Pass The CPA Exam One Topic At A Time

Pass The CPA Exam One Topic At A Time

From: Joe

ANNOUNCEMENT: We here at CPA Review for FREE are always trying to find new ways to be helpful to our readers. We realize that people who pass the CPA Exam might also be interested in the CFA (Chartered Financial Analyst) Exam. Or, you may have friends who are thinking of taking the CFA Exam.

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Of course, pass the CPA Exam first, but, after that, you might look into the possibility of adding three more letters (CFA) after your name. When you are in a study and testing mindset, it is good to get as many of those letters as you can.


(1) - One other quick announcement: we should hit a total of 2.2 million page views in the next day or two. If anyone at one of these big fancy CPA Review programs tells you that we are not real, just ask them why we've gotten 2.2 million page views in such a short period of time.

These big courses WANT YOUR MONEY. That is their number one goal.
They will tell you almost anything to GET YOUR MONEY.
Don't be gullible.

My recommendation:
--go to www.CPAreviewforFREE.com
--under CPA Exam Resources, read "Using CPAreviewforFREE"
--try us for 4-6 weeks
--after that, if you still want to send a couple of thousand to the big courses, then that is a considered decision on your part.

Don't let the big courses SCARE YOU OUT OF YOUR MONEY.


(2) - One of the biggest problems of the CPA Exam is that it looks so hard. Everyone hears how difficult it is; how many hours you have to spend. When you first start, it seems like you are beginning to climb Mt. Everest. It is very easy to get overwhelmed and discouraged. A lot of people just have trouble getting started. It can seem so hopeless that they never really get out of the starting gate.

One recommendation is to focus on passing one topic at a time.

For example, if you are studying to pass FAR, focus on a topic such as Accounts Receivable first. Stop thinking about the CPA Exam. Only worry about gaining enough knowledge to pass that ONE topic. My guess is that you can pass Accounts Receivable with 30-90 minutes of preparation. Other than estimating and recording bad debt expense, there is not much to it. So, that is a reasonable goal.

Then, once you have enough knowledge to pass Accounts Receivable, you move on to the next topic-something like Inventory. Okay, that is a bit broader topic but you can probably pass it in 1 hour to 2.5 hours. Then move on to Buildings and Equipment.

In that way, when you wake up each morning, you have a goal that you can actually accomplish. TODAY: pass a topic or two. Don't focus on the CPA Exam, focus on today's topic.

Otherwise, it is easy to wake up with the entire CPA Exam in front of you. You face the burden of studying for a couple of hours without a sense of accomplishment. It feels like you are struggling up Mount Everest and it is winning. Instead of looking at the CPA Exam as a huge mountain that is almost impossible to climb, think of it as a series of small hills. You climb one hill and then begin up the second hill. Now, that is a reasonable goal.

Start right now: what is the very first topic that you want to pass? Start climbing that hill. You can climb a hill-get the first one done today.


(3) - Remember that you can unsubscribe from these email lessons (that I send out every week or two) by scrolling to the bottom of this lesson and clicking on the unsubscribe button.

And, since we do no marketing, we very much appreciate your willingness to tell other folks about www.CPAreviewforFREE.com. YOU are the most important part of our success.


(4) - It is so easy to run out of energy when you are studying for the CPA Exam. Every night you come home from work and you plan to open up www.CPAreviewforFREE.com but you are just soooo very tired. You keep thinking that you will defer study until you have more energy but every time you even think about studying, your energy flies out of your body.

Every night you get to bed time and you have not accomplished what you had wanted to do and that makes you discouraged. It is tough-trust me, I have been there. I well know.

I am currently reading a book about the making of the famous 1967 movie The Graduate. They were getting ready to film a very important scene and Dustin Hoffman was having trouble doing it just right. The director (Mike Nichols) asked Hoffman what was wrong and the actor responded that he was tired.

Nichols took Hoffman aside and said something like: You are going to look back on this movie for the rest of your life. Do you really want to look back at the most important scene in the entire movie and realize that you didn't do it as well as you could have because you were tired? It was the most important scene and you were tired???????

The CPA Exam is very important to your career and to your own feeling of self-confidence. Do you really want to look back and realize that you could have passed except that you were tired?

---If this exam is really so important to you, shouldn't your heart be pumping every time you think about passing?
---If this exam is really so important to your career, shouldn't the adrenaline be racing through your body like a NASCAR racer?
---If this exam is really going to show people what you really can do, shouldn't you wake up each morning excited to have the chance to pass a new topic?

Tired??? Bah! Humbug! The excitement of such a major accomplishment should push tired right out of your head.

I think most mental tiredness is just psychological. We tell ourselves "I have been busy today; my mind is not going to function well." Why not tell ourselves "I have been busy today; my mind is already pumped up and ready to go after the CPA Exam."

We tell ourselves "I just had my dinner; I need to put my feet up and rest and turn on television." Why not tell ourselves "Okay, I'm finished with dinner, now is a good time to put in an hour or two and get closer to passing the CPA Exam." Heck, I'm well over 60 and I don't go lay down after dinner and rest. I get excited about the prospect of getting something accomplished.

We tell ourselves "I don't study well in the morning; my brain does not work well that early." Why not tell ourselves "This is a great time to study; I can add some points when the world is peaceful and quiet and won't disturb me."

