Not sure how quickly I will write again but wanted to make sure and wish everyone a Happy and Safe Holiday!!! When you are passing out gifts, don't forget to give the people near to you big hugs and tell them how important they are in your life. Anyone can spend money to come up with a gift. Actually telling people that you love and care for them is more important and doesn't cost a penny.
(a) - Got a couple of nice notes this week here at CPA Review for FREE (www.CPAreviewforFREE.com). It is always nice to hear from our many customers. The first comes from a college student using our questions to prepare for class and the second comes from another successful CPA Exam candidate.
(Email One): "I appreciate the emails with updates and the questions that they bring with them. I just wanted to share my appreciation for the site and let you know that it has been very resourceful in helping me with my current courses at the university. I often use the sections as they correspond to the material that I am learning. Sometimes I find that it is deeper than what we are covering, other times I am right on target. But it gives me the ability to not only see what the right answer is but to learn why. That is something it is hard to come by when you are studying on your own. 3 semesters left -- I hope as I study alongside your site I will be prepared for the exam...75 come on my way..!!!!"
(Email Two): "Three down, 1 to go! I just got my BEC score this morning -- a 92! Not quite up there with FAR and AUD ;-) -- but I'll take it since I spent the week before the exam goofing off with my wife and daughters at Disney World. (Can you believe it? I was doing review while waiting for the "Beauty and the Beast" stage show to start at MGM Studios and while standing in line for Space Mountain. That'll be MY story to tell.) Once again, I can't thank you enough for your site and the questions (as well as explanations) that are up there. I'm working in a field outside of accounting until the end of the year, and it is so great in my down time there to be able to log onto your site and just work question after question after question ... no complicated external software necessary. I'm pounding away at it now on REG. That said, as much as I love it, I hope I'm done using it (well, at least the exam review part) shortly after New Year's when I take REG. The finish
line is in sight, and cpareviewforfree has helped get me there."
(1) - I got another email this week from a person who used my review program back in 1999 to pass the CPA Exam. This time he wrote to tell me that he had recently passed the Certified Treasury Professional exam and had used a couple of techniques that I had taught him back in 1999.
I found two things that he told me to be quite interesting.
First, he said that I had told him to tape paper over the screen of his television set. Well, if that was true in 1999, it is even more true in 2008. If you talk to people, most will tell you "oh, I don't watch much television" but that's a myth. Most people waste many hours each week sitting in front of that monster. Movies, reality television, basketball games, football games (college and pro)-what do you benefit from all of that television?? Unplug the set for a week and see how much better you feel. You will read more and you will listen to music more AND you will work harder on passing the CPA Exam. Television eats up time, energy, and ambition. People become addicted to television because they don't have to worry about finding ways to occupy their time. Try it-unplug the television for a week and see if you don't like the results. In fact, just unplug the set UNTIL you have passed the CPA Exam. That's a great first step on the road to success.
Which is more important to you: your own personal success or watching the New York Giants and Carolina Panthers play football? That's a stupid question. Truly ambitious people are not interested in watching other people compete, they want to compete themselves.
Second, he reminded me of my philosophy about missing questions. Over the past few decades, I have often told candidates that every answer is a series of logical steps. You move from Step One to Step Two and so on until you get the correct answer. So, when you miss a question NEVER say that you missed the answer because that is not actually true. Always say that you missed one of the steps in arriving at the answer. Go back and figure out which step you missed and then determine how to get that step right the next time. What you are trying to accomplish is to get all the steps right by yourself. You cannot do that if you don't know which step is tripping you up and how to get that step right the next time you see a question.
Too many candidates don't know how to properly use missed questions because they don't know how to learn from them.
--Isolate the step that you missed.
--Focus on that step and how you can make sure to get it right the next time.
Two good lessons from all the way back in 1999.
(2) - Always remember-if you need to unsubscribe, just scroll to the bottom of this email and you can get right off.
(3) - I got another email last week (I do get lots of emails as you can see) from one of my favorite former students here at the University of Richmond. She asked what I thought was a fundamentally great question: "All of my friends are spending thousands of dollars for a very well-known CPA Review program. They then spend hundreds of hours plowing through hundreds of pages of boring materials and then make in the high 90s. I don't need to make a high score. I'd rather keep my money and make 75."
Okay, I'm biased but I must admit that I don't know why everyone who takes the CPA Exam doesn't think more carefully about the following choice:
99 and money gone or 75 and thousands of dollars of money in my pocket???
I told her the truth: try www.CPAreviewforFREE.com for six weeks and see how you do.
If you pass, keep your money.
If you fail miserably, then spend the money.
Spending the money first makes absolutely no sense.
Repeat after me: spending the money first makes absolutely no sense.
Here's what I would do if it were me:
(1) - Pick the part of the exam that you like the most. It's always easier to get started with a part you like.
(2) - Schedule to take that exam in roughly 40 days, let's say the end of January.
(3)-Go to www.CPAreviewforFREE.com and read all the information under "resources."
(4)-Start answering at least 15 questions per day.
(5)-Never guess. On the exam, you need to guess. In studying, never guess.
(6)-If you get a question correct, move on. Don't sit and congratulate yourself.
(7)-If you miss a question, find the step you missed (see above) and figure out what you missed in that step. Write down 10 words or less to help you get the question/step right the next time you see it.
(8)-Never forget that you only need to get 75 points to pass. You are not seeking perfection.
(9)-When you get to the final 7-10 days, start going methodically back through your 10 word notes. You want to make sure you can get as many questions right as possible.
(10)-During the exam, watch your time very closely. You want to finish with about 10 seconds left. Don't waste time but don't get too rushed.
(11)-If you don't know a question, eliminate as many answers as possible and take a guess. Don't let a tough question get you rattled.
Will you pass? I think you've got a great chance. Best of all, it only took you 40 days and you did not spend a penny for review materials. If you failed miserably, the big expensive programs will still be there but spending the money first makes absolutely no sense.
(4) - What an offer!!! Instead of giving a couple of review questions at the end of this lesson as I usually do, I thought I would do something different in this lesson. I gave 30 questions last week as part of a final exam in my introductory financial accounting course here at the University of Richmond.
If you send me a note at Jhoyle@cpareviewforfree.com, I will send you a copy of these 30 questions in a Word file along with explanations of the answers. Yet again, more free stuff from www.CPAreviewforFREE.com. Don't hit reply, you have to drop me an email at Jhoyle@cpareviewforfree.com.
Yes, it is an introductory course so these questions are probably a little bit easier than you would expect to find on the CPA Exam but not a whole lot easier. The CPA Exam stresses the breadth of coverage much more than the depth. Their questions are always more basic than you might expect. So, practicing on basic questions, even at the introductory level can be helpful. Sit down and take 90 minutes to 2 1/2 hours and see how you do. It is excellent practice. The answers are explained in a separate file that I will also send. Even at the introductory level, I would not necessarily expect you to get 100 percent correct. That is not the point of the exercise. The point is to find any holes that you might have in your basic knowledge of financial accounting and then work to get them filled.
Again--from all of us at CPA Review for FREE to all of you around the world: Happy Holidays!!!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
Friday, December 26, 2008
Tuesday, December 9, 2008
Times Are Tough But our Course is Still FREE
Lessons from the Rose Bowl
From: Joe
(a)-As always, we love getting notes from folks who are making good use of CPA Review for FREE (www.cpareviewforfree.com). Here is one that came in since my last email lesson:
"I wanted to send you an update on my CPA exam progress: I just received my AUD score this morning -- a 99! I have to once again thank you for your terrific site; I spent hours and hours and hours doing the multiple-choice questions there, which I'm sure helped me to do so well. Thanks again!"
Love such emails (as you can well imagine). However, I will tell you what I have said before: we are not out to get 99s. We are perfectly content for everyone to make 75 and pass. I know that a lot of the huge courses (those that charge thousands of dollars) brag all the time about having a few people make 99. However, that is only a very few people. I am not interested in a few people; I am interested in everyone who uses our site getting a 75. That is our one and only goal: for YOU to make 75 and pass. I am more interested in 100 percent of our customers making 75 than I am in 2 percent making 99.
I am always glad to hear about high scores but I am equally thrilled by every passing score. All you really need to do is pass. Once you pass, no one will ever care about how many points you got.
And, I firmly believe that, if you will work the questions that are available at CPA Review for FREE and take short notes (10 words or less) on each question that you miss, you will have a great chance for success. This is not rocket science or brain surgery. Yes, 99 takes incredible work but you don't need a 99. And, 75 certainly takes a whole lot less work. You can do it!!!!
(b) - If you wish to unsubscribe to our email lessons, just scroll to the bottom of this lesson and click on the appropriate link. It will pull you right off. Don't hurry to leave but please do realize that you can get off at any time that you wish.
(1)-If you are a college football fan, you know that Penn State only lost one (very close) game this year and will be playing in the Rose Bowl against Southern California on January 1. You probably also know that Penn State is coached by the truly legendary Joe Paterno.
I have a poster on the wall of my office (here at the University of Richmond). It has been there now for at least 20 years. It is a wonderful essay written by Joe Paterno that first appeared in the Wall Street Journal two decades ago. Even now, I read this essay about every three months. Paterno is one of the true winners in this world and I have always been fascinated by what true winners have to say. I think you can learn more helpful stuff from true winners than you can from anyone else. Losers tell you how to lose; winners tell you how to win.
There are a number of lines in Paterno's essay that I love but the main one (for me) is:
"The will to win is important, but the will to prepare is vital."
It is a line that-even after 20 years-I think about often. To me, success is all about "the will to prepare."
I have worked with thousands of students and CPA exam candidates over the years and the desire to win and succeed and get rich and famous is almost universal. Heck, who wouldn't want that? If you walk into any group and just ask "how many of you folks want to be successful, want to be winners?" they will practically knock you down as they wave their hands in the air.
Don't let anyone tell you there is a shortage of ambition in the world.
However, from my experience, true success comes from what I call "channeled ambition." That is the deep desire that gives you the strength to get up and do the dull and boring stuff that you have to do in order to be successful. In other words, channeled ambition provides you with the energy needed to prepare yourself for success-not just occasionally but every day. And, that is very tough because preparation can be truly boring so that it can be easy to fall back on shortcuts. We are hyperactive people; we love shortcuts. I'm convinced that most people fool themselves into believing that shortcuts work as well as real preparation (and that just isn't the case). It takes incredible self-discipline to skip the shortcuts and do the preparatory work every day. Do you have channeled ambition?
At this very moment, I am giving a final exam to my Intermediate Accounting II class. It is an extremely hard course covering deferred taxes, defined benefit pension plans, capital leases, earnings per share, statement of cash flows, contingencies, bonds, and the like. I was talking before the test with one of my students who really wants to improve her grade. I knew she had been working quite hard for this exam because I had gotten a number of questions by email from her over the week-end. I asked her how many hours she had studied for this one test. Her response was quick: about 30. Most students simply don't have the self-discipline to study 30 hours for one college test. I don't know how she will do but she has put herself into position where she can do well. That is what I want when the test starts-for her to be in position to do well. Without proper preparation, it is almost impossible to work those intermediate accounting questions. With preparation, she
has a great chance to earn a better grade. There are no guarantees but she has a good shot.
Whether it is Intermediate Accounting II or the CPA Exam or just life in general, there is little advice that can be better than what Joe Paterno wrote in the Wall Street Journal about 20 years ago:
"The will to win is important, but the will to prepare is vital."
If you would like to receive an electronic copy of the essay mentioned above by Joe Paterno, hit reply and we'll send it to you. As I said, if you want be a winner, it is good to get advice from true winners.
(2)-I started reading a new book Sunday on increasing personal energy. I am one of these people who is constantly trying to accomplish more every day so I'm always searching for new ways to have more energy. I work many days from 7:30 in the morning until 10:00 at night so I seem to be in need of an energy boost every single day. I am almost obsessed with being as productive as possible so I'm always looking for ways to increase my level of energy.
I don't know if this book will turn out to be any good but I was intrigued at the start when the author began talking about those people and jobs around us that zap our energy-those things that seem to suck our energy right out of our bodies. I think her point is going to be to identify those sources of negative energy and then work to avoid them as much as possible.
Preparing for the CPA Exam takes incredible energy because most people also have jobs, families, homes, and friends that require a lot of them. On top of that, add in hundreds of hours of study and it becomes a trying task. Life gets in the way. I get a lot of emails that begin "I've become totally worn down from preparing for the CPA Exam." I understand. It is not a task to be taken lightly. Adding this type of work load into an already busy existence can stretch us all to the breaking point. I actually think that passing the exam (with a program like CPA Review for FREE) is quite workable IF you can dig up the energy to answer the questions and take the notes. However, life often pulls at us from all sides.
So, if you are feeling a bit overwhelmed by your preparation for the CPA Exam at the moment, here is a quick suggestion. Look around at the people you meet and the things you do each day and try to figure out whether there are any sources of negative energy that you can eliminate-at least temporarily until you are through with the exam. If you have people around you who whine a lot or who want you to go partying every night, maybe you can set them aside for a few months. If you have tasks that don't seem to accomplish anything other than tiring you out, maybe you can defer them for awhile.
People often talk about simplifying their lives. When you are preparing for the CPA Exam, it is a great idea to simplify your life. Look around for anything that seems to suck the energy from you and GET RID OF IT!!! If there was ever a time when you only want positive energy, it is in this time when you are getting yourself ready to pass the CPA Exam.
Simplify your life - throw out all sources of negative energy.
(3) -- Because we are in the midst of final exams, I have been busily writing questions for my students. Here are a few questions (and answers) that might help you gain a point or two on the CPA Exam. Remember my rules for preparation:
--When practicing on questions, never guess. If you don't know the answer, you don't know the answer.
--If you get a question right, move on. You know it. Don't waste time celebrating.
--If you cannot get a question right, read the answer very carefully. Then, take 10 words or less of notes to help you get the question right the next time.
Financial Accounting & Reporting
Elijah Corporation begins the current year with inventory costing $400,000. During the year, the company buys another $1.8 million in merchandise and makes sales of $2.4 million. A physical inventory at the end of the year uncovers goods with a cost of $600,000. What is this company's inventory turnover for the year?
A - 3.2
B - 3.6
C - 4.2
D - 4.8
Answer is A
Inventory turnover is the cost of goods sold for the period divided by the average inventory balance. It reflects the number of times during the year that an amount equal to the inventory on hand is sold. It is a measure of the speed at which companies sell their merchandise. Here, average inventory is $500,000. That is the beginning inventory of $400,000 plus the ending inventory of $600,000 divided by two. Cost of goods sold is $1.6 million. That is the beginning inventory ($400,000) plus purchases ($1.8 million) less ending inventory ($600,000). Therefore, inventory turnover is $1.6 million divided by $500,000 or 3.2.
Regulation
Winston Albertson is an attorney who performs legal services for H & A Partnership during the current year. Near the end of the year, Albertson presents an invoice to H & A for $60,000 but offers to accept an immediate cash payment of $52,000. He is offered an 8 percent interest in the partnership which has a value of $44,000 as payment in full. He accepts the offer. What is the impact on his taxable income for that year?
A - Zero
B - $44,000
C - $52,000
D - $60,000
Answer is B
When work is done and an asset is received as payment other than cash, the assumption is that the fair value of this asset has been earned. Here, the fair value of the interest in the partnership is $44,000 and that should be recognized as taxable income by the taxpayer.
Auditing and Attestation
The CPA firm of Ambrose and Albert has been associated with the unaudited financial statements of Lakeside Corporation. The firm plans to issue a disclaimer because no audit procedures of any type were performed. However, the partner on the engagement realizes that Lakeside has omitted all income tax balances although a material amount is owed at the end of the current year. How does this knowledge impact the report to be issued?
A - An adverse opinion must be rendered because of the omission.
B - A qualified opinion must be render because of the omission.
C - The nature and extent of the problem must be described in the report and then a disclaimer is rendered.
D - As long as the statements are clearly marked as unaudited, no change need be made in the disclaimer of opinion.
Answer is C
Whenever a CPA is aware of a material problem in a set of financial statements, that problem must be clearly identified even if there is no audit and a disclaimer is to be rendered. Because an audit has not been performed, no opinion can be given. However, before disclaiming an opinion, the CPA is obligated to spell out all of the known information about the problem in connection with the reporting of income taxes.
Business Environment and Concepts
The Hadley Company produces widgets which are seasonal products. Therefore, the company produces 10,000 units per month for the first six months of the year (January through June) and then 30,000 units per month for the last six months of the year (July through December). It takes three pounds of product XYZ to produce one widget. The company plans to start each month with enough of product XYZ for the next two months so that shortages are avoided. How much product XYZ should the company plan to acquire during the month of May?
A - 20,000 pounds
B - 30,000 pounds
C - 60,000 pounds
D - 90,000 pounds
Answer is D
The company starts May expecting to make 20,000 units over the next two months (10,000 in May and 10,000 in June). Thus, 60,000 pounds of material (at three pounds per unit) should be on hand to make those units. During May, 10,000 units will be produced and use up 30,000 pounds of the material, leaving 30,000 pounds on hand. At the beginning of June, the company anticipates making 40,000 units over the subsequent two months (10,000 in June and 30,000 in July). On that date, the company wants to hold 120,000 pounds of material (at three pounds per widget). To raise the quantity of material from 30,000 pounds to the desired 120,000 pounds as of the beginning of June, an additional 90,000 must be bought during May.
Have a great week. Have controlled ambition so that you can do the preparation necessary to get the CPA Exam passed and out of your way.
Remember to let us know if you want to see a copy of the Joe Paterno essay.
