht? And you go,
Well, its a million dollar yacht. Ill lease it to you for the next 10 years for
a $100,000 a year. So, what is my annual payment? My periodic payment.

That would be
my annual payment. So, well present value 100, 100, 100, 100 plus any bargain purchase
option. If there was a BPO, a bargain purchase option, you present value that as a lump sum
plus any kind of guaranteed residual value. Now, guaranteed residual value means that
I'm guaranteeing at the end of the lease it's going to be worth something.

That's called
a guaranteed residual value. That's how much I am saying that it's going to be worth. You
do not include executory cost. Huh? Not executory costs.

What are executory costs? Taxes, insurance
and maintenance. You do not include those. Why not? Because those are expensed as paid.
Debit lease, debit insurance expense, credit cash, right, because, what is it? Executory
costs are taxes, insurance and maintenance. Tax, debit expense, credit cash.

Maintenance,
debit expense, credit cash. Insurance, debit expense, credit cash. So, those are not present
value. Theyre expensed as incurred.

So, what do we have to do? We're trying to figure
out what to debit our asset for present value minimum lease payments not to exceed fair
market value. What are the present value payments? Minimum lease payments are what? Annual payment,
bargain purchase option, a guaranteed residual value. Now, when I say present value, what
rate do you use? You have 2 choices. Its either called the incremental borrowing rate
or the implicit rate.

Okay, those are your 2 choices, to do what? You use one of these
2 rates to present value this. So, what's the incremental borrowing rate? Let's say
I wanted to lease that boat, and I went to the bank and I said, Hey, I want to lease
this yacht. How much? They said, 100,000 a year for 10 years. I want to borrow the
money.

How much? They said, Well charge you 10%. So, that is called my incremental
borrowing rate. That's the rate that I could borrow the money from the bank. The other
thing is, I go to the guy selling it, right, lessor, and lessee.

So, Im the lessee.
I go to the lessor and go, Hey, I like your yacht. How much? He goes,100,000
a year for 10 years or $621,000 cash today. Whatever rate where a million dollars, 100,000
a year for 10 years, equals 621, whatever that rate is, that is the rate implicit in
the lease. Who makes that rate up? Obviously the lessor because the lessor makes up the
sales price.

So, the lessor always knows the implicit rate, the lessee doesn't. So, here's
the deal. I'm going to use one of these 2 rates to present value this. You will use
the incremental borrowing rate unless the implicit rate is both lower...Lower than what?
The incremental borrowing rate and known.

Known by whom? By the lessee because obviously
the lessor knows the rate because they made it up. So, that's when you will present value.
So, if you look on page 3, it says, The lessee records the lease at the lower of fair
value. The perio...Or the present value minimum lease payments, which is the periodic payment,
BPO, the guaranteed residual value. Don't include executory cost.

To present value,
use the incremental or unless both. Use the implicit if it's both lower and known. Note:
the lessor always uses the implicit rate. So, the lessor always uses the implicit rate.
The lessee will only use it if it's both what? Lower and known.

Okay. So, what we need to
do is, we need to then figure out what we're going to record as the lease. Now, when we
go through this, there's a couple of journal entries that relate to all types of leases.
Let's look over here. On day 1, we're going to lease the asset.

Day one. Journal entry
is leased asset and credit obligation under capital lease or lease liability. And youre
going to record that for how much? The present value minimum lease payments not to exceed
fair value. Then, usually on day 1, you make the first payment.

Now, this isn't always
the case, but remember when I taught you bonds, I said you havent earned any interest till
the end of the year? But with a lease, you might make a payment right away. So, they
might say, I want you to make a payment up front. So, in that case, the first payment
is on what? Lets say you buy a house and they want 20% down. Isnt the first payment
all principal? Yeah.

So, therefore, it should all come out of lease liability and credit
cash because it's all principal. Then we're going to depreciate the asset. Now, who depreciates
the asset? Since its a capital lease, the lessee depreciates the asset. So, we're going
to debit depreciation expense and credit accumulated depreciation.

