 Hello and welcome to this session. This is Professor Farhad and this session we would look at previously used CPA questions that are released by the AI CPA. Those questions are the real deal. Those questions appeared on previous CPA exam. They may not appear in the future again, but the concept will appear in a different format. So understanding how to answer those questions is extremely important. And specifically, we're going to be working for questions. As always, I would like to remind you to connect with me on LinkedIn if you haven't done so. YouTube is where I park my 1500 plus accounting, auditing, finance, and tax lectures. This is a list of all the courses that I cover, including CPA questions. On my website, I do have additional resources such as PowerPoint slides, notes, CPA questions, quasi CPA simulations, and the CPA questions that I'm covering now. I have that file on my website as well. So let's go ahead and start toward the first question. As always, pause the video, try to answer the question if you can. Otherwise, then play the video and see how well you did. Now, for every question, I might refer you to what I have the further explanation on my YouTube. So for example, this question is about inventory. I have my inventory covered in chapter five and chapter six and my intermediate accounting. Let's go ahead and answer this questions. Stone Company had the following consignment transaction during December. Inventory shipped on consignment to Omega. So they shipped inventory to Omega freight paid by stone 18,000 inventory received on consignment from gamma. So they shipped some and they received some and freight paid by gamma 1000. So the amount or inventory on consignment to gamma 36,000 freight paid by stone 1800 inventory received on consignment from gamma as 24 freight paid by gamma as 1000. I'm going to try to read all the questions just in case someone is listening. For example, if they're driving under car this way, they can follow as much as possible. No sales of consigned goods made through December 31st year one, what amount of the consigned inventory should be included in stones December 31st year one balance sheet. Okay. So let's see. So stone inventory shipped on consignment to Omega 36,000. So if stone shipped the inventory to Omega, guess what? That's his inventory. Therefore, the 36,000 is considered part of stones inventory freight paid by stone for shipment 1800. That's that's also part of his inventory, a part of the inventory of the consigned inventory inventory received on consignment from gamma. That's not your inventory. That's gamma's inventory freight paid by gamma. Obviously, this is gamma. Therefore, the inventory, the amount of consigned inventory is the 36,000 and the 1800, which is 37,800. The answer is the, and this question is application. You just have to know what is goods on consignments. Simply put, if you can sign goods, if you take your inventory and ask somebody else to sell them for you, just sell them. Look, could you please place those inventory at your place of business and sell them for me? That's still your inventory. Okay. If you receive someone else's goods and they are they put their goods on consignment at your store, that's not your goods. So the 24,000 and the thousand dollar are not stones. Those are gamma. Cobb Inc. Inventory at May 1st consists of 200 unit at a total cost of 1250. Cobb uses the periodic inventory method. Purchases for the month were as follow May 4th, 20 units at the unit cost of $5.80 a total of $116. On May 16th, they made another purchase for 80 units. They paid 550. In total, they paid $440 for this purchase. Cobb sold 10 units on May 14th for $120. What's Cobb's weighted average cost of goods sold for May? So what are they asking us? We sold 10 units on May 14th. What is the cost of goods sold if we're using the weighted average method? Well, we started with 200 units at 1,250. Then we purchased 20 units for $116. Then we purchased 80 units at 400, not at just 200. We paid in total 1250, 20. We paid in total 116. In 80 units, we paid in total 440. Because they've given us the total, so we don't have to know at what price. Now, what we need to do, we had 300 units in total. What happened is students tend to forget those 200 units. The 200 unit at beginning inventory, you have to be careful. You have to add them. They put the 200 up there to confuse you. They want you to only to compute those. So be careful. Be careful. Okay? So now let's add up everything up. Let's add up the dollar amount that we invested. So we have dollar invested 1250 plus 116 plus 440. That's equal to 1806, 1806. Now, we're going to take 1806, divide them by, divide them by 300 units. This is what we have. Divide them by 300 units. Our average cost is $6.20. So each unit, the cost of goods sold. So if we took 1806 divided by 300 will give us per unit $6.20. We sold 10 units therefore our cost of goods sold is $60.20. The answer is A as an alpha. And this is an application problem. Again, you might take a minute to compute this, to compute the math and this problem, but I would say this is easy if you understand how the weighted average work, how the weighted average work. Let's take a look at this question. Good. The calculator is staying here. Okay. Ultra uses periodic inventory system. The following are inventory transaction for the month of January. 1-1 January 1st, beginning inventory $20,000 at $13. January 20th, they purchased 30,000 units at 15. January 23rd, purchased 4,000 units at 17. The last day of the month, January 31st, they sold 20 units at 50,000. Ultra uses life-formatted to determine the value of inventory. What's the amount should Ultra report as cost of goods sold on the income statement for the month of January? Well, life-formatted means lost and first out. Guess what? We sold 50,000 units. Well, if we sold 50,000 units using life-formatted, we're going to go backward. We're going to start with the latest purchase. The latest purchase was January 23rd. We purchased 40,000 units. Guess what? We're going to sell. So those are sold 40 times 17. That's not enough to complete the order. So this one is gone. Then we're going to have 10,000 units at 15. And basically, we still have 20,000 units here. 20,000 units here. So let's see. If we have 40,000 units times 17, that's 680,000. And 10,000 times 15 is 150,000. 