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.
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