And youre going to depreciate
it by what method? Whatever method you currently use for those similarly type owned assets.
So, in other words, if it's a piece of equipment, usually use straight line, do straight line.
Finally, this is the tricky part, all of the additional payments, payment one plus, all
of these, youre still going to be paying cash, but some of it is coming out of lease
liability and some of it is going to be interest expense. Now, think about this. When you're
amortizing this out, what method are we going to use? Same thing we did earlier, which is
what? The effective interest method. The same thing we learned for bonds.

Oh! That's why
it's such an important concept. So, you can see here, here is day 1, and here's the first
payment depreciation. This is where we have to use our effective interest table that I
taught you in bonds. So, we're going to have to go through and learn that again.

Okay?
So, that's what you're going to see as far as what we're doing. Let's look at this example
in your notes about page 4. It says, Example. We have an 8 year lease of 75,000 a year.
The present value of the minimum lease payments is 428,415.

What is that? That's the present
value of our 75,000 a year for 8 years because the gross amount is what? If were paying
75,000 a year for 8 years, we're paying...Whats that? $600,000, But the present value of 75,
75, 75, 75, 75, 75, 75, and 75 is 428,415, which means, again, if you put for 428,415
in the bank, it would gr...So, alright, it says, The first payment is 75,000 on day
one. It says, The implicit rate is 11%, which is known by the lessee. The incremental
borrowing rate is 12%. So, which rate are we going to use? You use the incremental unless
the implicit is both lower and known.

This is both lower and known. We have a 10-year
useful life and it includes a title transfer at the end of the lease term. So, you tell
me what kind of lease is this? Well, weve got T-T-B-P-O-75 or 90. Well, there's a couple
things.

Its an 8-year asset, its going to live 8 years and youre it for 10 years.
So, that tells you that its 8 over 10 is 80%. So, that. But it also has T-T, which means,
boom, we're going to own it. So, what do the rules say? It says if you meet TT, youre
going to own it.

Are you going to depreciate it? Yes. Since its TT or BPO, you depreciate
it over its useful life. Remember, useful life is 10 years, and the legal life, or the
lease term, is 8 years. So, if its TT or BPO, its 10 if its 75 or 90, 8.

If its
both, which it is, do 10. So, we're going to have to then depreciate it over 10 years.
What method? Whatever method they tell us. Luh luh luh luh luh luh luh. Alrighty.

So,
let's go through and do our journal entries because we need to see what we're trying to
accomplish, what we're trying to accomplish. Alright, so let's go through and see what's
happening. We start out and we go, let's lease the asset, and we're going to debit the asset
for how much? We're going to debit the asset for present value minimum lease payments not
to exceed fair market value 428,415, 428,415. Then, when do we make the first payment? It
said day one.

So, 75,000, 75,000. Why? Because it's all up front. It said the asset is going
to live 10 years. Straight line depreciation 428,415 over 10 equals 42,841, 42,841.

Okay?
This is the hard part. Now, weve got to figure out all these other payments and all
these other payments are going to be what? They're all going to be still 75, 75, 75,
but we've got to figure, of the 75, how much is principal, how much is interest. How much
is principal? How much is interest? What method are we going to use? The effective interest
method. What is the effective interest method? The same method that we learned earlier in
bonds is the effective interest method.

So, what I need to do now is, I need to kind of
set up an effective interest table, kind of like what we've dealt with earlier in bonds.
So, as we go through this, let's set up our effective interest approach, our effective
interest method. Now, you'll see this in the notes. I set up a lease liability times the
incremental or implicit interest rates, so Ill say times the interest rate equals
interest expense or interest income, because remember, one guy's expense is the other guys
income because were leasing the asset...Minus the cash payment, that's how much we're paying
a year, equals amortization of your lease liability. So, we're going to amortize it
out.

So, we have a lease liability times the interest rate is your interest expense, your
interest income, minus the cash, 75, 75, 75, 75, equals amortization of your lease liability.
Alright. So, when we look at this, let's start out...Journal entry. Let's look over here
again, journal entry. So, we've got debit leased asset, credit leased liability boom,
boom, boom...That's how much we're going to set up our asset for, that's what we owe.
What we have to do is amortize this out, but don't forget, we're going to make the first
payment up front.

So, we don't owe this, we really owe the net of these two. The asset
is still this, but this is our liability. Thats record. Thats report, net.