650 plus 150 equal to 830. The answer is C. So you have to be careful what they're asking you. They might ask you, what is the ending inventory? Well, the ending inventory is 20,000 units at 15 and 20,000 units at 13. In case, so just be careful. Answer the questions that they're asking you. They're asking about cost of goods sold, specifically LIFO. LIFO was lost and first out. Last in were January 23rd. Okay. Last. This should be easy. Again, have a decent knowledge. That's why I keep emphasizing the idea that you got to know the material inside out. You have a good understanding. And you should not have any problems whatsoever on the exam day. Okay. Let's take a look at this question. What amount should Pine capitalize as the cost of the completed factory building? Okay. So we bought a building. Pine company purchased land for 450 as a factory site. If they're asking me for the building, that factory site is out. I can cross it out. An existing building on the site was raised before construction began. That's fine. That's exit. The existing building, it has nothing to do with my factory building because it was raised additional information as whole cost of raising the old building has nothing to do with the factory. This is part of the land title insurance and legal fees to purchase the land that has nothing to do with the building that's land architect fees. Yes, that's architect fees for the building that's included new building construction cost. That's also included. So 1,850, plus 95,000. The answer is 1,945,000. I'm going to make this comment. Frankly, I teach financial accounting and financial accounting is introductory accounting course. Believe me, those are the questions that I put on my exams. So the CPA, the point that I'm trying to make the CPA exam questions, they are not difficult. But you have to cover a lot of territory. But if you have a good basic understanding, you should be in good shape. Literally today, I was teaching this course. And when I was explaining, I gave an example simple as simple as this one. I believe this is simple. This is like basically very introductory property, plant and equipment example. Okay. And if you want more, go to my intermediate accounting chapter 10 about property, plant and equipment, what's included and what's not included. Okay, let's take a look at this question. Smile purchase a computer on May 1st for 12,000. We call this the cost estimated salvage value 1500 and three year life. What is the depreciation expense for the year and the December 31st using the double declining balance? Now, once you hear the double declining balance immediately, you're gonna say, well, how do I compute the double declining balance? First, I have to find my rate. How do I find my rate? One divided by three times two, one divided by life. So one, one divided by three times two, that's gonna give me, let me just increase the size of this 0.66666. So the rate is 0.66666. It doesn't matter. Now I'm gonna take this multiplied by you take the double declining rate and you multiply the double declining rate by the book value at the at the beginning of the period. Well, the cost is 12,000. There is no accumulated depreciation. Therefore, for year one, the book value equal to 12,000. I'm gonna multiply this by 12,000. And that's gonna give me 8,000. Well, 8,000 is one of the answers. But be careful. This is where the date comes into place. You bought it May, May 1st. So if you put 8,000 in a rush, you're gonna make a mistake. The answer is not 8,000. What you have to do, you have to say, well, I bought it May. So it's gonna be May, June, July, August, September, October, November, and December. Times you're gonna multiply this by 8 divided by 12. And let's do this because you have to prorate it because you did not buy the asset at the beginning of the year. So let's go ahead. Take 8 divided by 12 equal to 0.6666 times 8,000. And the answer is 5,333. 5,333. I'm gonna go to year two. I'm gonna go to year two. If they're asking you how to compute the double declining balance for year two, let's assume that was the question. Well, the double declining balance for year two is 11,000 minus 5,333, the prior year depreciation. Let's do that. 12,000 minus 5,333. That's 6,667. That's the book value is 6,667. And this is the book value at the beginning of the period. And I'm gonna multiply the book value by 0,666. And that's my answer. Times 0,666. And that's my depreciation for year two, 4,440. And I don't think they go any further than this. Even if they go to year four, year five, it doesn't really matter. Once again, in my opinion, in my book, in my opinion, what I think, those are basic accounting questions. So if you're having any difficulty with these previous CPA questions, don't sit for the exam. You're not ready yet. Those are simple and simply put, those are actual questions that appeared on the exam. So this is the type of questions you might see. So if you're not ready for those, don't sit for the exam yet. Get ready. Go to my YouTube, review your book. And although this is an application, I'll say this is pretty straightforward, easy question. In the next session, as always, I'm gonna be working more real deal questions. I would like to remind you, go to my website if you want the questions. And you'll have access to many, many more resources, including 2000 plus CPA questions. But the file of the AI CPA, I downloaded it. I posted it on my YouTube, on my channel. You can download it if you want to. I'm sorry, on my website. Study hard and you'd invest once in your CPA. So study hard and get it done so you can succeed in your career.