What Does the CPA Exam Look Like

What Does the CPA Exam Look Like

From: Joe

If you are taking a part of the exam at the end of the January-February window and you work just 20 questions per day at www.cpareviewforfree.com, you can get 300 questions done and that ought to get you very close to a passing score. Even if you have not studied one bit so far, you can still pass in February if you get to work right now.


(a) - On Friday, it is Valentine's Day here in the United States (I am not sure if Valentine's Day is observed in other countries). I sent the following note to my college students today. It probably applies to everyone out there. Think of someone you love and write them a note.

"I am going to give you some fatherly advice that I wish someone had given me when I was your age. Valentine's Day is coming up on Saturday. If you are lucky and your mother is still alive, go to Hallmark or some other card shop and buy her a real card. Then, write her a few lines in your own handwriting and tell her how much you love her. Don't leave it to an email or to a phone call. Those don't show any imagination or creativity or caring - they are just overly convenient. Don't take the people in your family and in your life for granted. Life should be lived with some imagination and some caring. Go out of your way to do something personal. If you buy a card and especially if you write a note, there will come a day when you will be glad that you did."

(b)-In case you have not already done so, go to www.youtube.com and type in (without spaces) CPAreviewforfree. You should get three videos that I made about preparing for the CPA Exam. My spring break is coming up in a few weeks and I hope to make 2-3 more videos to put up on YouTube. I am always trying to think of every possible way to encourage people to get the points they need to pass the CPA Exam.

(c)-Got another great email today. Always makes me smile.

"Thanks for the valuable help. I really appreciate it, your questions are unique and the explanations are awesome. Also I like the names that are used in the questions. For sure I will inform you about my grades since you are my partner in any success."

Hey, we are always delighted to be of help to every person who wants to pass the CPA Exam. We know times are tough and not everyone can afford to pay $2,500 for a review program. Money should not be a barrier that keeps you from reaching your career goal. Life should reward the people who work, not just the people with money.


(1)-One of my senior students came by last week to chat about the CPA Exam. She graduates in 2 1/2 months and wants to get the exam done over the summer. She asked me to list out the things that were most important for her to know as she gets started.

My goodness, that was an interesting question. A list of the things that are most important to know about the CPA Exam. I thought for awhile and then gave her the following TOP TEN. I have pondered it for several days since that time and still like the choices.

(a)-Nothing beats hours studied. There are no short-cuts. You need to plan to study at least 60 hours per part. Anyone who tells you differently is giving you bad advice.
(b)-The exam is one mile wide and one inch deep. They want to see if you know a little bit about everything. They have very few topics where the depth of coverage is much more than shallow. It is a comprehensive exam of the basics.
(c)-You do not have to be perfect. You only need to pass. Learn each topic enough to pass and then move on.
(d)-On the exam itself, time management is critical. Always know how much time you have and how much time you can afford to spend on each question.
(e)-As you study, you need some easy way to review and keep the material fresh in your mind. I told her about the 10-word notes and the three-second questions that I have mentioned in these email lessons. It is shocking as to how quickly you will lose knowledge without some review process.
(f)-Knowing material is not the key; the key is being able to answer questions. For the CPA Exam, you have no other goal than being able to answer questions.
(g)-Learn from your mistakes. To pass you must constantly get better and you do that by learning from the problems you miss. Any time you miss a question, you have a golden opportunity to make improvement.
(h)-Consistency is a real key. Too many people study hard for a day and then take five days off. I really like for people to study 60-90 minutes per day 5-6 days per week. I think that is a schedule that works.
(i)-Study as early in the day as you can. If you put off studying, it is easy to get to the end of the day and be too tired to do any at all. Study first and then you cannot put it off. Procrastination is your biggest enemy.

(j)-I then gave her our Lesson 23 that I send out to all of our readers on February 3 and told her to read the 22 steps that I had listed for success using CPA Review For FREE. I think everyone who is taking the CPA Exam should read those 22 steps carefully. I believe they provide perfect guidance for passing the CPA Exam without spending one penny for review materials. Never forget our motto: Try us FIRST before you spend your hard-earned money.


(2)-Always know that you can very easily unsubscribe to these email lessons. Just scroll to the bottom of this lesson or any lesson and click on the appropriate button.

And, anyone who wants to automatically receive these email lessons can do so by going to www.CPAreviewforFREE.com and registering and then make sure the box is checked to get extra materials. These lessons ARE the extra material.


(3)-I am always surprised as to how many people go into the CPA Exam without a real understanding of the exam itself. I thought I would remind you of how the CPA Exam is structured.

(a)-Time:
Auditing-4.5 hours
BEC-2.5 hours
Financial Accounting and Reporting-4.0 hours
Regulation-3.0 hours

(b)-Composition of Exam:
Each part except BEC is made up of three testlets and two simulations.
BEC is made up of three testlets only.

(c)-Composition of Testlet:
In each part except Regulation, a testlet holds 30 multiple-choice questions.
In Regulation, a testlet holds 24 multiple-choice questions.

(d)-Graded Questions in a Testlet:
In each part except Regulation, 25 out of the 30 multiple-choice questions are graded. The other five are being tested to see if they are good questions.
In Regulation, 20 out of the 24 multiple-choice questions are graded. The other four are being tested to if they are good questions.