So,
we're going to have to go through and figure out what are we recording, what we are reporting.
So, in this particular case, we start out with what? 428, 415. Whats the effective
interest? It is 11 and 12%. The 11% was the implicit, 12% was incremental. Use implicit
if its both what? Lower and known.

So, it's 11%. That equals...No, no...What did
I do wrong? No...Because you've got to...You dont owe 11% interest on 428, you owe 11
on 428 minus 75 because thats your first payment. So, minus the 75. Now, what we have
to do is take that amount, which is 353,415 times the 11%...That gives us our 38,876 minus
the cash payment, which was given as 75,000 equals 36,124.

Then, 36,124 comes down to
317,291 times 11% equals 34,902 minus 75 equals 40,098 minus 40,098 is 277,193, and you could
keep going. Notice, in a lease, this eventually has to go to 0. Why is it going smaller, smaller,
smaller? Because at the end when you paid off your home, how much do you owe? 0, Zilch,
nada. You paid it off, you dont owe anything.

So, this is getting smaller, smaller, smaller,
smaller, and smaller, down to 0. Notice, just like with bonds, here's your journal entry.
So, my journal entry is what? I'm going to credit cash of 75. Remember we have to get
rid of the liability debit lease liability and lease liability amortization 36,124 and
your interest expense is going to be 38,876. And the next year, what is it? 75.

And this
lease liability is going to be 40,098, and your interest expense goes down to 34,902.
Notice every year as this gets smaller times 11%, this get smaller 75, 38, 75, 34, 75,
30, 7...Notice the amortization gets bigger every year. So, you can see the amortization
is getting bigger every year as the liability gets smaller because youre making the same
payment. That's why, like, when you buy a home, in the first few years, it's all interest,
and the last 5 years, its all principal because the interest is pretty much paid off.
So, you can see how the principal balance that you owe goes smaller, smaller, smaller...That's
how its happening. So, as we do that, this is our journal entry which will carry on over
to here so our journal entry over here is credit cash, 75, debit lease liability, 36,124,
which we'll see in that table 38,876 and then again 75 and so on.

So, thats your journal
entry year after year after year as far as how much you're going to be amortizing out.
So, you can see that theres some similarities between this and also with bonds as well because
there is some overlap in the accounting for that. So, you'll see that. Look in your notes
there. Now, a couple other things I want to mention going back to my A-B-C-D-E-F-G.

Let's
see that. A-B-C...Record, I'm recording it at 428, but I report yet at 353. CDP. Record
journal entry, report net of the first payment.

Report, report. The other thing that's really
important to understand. They've asked you to prepare a balance sheet between current
and non-current. So, one of the things that you have to understand is...How much do I
currently owe here? 353,415.

But how much of that is current? Thats this, current.
How much is non-current? That's this. So, whenever they want to know current or non-current,
you have to go one more year to break it down. I owe you this. Thats current, thats
non-current.

Because this plus this is this. So, if I'm standing here but they want to
know how much is current, youve got one more year because that's due within 12 months
of the operating cycle, thats the non-current amount. So, if you're breaking down...Remember,
with bonds, it was all due in the term bond all at the end of 10 years. It was all non-current.
If it was a serial bonds, some could be due currently.

Here, you always have some current
and non-current, current and non-current. So, that's important to understand as far
as how those amounts set up. In your notes, youll also see depreciation. What's it
say there? It says criteria 1 or 2, T-T-B-P-O, 3 or 4 75 or 90.

If its TT or BPO, you're
going to own the asset. Since youre going to own the asset, what does that mean? Well,
since you're going to own the asset, you're going to get the salvage value, so take it
out. If it's 75 or 90, you're not going to own it, therefore, you ignore the salvage
value. So, take it out, ignore it.

Again, useful life versus the shorter of useful or
lease term legal. Alrighty. Next page, note the liability 353, 36 is current and 317 is
non-current. That's what I just said over here.

Of the 353, thats current, that's
non-current. What do we have to disclose in the financial statements? A description, the
gross amount and the minimum lease payments for each of the next 5 years and the aggregate
beyond 5 years. Alrighty, lets do a couple questions on that. Question number 1.