From: Joe
(a)-As always, we love getting notes from folks who are making good use of CPA Review for FREE (www.cpareviewforfree.com). Here is one that came in since my last email lesson:
"I wanted to send you an update on my CPA exam progress: I just received my AUD score this morning -- a 99! I have to once again thank you for your terrific site; I spent hours and hours and hours doing the multiple-choice questions there, which I'm sure helped me to do so well. Thanks again!"
Love such emails (as you can well imagine). However, I will tell you what I have said before: we are not out to get 99s. We are perfectly content for everyone to make 75 and pass. I know that a lot of the huge courses (those that charge thousands of dollars) brag all the time about having a few people make 99. However, that is only a very few people. I am not interested in a few people; I am interested in everyone who uses our site getting a 75. That is our one and only goal: for YOU to make 75 and pass. I am more interested in 100 percent of our customers making 75 than I am in 2 percent making 99.
I am always glad to hear about high scores but I am equally thrilled by every passing score. All you really need to do is pass. Once you pass, no one will ever care about how many points you got.
And, I firmly believe that, if you will work the questions that are available at CPA Review for FREE and take short notes (10 words or less) on each question that you miss, you will have a great chance for success. This is not rocket science or brain surgery. Yes, 99 takes incredible work but you don't need a 99. And, 75 certainly takes a whole lot less work. You can do it!!!!
(b) - If you wish to unsubscribe to our email lessons, just scroll to the bottom of this lesson and click on the appropriate link. It will pull you right off. Don't hurry to leave but please do realize that you can get off at any time that you wish.
(1)-If you are a college football fan, you know that Penn State only lost one (very close) game this year and will be playing in the Rose Bowl against Southern California on January 1. You probably also know that Penn State is coached by the truly legendary Joe Paterno.
I have a poster on the wall of my office (here at the University of Richmond). It has been there now for at least 20 years. It is a wonderful essay written by Joe Paterno that first appeared in the Wall Street Journal two decades ago. Even now, I read this essay about every three months. Paterno is one of the true winners in this world and I have always been fascinated by what true winners have to say. I think you can learn more helpful stuff from true winners than you can from anyone else. Losers tell you how to lose; winners tell you how to win.
There are a number of lines in Paterno's essay that I love but the main one (for me) is:
"The will to win is important, but the will to prepare is vital."
It is a line that-even after 20 years-I think about often. To me, success is all about "the will to prepare."
I have worked with thousands of students and CPA exam candidates over the years and the desire to win and succeed and get rich and famous is almost universal. Heck, who wouldn't want that? If you walk into any group and just ask "how many of you folks want to be successful, want to be winners?" they will practically knock you down as they wave their hands in the air.
Don't let anyone tell you there is a shortage of ambition in the world.
However, from my experience, true success comes from what I call "channeled ambition." That is the deep desire that gives you the strength to get up and do the dull and boring stuff that you have to do in order to be successful. In other words, channeled ambition provides you with the energy needed to prepare yourself for success-not just occasionally but every day. And, that is very tough because preparation can be truly boring so that it can be easy to fall back on shortcuts. We are hyperactive people; we love shortcuts. I'm convinced that most people fool themselves into believing that shortcuts work as well as real preparation (and that just isn't the case). It takes incredible self-discipline to skip the shortcuts and do the preparatory work every day. Do you have channeled ambition?
At this very moment, I am giving a final exam to my Intermediate Accounting II class. It is an extremely hard course covering deferred taxes, defined benefit pension plans, capital leases, earnings per share, statement of cash flows, contingencies, bonds, and the like. I was talking before the test with one of my students who really wants to improve her grade. I knew she had been working quite hard for this exam because I had gotten a number of questions by email from her over the week-end. I asked her how many hours she had studied for this one test. Her response was quick: about 30. Most students simply don't have the self-discipline to study 30 hours for one college test. I don't know how she will do but she has put herself into position where she can do well. That is what I want when the test starts-for her to be in position to do well. Without proper preparation, it is almost impossible to work those intermediate accounting questions. With preparation, she
has a great chance to earn a better grade. There are no guarantees but she has a good shot.
Whether it is Intermediate Accounting II or the CPA Exam or just life in general, there is little advice that can be better than what Joe Paterno wrote in the Wall Street Journal about 20 years ago:
"The will to win is important, but the will to prepare is vital."
If you would like to receive an electronic copy of the essay mentioned above by Joe Paterno, hit reply and we'll send it to you. As I said, if you want be a winner, it is good to get advice from true winners.
(2)-I started reading a new book Sunday on increasing personal energy. I am one of these people who is constantly trying to accomplish more every day so I'm always searching for new ways to have more energy. I work many days from 7:30 in the morning until 10:00 at night so I seem to be in need of an energy boost every single day. I am almost obsessed with being as productive as possible so I'm always looking for ways to increase my level of energy.
I don't know if this book will turn out to be any good but I was intrigued at the start when the author began talking about those people and jobs around us that zap our energy-those things that seem to suck our energy right out of our bodies. I think her point is going to be to identify those sources of negative energy and then work to avoid them as much as possible.
Preparing for the CPA Exam takes incredible energy because most people also have jobs, families, homes, and friends that require a lot of them. On top of that, add in hundreds of hours of study and it becomes a trying task. Life gets in the way. I get a lot of emails that begin "I've become totally worn down from preparing for the CPA Exam." I understand. It is not a task to be taken lightly. Adding this type of work load into an already busy existence can stretch us all to the breaking point. I actually think that passing the exam (with a program like CPA Review for FREE) is quite workable IF you can dig up the energy to answer the questions and take the notes. However, life often pulls at us from all sides.
So, if you are feeling a bit overwhelmed by your preparation for the CPA Exam at the moment, here is a quick suggestion. Look around at the people you meet and the things you do each day and try to figure out whether there are any sources of negative energy that you can eliminate-at least temporarily until you are through with the exam. If you have people around you who whine a lot or who want you to go partying every night, maybe you can set them aside for a few months. If you have tasks that don't seem to accomplish anything other than tiring you out, maybe you can defer them for awhile.
People often talk about simplifying their lives. When you are preparing for the CPA Exam, it is a great idea to simplify your life. Look around for anything that seems to suck the energy from you and GET RID OF IT!!! If there was ever a time when you only want positive energy, it is in this time when you are getting yourself ready to pass the CPA Exam.
Simplify your life - throw out all sources of negative energy.
(3) -- Because we are in the midst of final exams, I have been busily writing questions for my students. Here are a few questions (and answers) that might help you gain a point or two on the CPA Exam. Remember my rules for preparation:
--When practicing on questions, never guess. If you don't know the answer, you don't know the answer.
--If you get a question right, move on. You know it. Don't waste time celebrating.
--If you cannot get a question right, read the answer very carefully. Then, take 10 words or less of notes to help you get the question right the next time.
Financial Accounting & Reporting
Elijah Corporation begins the current year with inventory costing $400,000. During the year, the company buys another $1.8 million in merchandise and makes sales of $2.4 million. A physical inventory at the end of the year uncovers goods with a cost of $600,000. What is this company's inventory turnover for the year?
A - 3.2
B - 3.6
C - 4.2
D - 4.8
Answer is A
Inventory turnover is the cost of goods sold for the period divided by the average inventory balance. It reflects the number of times during the year that an amount equal to the inventory on hand is sold. It is a measure of the speed at which companies sell their merchandise. Here, average inventory is $500,000. That is the beginning inventory of $400,000 plus the ending inventory of $600,000 divided by two. Cost of goods sold is $1.6 million. That is the beginning inventory ($400,000) plus purchases ($1.8 million) less ending inventory ($600,000). Therefore, inventory turnover is $1.6 million divided by $500,000 or 3.2.
Regulation
Winston Albertson is an attorney who performs legal services for H & A Partnership during the current year. Near the end of the year, Albertson presents an invoice to H & A for $60,000 but offers to accept an immediate cash payment of $52,000. He is offered an 8 percent interest in the partnership which has a value of $44,000 as payment in full. He accepts the offer. What is the impact on his taxable income for that year?
A - Zero
B - $44,000
C - $52,000
D - $60,000
Answer is B
When work is done and an asset is received as payment other than cash, the assumption is that the fair value of this asset has been earned. Here, the fair value of the interest in the partnership is $44,000 and that should be recognized as taxable income by the taxpayer.
Auditing and Attestation
The CPA firm of Ambrose and Albert has been associated with the unaudited financial statements of Lakeside Corporation. The firm plans to issue a disclaimer because no audit procedures of any type were performed. However, the partner on the engagement realizes that Lakeside has omitted all income tax balances although a material amount is owed at the end of the current year. How does this knowledge impact the report to be issued?
A - An adverse opinion must be rendered because of the omission.
B - A qualified opinion must be render because of the omission.
C - The nature and extent of the problem must be described in the report and then a disclaimer is rendered.
D - As long as the statements are clearly marked as unaudited, no change need be made in the disclaimer of opinion.
Answer is C
Whenever a CPA is aware of a material problem in a set of financial statements, that problem must be clearly identified even if there is no audit and a disclaimer is to be rendered. Because an audit has not been performed, no opinion can be given. However, before disclaiming an opinion, the CPA is obligated to spell out all of the known information about the problem in connection with the reporting of income taxes.
Business Environment and Concepts
The Hadley Company produces widgets which are seasonal products. Therefore, the company produces 10,000 units per month for the first six months of the year (January through June) and then 30,000 units per month for the last six months of the year (July through December). It takes three pounds of product XYZ to produce one widget. The company plans to start each month with enough of product XYZ for the next two months so that shortages are avoided. How much product XYZ should the company plan to acquire during the month of May?
A - 20,000 pounds
B - 30,000 pounds
C - 60,000 pounds
D - 90,000 pounds
Answer is D
The company starts May expecting to make 20,000 units over the next two months (10,000 in May and 10,000 in June). Thus, 60,000 pounds of material (at three pounds per unit) should be on hand to make those units. During May, 10,000 units will be produced and use up 30,000 pounds of the material, leaving 30,000 pounds on hand. At the beginning of June, the company anticipates making 40,000 units over the subsequent two months (10,000 in June and 30,000 in July). On that date, the company wants to hold 120,000 pounds of material (at three pounds per widget). To raise the quantity of material from 30,000 pounds to the desired 120,000 pounds as of the beginning of June, an additional 90,000 must be bought during May.
Have a great week. Have controlled ambition so that you can do the preparation necessary to get the CPA Exam passed and out of your way.
Remember to let us know if you want to see a copy of the Joe Paterno essay.
Wednesday, November 19, 2008
You Cannot Beat FREE FREE FREE
Home Runs Just Take Preparation
From: Joe
(a)-Greetings from Richmond, Virginia, where we actually had a little snow Tuesday morning. It looked beautiful and did not freeze on the road-the best of all situations.
(b) -All of us here at www.CPAreviewforFREE.com are celebrating. After a few short weeks in business, we will be going over one million (1,000,000!!!) page views in the next day or two. With no marketing, we have hit a million page views. The Internet is wonderful. Thanks to everyone who has passed our URL along to CPA candidates and college accounting students. On to a billion!!!!
(1)-Let me make a personal suggestion. A lot of times when people are preparing for the CPA Exam, they become somewhat self-centered. You have to devote so much time and energy to preparing that it is easy to only think about what you are going through.
It is not a bad idea to break out of that cocoon.
If you know someone else who is preparing for the exam or someone else who is facing a real challenge in the near future or someone else who is simply struggling in some way, take a moment and call them or send them an email or a card and tell them "I know you can do it. I understand that the challenges are tough, but I'm cheering for you. I know you are a winner and you are going to come out ahead."
We get so wrapped up in our own struggles some time that we forget about the needs of those other people who are around us. Yeah, it is great to have everyone cheering you on; it is almost addictive to have people pushing you to succeed. But, even if you are busy studying for the CPA Exam, there has to be a free moment where you can encourage someone else.
For today, you be the one who provides the encouragement. I think you will feel a whole lot better about your own challenges if you reach out to boost the spirits of someone else. If you want more energy and hope in your own life, give a push and a word of hope to someone else.
(2)-A good friend of mine sent me an email on Sunday wanting to meet for lunch this past Monday. We met and he told me that he had reached the point where he really needed to pass the CPA Exam because of his job. He immediately started the litany that I hear so often "I know it is going to cost me a lot of money but I need lots of material and lots of structure and lots of help." I sometimes think that candidates are hoping to pass based on the number of pounds of material they buy or the number of hours of class they sleep through. It was almost as if he were telling me: "surely, if I buy enough and waste enough money, I will pass that exam."
Before the exam became computerized, it was only offered two times per year and every candidate had to make the very best of that opportunity. There was no Spring Training to help you get a sense of where you were in your ability to pass.
Now, however, you can take each part four times per year.
--Why spend any money until you know you have to????
I'll repeat that:
--Why spend any money until you know you have to????
Here's what I told my friend (this is a true story-we were having turkey sandwiches at Stuffy's Deli on Libbie Avenue about 2 miles from the University of Richmond campus).
--Pick your favorite part of the exam.
--Schedule to take that part in the first week of January.
--Go to the "resources" section of CPAreviewforFREE and read all of that information.
--Start answering questions on CPAreviewforFREE. Answer 15-20 questions per day, five or six days per week. You'll probably have to spend 60-90 minutes each time.
--Never guess at an answer (guess on the exam but not when you are learning the material).
--Keep a pad of paper beside of the computer. Whenever you miss a question, write down 10 words (no more) that will help you get the question right the next time.
--Try to have every question on the site done 10 days before you are to take the exam.
--Use the last 10 days to review your notes and the topical areas where you missed the most questions.
--As soon as you finish the first exam, schedule the second one for the third week in February and do the process over again.
When the scores come out,
--if you made below 60, you may well need a more formal review program. You may have to spend the money.
--if you made between 60-65, you might need a program but I think I'd give CPAreviewforFREE one more push in April to save the money. You are close.
--if you made between 65-74, you should be able to pass with more strong push using CPAreviewforFREE. Save your money. You are very close; do the process again but focus more carefully on the ones you miss.
--if you made 75 or above, take all the money you just saved and book a nice vacation.
Why not try CPAreviewforFREE first before you spend all that money? I think my mother would have said "what kind of person wouldn't try free first before spending a whole bunch of money?"
(3)-If you need to unsubscribe, always remember that you merely need to scroll to the bottom of this email and click on the appropriate link. We love having you with us. We love talking with you about the CPA Exam and success. However, if you need to leave us, just click and your name will be removed.
If this lesson has been forwarded to you by a friend, relative, or complete stranger and you would like to get them automatically every week or two, go to www.CPAreviewforFREE.com and register and make sure to check the box that asks if you want to receive CPA Exam Review materials.
(4)-Back when I was a kid, one of my favorite baseball players was Roger Maris. He was the guy who broke Babe Ruth's home run record by hitting 61 home runs in 1961. What I liked about him was that he was not the biggest guy or the strongest guy or the fastest guy or the most talented guy. But he broke the record. He was the one who did it. Athletes always seemed to be giants compared to "normal" people but Maris just seemed like a normal guy. Everyone wanted to break Ruth's record but it was the "normal" guy who first did it.
Maris is dead now but I read a magazine article about him a few years back and they had this great quote from him: "You hit home runs not by chance but by preparation." As an educator, I wish I could write that line across the forehead of my students. I am not sure what happens in the education system but students do not equate preparation with academic success. I am giving an intermediate accounting test on Friday on pensions, deferred taxes, and compensatory stock options. I guarantee that the people who make the highest grades will be the people who have prepared the most since the previous test. It's almost automatic.
Knowing that, you would think the students would have competitions to see who could prepare the most. Instead, they have a tendency to look for shortcuts; they have a tendency to procrastinate; they have a tendency to wait for miracles. Miracles don't often happen (especially not in intermediate accounting or the CPA Exam). Preparation is the key to academic success.
As I have said many times before, I've been in CPA Review since 1980 and I've never met anyone who couldn't pass the CPA Exam. It is easier than most people think. However, I have encountered people who seemed incapable of preparing. They were the ones who struggled. They always had to mow the grass first or pay their bills. They had to get their desk clear and their problems solved and then (and only then) they were going to prepare.
Trust me, the small chores in life can eat up 100 percent of your time. It is not the difficulty of the CPA Exam that keeps you from passing but the small chores that keep you from proper preparation.
Make preparing for the CPA Exam and absolute top-of-the-list priority in your life and you are half way to success. If it is anything but one of your truly highest priorities, passing quickly becomes impossible.
(5) - Here are a few practice questions just for you.
Regulation
John Doe gambles during the year and has gambling winnings of $13,000. In addition, he also has gambling losses of $15,000. How is this reported for federal income tax purposes?
A - The $13,000 is taxable income and $13,000 is a miscellaneous itemized deduction.
B - The $13,000 and $15,000 are netted and a $2,000 loss is reported under miscellaneous income.
C - The $13,000 is taxable income and the $15,000 is an itemized deduction.
D - The $13,000 is taxable income and the amount of the $15,000 in excess of 2 percent of John Doe's adjusted gross income is a miscellaneous itemized deduction.
Answer is A
Tax winnings are included as taxable income on a federal income tax return. The losses can be deducted as a miscellaneous itemized deduction but only up to the amount of the winnings. Therefore, although $15,000 was lost, only the first $13,000 can be taken because that is the amount of the taxpayer's winnings.
Financial Accounting & Reporting
On January 1, Year One, the Waxman Company issues 10,000 stock options to its president. Stock can be bought for $25 per share but only if the president works with the company for four years. She then has two additional years in which to exercise the options. The price of the stock is $29 on January 1 but climbs to $37 on December 31, Year One. A computer pricing model values the option at $8 on January 1, Year One, and at $16 on December 31, Year One. If this is a compensatory stock option, what expense should the company recognize for Year One?
