Make Today Count

MAKE TODAY COUNT

Lesson 30

From: Joe

(1) - As I have mentioned in previous email lessons, I gave a speech this past Tuesday here on campus. In it, I talked about a person making the transition to greatness (and you can define the word "greatness" as you see fit). The speech went well (I thought). We had 300 chairs and well over 500 people. So, a lot of folks wound up sitting on the floor. Students are young, sitting on the floor is not a big deal to them.

If you are interested in seeing and hearing the speech, it is available at:

www.youtube.com/user/UniversityofRichmond

or, you can just go to www.YouTube.com and search for: Joe Hoyle University of Richmond and the speech should come up.


(2) - Last week, we had over 107,000 page views in that one week alone at www.CPAreviewforFREE.com. That is an amazing amount of points being earned FOR FREE. In addition, the number of people who visited our site was up 10.7 percent over our previous weekly high. That is just amazing to me. I was thrilled. It is neat when you can help so many people to work toward their goal.

Thanks to everyone who forwards our emails along to others. Our goal is to help EVERYONE. Not just the rich and famous; we want to help EVERYONE.


(3) - Several emails came to us in the last few days. Here are a couple. The first is from Sandra: "Thank you for posting the quote from the person whose goal is to pass the CPA exam when he or she turns 55. I am 55 and hope to pass the remaining 3 sections this year. Knowing that I am not the only 50+ out there is a real encouragement. Thank you for your website, to which I attribute my passing grade on the first attempt on the Audit and Attest section, and for your encouraging emails."

And from Beth: "Thank you for your inspiring emails and CPA review questions. I've been studying for the Exam for the past two years, and my hard work has finally paid off. I recently found out that I passed my last exam in the nick of time, and I am so excited!! I used your review questions along with another program, and it really helped. The toughest part for me was not letting myself get discouraged when I would repeatedly fail a part, but I refused to quit and believed in myself. Your inspirational emails helped encourage me along the way. My best advice to other candidates would be to not be afraid of failure. Through this process, I've learned that you have to be willing to deal with failure sometimes in order to reap the rewards of success. Overcoming my failed attempts has only made this victory sweeter! I like the reference that one motivational speaker, Willie Jolley, uses in regards to the role of failure: 'a setback is a setup for a comeback,' as it has
certainly been for me. Thanks again for your encouragement and support along my journey!"


(4) - As always, if you want to unsubscribe to these weekly (or so) email lessons, just scroll to the end of this email and click on the link that is provided.

Just a reminder that our candidates can get a discount on CFA review materials (but pass the CPA Exam first) by going to: www.professionalexamreview.com/CPAReviewForFree


(5) - I was in Manhattan this past Wednesday for an all-day meeting with the people at the AICPA who create and prepare the CPA Exam. Twice a year, they hold meetings with all the people who produce review materials for the CPA Exam so that they can keep us informed of upcoming changes. Nothing radical is going to happen to the exam for another 12-18 months and that is about as far out as they ever project.

However, in this meeting, they asked all of the review providers to pass along some tips to our candidates to ensure that everything runs smoothly. So, here are the tips that they wanted you to know as you prepare to take (and pass) the CPA Exam.

A - Schedule to take your exam well in advance and think about problems that might come up such as weather issues. They suggest scheduling at least 45 days in advance especially if you want one of the busy times (usually near the end of a window). They said to warn you that the July-August and October-November windows are the busiest and therefore require the most advance planning.

Their final advice was to look for testing sites that are close to you even if they are in another state. If you live in northern Virginia, for example, a Maryland site might well be much closer than many of the sites in Virginia. Once you have your notice to schedule (NTS), you can take the exam at any approved location. You don't have to stay inside your state of application.

B - Be ready when you come to the test center. You don't want to get to the site and have a problem. They strongly suggest that you read the candidate bulletin carefully in advance. It is available at the following URL: www.cpa-exam.org/cpa/bulletin.html.