Question
number 1 says, Lease M does not contain a bargain purchase option, but the lease term
is equal to 90% of the estimated economic life. Lease P does not transfer ownership
of the property by the end lease term, but the lease term is equal to 75% of its life.
How should we classify these leases? I. Already forgot. What is the rule? Lets
see right here.

Let's sing a little bit again. Hmm hmm hmm hmm hmm hmm. Let's sing. What
is it? T-T-B-P-O-75 or 90.

T-T-B-P-O-75 or...Title transfers? No. Bargain purchase? No. 75 Lease
term? Yeah, thats of the life. 90% Of what? The dollars.

So, remember, 75% of the life,
90% of dollars. So, what they're saying here is, in the first one, its 90% of the life,
90% of the life. Yeah, 75. Second one is 75% of the life.

Yes. 75%. So, they're both what?
Theyre both capital leases. Number 2...It says, last sentence first, At the beginning
of a lease term, Day should record a lease liability of how much? And, again, we're
using the word record versus report, how much should they record...Sorry...Yeah, record.
Alrighty.

On December 31st, Day Co. Leased a new machine from Pear with the following
pertinent information: The lease term 6 years, annual rental payable at beginning of the
year 50,000, useful life 8 years, incremental borrowing rate 15, implicit rate known by
Day 12, present value of annuity advance at 6% for 6 periods at 12% is 4.61, At 15% is
4.35. The lease is not renewable and the machine reverts to Pear at the termination of the
lease. So, they don't own it at the end.

The cost of the machine on their accounting
records is 375,500. At the beginning of the lease term, Day should record a lease liability
of how much? Alright. So, they want to know how much is our liability? Now, what
kind of lease is it and why? Is there a TT? No. It reverts back to them.

Is there a BPO?
No. So, weve got to see if we meet 75 or 90. Now, it says the lease term is 6 years,
and the useful life is 8, but see here...What 6 over 8 is, is three-quarters, is 75% greater
or equal to...Yes. So, we qualified here at 75.

Alrighty. Now, we're going to be making
payments. Now, how many years are we making payments and how many years are we depreciating?
Lets see...In this case, were making payments for 6...Lease term is 6 years, 50,000
a year. So, the gross amount we're going to be paying is 6 times 5 or $300,000 and that's
6 years at 50,000 a year.

Alright. It says useful life 8 years, incremental borrowing
rate, 15, implicit. Which rate do we use? 12%. Why? Because it's both lower and known.
Were going to use the 12% in order to present value.

It says the present value of an annuity
of a dollar for 6 periods at 12% is 4.61. So, 4.61 Times 50. So, we're going to have
$50,000 times 4.61, Which gives me something like 230,500, 230,500...Da, da, da...The lease
is not renewable...So, basically, we debit lease asset, credit lease liability. For how
much? Leased asset 230,500, lease liability 230,500.

Thats how much we're going to
record. What do you report it at? Then youre going to make the first payment, debit lease
liability for 50, credit cash for 50 because we're going to pay that off...But they're
not asking to report, theyre saying record, record, record 230,500. Alrighty. In a moment,
we're going to talk about another exciting area called non-operating leases, and were
going to look at that from the lessor standpoint.

Because what did we just look at? We just
looked at capital leases from the lessee standpoint. We talked about operating, operating, talked
about capital. Now, we've got to look at what we call non-operating from the lessor standpoint.
Well do that in just a minute. Okay, now let's look at a task based simulation on leases.
Now, remember on the FAR exam youve got 90 multiple choice 30, 30, 30 and you have
7 task based simulations of which 6 are graded.

One is pre-tested. Of course, you never know
which one is pre-tested. Also, youve got about 12 to 15 minutes per task based simulation.
Some will take longer, some will take shorter. What is a task based simulation? Its kind
of like taking a bunch of multiple choice like we just did, putting them together into
one bigger problem.

If you look at TBS 1, last sent...I would say read the question
first? Requirements. It says, Prepare the necessary journal entries without explanation
to be recorded by Nesbitt for entering into the lease on January 2nd, x2, making the lease
payment on December 31st, x3, which is the end that first year, expenses related to the
lease for the year ended December 31st, x2. Alright, let's read the background and kind
of remembering all the good stuff we just talked about, that we just learned. It says,
Situation: On January 2nd, Nesbitt Co.