A - Zero
B - $10,000
C - $20,000
D - $40,000
Answer is C
The value of compensatory stock options is determined on the grant date by a computer pricing model such as Black-Scholes. That total expense is then allocated over the years which the person must work to earn the options. The value of the options on the grant date is $8 times 10,000 or $80,000. The person must work for four years so the expense is $20,000 each year.
Auditing & Attestation
An independent CPA is assessing the level of control risk present at a company that is currently being audited. This company has an internal audit department and the independent CPA is evaluating the objectivity of that department. Which of the following is a sign that the department has proper objectivity?
A - The size of the department has grown from 7 people to 19 over the last three years.
B - In order to be promoted within this department, the employee must have become a CPA.
C - The head of the department meets privately with the chair of the board of directors each quarter.
D - The head of the department had seven years of experience with an international accounting firm before taking this position with the company.
Answer is C
The independent CPA is interested in both the competence and objectivity of the internal audit department because of the key function that it plays in the company. Answers A, B, and D all relate to competence. These relate to the question: Is there evidence that the people doing the work are capable of doing it properly? Objectivity concerns the internal auditor's independence so that the department can do the work that is necessary. That is usually shown by having a direct line of communication to an authority figure outside of management (usually the board of directors or the audit committee of the board of directors).
BEC
A company uses computer processing to calculate and print out employee paychecks each period. The company is worried that data will be entered into the system incorrectly so that one or more paychecks will be overstated as a means of stealing money from the company. Which of the following is most likely to detect such fraud?
A - Control totals are calculated for significant figures.
B - All paychecks must be hand delivered to the employee by a paymaster.
C - A system is devised so that employees who are overpaid can file a form to reimburse the company.
D - Checks that are not picked up by an employee are given to a person in authority to uncover the reason
Answer is A
Companies worry that numbers such as hours worked or pay rates will be increased in a scheme so that employees can steal money. For example, if 50 hours is entered rather than 40 hours for an employee, that person will get 25 percent more than has been earned. Thus, company officials determine control figures before computations are made and then verify those totals after the computations are made to ensure that no unauthorized changes have been made. Answers B and D are important controls but they are verifying that paychecks are written to actual employees rather than that the amounts have not been manipulated.
Have a great week - as we all move toward Thanksgiving, take a moment to count your blessings. The list will be longer than you might expect.
From: Joe
(a)-Greetings from Richmond, Virginia, where we actually had a little snow Tuesday morning. It looked beautiful and did not freeze on the road-the best of all situations.
(b) -All of us here at www.CPAreviewforFREE.com are celebrating. After a few short weeks in business, we will be going over one million (1,000,000!!!) page views in the next day or two. With no marketing, we have hit a million page views. The Internet is wonderful. Thanks to everyone who has passed our URL along to CPA candidates and college accounting students. On to a billion!!!!
(1)-Let me make a personal suggestion. A lot of times when people are preparing for the CPA Exam, they become somewhat self-centered. You have to devote so much time and energy to preparing that it is easy to only think about what you are going through.
It is not a bad idea to break out of that cocoon.
If you know someone else who is preparing for the exam or someone else who is facing a real challenge in the near future or someone else who is simply struggling in some way, take a moment and call them or send them an email or a card and tell them "I know you can do it. I understand that the challenges are tough, but I'm cheering for you. I know you are a winner and you are going to come out ahead."
We get so wrapped up in our own struggles some time that we forget about the needs of those other people who are around us. Yeah, it is great to have everyone cheering you on; it is almost addictive to have people pushing you to succeed. But, even if you are busy studying for the CPA Exam, there has to be a free moment where you can encourage someone else.
For today, you be the one who provides the encouragement. I think you will feel a whole lot better about your own challenges if you reach out to boost the spirits of someone else. If you want more energy and hope in your own life, give a push and a word of hope to someone else.
(2)-A good friend of mine sent me an email on Sunday wanting to meet for lunch this past Monday. We met and he told me that he had reached the point where he really needed to pass the CPA Exam because of his job. He immediately started the litany that I hear so often "I know it is going to cost me a lot of money but I need lots of material and lots of structure and lots of help." I sometimes think that candidates are hoping to pass based on the number of pounds of material they buy or the number of hours of class they sleep through. It was almost as if he were telling me: "surely, if I buy enough and waste enough money, I will pass that exam."
Before the exam became computerized, it was only offered two times per year and every candidate had to make the very best of that opportunity. There was no Spring Training to help you get a sense of where you were in your ability to pass.
Now, however, you can take each part four times per year.
--Why spend any money until you know you have to????
I'll repeat that:
--Why spend any money until you know you have to????
Here's what I told my friend (this is a true story-we were having turkey sandwiches at Stuffy's Deli on Libbie Avenue about 2 miles from the University of Richmond campus).
--Pick your favorite part of the exam.
--Schedule to take that part in the first week of January.
--Go to the "resources" section of CPAreviewforFREE and read all of that information.
--Start answering questions on CPAreviewforFREE. Answer 15-20 questions per day, five or six days per week. You'll probably have to spend 60-90 minutes each time.
--Never guess at an answer (guess on the exam but not when you are learning the material).
--Keep a pad of paper beside of the computer. Whenever you miss a question, write down 10 words (no more) that will help you get the question right the next time.
--Try to have every question on the site done 10 days before you are to take the exam.
--Use the last 10 days to review your notes and the topical areas where you missed the most questions.
--As soon as you finish the first exam, schedule the second one for the third week in February and do the process over again.
When the scores come out,
--if you made below 60, you may well need a more formal review program. You may have to spend the money.
--if you made between 60-65, you might need a program but I think I'd give CPAreviewforFREE one more push in April to save the money. You are close.
--if you made between 65-74, you should be able to pass with more strong push using CPAreviewforFREE. Save your money. You are very close; do the process again but focus more carefully on the ones you miss.
--if you made 75 or above, take all the money you just saved and book a nice vacation.
Why not try CPAreviewforFREE first before you spend all that money? I think my mother would have said "what kind of person wouldn't try free first before spending a whole bunch of money?"
(3)-If you need to unsubscribe, always remember that you merely need to scroll to the bottom of this email and click on the appropriate link. We love having you with us. We love talking with you about the CPA Exam and success. However, if you need to leave us, just click and your name will be removed.
If this lesson has been forwarded to you by a friend, relative, or complete stranger and you would like to get them automatically every week or two, go to www.CPAreviewforFREE.com and register and make sure to check the box that asks if you want to receive CPA Exam Review materials.
(4)-Back when I was a kid, one of my favorite baseball players was Roger Maris. He was the guy who broke Babe Ruth's home run record by hitting 61 home runs in 1961. What I liked about him was that he was not the biggest guy or the strongest guy or the fastest guy or the most talented guy. But he broke the record. He was the one who did it. Athletes always seemed to be giants compared to "normal" people but Maris just seemed like a normal guy. Everyone wanted to break Ruth's record but it was the "normal" guy who first did it.
Maris is dead now but I read a magazine article about him a few years back and they had this great quote from him: "You hit home runs not by chance but by preparation." As an educator, I wish I could write that line across the forehead of my students. I am not sure what happens in the education system but students do not equate preparation with academic success. I am giving an intermediate accounting test on Friday on pensions, deferred taxes, and compensatory stock options. I guarantee that the people who make the highest grades will be the people who have prepared the most since the previous test. It's almost automatic.
Knowing that, you would think the students would have competitions to see who could prepare the most. Instead, they have a tendency to look for shortcuts; they have a tendency to procrastinate; they have a tendency to wait for miracles. Miracles don't often happen (especially not in intermediate accounting or the CPA Exam). Preparation is the key to academic success.
As I have said many times before, I've been in CPA Review since 1980 and I've never met anyone who couldn't pass the CPA Exam. It is easier than most people think. However, I have encountered people who seemed incapable of preparing. They were the ones who struggled. They always had to mow the grass first or pay their bills. They had to get their desk clear and their problems solved and then (and only then) they were going to prepare.
Trust me, the small chores in life can eat up 100 percent of your time. It is not the difficulty of the CPA Exam that keeps you from passing but the small chores that keep you from proper preparation.
Make preparing for the CPA Exam and absolute top-of-the-list priority in your life and you are half way to success. If it is anything but one of your truly highest priorities, passing quickly becomes impossible.
(5) - Here are a few practice questions just for you.
Regulation
John Doe gambles during the year and has gambling winnings of $13,000. In addition, he also has gambling losses of $15,000. How is this reported for federal income tax purposes?
A - The $13,000 is taxable income and $13,000 is a miscellaneous itemized deduction.
B - The $13,000 and $15,000 are netted and a $2,000 loss is reported under miscellaneous income.
C - The $13,000 is taxable income and the $15,000 is an itemized deduction.
D - The $13,000 is taxable income and the amount of the $15,000 in excess of 2 percent of John Doe's adjusted gross income is a miscellaneous itemized deduction.
Answer is A
Tax winnings are included as taxable income on a federal income tax return. The losses can be deducted as a miscellaneous itemized deduction but only up to the amount of the winnings. Therefore, although $15,000 was lost, only the first $13,000 can be taken because that is the amount of the taxpayer's winnings.
Financial Accounting & Reporting
On January 1, Year One, the Waxman Company issues 10,000 stock options to its president. Stock can be bought for $25 per share but only if the president works with the company for four years. She then has two additional years in which to exercise the options. The price of the stock is $29 on January 1 but climbs to $37 on December 31, Year One. A computer pricing model values the option at $8 on January 1, Year One, and at $16 on December 31, Year One. If this is a compensatory stock option, what expense should the company recognize for Year One?
A - Zero
B - $10,000
C - $20,000
D - $40,000
Answer is C
The value of compensatory stock options is determined on the grant date by a computer pricing model such as Black-Scholes. That total expense is then allocated over the years which the person must work to earn the options. The value of the options on the grant date is $8 times 10,000 or $80,000. The person must work for four years so the expense is $20,000 each year.
Auditing & Attestation
An independent CPA is assessing the level of control risk present at a company that is currently being audited. This company has an internal audit department and the independent CPA is evaluating the objectivity of that department. Which of the following is a sign that the department has proper objectivity?
A - The size of the department has grown from 7 people to 19 over the last three years.
B - In order to be promoted within this department, the employee must have become a CPA.
C - The head of the department meets privately with the chair of the board of directors each quarter.
D - The head of the department had seven years of experience with an international accounting firm before taking this position with the company.
Answer is C
The independent CPA is interested in both the competence and objectivity of the internal audit department because of the key function that it plays in the company. Answers A, B, and D all relate to competence. These relate to the question: Is there evidence that the people doing the work are capable of doing it properly? Objectivity concerns the internal auditor's independence so that the department can do the work that is necessary. That is usually shown by having a direct line of communication to an authority figure outside of management (usually the board of directors or the audit committee of the board of directors).
BEC
A company uses computer processing to calculate and print out employee paychecks each period. The company is worried that data will be entered into the system incorrectly so that one or more paychecks will be overstated as a means of stealing money from the company. Which of the following is most likely to detect such fraud?
A - Control totals are calculated for significant figures.
B - All paychecks must be hand delivered to the employee by a paymaster.
C - A system is devised so that employees who are overpaid can file a form to reimburse the company.
D - Checks that are not picked up by an employee are given to a person in authority to uncover the reason
Answer is A
Companies worry that numbers such as hours worked or pay rates will be increased in a scheme so that employees can steal money. For example, if 50 hours is entered rather than 40 hours for an employee, that person will get 25 percent more than has been earned. Thus, company officials determine control figures before computations are made and then verify those totals after the computations are made to ensure that no unauthorized changes have been made. Answers B and D are important controls but they are verifying that paychecks are written to actual employees rather than that the amounts have not been manipulated.
Have a great week - as we all move toward Thanksgiving, take a moment to count your blessings. The list will be longer than you might expect.
Sunday, November 16, 2008
Don't Just Try--Do It
Lesson 15
Getting Better
From: Joe
(a) - We have hundreds and thousands of new visitors to our site
(www.CPAreviewforFREE.com) each week. So, if you are new, let me make
a couple of suggestions.
--On the homepage, click on "Resources" in the upper-right hand corner.
That will lead you to FAQs and Articles. I really would read all of
that, especially if you are just trying to get started toward passing
the CPA Exam.
--When you register on our site, make sure that the box is checked to
get additional CPA Exam information-that will put you on our list to get
these emails that we send out every week or two.
--Get started. A lot of people spend forever planning and never get
around to starting. The best thing you can do is go to a topic and
immediately start answering questions.
--For every question that you miss, take good notes to help you get the
question correct the next time you see it. You will need some easy and
simple way to review. Efficiency is very important. Keep the notes
short and have them focus on the questions you miss.
(b) - Whenever we start getting close to the end of a testing window, I
am always aware that a lot of people are getting ready to go into the
testing site. GOOD LUCK and always remember the C's:
--Stay calm
--Stay confident
--Maintain concentration
And, although it doesn't start with a C, watch your time very closely.
Finally, remember that you don't have to be perfect. You only have to
score 75 and that doesn't necessarily mean that you even need to get 75
percent of the questions correct because of the way they weight the
questions.
(c) - As always, if you need to unsubscribe, go to the bottom of this
email and click on the appropriate link and it will remove your name.
We love having each of you folks; we like helping people to pass the CPA
Exam but, if you need to leave, you certainly have that right.
(1) - I want you to stop for a moment in your preparation and do
something for me. I want you to think about how well you are preparing
for the CPA Exam. Think about the time you are spending and how well
you are spending those hours. Think about the whole process that you
are going through at the moment.
Now, I want you to rate yourself on a scale of 1 to 10. One being that
you are really not making any progress and ten being that you are
absolutely as efficient as possible. So, let's say you are a 4 or a 7
or a 5. My guess is that you roughly know how well you are doing. Most
people certainly do.
Now, finally, I want you to make a list of the things that you could do
this week to become one point better. Just one point better. In other
words, if you are a 5 as a CPA review student, what would it take to
become a six? What would you have to change to get one point better?
Notice, I'm not asking you to become a ten. I think people mess up by
seeking perfection and then being disappointed when they don't get
there. So, make a list of 3-5 things that you might be able to do that
would move your ranking up one point. I think that is a very makeable
and helpful objective. Getting better.
For example,
--could you add 15 more minutes of study by getting up 15 minutes
earlier in the morning or go to bed 15 minutes later? That alone is
nearly two hours per week.
--could you carry your note cards with you wherever you go so you can
study at free moments during your day?
--could you cut down on the amount of television you watch (or even turn
the television off completely)?
I truly believe that the secret to success is to work to get better but
first you must (a) decide where you are and (b) determine what might
help you get better.
Once you have your list, do them for one week to see what helps and what
doesn't help. Notice that I did not say that you should "try" to do
them. I don't want you to try to do them; I want you to do them. "I'll
try to do them" is code for "I probably won't do them."
I was in an office building last week waiting for a meeting to begin.
On one of the desks was a book of sayings which I picked up and began to
leaf through. It was a book of quotes and the first one that I noticed
was from Yoda, the little character from Star Wars. My first comment to
myself was a cynical one: "Oh great, now I'm getting advice from a
muppet." But here is what Yoda had to say: "Do, or do not. There is
no 'try.'"
That hit home.
I've taught in college now for 38 years. I have had conversations with
thousands of students who were not living up to their potential.
Thinking back, I realize that their normal response is always: "I'll
try to do better."
Trying to do better implies that it is out of your hands.
I'm not asking you to pass the exam; I'm asking you to prepare
better-spend more time, be a little more efficient. Do it - don't try
to do it.
Don't respond with: "I'll try." In fact, don't respond at all. Just
do it!!!!
Your goal for this week is to become one point better in your
preparation for the CPA Exam. Decide what you need to do to make that
happen and then DO IT!!!!
(2) - Here are a couple of quick practice questions that I'm getting
ready to load up on CPA Review for FREE. Remember that we have about
2,000 free (free) questions available for you at
www.cpareviewforfree.com.
Auditing & Attestation
An auditor assesses inherent risk in an engagement. An auditor assesses
control risk in an engagement. Then, based on those two assessments,
the auditor does enough substantive testing to reduce detection risk so
that overall audit risk drops to an acceptably low level. That is the
structure of an audit. In assessing control risk, the auditor starts by
learning the design of the control system and then considers whether to
perform tests of individual controls. If the design of the control
system is viewed as weak, which of the following is most likely to be
true?
A - The auditor will be likely to test the controls because of the
weakness.
B - The auditor is likely to do additional substantive testing.
C - The auditor will likely reduce the assessment of inherent risk.
D - An unqualified opinion cannot be issued.
Answer is B
When the design of internal control is weak, there is no reason to do
any testing of those controls. Properly operating within a weak system
does not make it any less weak. Instead, the auditor will probably
assess control risk as high which is likely to force the auditor to do
additional (or better) substantive testing in order to compensate for
this problem. Detection risk has to be quite low to make up for the
weakness in internal control. The assessment of inherent risk is
independent from the assessment of control risk and is not affected.
Finally, as long as the auditor eventually reduces overall audit risk to
an appropriately low level, an unqualified opinion can be given even
though the control system is weak.
Financial Accounting and Reporting (we are discussing pensions currently
in intermediate accounting).
A company has a defined benefit pension plan. On January 1, Year Ten,
the company amends a contractual provision within the plan. This change
causes the projected benefit obligation to go up by $700,000. At that
time, the vested employees are expected to work another five years on
the average. On the Year Ten financial statements, what is the
reporting of this $700,000 prior service cost?
A - $700,000 is reported within pension expense B - $580,000 is reported
as a pension asset and $120,000 is reported within other accumulated
comprehensive income within stockholders' equity.
C- $700,000 is reported within other accumulated comprehensive income
within stockholders' equity.
