 Hello and welcome to the session. This is Professor Farhad. In the session, we would look at previously used CPA questions that were released by the AICPA using the actual exam format. So you want to be familiar with the exam format. This way on the exam day, you're not intimidated. As always, I would like to remind you to connect with me online then if you haven't done so. YouTube is where you would need to subscribe. I have 1,600 plus accounting, auditing, finance, and tax lecture. This is a list of all the courses that I covered. Including hundreds of CPA questions. On my website, you'll have access to additional material, such as PowerPoint slides, true, false, multiple choice, quasi-CPA simulations, 2,000 plus CPA questions. Let's take a look at these questions and solve them. So let's take a look at this question. Once again, you will see that this format is the actual exam format. So you want to be familiar with it. So on the exam day, psychologically, you are comfortable by looking at this screen. So let's take a look at the first question. Which of the following methods should be used to account for research and development costs that has no, with no alternative future use? This question is about research and development. This topic is covered heavily in my intermediate accounting, how to account for research and development. But the first thing you want to remember is this. When you hear the word research and development, the next thing that comes to mind is X-pence. What do we do with research and development? Generally speaking, we expense them. What does that mean? It means immediately what you can do is start to eliminate the wrong answers. So on the exam, it's very important that you know how to eliminate the wrong answers. Because in my opinion, every CPA questions, it should go down to 50-50. So you should be able to eliminate two of the choices and you're gonna be left with two and those two will be 50-50 chance, if you have to guess. What does that mean? For example, if we look at choice B, choice B says capitalize. So we know that research and development, we don't capitalize, especially it has no alternative use. That's out. Because if it has alternative use, we might capitalize that here they're specifically saying, you have research and development and you cannot use them for something else. B, C, capitalize cost is specified by management and charging all other costs to expense. They're already telling you no alternative use. So they can only be used for research and development, that's out too. So notice we're down to 50-50. Let's take a look at D or the fourth option. Accumulating all costs in a separate component stockholders' equity until the existence of a future benefit can be determined. I'm sorry, if you choose this answer, it's like, what are you talking about here? So turn it into an equity until we can use it later. What do we do with it later? We amortize it. I mean, I don't know what this is, but whoever wrote the strong answer, they were very creative. Therefore, this is out. And what it is, as I told you, once we hear the word research and development, charging all costs to expense. Research and development is expense. Research and development is expense. So the answer is this one here. Let's take a look at this question, of course. Which of the following is considered part of the required supplementary information for the general purpose external financial statements? So what you are being asked here is RSI, required supplementary information you have. Remember, you have RSI and basic, and basic, basic information. So here you are being asked for RSI. And this is a governmental question. And I covered governmental accounting heavily in my governmental accounting course. I have a whole course. So they're asking you, do you know what goes into the RSI for the general purpose external financial reporting of a local government? Is it, I selected this by mistake, is it fund financial statement? Is it fund financial statement? No, fund financial statement, they go with the basic. So you need to know what goes under the basic. So this one is out. Combining non-major fund statements, if you eliminated A, you should be able to eliminate B. Why? Because those are part of the fund, therefore B is out. So fund goes into the basic, that's out. Notes in the financial statements, guess what? The notes goes there too under the basic, under the basic financial statements. And what goes under the basic? Government-wide. So you need to know those. Basically you need to memorize what goes under the basic. So with the process of elimination, what's under required supplementary information or MDNA is there, MDNA. This is basically a memory question. You know the answer. This should be an easy, easy point on the exam. So MDNA is part of RSI. Let's take a look at this question. In preparing the consolidated financial statements of a US parent company with the foreign subsidiaries, the foreign subsidiaries' functional currency is the currency of what? So basically they're asking you, what is the functional currency? This topic on my website, it's either covered in, actually it's covered in advanced accounting and also covered in international accounting, so whatever you want to choose. Let's take a look. So it's basically, do you know the