Enrolled Agent Exam [Part 2] 55, Cash vs Accrual Accounting Method

Enrolled Agent Exam [Part 2] 56, Hybrid Accounting Method

This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams. In this episode you will learn: - The hybrid method is a combination of cash and accrual accounting permitted by the IRS. - A business with inventory must use the accrual method for all purchases and sales of that merchandise. - Service-based income and general operating expenses can often be accounted for using the cash method under a hybrid system. - A common exam trap involves small businesses with inventory incorrectly attempting to use the pure cash method for all transactions. - Any accounting method chosen, including hybrid, must be used consistently and must clearly reflect income to be valid. For more free exam prep tools, practice questions, and AI-powered explanations, visit https://open-exam-prep.com/ or YouTube Channel: https://www.youtube.com/@Open-exam-prep

Enrolled Agent Exam [Part 2] 55, Cash vs Accrual Accounting Method

This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams. In this episode you will learn: - The core difference between cash basis (income when received, expenses when paid) and accrual basis (income when earned, expenses when incurred). - How the constructive receipt doctrine is a common exam trap for cash-basis taxpayers. - The three parts of the 'all-events test' required for deducting expenses under the accrual method, with a focus on economic performance. - Which entities, such as large C corporations and tax shelters, are required to use the accrual method. - The specifics of the small business taxpayer exception, including the gross receipts test that allows certain larger businesses to use the cash method.

Enrolled Agent Exam [Part 2] 54, Lower of Cost or Market (LCM)

This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams. In this episode you will learn: - The Lower of Cost or Market (LCM) method requires inventory to be valued at the lesser of its historical cost or current market value. - For tax purposes, "market" is typically the current replacement cost of the inventory. - The LCM method cannot be used if the taxpayer uses the LIFO inventory method. - A write-down from cost to a lower market value results in a recognized loss in the current period. - The exam will likely test your ability to apply the LCM rule on an item-by-item basis to calculate the correct inventory valuation. For more free exam prep tools, practice questions, and AI-powered explanations, visit https://open-exam-prep.com/ or YouTube Channel: https://www.youtube.com/@Open-exam-prep

Enrolled Agent Exam [Part 2] 53, Inventory Methods — FIFO, LIFO, Specific ID

This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams. In this episode you will learn: - How the FIFO method assumes the first units purchased are the first ones sold, typically resulting in higher taxable income during inflationary periods. - How the LIFO method assumes the last units purchased are the first ones sold, leading to a higher Cost of Goods Sold (COGS) and lower taxable income when prices are rising. - The critical LIFO conformity rule, which mandates that if a business uses LIFO for tax purposes, it must also use it for financial reporting. - The procedural requirement of filing Form 970 with the IRS to properly elect the LIFO inventory method. - The application of the Specific Identification method for unique, high-value inventory items where the actual cost of each item can be tracked. For more free exam prep tools, practice questions, and AI-powered explanations, visit https://open-exam-prep.com/ or YouTube Channel: https://www.youtube.com/@Open-exam-prep

Enrolled Agent Exam [Part 2] 52, Business Casualty Losses

This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams. In this episode you will learn: - How to calculate a business casualty loss: the lesser of the property's adjusted basis or the decline in its fair market value, minus insurance proceeds. - That business casualty losses are not subject to the $100 per-event reduction or the 10% of AGI floor that applies to personal losses. - Why a federally declared disaster is not a requirement for deducting a business casualty loss, unlike the strict rule for personal losses. - That the deduction for a business casualty loss is taken in the year the loss occurs, not the year of discovery (except for theft). - The specific rule for completely destroyed business property, where the loss is simply the adjusted basis minus any salvage value or insurance reimbursement. For more free exam prep tools, practice questions, and AI-powered explanations, visit https://open-exam-prep.com/ or YouTube Channel: https://www.youtube.com/@Open-exam-prep