Leased equipment from Grant. Lease payments
are to be a $100,000 payable annually every December 31st for 20 years. So, we're going
to make the payment not at the beginning but the end of the year. Also, it's for 20 years.
Title to the equipment passes to Nesbitt at the end of the lease term.

The lease is
non-cancelable. So, let's review. What is it? T-T-B-P-O-75 or 90, T-T-B-P-O-75 or...A
little dancing. So, what is it? T-T, title transfers, sounds like a capital lease.

Title
transfers. The lease is non-cancelable. The equipment is at a 750 carrying amount on Grants
books. Its estimated economic life is 25 years.

So, they're giving us 20 and 25
years. This gets tricky. So, we're going to depreciate the asset over what? Remember what
we said, if its criteria 1 or 2, over the useful life. If its 3 or 4, the shorter
of useful or legal.

In this case, it's TT. So, we're going to depreciate it over what?
Its useful life. Useful life is what? 25 Years. But careful...When we're making payments,
were making payments for how many years? It's a 20-year lease.

So, the asset lives
25, were only leasing it for 20. So, at the end of the 20th year, weve paid it
all off. Basically, we're going to own it, but we're going to depreciate it over 25.
We're going to have to present value the payments over 20. The rate implicit in the lease,
which is known to Nesbitt is 10%.

The incremental borrowing rate is 12. What do we use? We
use the implicit rate unless the incremental borrowing rate is both what? Lower and known,
lower and known. Known by whom? By the lessee, Nesbitt, which it is? So, well use 10%.
Nesbitt used a straight line method of amort...Of depreciation. Straight line.

25
Years for the depreciation and the round of present value factors for the ordinary annuity
for 20 years are as follows... Now, an ordinary annuity. We have an annuity in advance,
which is annuity due now. That's when you make the payment in the beginning.

Ordinary
annuity. Where is your arrears? Your rear is at the end, at the end of the year. That
is ordinary annuity or annuity in arrears. It says here, for 20 years 12%, 8%.

Now, if
I wrote this question, what would do? I'd give you the present value at 12% and 10%,
and I'd give it to you for 20 and 25 years, because you know someone would have picked
the 25-year present value factor, but we want the 20 because we're going to make payments
for 20 even though we're going to own it for 25. Alright. Now, which rate, which rate is
lower and known? 10%, 10%, 8.5. Prepare the necessary journal entries with an explanation.
Alright.

So, when we look at this, first of all, weve got $100,000 a year, the present
value factor is an 8.5. So, weve got 100,000 a year times 8.5 Is $850,000 is the present
value, the minimum lease payments, not to exceed fair market value. So, that's going
to be the 850. So, on day one, what do we have? Were going to lease the asset.

We
have leased asset 850, and, let's say, obligation under capital lease or Ill just say lease
liability. 850. Okay. So, that's our first journal entry.

The other thing we're going
to do, remember we said the assets going to live how many years? 25 Years. So, if I
take the asset, which is 850 over 25 years is $34,000 a year. So, I'll have some depreciation
expense of 34,000 and credit accumulated depreciation, 34. Remember, you learned this back with fixed
assets, straight line, sum of the years digits, declining balance, different types
of depreciation.

In this case, we've got our straight line depreciation. Now, make the
journal entry entering the lease...Boom... Make the lease...Expenses related. There's
one of them.

Another one, it says, Making a lease payment at the end of the year and
here is at the end of x2. So, on day one, we make this journal entry. Now, what do we
have to do? Let's go back to our present value...Remember our table over here...The effective interest,
the amortization table. So, what do we do? We start with our lease liability of 850.
Now, remember, we're going to pay it off.

Its like your mortgage. You buy a home.
Youre going to pay it off over 30 years. What happens? Eventually this goes down, down,
down, down, down, down to 0. So, weve got 850 times the interest rate.

Which rate are
we using? Implicit or incremental? We're using implicit, because its both lower and known.
So, that's going to be our 10% equals 85,000. The cash payment is we're paying 100,000,
100,000, and 100,000 so, were paying 100,000 a year equals $15,000. Now, remember, this
has to get smaller. So, take out the 15, gives us 835...Oops...A little dyslexia there, 835
times 10%, equals 83,500 minus 100,000 equals, that looks like what, about 16,500.