D - $580,000 is reported within other accumulated comprehensive income
within stockholders' equity and $120,000 is reported as pension expense.
Answer is D
Prior service cost from amending the contractual provisions of a defined
benefit plan are initially reported within accumulated other
comprehensive income. This amount is gradually moved into pension
expense over the remaining working life of the employees at the date of
amendment. At the end of the first year, $140,000 ($700,000/5 years) is
moved from stockholders' equity to pension expense.
Regulation
Which of the following moving expenses can an individual taxpayer not
take as a deduction to arrive at adjusted gross income?
A - The taxpayer took a job in a city 80 miles away but did not move for
the first 15 months so that her eldest son could graduate from his local
high school.
B - The taxpayer commuted 12 miles to get to his job but took another
job that required a commute of 55 miles so he moved to be closer.
C - The taxpayer moved to take a job in a city 100 miles away but
retired after only working for 42 weeks.
D - The taxpayer took a job in a city 120 miles away and sold his house
to move into an apartment at the new location.
Answer is B
There are several tests that must be met before moving expenses can be
deducted. For example, the taxpayer must normally move within a year of
taking the new job unless circumstances arose that prevent the move in
that time period. The son finishing high school is one of those
circumstances. The taxpayer must also work at least 39 weeks in the
general area of the new location. Moving must be a change in the
taxpayer's main home, which can be a house, apartment, condominium,
houseboat, or the like. Finally, the new job must be a commute of 50 or
more miles farther than the previous commute. In B, the commute is only
43 miles farther (55 miles minus 12 miles) and does not qualify.
BEC
A company started production on 110 widgets. Due to an abnormal loss, 8
of the widgets had to be thrown away after they were finished. Another
12 of the widgets were not complete at the end of the year. These units
were 100 percent complete as to direct materials but only 50 percent
complete as to conversion costs. The company spent $2,200 on direct
materials, $832 on direct labor, and $520 on factory overhead. What
amount of cost was moved into finished goods for the year?
A - $2,970
B - $3,025
C - $3,118
D - $3,234
Answer is A
The company had 110 units: 8 were lost, 12 were not completed, so the
remaining 90 must have been completed. Because the loss of 8 units was
viewed as abnormal, their cost is computed and then moved into a loss
account on the income statement. The number of units of direct material
is 110 (90 completed, 8 lost that were completed, and 12 in-process that
were completed as to direct material). The direct material cost per
unit was $2,200/110 units or $20 each. The number of units of
conversion cost (direct labor and factory overhead) is 104 (90
completed, 8 lost that were completed, and 12 that were 50 percent
complete as to conversion costs). The conversion cost per unit is
$1,352/104 units or $13 each. Because 90 units were completed (and not
lost through an abnormal loss), cost transferred from work-in-process to
finished goods is 90 times $33 ($20 plus $13) or $2,970. (Notice that
you don't have to use either a weighted-average approach or a FIFO
approach because
there is no beginning work-in-process.)
Delighted to have you with us. Work this week on getting better as a
student.
Don't try - do it
Getting Better
From: Joe
(a) - We have hundreds and thousands of new visitors to our site
(www.CPAreviewforFREE.com) each week. So, if you are new, let me make
a couple of suggestions.
--On the homepage, click on "Resources" in the upper-right hand corner.
That will lead you to FAQs and Articles. I really would read all of
that, especially if you are just trying to get started toward passing
the CPA Exam.
--When you register on our site, make sure that the box is checked to
get additional CPA Exam information-that will put you on our list to get
these emails that we send out every week or two.
--Get started. A lot of people spend forever planning and never get
around to starting. The best thing you can do is go to a topic and
immediately start answering questions.
--For every question that you miss, take good notes to help you get the
question correct the next time you see it. You will need some easy and
simple way to review. Efficiency is very important. Keep the notes
short and have them focus on the questions you miss.
(b) - Whenever we start getting close to the end of a testing window, I
am always aware that a lot of people are getting ready to go into the
testing site. GOOD LUCK and always remember the C's:
--Stay calm
--Stay confident
--Maintain concentration
And, although it doesn't start with a C, watch your time very closely.
Finally, remember that you don't have to be perfect. You only have to
score 75 and that doesn't necessarily mean that you even need to get 75
percent of the questions correct because of the way they weight the
questions.
(c) - As always, if you need to unsubscribe, go to the bottom of this
email and click on the appropriate link and it will remove your name.
We love having each of you folks; we like helping people to pass the CPA
Exam but, if you need to leave, you certainly have that right.
(1) - I want you to stop for a moment in your preparation and do
something for me. I want you to think about how well you are preparing
for the CPA Exam. Think about the time you are spending and how well
you are spending those hours. Think about the whole process that you
are going through at the moment.
Now, I want you to rate yourself on a scale of 1 to 10. One being that
you are really not making any progress and ten being that you are
absolutely as efficient as possible. So, let's say you are a 4 or a 7
or a 5. My guess is that you roughly know how well you are doing. Most
people certainly do.
Now, finally, I want you to make a list of the things that you could do
this week to become one point better. Just one point better. In other
words, if you are a 5 as a CPA review student, what would it take to
become a six? What would you have to change to get one point better?
Notice, I'm not asking you to become a ten. I think people mess up by
seeking perfection and then being disappointed when they don't get
there. So, make a list of 3-5 things that you might be able to do that
would move your ranking up one point. I think that is a very makeable
and helpful objective. Getting better.
For example,
--could you add 15 more minutes of study by getting up 15 minutes
earlier in the morning or go to bed 15 minutes later? That alone is
nearly two hours per week.
--could you carry your note cards with you wherever you go so you can
study at free moments during your day?
--could you cut down on the amount of television you watch (or even turn
the television off completely)?
I truly believe that the secret to success is to work to get better but
first you must (a) decide where you are and (b) determine what might
help you get better.
Once you have your list, do them for one week to see what helps and what
doesn't help. Notice that I did not say that you should "try" to do
them. I don't want you to try to do them; I want you to do them. "I'll
try to do them" is code for "I probably won't do them."
I was in an office building last week waiting for a meeting to begin.
On one of the desks was a book of sayings which I picked up and began to
leaf through. It was a book of quotes and the first one that I noticed
was from Yoda, the little character from Star Wars. My first comment to
myself was a cynical one: "Oh great, now I'm getting advice from a
muppet." But here is what Yoda had to say: "Do, or do not. There is
no 'try.'"
That hit home.
I've taught in college now for 38 years. I have had conversations with
thousands of students who were not living up to their potential.
Thinking back, I realize that their normal response is always: "I'll
try to do better."
Trying to do better implies that it is out of your hands.
I'm not asking you to pass the exam; I'm asking you to prepare
better-spend more time, be a little more efficient. Do it - don't try
to do it.
Don't respond with: "I'll try." In fact, don't respond at all. Just
do it!!!!
Your goal for this week is to become one point better in your
preparation for the CPA Exam. Decide what you need to do to make that
happen and then DO IT!!!!
(2) - Here are a couple of quick practice questions that I'm getting
ready to load up on CPA Review for FREE. Remember that we have about
2,000 free (free) questions available for you at
www.cpareviewforfree.com.
Auditing & Attestation
An auditor assesses inherent risk in an engagement. An auditor assesses
control risk in an engagement. Then, based on those two assessments,
the auditor does enough substantive testing to reduce detection risk so
that overall audit risk drops to an acceptably low level. That is the
structure of an audit. In assessing control risk, the auditor starts by
learning the design of the control system and then considers whether to
perform tests of individual controls. If the design of the control
system is viewed as weak, which of the following is most likely to be
true?
A - The auditor will be likely to test the controls because of the
weakness.
B - The auditor is likely to do additional substantive testing.
C - The auditor will likely reduce the assessment of inherent risk.
D - An unqualified opinion cannot be issued.
Answer is B
When the design of internal control is weak, there is no reason to do
any testing of those controls. Properly operating within a weak system
does not make it any less weak. Instead, the auditor will probably
assess control risk as high which is likely to force the auditor to do
additional (or better) substantive testing in order to compensate for
this problem. Detection risk has to be quite low to make up for the
weakness in internal control. The assessment of inherent risk is
independent from the assessment of control risk and is not affected.
Finally, as long as the auditor eventually reduces overall audit risk to
an appropriately low level, an unqualified opinion can be given even
though the control system is weak.
Financial Accounting and Reporting (we are discussing pensions currently
in intermediate accounting).
A company has a defined benefit pension plan. On January 1, Year Ten,
the company amends a contractual provision within the plan. This change
causes the projected benefit obligation to go up by $700,000. At that
time, the vested employees are expected to work another five years on
the average. On the Year Ten financial statements, what is the
reporting of this $700,000 prior service cost?
A - $700,000 is reported within pension expense B - $580,000 is reported
as a pension asset and $120,000 is reported within other accumulated
comprehensive income within stockholders' equity.
C- $700,000 is reported within other accumulated comprehensive income
within stockholders' equity.
D - $580,000 is reported within other accumulated comprehensive income
within stockholders' equity and $120,000 is reported as pension expense.
Answer is D
Prior service cost from amending the contractual provisions of a defined
benefit plan are initially reported within accumulated other
comprehensive income. This amount is gradually moved into pension
expense over the remaining working life of the employees at the date of
amendment. At the end of the first year, $140,000 ($700,000/5 years) is
moved from stockholders' equity to pension expense.
Regulation
Which of the following moving expenses can an individual taxpayer not
take as a deduction to arrive at adjusted gross income?
A - The taxpayer took a job in a city 80 miles away but did not move for
the first 15 months so that her eldest son could graduate from his local
high school.
B - The taxpayer commuted 12 miles to get to his job but took another
job that required a commute of 55 miles so he moved to be closer.
C - The taxpayer moved to take a job in a city 100 miles away but
retired after only working for 42 weeks.
D - The taxpayer took a job in a city 120 miles away and sold his house
to move into an apartment at the new location.
Answer is B
There are several tests that must be met before moving expenses can be
deducted. For example, the taxpayer must normally move within a year of
taking the new job unless circumstances arose that prevent the move in
that time period. The son finishing high school is one of those
circumstances. The taxpayer must also work at least 39 weeks in the
general area of the new location. Moving must be a change in the
taxpayer's main home, which can be a house, apartment, condominium,
houseboat, or the like. Finally, the new job must be a commute of 50 or
more miles farther than the previous commute. In B, the commute is only
43 miles farther (55 miles minus 12 miles) and does not qualify.
BEC
A company started production on 110 widgets. Due to an abnormal loss, 8
of the widgets had to be thrown away after they were finished. Another
12 of the widgets were not complete at the end of the year. These units
were 100 percent complete as to direct materials but only 50 percent
complete as to conversion costs. The company spent $2,200 on direct
materials, $832 on direct labor, and $520 on factory overhead. What
amount of cost was moved into finished goods for the year?
A - $2,970
B - $3,025
C - $3,118
D - $3,234
Answer is A
The company had 110 units: 8 were lost, 12 were not completed, so the
remaining 90 must have been completed. Because the loss of 8 units was
viewed as abnormal, their cost is computed and then moved into a loss
account on the income statement. The number of units of direct material
is 110 (90 completed, 8 lost that were completed, and 12 in-process that
were completed as to direct material). The direct material cost per
unit was $2,200/110 units or $20 each. The number of units of
conversion cost (direct labor and factory overhead) is 104 (90
completed, 8 lost that were completed, and 12 that were 50 percent
complete as to conversion costs). The conversion cost per unit is
$1,352/104 units or $13 each. Because 90 units were completed (and not
lost through an abnormal loss), cost transferred from work-in-process to
finished goods is 90 times $33 ($20 plus $13) or $2,970. (Notice that
you don't have to use either a weighted-average approach or a FIFO
approach because
there is no beginning work-in-process.)
Delighted to have you with us. Work this week on getting better as a
student.
Don't try - do it
Monday, October 20, 2008
Add Just 15 Minutes Each Day
From: Joe
(a) – I always appreciate so much all of the emails that I get from CPA Exam candidates. It is a great job when you hear from people from all around the world. It is a neat time when technology is so advanced that you can assist people living in dozens of different countries.
Here are a couple of the emails that I got this week:
"Let me start by saying your website is incredible. The questions on your website are much better then (Giant) CPA Review. The explanations of the answers are in the league of their own. . . . I hope your website puts them out of business. . . . Thank you for your website and your motivational YouTube videos."
"Thank you very much for your encouragement and the great effort behind the creation of your CPAREVIEWFORFREE website. My heartfelt appreciation goes out to the entire team behind this great work. I am a CPA student from the Middle East, planning to sit for BEC and FARE at the end of November. Although I started using (Well Known) CPA review book, I found the questions and answers on your web site quite different and more informative. Plus, they boost my confidence level. Once again, thank you very much."
And finally a request from a candidate. If you are interested in doing a study group in this area, hit "reply" and let us know and we will forward the information.
Here's the request: "I discovered your website through AccountingCoach.com and extend my gratitude for the sample questions and the guidance provided for successfully passing the CPA Exam. I live in the East Los Angeles area. I am interested in discovering other candidates in the area who might be interested in creating a study group. Your help in this matter in great appreciated."
(b) – Don't forget that you can find hundreds and hundreds of great CPA Exam review questions at www.CPAreviewforFREE.com. Study a topic intensely or take randomized exams. Read the questions and study the answers. Take notes on the ones you miss. Start adding those points to your base of knowledge. You need 75 points; we can help you get them.
(c) – If you need to unsubscribe, just scroll to the end of this email lesson and click on the appropriate link.
(1) – I am a big fan of William Shakespeare. I just think it is truly amazing that one person could write so many wonderful, beautiful, and insightful words. I even try to get my intermediate accounting students to go see Shakespeare plays because they need to know more than just accounting to be successful in life.
I was recently reading a fictional book about Shakespeare and someone in that book asked him how he could write so many magnificent works. His answer was immediate and to the point: "I worked very hard."
I think we all give way too much credence to the importance of virtually everything other than hard work. Whether you are playing football or baseball or studying for intermediate accounting or preparing for the CPA Exam, there really is absolutely nothing that takes the place of hard work. It is hard to get successful at anything without hard work.
I have taught in college now for 38 years; I have worked with tens of thousands of students and exam candidates. I have found that virtually all of my students are capable of making an A. However, I already know who WILL make an A. If you teach something for that many years, you learn such things. Almost without exception, the students who get the high grades are the ones who work the hardest. Just like Shakespeare: simple and to the point. It is not about ability; it is not about smarts; it is not about having the knack. It is much more basic than that. The students who work the hardest—put in the most hours and do so with genuine intensity—tend to earn the good grades.
Ray Kroc, the man who built McDonalds into the giant company it is today has a wonderful and famous quote: "Luck is a dividend of sweat. The more you sweat, the luckier you get."
How much are you sweating in order to pass the CPA Exam? If you are not sweating, you probably need to work a bit harder.
There is a question that is probably the most important one that you can ask yourself while you are preparing for the CPA Exam: Am I outworking the other candidates or are they outworking me? That is a question that I don't often hear people asking but I think that is the crucial question. If you can truthfully say "I know there are thousands of people who really want to become CPAs and they are studying very hard but I am still outworking them" then you are on the road to success. Your sweat is making you lucky. However, if you know, deep down in your heart, that lots and lots of people around the world are outworking you, then you know what you have to do. You have to kick it up a notch. You have to push yourself just a little bit more. You have to figure out how to work as hard as they are.
How do you start? How do you work harder? Start by working just 15 more minutes every day. If you usually work 75 minutes each day, then work 90 minutes instead. That doesn't seem like much of a change but you just increased your time BY 20 PERCENT. Everyone can find 15 free minutes per day. Don't try to double your time; that is not realistic. Make it your goal over the next week to add 15 minutes per day to your study time. Even that small of a change can add an incredible amount of points to your total.
Okay, I know what you are going to say: "I'm working so hard now, I'm so busy now, I'm so pushed for time now, that I cannot add even 15 minutes per day."
Well, let me ask you this question. If I said that I would give you $1 million just as soon as you passed the final part of the CPA Exam, what would happen?????
The answer is simple. If the reward is big enough, YOU will make time. You would stop sleeping as much; you would take a shorter lunch break; you would stay on email less; you would cut out all unnecessary activities so you could study. If the reward is big enough, everyone will pass.
So, do not come back and tell me that you just cannot find the time. Everyone makes time for what they really want to do. I am not asking for hours. I am only asking you to add 15 minutes per day. There just has to be some way to squeeze out a few extra minutes during the day.
That is my challenge to each person on our email list for this week: I want 15 minutes more in study time each and every day. Make it happen. Don't make excuses; make it happen. You will be surprised by how much luckier you start to get when you start to work a bit harder. We can accomplish ever so much by just putting things into priority and working a bit more efficiently and adding those 15 minutes.
(2) – Here are a few quick practice questions that I want to load up on www.CPAreviewforFREE.com but I will let you have a crack at them first.
Financial Accounting and Reporting
The Impala Company has revenues of $300,000 and expenses of $200,000 for the most recent year. However, to date, no recording has been made of the company's investments in marketable securities. During the current year, the company held trading securities that went up in value by $3,000. In the same period, the company held available for sale securities that went up in value by $2,000. Assume that the fair value option has not been elected. Which of the following statements is true for the current year?
A – Net income was $100,000 and comprehensive income was $105,000.
B – Net income was $105,000 and comprehensive income was $105,000.
C – Net income was $103,000 and comprehensive income was $105,000.
D – Net income was $102,000 and comprehensive income was $105,000.
Answer is C
Changes in the value of trading securities are put directly into net income. The $3,000 appreciation of value for these securities increases reported net income immediately from $100,000 to $103,000. Changes in value of available for sale securities are put into accumulated other comprehensive income in the stockholders' equity section of the balance sheet. Hence, the $2,000 increase in value does not impact net income. However, in calculating comprehensive income, that $2,000 is included which moves net income of $103,000 up to a comprehensive income figure of $105,000.
