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.

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