 Oh, and welcome to the session. This is Professor Farhad. In this session, we would look at previously used CPA questions that were recently released by the AICPA. These questions are the real deal. The AICPA is the holy grail for CPA questions. Those questions actually appeared on an actual CPA exam. They may or may not appear again on future exam, but the topics or the concepts will definitely be tested again, specifically we're going to be looking at far questions. As always, I would like to remind you to connect with me on LinkedIn if you haven't done so. YouTube is where you would need to subscribe. I have 1,500 plus accounting, auditing, finance, and tax lectures. This is a list of all the courses that I cover, including the number of lectures, including CPA questions. On my website, I do have additional resources, such as notes, PowerPoint slides, exercises, true false questions, and 2,000 plus CPA questions. The PDF file for the AICPA, you could also find it on my website as well. So let's take a look at the first question, and I always tell you if you want to go to this topic, you can go to my Intermediate Accounting Course, Chapter 13 for this topic, and check the click on the card here to find the Intermediate Accounting Course, or whatever course I reference. Let's take a look at the first question. True company did not record an accrual for probable loss from a lawsuit in its financial statement. Which of the following explanation for true, for truths not accruing the probable loss is in accordance with generally accepted accounting principle? Well, here you have to know the rules. When do you accrue a liability? When do you accrue a probable loss for a lawsuit? You have to have two conditions, not one, two. The first one has been met, probable. It is probable you are going to lose, and they told us here it is probable. In addition to probable, plus, notice, two conditions, not one. First, it has to be probable. The highest probability, probable. The highest likelihood, probable. Plus, you should be able to estimate the loss, the dollar amount. So let's take a look at number A. No reasonable estimate of the loss can be made. Perfect explanation. I have the probable, I don't have the estimated loss. The answer is A. An estimated range, that's not good enough for the loss can be made, but no amount in the range is more accurate than any other. You don't accrue. Recognize an amount in the financial statement would weaken the company's defense of the lawsuit? Not at all. Well, that's not relevant for us, whether it's weakened or not. Disclosure, if it's probable, and you can estimate the dollar amount. Accrual was not required because an estimated amount of the loss was disclosed in the notes. Not at all. You would still disclose in the notes, whether if it's probable and estimatable, you would still disclose. So that's not any answer. So the answer is A. The reason why they did not accrue a loss, accrue means record the loss because they could not, the only explanation is they could not reasonably estimate the amount of the loss. Let's take a look at this question, which take you like 10 seconds to answer this question. Which of the following financial instrument may be considered a derivative financial instrument? Is it A, option contract? Is it B, municipal bond? Is it C, bank certificate of deposit? CD or is it a D, a money market fund? Come on. If you answer this question incorrectly on the exam, if you don't know what a derivative financial instrument is, you should not pass the exam. The answer is A, option contract. Derivatives are, some of them, this is like as basic as it gets. They get more involved. Don't worry, go to my chapter 17. But the point is, you get this question wrong on the exam. You don't know that option or future contracts are derivatives instrument. Then guess what? You're not gonna pass, okay? But the point is, this is remembering and understanding. And this is five or 10 second question. That's it. You move on to the next question on the exam day. Mentor company, a U.S. corporation owned 100% of a Swiss corporation. The Swiss franc is the functional currency. That's fine. The remeasurement of mentors financial statement resulted in a 25,000 gain at year end. The translation of the financial statement resulted in a 40,000 gain at year end. What amount should mentor recognizes a foreign currency gain in its income statement? And all what you have to do, all we have to know here is when we, when we measure the financial statement and when we translate the financial statement, what goes where? Well, if we translate, if the translation method, if we use the translation method, we have a $40,000 gain, this goes into OCI. Therefore, the 40,000, it doesn't go on the income statement. The remeasurement goes into the income statement. Therefore, the answer is V. So all you have to know here is translation goes into OCI, remeasurement gain or loss goes on the income statement. Well, what goes on the income statement? The remeasurement. How much is the remeasurement 25,000? Now this topic is covered in depth in my advanced accounting chapter 13, different. This is not an intermediate accounting topic. This is advanced accounting. Let's take a look at this question. Brill company made the following expenditure related to product X. Labor and material cost incurred in producing a prototype 100,000. Cost of testing the prototype, $40,000. Legal cost to file a patent, $5,000. Production of product X commenced when the legal patent was granted. So the production did not start until we paid this $5,000. What amount of the above cost should be expense as R&D? Guess what? Any cost incurred before you start production, it's R&D. When did we start production after we filed the patent? This is R&D, the 100,000 is R&D, the 40,000 is R&D. Because you are still producing a prototype, you are still testing the prototype, you did not start until after you filed the legal lawsuit. And legal cost to file a patent, this is, you need to know this, this is capitalize. This is capitalize. Therefore the answer, the R&D is 140,000. Let's take a look at this question. Ellen company incurred the following expenses during the current year. Routine ongoing effort to improve an existing product, $50,000. Troubled shooting in connection with the breakdown during commercial production, 75,000. Routine testing of product during commercial production for quality control purposes, 100,000. What is the amount of research and development expense incurred by Ellen's during the current year? Well, so simply put, what's the R&D cost? Well, here we go. If we have an existing product and we're only improving the product, that's not R&D. Therefore the 50,000 is out. It says Routine, notice the word routine is there. Troubled shooting in connection with breakdown during commercial production. Well, you already did the R&D and now you are producing the product. Well, guess what? This is not R&D and something broke down. That's not R&D because it's production phase. 75,000 is out. And at this point, there is no 100,000. You could eliminate the 100,000 but let's take a look at it. Routine testing of product during commercial production, that's nothing to do with R&D. Therefore, none of these are R&D. The answer is A, the answer is zero. In the next session, we would look at additional questions that deals with the far section of the CPA exam. Remember, those are actual CPA questions. What I strongly suggest you do is you go to my website. If you're studying for your CPA exam, subscribe, get more resources. You study for your CPA once in your lifetime. Study hard, pass it, invest in your career. Good luck and I'm always here to help you.