BEC
A company produces 10 different products in 10 different plants. From the items produced in Plant 8, the company makes sales of $900,000. Variable costs are $300,000 in that plant and the fixed costs are $700,000. Because the plant is losing $100,000 per year, company officials close it at the start of the current year and lease the building to a competitor for a flat $360,000 per year ($30,000 per month). How does this decision impact the company's overall net income for this year?
A – Net income will go up by $660,000.
B – Net income will go up by $700,000.
C – Net income will go down by $40,000.
D – Net income will go down by $240,000.
Answer is D
Currently, the company is losing $100,000 from Plant 8. Unless stated otherwise, the fixed costs will not be eliminated by closing the plant. Such costs include property taxes and insurance that are often unaffected by revenues and other variables. After closing, revenues will be $360,000 from the lease but the fixed expenses of $700,000 will remain so that the company will lose $340,000. Going from a loss of $100,000 to a loss of $340,000 reduces the company's net income by $240,000.
Auditing and Attestation
Xavier, CPA is currently auditing the financial statements of the Polk Corporation. At the moment, Xavier is assessing the control risk surrounding the recognition of sales revenue. The CPA has become concerned that revenues are understated. The CPA thinks the company may be shipping merchandise to false customers with no sales invoice (or other record) being prepared. If true, company employees are using this scheme to steal goods from the company. In assessing the possibility of this problem, which of the following is the auditor most likely to do?
A – Take a sample of sales invoices and match those documents to the appropriate bill of lading or other shipping document.
B – Take a sample of receiving reports and match those documents to the appropriate sales invoice.
C – Take a sample of cash receipts and match those payments to the appropriate sales invoice.
D – Take a sample of bills of lading (or other shipping document) and match those documents to the appropriate sales invoice.
Answer is D
The company is shipping merchandise but may not be preparing a sales invoice. The auditor should look for shipping documents (usually a bill of lading) and then make sure that a sales invoice was subsequently prepared for each. The auditor typically goes from the event that is known to happen to the event that might not have happened. Here, the shipment was made but the auditor is afraid that the sales invoice was never produced.
Regulation
In Year One, Nancy Dru's husband died. They had three children, two of which were still dependents. Nancy does not remarry and the two children remain as her dependents living with her until Year Five. What is her filing status for federal income tax purposes?
A – She is head of houseful for Years One through Four.
B – She is a qualifying widow (surviving spouse) for Years One through Four.
C – She is a qualifying widow (surviving spouse) for Years Two and Three and head of household for Year Four.
D – She is a qualifying widow (surviving spouse) for Year One and head of household for Years Two through Four.
Answer is C
In the year of death, the couple files a joint return as long as they would have been able to file a joint return at the time of death. Because of the dependent children, she can then file as a qualifying widow for the next two years. After that time, she can file as head of household as long as the children are dependents or unmarried and continue to live with her.
Okay, start finding those extra 15 minutes each day to study for the CPA Exam. That is your assignment for this week.
Joe Hoyle
Co-Founder
CPAreviewforFREE
www.CPAreviewforFREE.com
PASS THAT EXAM -- YOU CAN DO IT!!!!
(a) – I always appreciate so much all of the emails that I get from CPA Exam candidates. It is a great job when you hear from people from all around the world. It is a neat time when technology is so advanced that you can assist people living in dozens of different countries.
Here are a couple of the emails that I got this week:
"Let me start by saying your website is incredible. The questions on your website are much better then (Giant) CPA Review. The explanations of the answers are in the league of their own. . . . I hope your website puts them out of business. . . . Thank you for your website and your motivational YouTube videos."
"Thank you very much for your encouragement and the great effort behind the creation of your CPAREVIEWFORFREE website. My heartfelt appreciation goes out to the entire team behind this great work. I am a CPA student from the Middle East, planning to sit for BEC and FARE at the end of November. Although I started using (Well Known) CPA review book, I found the questions and answers on your web site quite different and more informative. Plus, they boost my confidence level. Once again, thank you very much."
And finally a request from a candidate. If you are interested in doing a study group in this area, hit "reply" and let us know and we will forward the information.
Here's the request: "I discovered your website through AccountingCoach.com and extend my gratitude for the sample questions and the guidance provided for successfully passing the CPA Exam. I live in the East Los Angeles area. I am interested in discovering other candidates in the area who might be interested in creating a study group. Your help in this matter in great appreciated."
(b) – Don't forget that you can find hundreds and hundreds of great CPA Exam review questions at www.CPAreviewforFREE.com. Study a topic intensely or take randomized exams. Read the questions and study the answers. Take notes on the ones you miss. Start adding those points to your base of knowledge. You need 75 points; we can help you get them.
(c) – If you need to unsubscribe, just scroll to the end of this email lesson and click on the appropriate link.
(1) – I am a big fan of William Shakespeare. I just think it is truly amazing that one person could write so many wonderful, beautiful, and insightful words. I even try to get my intermediate accounting students to go see Shakespeare plays because they need to know more than just accounting to be successful in life.
I was recently reading a fictional book about Shakespeare and someone in that book asked him how he could write so many magnificent works. His answer was immediate and to the point: "I worked very hard."
I think we all give way too much credence to the importance of virtually everything other than hard work. Whether you are playing football or baseball or studying for intermediate accounting or preparing for the CPA Exam, there really is absolutely nothing that takes the place of hard work. It is hard to get successful at anything without hard work.
I have taught in college now for 38 years; I have worked with tens of thousands of students and exam candidates. I have found that virtually all of my students are capable of making an A. However, I already know who WILL make an A. If you teach something for that many years, you learn such things. Almost without exception, the students who get the high grades are the ones who work the hardest. Just like Shakespeare: simple and to the point. It is not about ability; it is not about smarts; it is not about having the knack. It is much more basic than that. The students who work the hardest—put in the most hours and do so with genuine intensity—tend to earn the good grades.
Ray Kroc, the man who built McDonalds into the giant company it is today has a wonderful and famous quote: "Luck is a dividend of sweat. The more you sweat, the luckier you get."
How much are you sweating in order to pass the CPA Exam? If you are not sweating, you probably need to work a bit harder.
There is a question that is probably the most important one that you can ask yourself while you are preparing for the CPA Exam: Am I outworking the other candidates or are they outworking me? That is a question that I don't often hear people asking but I think that is the crucial question. If you can truthfully say "I know there are thousands of people who really want to become CPAs and they are studying very hard but I am still outworking them" then you are on the road to success. Your sweat is making you lucky. However, if you know, deep down in your heart, that lots and lots of people around the world are outworking you, then you know what you have to do. You have to kick it up a notch. You have to push yourself just a little bit more. You have to figure out how to work as hard as they are.
How do you start? How do you work harder? Start by working just 15 more minutes every day. If you usually work 75 minutes each day, then work 90 minutes instead. That doesn't seem like much of a change but you just increased your time BY 20 PERCENT. Everyone can find 15 free minutes per day. Don't try to double your time; that is not realistic. Make it your goal over the next week to add 15 minutes per day to your study time. Even that small of a change can add an incredible amount of points to your total.
Okay, I know what you are going to say: "I'm working so hard now, I'm so busy now, I'm so pushed for time now, that I cannot add even 15 minutes per day."
Well, let me ask you this question. If I said that I would give you $1 million just as soon as you passed the final part of the CPA Exam, what would happen?????
The answer is simple. If the reward is big enough, YOU will make time. You would stop sleeping as much; you would take a shorter lunch break; you would stay on email less; you would cut out all unnecessary activities so you could study. If the reward is big enough, everyone will pass.
So, do not come back and tell me that you just cannot find the time. Everyone makes time for what they really want to do. I am not asking for hours. I am only asking you to add 15 minutes per day. There just has to be some way to squeeze out a few extra minutes during the day.
That is my challenge to each person on our email list for this week: I want 15 minutes more in study time each and every day. Make it happen. Don't make excuses; make it happen. You will be surprised by how much luckier you start to get when you start to work a bit harder. We can accomplish ever so much by just putting things into priority and working a bit more efficiently and adding those 15 minutes.
(2) – Here are a few quick practice questions that I want to load up on www.CPAreviewforFREE.com but I will let you have a crack at them first.
Financial Accounting and Reporting
The Impala Company has revenues of $300,000 and expenses of $200,000 for the most recent year. However, to date, no recording has been made of the company's investments in marketable securities. During the current year, the company held trading securities that went up in value by $3,000. In the same period, the company held available for sale securities that went up in value by $2,000. Assume that the fair value option has not been elected. Which of the following statements is true for the current year?
A – Net income was $100,000 and comprehensive income was $105,000.
B – Net income was $105,000 and comprehensive income was $105,000.
C – Net income was $103,000 and comprehensive income was $105,000.
D – Net income was $102,000 and comprehensive income was $105,000.
Answer is C
Changes in the value of trading securities are put directly into net income. The $3,000 appreciation of value for these securities increases reported net income immediately from $100,000 to $103,000. Changes in value of available for sale securities are put into accumulated other comprehensive income in the stockholders' equity section of the balance sheet. Hence, the $2,000 increase in value does not impact net income. However, in calculating comprehensive income, that $2,000 is included which moves net income of $103,000 up to a comprehensive income figure of $105,000.
BEC
A company produces 10 different products in 10 different plants. From the items produced in Plant 8, the company makes sales of $900,000. Variable costs are $300,000 in that plant and the fixed costs are $700,000. Because the plant is losing $100,000 per year, company officials close it at the start of the current year and lease the building to a competitor for a flat $360,000 per year ($30,000 per month). How does this decision impact the company's overall net income for this year?
A – Net income will go up by $660,000.
B – Net income will go up by $700,000.
C – Net income will go down by $40,000.
D – Net income will go down by $240,000.
Answer is D
Currently, the company is losing $100,000 from Plant 8. Unless stated otherwise, the fixed costs will not be eliminated by closing the plant. Such costs include property taxes and insurance that are often unaffected by revenues and other variables. After closing, revenues will be $360,000 from the lease but the fixed expenses of $700,000 will remain so that the company will lose $340,000. Going from a loss of $100,000 to a loss of $340,000 reduces the company's net income by $240,000.
Auditing and Attestation
Xavier, CPA is currently auditing the financial statements of the Polk Corporation. At the moment, Xavier is assessing the control risk surrounding the recognition of sales revenue. The CPA has become concerned that revenues are understated. The CPA thinks the company may be shipping merchandise to false customers with no sales invoice (or other record) being prepared. If true, company employees are using this scheme to steal goods from the company. In assessing the possibility of this problem, which of the following is the auditor most likely to do?
A – Take a sample of sales invoices and match those documents to the appropriate bill of lading or other shipping document.
B – Take a sample of receiving reports and match those documents to the appropriate sales invoice.
C – Take a sample of cash receipts and match those payments to the appropriate sales invoice.
D – Take a sample of bills of lading (or other shipping document) and match those documents to the appropriate sales invoice.
Answer is D
The company is shipping merchandise but may not be preparing a sales invoice. The auditor should look for shipping documents (usually a bill of lading) and then make sure that a sales invoice was subsequently prepared for each. The auditor typically goes from the event that is known to happen to the event that might not have happened. Here, the shipment was made but the auditor is afraid that the sales invoice was never produced.
Regulation
In Year One, Nancy Dru's husband died. They had three children, two of which were still dependents. Nancy does not remarry and the two children remain as her dependents living with her until Year Five. What is her filing status for federal income tax purposes?
A – She is head of houseful for Years One through Four.
B – She is a qualifying widow (surviving spouse) for Years One through Four.
C – She is a qualifying widow (surviving spouse) for Years Two and Three and head of household for Year Four.
D – She is a qualifying widow (surviving spouse) for Year One and head of household for Years Two through Four.
Answer is C
In the year of death, the couple files a joint return as long as they would have been able to file a joint return at the time of death. Because of the dependent children, she can then file as a qualifying widow for the next two years. After that time, she can file as head of household as long as the children are dependents or unmarried and continue to live with her.
Okay, start finding those extra 15 minutes each day to study for the CPA Exam. That is your assignment for this week.
Joe Hoyle
Co-Founder
CPAreviewforFREE
www.CPAreviewforFREE.com
PASS THAT EXAM -- YOU CAN DO IT!!!!
Sunday, October 19, 2008
Study Group
If you are interested in a study group, here's where you join. We've had interest from comments back to us. Sound off! Come together here.
Monday, October 6, 2008
Success on the CPA Exam - You CAN Do It
Lesson 11
Giving Thanks for Missed Questions
From: Joe
(a) - As always, I want to thank everyone who passes our emails along to their friends, relatives, enemies, strangers, and random tourists. Last week alone, our traffic at www.CPAreviewforFREE.com grew by a wonderful 21 percent, including visitors from 69 countries. We owe that growth to you.
(b) - And, now for the legal requirements: if you need to unsubscribe, scroll down to the end of this email and click on the Unsubscribe button. However, DON'T GO!!! We like having you with us for these email lessons. We are a small community of people who believe that having the chance to pass the CPA Exam should be a opportunity that is available to everyone, even the people without big bank accounts. We like having you as part of this community. Stay as long as you can.
(1)-In my 28 years in CPA Review, the comment that I probably hear more than any other is the very troubling "I keep missing questions." The candidate is upset; the candidate wants to get the question right. The candidate misses a question and gets scared.
Not surprisingly, the candidate is often not too thrilled when I am less troubled by missed questions. But I always think about what a candidate once told me "a missed question is like fertilizer, it is the one thing in this whole process that really helps your knowledge to grow." That is absolutely true. The key, though, is not missing the question but what you do after you miss the question.
Many candidates make a mistake and say "I missed a question." I honestly do not believe that is exactly true. The solution to virtually any question on the CPA Exam is a series of sequential steps: you do A and then you do B and then you do C and eventually you get to the right answer. Some of these steps are computational (multiply X times Y) and some of these steps are more verbal (which types of interest expense are deductible on an individual tax return). Some answers have one or two steps; some answers have 4-8 steps.
When you get a question correct, it shows that you have mastered this series of steps. When you miss a question, you really don't miss the entire question. Instead, you got to a particular step in the process and you missed that step. Once you get past that particular step, you may well be able to answer the question just perfectly. That one step in the process is your stumbling block.
It is that stumbling block that you want to identify and resolve. I hear students all the time who will tell me "I cannot do present value" or "I cannot do deferred taxes" or "I cannot do pensions." (I am convinced that saying "I cannot do" is one of the biggest crutches that humans cling to because it provides them with an automatic excuse.) But they are wrong. In doing those topics, they just get to some step along the way that they do not understand and it becomes their stumbling block. They need to pinpoint that one step and work to learn how to do it. Once they understand that one step, often the rest of the answer falls perfectly into place. Their knowledge has a hole in it.
So, when you are practicing the questions at www.CPAreviewforFREE.com, whenever you miss a question, always say to yourself "Great, now I can learn something. At which step did I miss this question and how do I go about getting past this stumbling block so I will get it right the next time."
(2) - I know this might be hard to believe (as an accounting professor) but I was reading a book this morning about Zen meditations (I like to read lots of different stuff). Just a few minutes ago, I read the following lines (which actually inspired me to write this email):
"There are three qualities for training: Great Faith, Great Doubt, Great Effort." Simple stuff but very true.
Great Faith: As I have said before in these email lessons, you have to believe in yourself if you want to succeed. Okay, none of us are Albert Einstein but we are capable of learning enough accounting, auditing, tax, law, and the like to pass the CPA Exam. It is easy to fall back on "I'm the dumbest person on the planet" but that is simply not true. You are a college graduate with an Accounting major; everyone knows you are quite smart. You can read questions, you can work problems, you can analyze answers, you can take notes. You have the ability to learn enough material to pass the CPA Exam. It does take time but you can get there.
You also need to have great faith in the preparation program you are using. One of the problems with many of the CPA Review programs is that candidates realize that they are not very well made. But once you have paid your money, what do you do? The questions are old and stale and the explanations tend to be confusing. It is very helpful if you have great faith in the program that you use in preparing for the CPA Exam. It is ever so much easier to do the work if you have faith that the program is well constructed.
Great Doubt: One of the problems with Great Faith is that it can lead to arrogance and over-confidence. I have known many extremely smart people who failed the CPA Exam because they assumed they did not need to do the work. Wrong!!! You must understand from Day One that if you do not put in your best effort on a consistent basis you are going to fail. It is not that you cannot pass. It is that you cannot pass without doing your very best.
That understanding that failure is very possible is a wonderfully motivating force. Often candidates will write to me and moan that they are having trouble getting motivated to do the work. My response is always the same: "If you do not do the work absolutely to the best of your ability, YOU ARE GOING TO FAIL." There needs to be doubt in your heart because that will push you to do your best. And, if you do your best, you will pass.
Great Effort: If it were not difficult, everyone would do it. If you really want to do something special (such as pass the CPA Exam), you must understand that a great effort will be required. And, it is that great effort that actually makes it all so special.
Everyone will tell you that they would like to pass the CPA Exam but a whole lot of people simply do not have what it takes to put out that great effort. They have good intentions but not good follow-through.
If you come to the CPA Exam with Great Faith and with Great Doubt and with Great Effort, you will pass. Okay, maybe not the first time, nothing in life is ever guaranteed, but you will eventually conquer the CPA Exam. The race does not necessarily go to the swift but rather to the persistent.
(3) - My Intermediate Accounting II students are currently beginning to learn about lease accounting, a favorite topic in accounting education. In (1) above, I talked about looking at answers as a series of sequential steps. I thought I would use a lease question to demonstrate that idea.