So, if
we take out 16,500, then, again, we just keep getting smaller, smaller gives us, what? Like,
67,000. 6 And 7 is 13, 5. Yes. So, you can just keep going and do the whole thing.

Notice,
the journal entry comes out of here. Now, as I showed you earlier, here it starts big,
smaller, smaller, smaller, smaller, smaller. As this get smaller times the same interest
rate, this get smaller. It's a 100, 85, 100, 83, 100, 79, 100...This difference every year
gets what? It gets bigger.

The amortization gets bigger. That's why when you pay off your
home, everyone says, Hey, you want to save money in taxes? Buy a home because your interest
expense is tax deductible. So, your interest expense is tax deductible. Notice the first
year you buy the home, it's all interest.

Very little principal. At the very end, what
happens? So, the beginning its interest expense is high, at the very last year of your mortgage,
there's no interest, right? It's very little. So, this starts big and gets smaller, but
as your interest gets smaller, you're paying the same amount, more of it comes out of the
principal. Alright, what's our journal entry? Journal entry comes right out of here.

So,
we've got what? The amortization of that amount. So, every year, as we make our cash payment,
we're going to pay cash of 100,000. Then we're going to take it out of interest expense and
lease liability. So, our lease liability is going to go down.

Here's our lease liability.
In the first case, amortization, liabilities are come down by 15,000, and your interest
expense is going to be 85,000. The next year, and all your entries just come right out of
this table, so, the next year, we're going to pay 100,000. They didnt ask for this,
but we're going to do it anyway. The next year, this is going to go 16, 5, this is going
to go down to 83,500.

So, every year, notice this payment 100,000 still stays the same,
but these 2...As this number goes up, this has to go down. This goes up, this goes down,
because we're still paying the same amount every year. So you can see right here how
that kind of flows together. So, those are the journal entries are looking for.

In a
question, on today's exam, what would they do? Theyd basically ask you to go through
and either drag and drop the amounts...Also theyll ask you for the categories. So,
theyll give you a whole list lease asset, lease liability and so on and so forth. You
drag and drop. If you look at the next question, they just want you to go through and kind
of match things up.

So, for example, you have 2 different columns. Here, it says, A.
The substance of this transaction is that it consists of 2 separate and distinct transactions.
We haven't talked about that yet. You may have in class, but it's called a sale-leaseback
transaction where basically I have an asset, I sell it but I still need the asset. So,
I sell it to you, then I immediately lease it back.

When I lease it back Im now the
lessee. It could either be and operating or capital lease. I know well talk about the
deferred gain what to do about it, which well cover that down the road or you can watch
my lecture as well. If you want to watch my lease lecture, just contact my office.

You
can watch the whole lecture again. Rental payments are recognized on a straight line
basis, even though the lease calls for payment that increase over the term. Remember,
you want to recognize your rents uniformly. That's an operating lease.

C. Depreciation
expense related to the leased asset is reported on the lessees income statement over the
lease term. Well, when you depreciate it, you pay executory costs, taxes, maintenance...All
of those are going to be in a capital lease as opposed to an operating lease. Sales
revenue.

The present value of minimum lease payments unless the carrying amount of leased
asset is reported on the lessors income statement. This is called a sales-type
lease, which, again, I haven't talked about so far, but I would in my regular class and
it's in the notes...Called the sales-type lease or a direct financing lease. That is
from the lessors standpoint, and we talk about how do you know if it's a sales-type
or a direct finance. It has to be 1 of the 4 criteria.

T-T-B-P-O-75 or 90. It also has
to be collectible and measurable in order for the lessor to take it off their books
as if it's a sales-type lease...But anyway, those are just a couple of areas just to show
you an example of how and the types of questions you would see at the actual CPA exam. Remember,
this just one piece of all of financial accounting. Remembering, that again, this is a 4 hour
exam.

It includes all your intermediate I, intermediate II, advanced, government, non-profit.
If theres stuff like governmental accounting, you've never seen, don't worry about it because
I'll walk you through it so you can see it step by step by step. Again, hopefully you
learned a lot from my presentations. Study hard, and you too will not only pass this
intermediate class, but youll also pass the CPA exam..