difference between functional and reporting? That's what they're asking you here. Even though they're not mentioning reporting, but you have to know the difference between functional and reporting. So is it functional in which the subsidiaries maintain its accounting record? It could be, but that's not the definition for it. Of the country in which the subsidiary is located, basically AMB are together in a sense. They're the same answer, which is not true. Of the country in which the parent company is located, well, where the parent company is located, that's the report and currency. Like if you're located in the US, you report everything in the US dollar, that's the report and currency. So by process of elimination, the definition of functional currency, it's the currency of the environment in which the subsidiaries primarily generate and expand cash. So this is the definition for functional currency. So you want to make sure you know this because knowing the definition is important, but remember in advanced accounting or on the exam, you have to know how to use the functional currency within different applications. So now make sure you know what's the difference between functional and reporting. Reporting is the country in which the parent company usually is located, okay? Let's take a look at number four. Again, I'm clicking on these by mistake. The FASB makes changes to the accounting standard codification by issuing what. So what do they issue? What do they issue when they have an update? Make changes, basically make changes. Well, guess what do they issue? They issue accounting standard updates, ASU. So when everyone's in a while, I go on my YouTube channel and I'll say, okay, here's the new ASU. So basically those are changes to the accounting standard codification, ESU. They're updates. So when there's a change, there's an update. That's how you remember it. Now you want to know also what the other terms mean. For example, emerging issue tax force release. Well, we need to know what this is, okay? This is basically to help you with narrow implementation of FASB, okay? And to issue like timely responses to emerging issues. So if there's, I don't know, it's emerging, sorry, it's emerging issues, yes, to issue. So if there's a new issue and new accounting issue, like stock options, whatever, accounting for cybersecurity or whatever the issue is. So if you want a timely response, this committee, the emerging issue tax force release will give you an answer for now. So it's basically timely. Is it the statement of financial accounting standard board? The financial accounting standard board, the SFAS, this provide guidance for specific issues. So this is more specific. And the staff technical bulletin, well, you need to know this. This has to do with the SEC rather than accounting standard codification. It has to do with FASB, notice FASB here. The staff technical bulletin has to do with the SEC and has to do with disclosure. If you have any issues with accounting disclosure, you would go to the staff technical bulletin and it's part of the SEC. So who makes the changes to accounting codification? It's the ASU, Accounting Standard Updates. Let's take a look at this question. This one require computation. So let me just maybe it's good to copy it so we can write down the computation. So Limp company salaries expense 10,000 for every other Friday for the 10 working days ending. Good. So for every two weeks, they paid their employees $10,000 for 10 days. Limp's employed the network Saturday and Sundays, okay? The last payroll was paid on June 18th. On Wednesday, June 30th, the month in balance and the salary expense account before accrual was 14,000. What amount should Limp report as salaries expense in its income statement for the month ended June 30th? So what they're telling us, salary expense right now is 14,000 before adjustments for accrual, before this is 14,000, before 14,000, before accrual, before accrual. What does it mean before accrual? That means the last time we paid them was June the 18th. So June, let me do the eight, this is the 18th. And remember, June the 18th is Friday. So we have Saturday, Sunday, the 19th and the 20th. Those are non-working days. Then the employee came back work Monday, Tuesday, Wednesday, Thursday, Friday. That's 21st, 22nd, 23rd, 24th and 25th. And the employee technically earned $5,000 because they earned 10,000 for two weeks. Then again, we have Saturday and Sunday, which are the 26 and the 27th kind of do not count it. Then they went back to work, they work Monday, Tuesday, Wednesday, which is the 28, 29 and the 30th. Okay, so it seems they earn 1,000 per day. So they earn 1,000 for Monday, 1,000 for Tuesday, 1,000 for Wednesday. So in total, we have a cruel of $8,000. So if the salary expense is 14,000, we have to accrue an additional 8,000. Therefore the answer will be 22,000. So simply put, the entry will be debit salaries expense, credit salaries payable to include this and the answer will be 22,000. Those are good questions, good questions in a sense that you wanna be familiar with them when walking into the exam. I strongly suggest you go to my website. You sign up, you study for your CPA exam once in your lifetime. It's a lifetime investment. Don't take any chances. Subscribe, I'm always here to help you. Good luck.