Acme Company needs a truck on January 1, Year One, and leases one from a local dealership for 8 years with annual payments of $10,000 each with the payments beginning immediately. The truck is expected to have a life of 10 years. At the end of the lease Acme will give the truck back to the dealership. The contract does not specify any required value at the time of the return. Acme has an incremental borrowing rate of 10 percent per year. Acme does not know the implicit interest rate factored into the contract by the dealership. The present value of an ordinary annuity for 8 years at a 10 percent annual rate is 5.335. The present value of an annuity due for 8 years at a 10 percent annual rate is 5.868.
Question One: At the end of Year Two, what net liability balance (if any) should Acme report on its balance sheet?
Question Two: At the end of Year Two, what net asset balance (if any) should Acme report on its balance sheet?
Answer
Step One. Leases can be operating leases or capital (nonoperating) leases). There are four criteria. If any one of the four criteria is met, the lease is a capital lease. In this problem, title does not transfer and there is no bargain purchase option. There is not enough information to determine if the present value of the minimum lease payments is 90 percent or more of the value of the asset. However, the life of the lease (8 years) is 75 percent or more of the life of the asset (10 years). That alone makes it a capital lease.
Step Two. The lessee (Acme as the user of the asset) accounts for a capital lease at the present value of the payments. The payments are $10,000 each year over 8 years. The interest rate to use is the lower of the incremental borrowing rate or the lessor's implicit rate. Since the lessor's implicit rate is not given, the 10 percent incremental borrowing rate must be applied.
Step Three. To get the present value, a conversion rate must be used. Because the first payment is made immediately, the annuity due factor of 5.868 is appropriate. The present value of these cash flows is $10,000 times 5.868 or $58,680. Both the liability and the truck should be recorded at $58,680 to begin.
Step Four. After the present value has been established, the liability and the asset will be accounted in totally separate ways. They are no longer really connected. The liability is reported based on recognizing interest at the end of each year as well as payments at the beginning of each year.
Step Five. The liability begins at $58,680 but there is an immediate first payment of $10,000 to reduce the balance to $48,680. That is the balance throughout the first year. At the end of the first year (interest is ALWAYS computed and recorded at the end of the period), the interest expense to be recognized is $48,680 times 10 percent or $4,868. Since that interest is not paid, it is compounded (added to the principal). Compounding on December 31, Year One, increases the liability balance from $48,680 to $53,548.
Step Six. Another payment of $10,000 is made on the lease on the first day of the second year. That reduces the liability from $53,548 to $43,548. This balance is retained throughout Year Two. At the end of Year Two, interest expense is computed again and it is $43,548 times 10 percent or $4,355. Once again, no interest is actually paid directly on a lease so that entire balance is compounded. The $43,548 principal for the period plus this $4,355 interest for Year Two brings the reported liability up to $47,903.
Step Seven. Now, let's go back to the truck. It was originally capitalized at the present value of the cash flows or $58,680. Acme will make use of it for 8 years and then give it back with no guarantee as to its residual value. Annual depreciation of this asset should be $7,335 ($58,680 divided by 8 years).
Step Eight. After two years, the asset will be reported at $58,680 minus $7,335 and $7,335 for a net value of $44,010.
Your two answers are: the net liability is $53,548 and the net asset is $44,010.
If you got it right, great! Move on and do something else. You have the basic capital lease steps down for the lessee. If you did not get these answers, you did NOT miss the question. You missed one of these 8 steps. Go back now and focus on that one step where you stumbled and make sure you understand it completely and then try again.
You can add points and you can pass the CPA Exam. Give it a great effort.
Giving Thanks for Missed Questions
From: Joe
(a) - As always, I want to thank everyone who passes our emails along to their friends, relatives, enemies, strangers, and random tourists. Last week alone, our traffic at www.CPAreviewforFREE.com grew by a wonderful 21 percent, including visitors from 69 countries. We owe that growth to you.
(b) - And, now for the legal requirements: if you need to unsubscribe, scroll down to the end of this email and click on the Unsubscribe button. However, DON'T GO!!! We like having you with us for these email lessons. We are a small community of people who believe that having the chance to pass the CPA Exam should be a opportunity that is available to everyone, even the people without big bank accounts. We like having you as part of this community. Stay as long as you can.
(1)-In my 28 years in CPA Review, the comment that I probably hear more than any other is the very troubling "I keep missing questions." The candidate is upset; the candidate wants to get the question right. The candidate misses a question and gets scared.
Not surprisingly, the candidate is often not too thrilled when I am less troubled by missed questions. But I always think about what a candidate once told me "a missed question is like fertilizer, it is the one thing in this whole process that really helps your knowledge to grow." That is absolutely true. The key, though, is not missing the question but what you do after you miss the question.
Many candidates make a mistake and say "I missed a question." I honestly do not believe that is exactly true. The solution to virtually any question on the CPA Exam is a series of sequential steps: you do A and then you do B and then you do C and eventually you get to the right answer. Some of these steps are computational (multiply X times Y) and some of these steps are more verbal (which types of interest expense are deductible on an individual tax return). Some answers have one or two steps; some answers have 4-8 steps.
When you get a question correct, it shows that you have mastered this series of steps. When you miss a question, you really don't miss the entire question. Instead, you got to a particular step in the process and you missed that step. Once you get past that particular step, you may well be able to answer the question just perfectly. That one step in the process is your stumbling block.
It is that stumbling block that you want to identify and resolve. I hear students all the time who will tell me "I cannot do present value" or "I cannot do deferred taxes" or "I cannot do pensions." (I am convinced that saying "I cannot do" is one of the biggest crutches that humans cling to because it provides them with an automatic excuse.) But they are wrong. In doing those topics, they just get to some step along the way that they do not understand and it becomes their stumbling block. They need to pinpoint that one step and work to learn how to do it. Once they understand that one step, often the rest of the answer falls perfectly into place. Their knowledge has a hole in it.
So, when you are practicing the questions at www.CPAreviewforFREE.com, whenever you miss a question, always say to yourself "Great, now I can learn something. At which step did I miss this question and how do I go about getting past this stumbling block so I will get it right the next time."
(2) - I know this might be hard to believe (as an accounting professor) but I was reading a book this morning about Zen meditations (I like to read lots of different stuff). Just a few minutes ago, I read the following lines (which actually inspired me to write this email):
"There are three qualities for training: Great Faith, Great Doubt, Great Effort." Simple stuff but very true.
Great Faith: As I have said before in these email lessons, you have to believe in yourself if you want to succeed. Okay, none of us are Albert Einstein but we are capable of learning enough accounting, auditing, tax, law, and the like to pass the CPA Exam. It is easy to fall back on "I'm the dumbest person on the planet" but that is simply not true. You are a college graduate with an Accounting major; everyone knows you are quite smart. You can read questions, you can work problems, you can analyze answers, you can take notes. You have the ability to learn enough material to pass the CPA Exam. It does take time but you can get there.
You also need to have great faith in the preparation program you are using. One of the problems with many of the CPA Review programs is that candidates realize that they are not very well made. But once you have paid your money, what do you do? The questions are old and stale and the explanations tend to be confusing. It is very helpful if you have great faith in the program that you use in preparing for the CPA Exam. It is ever so much easier to do the work if you have faith that the program is well constructed.
Great Doubt: One of the problems with Great Faith is that it can lead to arrogance and over-confidence. I have known many extremely smart people who failed the CPA Exam because they assumed they did not need to do the work. Wrong!!! You must understand from Day One that if you do not put in your best effort on a consistent basis you are going to fail. It is not that you cannot pass. It is that you cannot pass without doing your very best.
That understanding that failure is very possible is a wonderfully motivating force. Often candidates will write to me and moan that they are having trouble getting motivated to do the work. My response is always the same: "If you do not do the work absolutely to the best of your ability, YOU ARE GOING TO FAIL." There needs to be doubt in your heart because that will push you to do your best. And, if you do your best, you will pass.
Great Effort: If it were not difficult, everyone would do it. If you really want to do something special (such as pass the CPA Exam), you must understand that a great effort will be required. And, it is that great effort that actually makes it all so special.
Everyone will tell you that they would like to pass the CPA Exam but a whole lot of people simply do not have what it takes to put out that great effort. They have good intentions but not good follow-through.
If you come to the CPA Exam with Great Faith and with Great Doubt and with Great Effort, you will pass. Okay, maybe not the first time, nothing in life is ever guaranteed, but you will eventually conquer the CPA Exam. The race does not necessarily go to the swift but rather to the persistent.
(3) - My Intermediate Accounting II students are currently beginning to learn about lease accounting, a favorite topic in accounting education. In (1) above, I talked about looking at answers as a series of sequential steps. I thought I would use a lease question to demonstrate that idea.
Acme Company needs a truck on January 1, Year One, and leases one from a local dealership for 8 years with annual payments of $10,000 each with the payments beginning immediately. The truck is expected to have a life of 10 years. At the end of the lease Acme will give the truck back to the dealership. The contract does not specify any required value at the time of the return. Acme has an incremental borrowing rate of 10 percent per year. Acme does not know the implicit interest rate factored into the contract by the dealership. The present value of an ordinary annuity for 8 years at a 10 percent annual rate is 5.335. The present value of an annuity due for 8 years at a 10 percent annual rate is 5.868.
Question One: At the end of Year Two, what net liability balance (if any) should Acme report on its balance sheet?
Question Two: At the end of Year Two, what net asset balance (if any) should Acme report on its balance sheet?
Answer
Step One. Leases can be operating leases or capital (nonoperating) leases). There are four criteria. If any one of the four criteria is met, the lease is a capital lease. In this problem, title does not transfer and there is no bargain purchase option. There is not enough information to determine if the present value of the minimum lease payments is 90 percent or more of the value of the asset. However, the life of the lease (8 years) is 75 percent or more of the life of the asset (10 years). That alone makes it a capital lease.
Step Two. The lessee (Acme as the user of the asset) accounts for a capital lease at the present value of the payments. The payments are $10,000 each year over 8 years. The interest rate to use is the lower of the incremental borrowing rate or the lessor's implicit rate. Since the lessor's implicit rate is not given, the 10 percent incremental borrowing rate must be applied.
Step Three. To get the present value, a conversion rate must be used. Because the first payment is made immediately, the annuity due factor of 5.868 is appropriate. The present value of these cash flows is $10,000 times 5.868 or $58,680. Both the liability and the truck should be recorded at $58,680 to begin.
Step Four. After the present value has been established, the liability and the asset will be accounted in totally separate ways. They are no longer really connected. The liability is reported based on recognizing interest at the end of each year as well as payments at the beginning of each year.
Step Five. The liability begins at $58,680 but there is an immediate first payment of $10,000 to reduce the balance to $48,680. That is the balance throughout the first year. At the end of the first year (interest is ALWAYS computed and recorded at the end of the period), the interest expense to be recognized is $48,680 times 10 percent or $4,868. Since that interest is not paid, it is compounded (added to the principal). Compounding on December 31, Year One, increases the liability balance from $48,680 to $53,548.
Step Six. Another payment of $10,000 is made on the lease on the first day of the second year. That reduces the liability from $53,548 to $43,548. This balance is retained throughout Year Two. At the end of Year Two, interest expense is computed again and it is $43,548 times 10 percent or $4,355. Once again, no interest is actually paid directly on a lease so that entire balance is compounded. The $43,548 principal for the period plus this $4,355 interest for Year Two brings the reported liability up to $47,903.
Step Seven. Now, let's go back to the truck. It was originally capitalized at the present value of the cash flows or $58,680. Acme will make use of it for 8 years and then give it back with no guarantee as to its residual value. Annual depreciation of this asset should be $7,335 ($58,680 divided by 8 years).
Step Eight. After two years, the asset will be reported at $58,680 minus $7,335 and $7,335 for a net value of $44,010.
Your two answers are: the net liability is $53,548 and the net asset is $44,010.
If you got it right, great! Move on and do something else. You have the basic capital lease steps down for the lessee. If you did not get these answers, you did NOT miss the question. You missed one of these 8 steps. Go back now and focus on that one step where you stumbled and make sure you understand it completely and then try again.
You can add points and you can pass the CPA Exam. Give it a great effort.
Wednesday, September 24, 2008
Practice and Pass Practice and Pass Practice and Pass
September 24, 2008
CPA Review for FREE
www.CPAreviewforFREE.com
Lesson 10
Practice a Little Longer
From: Joe
I always love getting emails from candidates who are using our website. Here are two that I got earlier this week.
FROM LK: "I just wanted to send you a quick note. The CPA for free website is great. What a good idea! I did a lot of questions for the section that I most recently took and I received my score today: I got a 99 on the Auditing and Attestation section! Keep up the good work on that website. I know tons of new hires here at (Big CPA firm) who would love to have a free resource like that to use while studying."
FROM ERIK GREENAWALT IN PITTSBURGH: "I can't say enough just how beneficial cpareviewforfree.com has been for me in preparing for the CPA exam. This site helped me score a 98-yes, a 98!-on FAR. The question-and-answer format it provides is as good (if not better) than those competitors who charge hundreds-even thousands-of dollars. Plus, I can practice on questions wherever I am, whether in my
cubicle at work or on my deck at home. Thank you, thank you, thank you, cpareviewforfree.com! Now, on to AUD!"
Okay, I really do love getting 99s and 98s BUT always remember that the one and only goal is to get 75 and pass. It is great to see the super high scores but take your time, do the work, and just make sure you make 75. Only a few people can make a 98 but EVERYONE can make 75.
EVERYONE can make 75.
And, in the long run, no one is ever going to ask you your grade. They will just want to know that you passed. CPAreviewforFREE.com is here to help you reach that goal especially (in these tough economic times) if you just cannot afford to waste thousands of dollars on a program.
(1)-FREE STUFF. The people who create the CPA Exam at the AICPA send out information periodically about the exam. I got their regular email yesterday and they put in a reminder that I think is worth mentioning to you.
As probably most everyone knows, there are research questions on three of the parts of the CPA Exam (each part except for BEC). It somewhat resembles a Google search of the professional literature in order to find the appropriate answer to a question. From what can be told, the grade is relatively small but, indeed, as we all know, every point can be important. Here's some official guidance from the examiners:
"Large numbers of candidates continue to avail themselves of the free six-month subscriptions to authoritative literature used on the Uniform CPA Examination. . . , these subscriptions are available to candidates who are eligible to take the examination (i. e., those who have received Notices to Schedule). Subscriptions may be requested on the CPA Examination website, www.cpa-exam.org, under Prepare for the Exam/Access to Professional Literature.
"The free online package consists of AICPA Professional Standards and FASB Original Pronouncements. (FASB Current Text is not included as it is no longer used on the examination.) The Tax Code is not part of the package. Candidates seeking access to the Tax Code should contact publishers of the Code or search the Internet for versions that may be available on line.
"Candidates must perform online searches of professional literature databases in order to answer research questions on the CPA Examination. To become familiar with the authoritative literature search function in use on the live examination, candidates should view the Tutorial and Sample Tests, which are available on the CPA Examination website, www.cpa-exam.org. The Tutorial demonstrates the search features and the Sample Tests show the search functionality in action."
Quite obviously, we here at CPA Review for FREE believe in using as much free stuff as possible. For example, you can get free access to much of the professional literature and see how the research function works for free. Sounds like a good price to me. (However, as you can imagine, I don't think people should have to pay to learn how to pass the CPA Exam. I think passing the exam should be based on how much you are willing to work NOT how much you are willing to pay.)
(2)-If you need to unsubscribe from our weekly lessons, just scroll to the bottom of this email and click on the appropriate link.
As always, thanks to everyone who uses our site and tells others about us. Here are three interesting pieces of information about www.CPAreviewforFREE.com.
--Last week, our traffic increased by 18 percent over the previous week. And, indeed, that previous week was a 19 percent increase over the week before. The word is spreading that you don't need to pay thousands to pass the CPA Exam.
--Last week, we had visitors from 65 different countries (versus 48 in the previous week) with the Philippines, the United Arab Emirates, Canada, India, Japan, and Peru leading the way. www.CPAreviewforFREE.com is promoting world harmony (something we could all use at the moment) through the CPA Examination and free materials.
--Last week, the average visitor (the AVERAGE visitor) stayed on our site for 19 minutes and 51 seconds. We clearly have a lot of people who are sitting down and answering our questions and learning how to pass this exam. This is even more impressive because September is a dark month-no one is actually taking the exam right now.
(3)-KEEP PRACTICING. I have written email lessons like this one for about a dozen years, off and on. I have a million (well, several thousand) stories to tell. Here is my very favorite one. This is the one that means the most to me. I heard it on ESPN television about 8-10 years ago.
The NBA (the professional basketball league in North America) had its annual all-star game where the top 24 or so players are brought together to show their talents. On the night before the game, all of the players got together for a practice session since they were not used to playing with each other. After a couple of hours of tough practice, the coaches called a halt and the players went to the locker room to clean up and go out and relax.
However, four players stayed behind to practice their free throws. Each one went to a separate basket in a separate corner of the gym and simply began to shoot free throw after free throw, something that is just about as monotonous as possible. They were tired; they were ready to quit. But they stayed and shot those free throws. They kept on practicing even when they were exhausted.
The interesting part was that these were the four players who were leading the entire league at the time in free throw accuracy. They were already great; they just wanted to make sure they stayed at the top of their game. They found the time and the energy to keep on practicing.
You would have thought it would have been the poor free throw shooters who would have stayed behind in hopes of getting better. No, those folks were all out at the party. It was the people who wanted to excel who had the self-discipline to do even a bit more work.
How does this apply to the CPA Exam?
--There are going to be times when you are tired and ready to quit studying. Try to practice just a little bit longer.
--There are going to be times when you have something that you really want to do other than studying. Try to practice just a little bit longer.