Are you telling your mind negative things or positive things? If you fill up your mind with negatives, don't be surprised that it feels tired.

Your mind is as tired or as active as you tell it to be. I know plenty of people who go through life with "mental weariness" because they tell themselves day in and day out that they are just so very tired. I know just as many people who convince themselves that their brain is alive and pumping and ready to go to work.

Guess who passes the CPA Exam?
Which one are you?


(5) - Here's an email I got a day or two ago:

"My exam experience with FAR was not that good. I was a wreck when I came out as I had run out of time and was only able to do the communications part of both simulations. That was the third time I'd taken it and had only done a little bit more than the other times. The only difference this time was that I had used questions from CPA Review for Free and tried to incorporate your 'inch deep, mile wide' attitude. Anyway, I was hopeful, but not as confident as when I did BEC. Bottom line. I passed with 75%!"

CONGRATULATIONS!!! That is just wonderful. That is a perfect example of my advice: remember, you do not have to be perfect; you just have to get enough questions right to pass!!! And you did it!! I know you must be proud of yourself. You did the work and you made it happen. Go out and celebrate-tell your friends and neighbors. YOU did it.


(6) - Some practice problems. The first one here I am taking from my Intermediate Accounting class this past Friday.

Financial Accounting and Reporting

The Palermo Company reported net income in its financial statements of $600,000 (before tax) in Year One. The tax rate is currently 30 percent but is expected to go up to 32 percent at the start of Year Two. The company has revenue of $90,000 that will not be taxed until Year Two. In addition, the company has another $50,000 in revenue that will never be taxed. What does the company show as its income tax expense for Year One?

A - Income tax expense-current is $138,000 and income tax expense-deferred is $27,000
B - Income tax expense-current is $180,000 and income tax expense-deferred is $28,800
C - Income tax expense-current is $153,000 and income tax expense-deferred is $27,000
D - Income tax expense-current is $153,000 and income tax expense-deferred is $28,800

Answer is A

Future tax rates are only used if the rate has been legally enacted, not just anticipated. Thus, all income here is recorded at the current rate of 30 percent since the new rate is only expected. Only $460,000 is to be taxed in the current year ($600,000 less $90,000 and $50,000). At 30 percent, the income tax expense-current is $138,000. The $50,000 will never be taxed and can be ignored. The $90,000 will be taxed next year but the expense is recognized this year at the 30 percent rate so that the income tax expense-deferred is $27,000.


Regulation (Unfortunately, I thought of this one yesterday when I was doing my income tax return for 2008)

Mr. and Mrs. Archibald Taylor are filing their income tax return for the current year. They have short-term capital losses of $10,000 and long-term capital losses of $20,000. Which of the following is correct?

A - They can deduct $3,000 of the short-term losses this year and carry all of the remaining losses forward indefinitely.
B - They can deduct nothing this year but can carry all of the losses back for three years and then forward for up to seven years.
C - They can deduct $3,000 of the long-term losses this year and carry all of the remaining losses forward for up to 20 years.
D - The losses are combined and $3,000 can be deducted this year with the remaining $17,000 carried over for up to seven years.

Answer is A

For individual taxpayers filing a joint return, $3,000 in capital losses can be deducted each year. Short-term losses are deducted first. The remaining amounts can be carried forward indefinitely. In the carryover process, short-term losses remain short-term and long-term losses remain long-term. Corporate rules are quite different for capital gains and losses.


Auditing & Attestation

The Acme Coal Company spends $3 million to buy a new coal mine. Depletion expense is to be computed based on the company's estimation that the mine contains 600,000 tons of coal. Ross and Company CPAs is auditing the financial statements produced by Acme. Ross hires the engineering firm of Less and Low to substantiate the estimation of coal made by company management. The CPA firm has made sure that the engineering firm is independent of Ross and has appropriate credentials. Which of the following is true?

A - The hiring of Less and Low was inappropriate because they are not under the control of the CPA firm.
B - The CPA firm must review all computations made by the engineering firm.
C - The CPA firm must ask the engineering firm to disclose and explain all assumptions and methods that were used in making this estimation.
D - The engineering firm must be independent of the audit client.

Answer is C

Using the work of a specialist in an audit is quite normal. CPAs cannot be expected to have unlimited knowledge on all possible topics (such as estimating the amount of coal in a coal mine). The specialist does not have to be independent but the CPA's reliance on the findings of the specialist should be guarded if independence is lacking. The auditor is probably not capable of reviewing all the work of the specialist. If the auditor had that much knowledge, a specialist would not be needed. However, the CPA needs to be well aware of all assumptions and methods used by the specialist in doing the assigned work.


BEC

A company buys and sells widgets on credit. The inventory conversion period is 31 days. The receivables conversion period is 23 days. The accounts payable conversion period is 28 days. What is the cash conversion period?

A - 23 days
B - 26 days
C - 54 days
D - 82 days

Answer is B

The cash conversion period is the inventory conversion period (31) plus the receivables conversion period (23) less the payable conversion period (28).


And one final thought for the upcoming week:

"Look at a day when you are supremely satisfied at the end. It's not a day when you lounge around doing nothing; it's when you've had everything to do, and you've done it."

Margaret Thatcher

Joe Hoyle
Co-Founder
CPA Review for FREE