(e)-Passing Grade:
75 is the passing grade in all four parts.
However, because different questions have different weighted values, that does not mean that you need to get 75 percent of the questions correct in order to pass.

(f)-Grading Points:
Because BEC only has multiple-choice questions, 100 percent of the grade comes from those questions.
For all other parts, 70 percent of the grade comes from the multiple-choice questions, 10 percent from the written communications question, and 20 percent from the rest of the simulations.

(g)-Variability of Difficulty
In BEC, there is no variability in difficulty from one testlet to the next.
In all of the other parts, if you do well on the first testlet, the next testlet has harder questions. If you do well on the second testlet, the third testlet also has questions that are judged to be harder. You want harder questions because they have a higher point value.

(h)-Examination Windows
Each part of the exam can be taken one time per exam window. Those exam windows are January-February, April-May, July-August, October-November.

(i)-Time Limit for Passing
Each state sets a limit in which all four parts must be passed. Many states use 18 months.

(j)-Number of Tests Per Window
A vast majority of candidates take one or two parts of the CPA Exam per window. A few candidates do attempt all four parts in a single two-month window.

(k)-Getting More Information
There is a lot of information about the CPA Exam at www.cpa-exam.org. I would especially recommend the CPA Candidate Bulletin, Tutorial and Sample Exams, and CPA Examination Newsletters. In addition, the Notice to Schedule that you receive when you are approved to take the exam provides a significant amount of information.


(4)-Okay, let's practice a bit. Think through each of the following questions and see if we can add a point or so. Every point moves you that much closer to passing.

---Financial Accounting
The Mulieri Company was authorized to issue 100,000 shares of common stock with a $10 par value. The company issued 30,000 shares for cash of $15 per share. Later, when the shares were selling for $20 per share on a stock exchange, the company issued another 9,000 shares as a stock dividend. Which of the following statements is true about the recording of the stock dividend?

A-The total amount of stockholders' equity is not affected but retained earnings is reduced by $90,000.
B-Stockholders' equity is reduced by $180,000 and retained earnings is also reduced by $180,000.
C-Stockholders' equity is reduced by $90,000 and retained earnings is reduced by $135,000.
D-The total amount of stockholders' equity is not effected but retained earnings is reduced by $180,000.

Answer is A.

When a stock dividend is above 20-25 percent, it is recorded at the par value of the shares issued. Here, that is 9,000 shares times $10 per share are $90,000. Retained earnings is reduced by that amount and common stock is increased by that same amount. The increase in common stock and the decrease in retained earnings offset each other so that total stockholders' equity is not affected.


---Auditing and Attestation
The CPA firm of Bryant and James is auditing Garnett Corporation and has made the decision that there is a increased amount of risk that the financial statements being issued contain a material misstatement. Which of the following is most likely to have led to that assessment?

A-The board of directors takes an active role in the oversight of company management.
B-Garnett is a bank in a region where several banks have failed in recent months.
C-The company recently sold land and has reporting a gain on that transaction.
D-The president of Garnett holds two percent of the outstanding shares of the company.

Answer is B.

There are many factors that can lead to special concern by the auditors. The board of directors being actively involved with the company is considered beneficial and might actually reduce the risk of a misstatement. The sale of land would probably warrant examination by the auditor but the mere sale does not increase the risk of a misstatement. The president holding stock in the company is not unusual and, again, by itself does not lead to an increase in the level of assessed risk. However, when an audit client is in a declining industry, the auditor knows that market conditions are already bad. The fact that the company faces such adverse times means that the likelihood of material misstatements (especially from fraud) is elevated.


Regulation
The Oregon Company has a large donut maker used in its business which has a tax basis of $14,000 but a fair value of $11,000. It is exchanged for a new donut maker worth $10,000. Oregon also collected $1,000 in cash to even up the trade. What is the tax basis to Oregon of the new donut maker after the trade?

A--$10,000
B--$11,000
C--$13,000
D--$14,000

Answer is C.

In a like-kind exchange, the taxable gain is the lower of the gain on the trade or the cash (boot) received. Here, the gain is actually a loss of $3,000 so no gain is recognized. The loss is the tax basis given up ($14,000) less the fair value received ($11,000 or $10,000 plus $1,000). So, if Oregon is given up a tax basis of $14,000 and no gain is recognized, the items received must have a tax basis of that same $14,000. The cash has to have a tax basis of $1,000. That leaves $13,000 as the remaining tax basis for the new donut-maker.


BEC

Which of the following is the best explanation of an enterprise resource planning system or ERP?

A-It is a computer system designed to make certain that all raw materials are received as needed within an organization.
B-It is an attempt to consolidate all of a company's departments and functions into a single computer system that services each department's individual needs through the use of a common database.
C-It is a computer program that should maintain proper cash resources within a company at all times and places.
D-It is an ongoing planning process that measures labor input and related output in an attempt to maximize efficiency.

Answer is B.

According to Wikipedia: "Enterprise resource planning (ERP) is an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing. An ERP system supports most of the business system that maintains - in a single database - the data needed for a variety of business functions such as manufacturing, supply chain management, financials, projects, human resources and customer relationship management."


Have a great week!!!