--There are going to be times when you feel like you know enough. Try to practice just a little bit longer.
--There are going to be times when you are so frustrated with yourself that you want to give up. Try to practice just a little bit longer.
--There are going to be times when you are so optimistic that you feel nothing can stop you. Try to practice just a little bit longer.
When it comes to studying for the CPA Exam, most of the times the person who says "Stop" is you. The person who says "That's enough" is you. Before you stop, if you truly want to excel, try to practice just a little bit longer.
The race doesn't go to the swift or the smart or the rich or the lucky. I truly believe the race goes to the person who has the inner fortitude so that when they are really exhausted, they try to practice just a little bit longer.
(4)-Speaking of practicing. Here are four more questions that I just wrote and am getting ready to add to our database at www.CPAreviewforFREE.com. See how you do.
FINANCIAL ACCOUNTING AND REPORTING
Idelton Company buys 30 percent of Waynwrought Corporation on January 1, Year One. Several officers of Idelton are on the board of directors for Waynwrought so the company believes that it holds the ability to significantly influence the operating and financing decisions of Waynwrought and has decided to apply the equity method to account for the investment. In making this investment, Idelton paid a premium of $40,000 because Waynwrought held a valuable database that had not been included on its balance sheet since it did not have an historical cost. The database should be usable for five more years. In Year One, Waynwrought reported net income of $90,000 and paid dividends of $30,000. What amount of investment income should Idelton report on its own Year One income statement?
A - $9,000
B - $19,000
C - $27,000
D - $36,000
Answer is B
Dividends are not viewed as income when the equity method is applied (they reduce the balance of the investment). Instead, the income of the investee is accrued by the investor as it is earned. Waynwrought reported net income of $90,000 so this 30 percent owner should have recognized $27,000. However, when a portion of the original investment price was paid because the value of some investee assets were not properly reflected, then that cost must also be amortized unless the life cannot be determined. Here, there is a database and an additional $40,000 has been paid as a result. Because this value is only expected to last for five years, it is amortized over that period at the rate of $8,000 per year. Idelton should recognize $27,000 as its share of the investee's reported income but also subtract $8,000 because of the amortization of the excess amount paid because of the database when these shares were bought. The investment income is $27,000 minus $8,000 or $19,000.
REGULATION
Julia sold her stock in ABC Company to her sister Hannah for $30,000. Julia's tax basis in this investment was $33,000. Sixteen months later, Hannah sold the stock to an unrelated third party for $32,000 in cash. What is the income tax effect of Hannah's sale?
A - Neither a gain or a loss
B - Gain of $2,000
C - Gain of $1,000
D - Loss of $1,000
Answer is A
The first transaction results in a disallowed loss of $3,000 ($30,000 less $33,000) because the investment was sold to a related party. The second transaction was to an unrelated party and results in a gain of $2,000 ($32,000 less $30,000). The disallowed loss of $3,000 can then be used to reduce this gain for tax purposes to zero. However, a disallowed loss of this type cannot be used to create a taxable loss. Therefore, although the loss of $3,000 is greater than the eventual gain of $2,000, it can only reduce the gain to zero. That is its limit.
AUDITING AND ATTESTATION
An independent auditor is currently attempting to gain evidence about a reporting company's accounts receivable. According to the records, the company is owed $760 by Arnold Alexander Wilson. Which of the following is true?
A - Confirmation is primarily an evidence gathering technique to substantiate the valuation assertion made by management.
B - Confirmations tend to be done late in the fiscal year so that the balance being confirmed is close to the balance sheet date.
C - If internal control is weak, negative confirmations are more likely to be used than positive confirmations.
D - Subsequent payment of the account after the end of the year can be used as evidence that the balance is properly stated at the balance sheet date.
Answer is D
The most important purpose in an audit of confirmation is to prove that the balance actually does exist. Many frauds have been created by recording false receivables to boost reported revenues (and net income). Confirmation attempts to gain evidence that the balance (and the debtor) do exist. Because confirmation generally takes a considerable period of time, it is usually performed early in an audit unless serious problems are expected. Positive confirmations ask for a response in all cases and is viewed as a better testing technique than negative confirmations which only ask for communication if a problem is found. Thus, positive confirmations are more likely to be used when additional risk is involved such as when internal control risk is assessed as high. Finally, the collection of a balance does help to indicate that the balance did exist and is collectible. Auditors often spend considerable time in the period right after the end of the year reviewing cash
collections for that reason.
BUSINESS ENVIRONMENT AND CONCEPTS
A company has a rule that an investment must earn an annual effective income rate of 10 percent or more before the investment can be made. Currently, the company is looking at two investments. Investment A has a cost of $20,000 and its expected cash flows have a present value based on a 10 percent annual income rate of $19,000. Investment B has a cost of $34,000 and its expected cash flows have a present value based on a 10 percent annual income rate of $33,000. Which of the following statements is true?
A - Both investments meet the company's criteria.
B - Only Investment A meets the company's criteria.
C - Only Investment B meets the company's criteria.
D - Neither investment meets the company's criteria.
Answer is D
Investments should be made when they have a net present value that is positive. The net present value is the present value of the future cash flows to be generated (computed at a desired rate) less the cost to make the investment. Both of these investments have a negative net present value of $1,000 ($19,000 less $20,000 and $33,000 less $34,000). They are not earning an annual income rate of 10 percent because the resulting figure is negative.
Have a great rest of the week.
Try to keep practicing as long as you can. I fully understand that you are probably getting tired and would love to do something else. It will all be over relatively soon and if you stick with it, you will have the CPA Exam passed and you will feel GREAT!!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
CPA Review for FREE
www.CPAreviewforFREE.com
Lesson 10
Practice a Little Longer
From: Joe
I always love getting emails from candidates who are using our website. Here are two that I got earlier this week.
FROM LK: "I just wanted to send you a quick note. The CPA for free website is great. What a good idea! I did a lot of questions for the section that I most recently took and I received my score today: I got a 99 on the Auditing and Attestation section! Keep up the good work on that website. I know tons of new hires here at (Big CPA firm) who would love to have a free resource like that to use while studying."
FROM ERIK GREENAWALT IN PITTSBURGH: "I can't say enough just how beneficial cpareviewforfree.com has been for me in preparing for the CPA exam. This site helped me score a 98-yes, a 98!-on FAR. The question-and-answer format it provides is as good (if not better) than those competitors who charge hundreds-even thousands-of dollars. Plus, I can practice on questions wherever I am, whether in my
cubicle at work or on my deck at home. Thank you, thank you, thank you, cpareviewforfree.com! Now, on to AUD!"
Okay, I really do love getting 99s and 98s BUT always remember that the one and only goal is to get 75 and pass. It is great to see the super high scores but take your time, do the work, and just make sure you make 75. Only a few people can make a 98 but EVERYONE can make 75.
EVERYONE can make 75.
And, in the long run, no one is ever going to ask you your grade. They will just want to know that you passed. CPAreviewforFREE.com is here to help you reach that goal especially (in these tough economic times) if you just cannot afford to waste thousands of dollars on a program.
(1)-FREE STUFF. The people who create the CPA Exam at the AICPA send out information periodically about the exam. I got their regular email yesterday and they put in a reminder that I think is worth mentioning to you.
As probably most everyone knows, there are research questions on three of the parts of the CPA Exam (each part except for BEC). It somewhat resembles a Google search of the professional literature in order to find the appropriate answer to a question. From what can be told, the grade is relatively small but, indeed, as we all know, every point can be important. Here's some official guidance from the examiners:
"Large numbers of candidates continue to avail themselves of the free six-month subscriptions to authoritative literature used on the Uniform CPA Examination. . . , these subscriptions are available to candidates who are eligible to take the examination (i. e., those who have received Notices to Schedule). Subscriptions may be requested on the CPA Examination website, www.cpa-exam.org, under Prepare for the Exam/Access to Professional Literature.
"The free online package consists of AICPA Professional Standards and FASB Original Pronouncements. (FASB Current Text is not included as it is no longer used on the examination.) The Tax Code is not part of the package. Candidates seeking access to the Tax Code should contact publishers of the Code or search the Internet for versions that may be available on line.
"Candidates must perform online searches of professional literature databases in order to answer research questions on the CPA Examination. To become familiar with the authoritative literature search function in use on the live examination, candidates should view the Tutorial and Sample Tests, which are available on the CPA Examination website, www.cpa-exam.org. The Tutorial demonstrates the search features and the Sample Tests show the search functionality in action."
Quite obviously, we here at CPA Review for FREE believe in using as much free stuff as possible. For example, you can get free access to much of the professional literature and see how the research function works for free. Sounds like a good price to me. (However, as you can imagine, I don't think people should have to pay to learn how to pass the CPA Exam. I think passing the exam should be based on how much you are willing to work NOT how much you are willing to pay.)
(2)-If you need to unsubscribe from our weekly lessons, just scroll to the bottom of this email and click on the appropriate link.
As always, thanks to everyone who uses our site and tells others about us. Here are three interesting pieces of information about www.CPAreviewforFREE.com.
--Last week, our traffic increased by 18 percent over the previous week. And, indeed, that previous week was a 19 percent increase over the week before. The word is spreading that you don't need to pay thousands to pass the CPA Exam.
--Last week, we had visitors from 65 different countries (versus 48 in the previous week) with the Philippines, the United Arab Emirates, Canada, India, Japan, and Peru leading the way. www.CPAreviewforFREE.com is promoting world harmony (something we could all use at the moment) through the CPA Examination and free materials.
--Last week, the average visitor (the AVERAGE visitor) stayed on our site for 19 minutes and 51 seconds. We clearly have a lot of people who are sitting down and answering our questions and learning how to pass this exam. This is even more impressive because September is a dark month-no one is actually taking the exam right now.
(3)-KEEP PRACTICING. I have written email lessons like this one for about a dozen years, off and on. I have a million (well, several thousand) stories to tell. Here is my very favorite one. This is the one that means the most to me. I heard it on ESPN television about 8-10 years ago.
The NBA (the professional basketball league in North America) had its annual all-star game where the top 24 or so players are brought together to show their talents. On the night before the game, all of the players got together for a practice session since they were not used to playing with each other. After a couple of hours of tough practice, the coaches called a halt and the players went to the locker room to clean up and go out and relax.
However, four players stayed behind to practice their free throws. Each one went to a separate basket in a separate corner of the gym and simply began to shoot free throw after free throw, something that is just about as monotonous as possible. They were tired; they were ready to quit. But they stayed and shot those free throws. They kept on practicing even when they were exhausted.
The interesting part was that these were the four players who were leading the entire league at the time in free throw accuracy. They were already great; they just wanted to make sure they stayed at the top of their game. They found the time and the energy to keep on practicing.
You would have thought it would have been the poor free throw shooters who would have stayed behind in hopes of getting better. No, those folks were all out at the party. It was the people who wanted to excel who had the self-discipline to do even a bit more work.
How does this apply to the CPA Exam?
--There are going to be times when you are tired and ready to quit studying. Try to practice just a little bit longer.
--There are going to be times when you have something that you really want to do other than studying. Try to practice just a little bit longer.
--There are going to be times when you feel like you know enough. Try to practice just a little bit longer.
--There are going to be times when you are so frustrated with yourself that you want to give up. Try to practice just a little bit longer.
--There are going to be times when you are so optimistic that you feel nothing can stop you. Try to practice just a little bit longer.
When it comes to studying for the CPA Exam, most of the times the person who says "Stop" is you. The person who says "That's enough" is you. Before you stop, if you truly want to excel, try to practice just a little bit longer.
The race doesn't go to the swift or the smart or the rich or the lucky. I truly believe the race goes to the person who has the inner fortitude so that when they are really exhausted, they try to practice just a little bit longer.
(4)-Speaking of practicing. Here are four more questions that I just wrote and am getting ready to add to our database at www.CPAreviewforFREE.com. See how you do.
FINANCIAL ACCOUNTING AND REPORTING
Idelton Company buys 30 percent of Waynwrought Corporation on January 1, Year One. Several officers of Idelton are on the board of directors for Waynwrought so the company believes that it holds the ability to significantly influence the operating and financing decisions of Waynwrought and has decided to apply the equity method to account for the investment. In making this investment, Idelton paid a premium of $40,000 because Waynwrought held a valuable database that had not been included on its balance sheet since it did not have an historical cost. The database should be usable for five more years. In Year One, Waynwrought reported net income of $90,000 and paid dividends of $30,000. What amount of investment income should Idelton report on its own Year One income statement?
A - $9,000
B - $19,000
C - $27,000
D - $36,000
Answer is B
Dividends are not viewed as income when the equity method is applied (they reduce the balance of the investment). Instead, the income of the investee is accrued by the investor as it is earned. Waynwrought reported net income of $90,000 so this 30 percent owner should have recognized $27,000. However, when a portion of the original investment price was paid because the value of some investee assets were not properly reflected, then that cost must also be amortized unless the life cannot be determined. Here, there is a database and an additional $40,000 has been paid as a result. Because this value is only expected to last for five years, it is amortized over that period at the rate of $8,000 per year. Idelton should recognize $27,000 as its share of the investee's reported income but also subtract $8,000 because of the amortization of the excess amount paid because of the database when these shares were bought. The investment income is $27,000 minus $8,000 or $19,000.
REGULATION
Julia sold her stock in ABC Company to her sister Hannah for $30,000. Julia's tax basis in this investment was $33,000. Sixteen months later, Hannah sold the stock to an unrelated third party for $32,000 in cash. What is the income tax effect of Hannah's sale?
A - Neither a gain or a loss
B - Gain of $2,000
C - Gain of $1,000
D - Loss of $1,000
Answer is A
The first transaction results in a disallowed loss of $3,000 ($30,000 less $33,000) because the investment was sold to a related party. The second transaction was to an unrelated party and results in a gain of $2,000 ($32,000 less $30,000). The disallowed loss of $3,000 can then be used to reduce this gain for tax purposes to zero. However, a disallowed loss of this type cannot be used to create a taxable loss. Therefore, although the loss of $3,000 is greater than the eventual gain of $2,000, it can only reduce the gain to zero. That is its limit.
AUDITING AND ATTESTATION
An independent auditor is currently attempting to gain evidence about a reporting company's accounts receivable. According to the records, the company is owed $760 by Arnold Alexander Wilson. Which of the following is true?
A - Confirmation is primarily an evidence gathering technique to substantiate the valuation assertion made by management.
B - Confirmations tend to be done late in the fiscal year so that the balance being confirmed is close to the balance sheet date.
C - If internal control is weak, negative confirmations are more likely to be used than positive confirmations.
D - Subsequent payment of the account after the end of the year can be used as evidence that the balance is properly stated at the balance sheet date.
Answer is D
The most important purpose in an audit of confirmation is to prove that the balance actually does exist. Many frauds have been created by recording false receivables to boost reported revenues (and net income). Confirmation attempts to gain evidence that the balance (and the debtor) do exist. Because confirmation generally takes a considerable period of time, it is usually performed early in an audit unless serious problems are expected. Positive confirmations ask for a response in all cases and is viewed as a better testing technique than negative confirmations which only ask for communication if a problem is found. Thus, positive confirmations are more likely to be used when additional risk is involved such as when internal control risk is assessed as high. Finally, the collection of a balance does help to indicate that the balance did exist and is collectible. Auditors often spend considerable time in the period right after the end of the year reviewing cash
collections for that reason.
BUSINESS ENVIRONMENT AND CONCEPTS
A company has a rule that an investment must earn an annual effective income rate of 10 percent or more before the investment can be made. Currently, the company is looking at two investments. Investment A has a cost of $20,000 and its expected cash flows have a present value based on a 10 percent annual income rate of $19,000. Investment B has a cost of $34,000 and its expected cash flows have a present value based on a 10 percent annual income rate of $33,000. Which of the following statements is true?
A - Both investments meet the company's criteria.
B - Only Investment A meets the company's criteria.
C - Only Investment B meets the company's criteria.
D - Neither investment meets the company's criteria.
Answer is D
Investments should be made when they have a net present value that is positive. The net present value is the present value of the future cash flows to be generated (computed at a desired rate) less the cost to make the investment. Both of these investments have a negative net present value of $1,000 ($19,000 less $20,000 and $33,000 less $34,000). They are not earning an annual income rate of 10 percent because the resulting figure is negative.
Have a great rest of the week.
Try to keep practicing as long as you can. I fully understand that you are probably getting tired and would love to do something else. It will all be over relatively soon and if you stick with it, you will have the CPA Exam passed and you will feel GREAT!!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
Monday, September 22, 2008
A 98 in FAR! Yes, a 98!
"I can't say enough just how beneficial cpareviewforfree.com has been for me
in preparing for the CPA exam. This site helped me score a 98 -- yes, a 98!
-- on FAR. The question-and-answer format it provides is as good (if not
better) than those competitors who charge hundreds -- even thousands -- of
dollars. Plus, I can practice on questions wherever I am, whether in my
cubicle at work or on my deck at home. Thank you, thank you, thank you,
cpareviewforfree.com! Now, on to AUD!" -- Erik Greenawalt, Pittsburgh
in preparing for the CPA exam. This site helped me score a 98 -- yes, a 98!
-- on FAR. The question-and-answer format it provides is as good (if not
better) than those competitors who charge hundreds -- even thousands -- of
dollars. Plus, I can practice on questions wherever I am, whether in my
cubicle at work or on my deck at home. Thank you, thank you, thank you,
cpareviewforfree.com! Now, on to AUD!" -- Erik Greenawalt, Pittsburgh
Thursday, September 4, 2008
Questions to Consider as You Begin Your Journey To Success
APPROXIMATELY 2,000 FREE QUESTIONS AND ANSWERS
September 1, 2008
CPA Review for FREE
www.CPAreviewforFREE.com
Lesson 7
Questions to Consider as You Begin Your Journey To Success
From: Joe
Best of luck to everyone who gets these email lessons down in the Louisiana
area. I have several former students who live down in New Orleans and I know
how scary and dangerous the hurricanes can be. I hope it is over soon and you
are back to being safe.
(a)—If this is your first email lesson from us, I want to welcome you. I send
these lessons out about 2-4 times each month to help current and future
candidates get ready to pass the CPA Exam. Thousands of accountants pass the
exam every quarter and so can you. Our goal at CPAreviewforFREE is to help
every person who wants to pass the CPA Exam to achieve that goal.
If you ever decide that you need to unsubscribe, the process is easy. Scroll
to the end of the lesson and click on the unsubscribe link. We love having you
with us but please feel free to unsubscribe whenever you need.
(b)—Please check out our advertisers on our website. They help us to provide
all of this free material to you through CPAreviewforFREE. Without them, we
would not exist. Plus, they provide a lot of great services that can really be
helpful.
(c)—Don’t forget to check out our free video tips under “Take a Study
Break” at www.CPAreviewforFREE.com. I hope to have a fourth one up in the
next couple of days. Each one is roughly 4-5 minutes long.
(d)—Also notice, as indicated in our last lesson, you can now find the
complete steps for an audit engagement at www.CPAreviewforFREE.com under CPA
Exam Resources on the homepage. Good information; it is helpful in coming to
understand the auditing process.
(1)—SEPTEMBER QUESTIONS. September is a month when the CPA Exam “goes
dark.” In other words, no one can take the CPA Exam in September. Thus,
everyone is getting ready. It is a great time, here on September 1, to plan out
your strategy for the October-November testing window. Things go so much better
if you have a plan. The CPA Exam is too important to leave your preparation to
random chance. Here are some questions that you should consider, starting
today.
--Have you qualified to take the CPA Exam? Have you received your NTS
(notice to schedule)? If you have not applied for the CPA Exam, read
“Applying for the CPA Exam” under CPA Exam Resources at
www.CPAreviewforFREE.com.
--Have you read the NTS carefully? There is a lot of very helpful
information included.
--If you have not previously taken the CPA Exam, have you read “The
Structure of the CPA Exam” at CPA Exam Resources at www.CPAreviewforFREE.com.
The more you know about the exam, the easier it is to pass. You don’t want
any surprises.
--Have you considered how many parts you want to take in October and
November? Do you want to take 1, 2, 3, or 4? As I have said before in these
email lessons, it all depends on how much time you have to study. This is a
very important question. For some advice, go to www.CPAreviewforFREE.com and
click on “resources” at the top of the page and then look at the “FAQ”
section.
--Have you actually scheduled the exams that you are going to take in
October and November? If you want specific dates, it is better to make the
reservation early. If you are taking more than one part in October-November,
try to leave as much time in between as possible.
--Have you scheduled out how many hours you are going to try to study each
week in September (I am not sure that scheduling more than one month in advance
is very helpful)? Have you scheduled out how many hours you are going to study
each day for the next two weeks? (You don’t need to study every day but you
probably need to study most days.) Have you scheduled out when you are going to
be studying each day during the coming week? Have you scheduled out exactly
what you are going to be accomplishing each of the next two or three days?
--Preparation requires two processes: (1) going over new material and (2)
reviewing previously covered material. Do you have a schedule for how much time
you are going to spend on each? I am a big believer that you divide your
remaining time into three parts. For the first 1/3 of the time, you only study
new material and work new problems. During the second 1/3, you study new
material 2/3 of the time and review previous material for the remainder. For
the final 1/3 of the study time, you only cover new material 1/3 of the time
with review making up the other 2/3. I think this pattern helps you get through
everything and keep it all fresh in your brain.
--Have you decided how you are going to keep notes? You need those for
review purposes; you cannot keep everything in your head. Here is my rule. If
you work a question and get it right, you probably do not need to take any notes
on it. If you work a question and get it wrong, you want to isolate what you
missed and take a note on just that. Focus on the part that you missed. There
is where you have the opportunity to learn. That was the part you did not know.
I like keeping my notes on 3 by 5 cards with a question on one side and the
answer on the other. That way you have something you can carry with you to
study and it is very easy to use.
--Have you looked at the hundreds and hundreds of questions on
www.CPAreviewforFREE.com to see how you can start working them and begin to add
points right now. Read a question and get it right, then move on. Read a
question and miss it, then stop and isolate the mistake and set up your note
card. Set a goal: how many questions and problems do you want to do
today? Tomorrow?
Go about the exam the right way and you can do it!!!
(2)—FACT: roughly half of the people who take each of the four parts of the
CPA Exam pass while roughly half fail. Half pass and half fail. Consequently,
your primary goal is to be in the upper half. If you can get into a position
where your knowledge is in the upper half, you’ve got a great chance to pass
the exam. You do not need to be in the topo 1 percent. Not the upper 10
percent or even the upper 25 percent, just the upper half. That is a goal that
YOU can achieve. You might not be able to be number one in class but, if you
work at it, you CAN get in the upper half.
You know the next question: how do you get into the upper half? Today, in
the United States, it is Labor Day, a national holiday. Most people spent the
day enjoying the vacation. Everyone needs a rest occasionally and, if you needed
a break from preparing for the CPA Exam, I hope you took it. I always believe
that occasional relaxation and occasional exercise will help you function more
effectively the rest of the time.
However, when I took the CPA Exam, I always worried that I wasn’t smart
enough (I think this must be a universal human problem—self-doubt). I
wondered how I could ever catch up with those smart people so I could get in the
upper half. I didn’t want to be first; I just wanted to pass. One of my
favorite techniques was to study when I did not think other people were
studying. That really made me feel good. Whether it was Friday night or
Saturday morning or on holidays or on Sunday afternoon when most people are
watching football, I loved the idea that I was adding points to my score when
other people were loafing.
If you are taking the exam in October-November, you want to start working on
building a sense of confidence RIGHT NOW. One way to do that is to study in a
way that makes you feel like you are getting ahead of the competition. So, each
week, come up with a time where most people are not studying. Then, you put in
30 minutes or so—enough time so that you know you have added some points.
When I was preparing for the CPA Exam, I would decide what I wanted to do in
the first 30 minutes of the next day. When I went to bed at night, I placed my
books right beside my bed. In fact, I would open them to the spot I planned to
study.
Then, in the morning, before I even got out of bed, I grabbed my books and put
in 30 minutes. I felt strong the rest of the day. I loved realizing that I had
studied before other people had even gotten out of bed. No matter what I did
during the rest of the day, I had made progress.
You don’t need to be number one. You don’t even need to be number 40. You
just need to be in the top half. If you will start adding points when other
people are resting or playing, you are moving yourself up in the rankings and
getting ever closer to your goal.
(3)—WORDS FROM A GOOD BOOK. A friend of mine (actually the father of one of
my former students) sent me a book last week titled The Last Lecture by Randy
Pausch. Randy Pausch, for those of you who do not know, was a college professor
who died at a young age. However, before he died, he went back to his college
(Carnegie Mellon) and gave a wonderful lecture. You can see it at
http://www.youtube.com/watch?v=ji5_MqicxSo and it is well worth your time. Stop
reading this and go watch—it will help you.
The book that I received is a series of about 60 short thoughts that Pausch
wrote on a variety of topics dealing with living. Trust me, it is a tough book
to read without wanting to jump up and make more of your time on this planet.
On page 36, Pausch says “Fundamentals, fundamentals, fundamentals. As a
college professor, I’ve seen this as one lesson so many kids ignore, always to
their detriment: You’ve got to get the fundamentals down, because otherwise
the fancy stuff is not going to work.”
I agree completely with Pausch on the fundamentals. It is true about a lot of
things in life, even including the CPA Exam. Whether it is hand grenades or
horseshoes, you are not going to succeed unless you know the fundamentals. Most
people start preparing for the CPA Exam with a sense of being overwhelmed. They
want to skip the fundamentals and go right to the overly complex stuff.
“I’ve got to learn it all. I’ve got to learn all of the most difficult
topics in accounting, auditing, tax, and the like. It is just too much for
me.”
Don’t let yourself get distracted. You have to learn the fundamentals. You
have to know the basics. You just need to get in the upper half; you don’t
need to be perfect. To do that, the fundamentals are enough. How do you compute
bad debt expense? How do you handle the exchange of assets? How do you compute
present value? When is interest revenue not taxable?
In fact, one of my suggestions, as you study, is to start making a list of the
fundamentals. As you cover a topic, what parts do you see over and over? Just
make a simple list that you can go back and read now and then.
---Double-declining balance depreciation is 2 over the life times the book
value. That is a fundamental.
---Basic earnings per share is net income less preferred stock dividends
declared divided by the weighted average number of common shares. That is a
fundamental.
It is easy to fail the CPA Exam by actually trying to learn too much. If you
can just learn the fundamentals, you should be ready to pass.
September 1, 2008
CPA Review for FREE
www.CPAreviewforFREE.com
Lesson 7
Questions to Consider as You Begin Your Journey To Success
From: Joe
Best of luck to everyone who gets these email lessons down in the Louisiana
area. I have several former students who live down in New Orleans and I know
how scary and dangerous the hurricanes can be. I hope it is over soon and you
are back to being safe.
(a)—If this is your first email lesson from us, I want to welcome you. I send
these lessons out about 2-4 times each month to help current and future
candidates get ready to pass the CPA Exam. Thousands of accountants pass the
exam every quarter and so can you. Our goal at CPAreviewforFREE is to help
every person who wants to pass the CPA Exam to achieve that goal.
If you ever decide that you need to unsubscribe, the process is easy. Scroll
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with us but please feel free to unsubscribe whenever you need.
(b)—Please check out our advertisers on our website. They help us to provide
all of this free material to you through CPAreviewforFREE. Without them, we
would not exist. Plus, they provide a lot of great services that can really be
helpful.
(c)—Don’t forget to check out our free video tips under “Take a Study
Break” at www.CPAreviewforFREE.com. I hope to have a fourth one up in the
next couple of days. Each one is roughly 4-5 minutes long.
(d)—Also notice, as indicated in our last lesson, you can now find the
complete steps for an audit engagement at www.CPAreviewforFREE.com under CPA
Exam Resources on the homepage. Good information; it is helpful in coming to
understand the auditing process.
(1)—SEPTEMBER QUESTIONS. September is a month when the CPA Exam “goes
dark.” In other words, no one can take the CPA Exam in September. Thus,
everyone is getting ready. It is a great time, here on September 1, to plan out
your strategy for the October-November testing window. Things go so much better
if you have a plan. The CPA Exam is too important to leave your preparation to
random chance. Here are some questions that you should consider, starting
today.
--Have you qualified to take the CPA Exam? Have you received your NTS
(notice to schedule)? If you have not applied for the CPA Exam, read
“Applying for the CPA Exam” under CPA Exam Resources at
www.CPAreviewforFREE.com.
--Have you read the NTS carefully? There is a lot of very helpful
information included.
--If you have not previously taken the CPA Exam, have you read “The
Structure of the CPA Exam” at CPA Exam Resources at www.CPAreviewforFREE.com.
The more you know about the exam, the easier it is to pass. You don’t want
any surprises.
--Have you considered how many parts you want to take in October and
November? Do you want to take 1, 2, 3, or 4? As I have said before in these
email lessons, it all depends on how much time you have to study. This is a
very important question. For some advice, go to www.CPAreviewforFREE.com and
click on “resources” at the top of the page and then look at the “FAQ”
section.
--Have you actually scheduled the exams that you are going to take in
October and November? If you want specific dates, it is better to make the
reservation early. If you are taking more than one part in October-November,
try to leave as much time in between as possible.
--Have you scheduled out how many hours you are going to try to study each
week in September (I am not sure that scheduling more than one month in advance
is very helpful)? Have you scheduled out how many hours you are going to study
each day for the next two weeks? (You don’t need to study every day but you
probably need to study most days.) Have you scheduled out when you are going to
be studying each day during the coming week? Have you scheduled out exactly
what you are going to be accomplishing each of the next two or three days?
--Preparation requires two processes: (1) going over new material and (2)
reviewing previously covered material. Do you have a schedule for how much time
you are going to spend on each? I am a big believer that you divide your
remaining time into three parts. For the first 1/3 of the time, you only study
new material and work new problems. During the second 1/3, you study new
material 2/3 of the time and review previous material for the remainder. For
the final 1/3 of the study time, you only cover new material 1/3 of the time
with review making up the other 2/3. I think this pattern helps you get through
everything and keep it all fresh in your brain.
--Have you decided how you are going to keep notes? You need those for
review purposes; you cannot keep everything in your head. Here is my rule. If
you work a question and get it right, you probably do not need to take any notes
on it. If you work a question and get it wrong, you want to isolate what you
missed and take a note on just that. Focus on the part that you missed. There
is where you have the opportunity to learn. That was the part you did not know.
I like keeping my notes on 3 by 5 cards with a question on one side and the
answer on the other. That way you have something you can carry with you to
study and it is very easy to use.
--Have you looked at the hundreds and hundreds of questions on
www.CPAreviewforFREE.com to see how you can start working them and begin to add
points right now. Read a question and get it right, then move on. Read a
question and miss it, then stop and isolate the mistake and set up your note
card. Set a goal: how many questions and problems do you want to do
today? Tomorrow?
Go about the exam the right way and you can do it!!!
(2)—FACT: roughly half of the people who take each of the four parts of the
CPA Exam pass while roughly half fail. Half pass and half fail. Consequently,
your primary goal is to be in the upper half. If you can get into a position
where your knowledge is in the upper half, you’ve got a great chance to pass
the exam. You do not need to be in the topo 1 percent. Not the upper 10
percent or even the upper 25 percent, just the upper half. That is a goal that
YOU can achieve. You might not be able to be number one in class but, if you
work at it, you CAN get in the upper half.
You know the next question: how do you get into the upper half? Today, in
the United States, it is Labor Day, a national holiday. Most people spent the
day enjoying the vacation. Everyone needs a rest occasionally and, if you needed
a break from preparing for the CPA Exam, I hope you took it. I always believe
that occasional relaxation and occasional exercise will help you function more
effectively the rest of the time.
However, when I took the CPA Exam, I always worried that I wasn’t smart
enough (I think this must be a universal human problem—self-doubt). I
wondered how I could ever catch up with those smart people so I could get in the
upper half. I didn’t want to be first; I just wanted to pass. One of my
favorite techniques was to study when I did not think other people were
studying. That really made me feel good. Whether it was Friday night or
Saturday morning or on holidays or on Sunday afternoon when most people are
watching football, I loved the idea that I was adding points to my score when
other people were loafing.
If you are taking the exam in October-November, you want to start working on
building a sense of confidence RIGHT NOW. One way to do that is to study in a
way that makes you feel like you are getting ahead of the competition. So, each
week, come up with a time where most people are not studying. Then, you put in
30 minutes or so—enough time so that you know you have added some points.
When I was preparing for the CPA Exam, I would decide what I wanted to do in
the first 30 minutes of the next day. When I went to bed at night, I placed my
books right beside my bed. In fact, I would open them to the spot I planned to
study.
Then, in the morning, before I even got out of bed, I grabbed my books and put
in 30 minutes. I felt strong the rest of the day. I loved realizing that I had
studied before other people had even gotten out of bed. No matter what I did
during the rest of the day, I had made progress.
You don’t need to be number one. You don’t even need to be number 40. You
just need to be in the top half. If you will start adding points when other
people are resting or playing, you are moving yourself up in the rankings and
getting ever closer to your goal.
(3)—WORDS FROM A GOOD BOOK. A friend of mine (actually the father of one of
my former students) sent me a book last week titled The Last Lecture by Randy
Pausch. Randy Pausch, for those of you who do not know, was a college professor
who died at a young age. However, before he died, he went back to his college
(Carnegie Mellon) and gave a wonderful lecture. You can see it at
http://www.youtube.com/watch?v=ji5_MqicxSo and it is well worth your time. Stop
reading this and go watch—it will help you.
The book that I received is a series of about 60 short thoughts that Pausch
wrote on a variety of topics dealing with living. Trust me, it is a tough book
to read without wanting to jump up and make more of your time on this planet.
On page 36, Pausch says “Fundamentals, fundamentals, fundamentals. As a
college professor, I’ve seen this as one lesson so many kids ignore, always to
their detriment: You’ve got to get the fundamentals down, because otherwise
the fancy stuff is not going to work.”
I agree completely with Pausch on the fundamentals. It is true about a lot of
things in life, even including the CPA Exam. Whether it is hand grenades or
horseshoes, you are not going to succeed unless you know the fundamentals. Most
people start preparing for the CPA Exam with a sense of being overwhelmed. They
want to skip the fundamentals and go right to the overly complex stuff.
“I’ve got to learn it all. I’ve got to learn all of the most difficult
topics in accounting, auditing, tax, and the like. It is just too much for
me.”
Don’t let yourself get distracted. You have to learn the fundamentals. You
have to know the basics. You just need to get in the upper half; you don’t
need to be perfect. To do that, the fundamentals are enough. How do you compute
bad debt expense? How do you handle the exchange of assets? How do you compute
present value? When is interest revenue not taxable?
In fact, one of my suggestions, as you study, is to start making a list of the
fundamentals. As you cover a topic, what parts do you see over and over? Just
make a simple list that you can go back and read now and then.
---Double-declining balance depreciation is 2 over the life times the book
value. That is a fundamental.
---Basic earnings per share is net income less preferred stock dividends
declared divided by the weighted average number of common shares. That is a
fundamental.
It is easy to fail the CPA Exam by actually trying to learn too much. If you
can just learn the fundamentals, you should be ready to pass.
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