Be sure to bring two forms of government issued identification. Apparently, one must have a picture and signature and the other a signature. Also make sure to bring your valid NTS (notice to schedule) because it identifies your launch code to start the computer program. They said that a lot of people who were retaking parts would accidently bring an old NTS and then have to return home to get the right one. Trust me: on that day, you want everything to work out with no stress or surprises.

They also said not to bring large bags, suitcases, or other large items to the test site. Lockers are provided at the facility for cell phones, purses, and jackets. A list of prohibited items is included in the candidate bulletin.

They indicated that the check-in process is as follows:
--Present NTS
--Present your two forms of identification
--Complete electronic finger printing process
--Have your digital image taken by a camera
--Sign the sign-in log

The AICPA also said to tell you that you could "test drive" the process in advance if you are concerned. Apparently, you can make an appointment with the Prometric test center for a 30 minute trial run just to make sure you are familiar with the process. If you are worried in the least, I would take advantage of that service. On the real test day, you want to arrive with nothing on your mind except getting questions correct.

C - When you get ready to start your exam, do not delay after entering your launch code into the computer. Apparently, you have to go through four opening screens before you officially start the test: welcome screen, confidentiality, copyright, and directions. When you go through the fourth screen, the exam then starts and your test time begins. However, you have a maximum of 10 minutes to go through those first four screens (they probably take a total of one minute or less). After 10 minutes, if you have not started, the exam shuts down and it is over. They said that occasionally people get to the first screen and pray or meditate and literally don't get through the first four screens in 10 minutes so that their exam is finished without ever getting started. (To my knowledge, I've never known anyone who had that problem so I personally don't think it is a huge risk but don't take 10 minutes.)

D - Learn all you can in advance about the exam so you know what you are going to see. Go to: www.cpa-exam.org/lrc/exam_tutorial_parallel.html for tutorial and sample questions.

Read all the information that you receive about the exam and make sure that you make some time to wander around at www.cpa-exam.org just to learn about the exam. Again, the candidate bulletin has a lot of helpful information that you should be aware of before you arrive at the site.

E - During the exam, read everything carefully. If a message pops up, they did that because they wanted you to read the message NOT IGNORE IT. They told a few stories about people who ignored messages and then encountered problems with the exam. (Again, this is a possible problem but I wouldn't worry much about it - just read the messages.)

There are virtually no computer glitches in the exam at the present time. They said that 99.9 percent of the candidates have no problems with the computers at all. Problems tend to occur only because candidates fail to read a message.

They did ask that candidates make sure to get their confirmation of attendance which apparently is printed out from the computer when you log off at the end of the exam. They urged everyone to read this confirmation because it has some helpful information on it.


When the CPA Exam first became computerized back in 2004, there was a fair amount of confusion and some problems. The AICPA has really worked hard to make the CPA Exam a nonstressful situation for candidates. They want you to pass or fail based of what you know and do not know rather than on how well you navigate the mechanics of the exam. I wouldn't have said this five years ago but, if you will read what they send you and follow what they tell you, your experience should work out fine. There is no guarantee and problems do arise but, if I were you, I would worry about learning the material and not about whether the test is going to work or not.


(6) - I was talking with someone recently who asked what advice I would give to a candidate if I could boil it all day to one single word? It is really an interesting question. What is the one word that you should think about when getting ready to pass the CPA Exam?

When pondering this question, I was reminded of John Ruskin who was an English social critic and author who was said to have a stone that lay on his desk with one word carved on it: Today.

I think that would be my one word of advice for most questions. You have one day and one day only when you can accomplish something. That one day is Today. That's true for the CPA Exam and everything else you want to accomplish.

When you wake up in the morning, you are being given a golden opportunity. About 16 hours later you go to bed and you have made something great or something small of Today. Success in life often hinges on how well you utilize Today.

I know a lot of people who dwell in the past. They talk about past victories, excitement in the past. They seem to be stuck in some previous era. Their triumphs and successes are gone, never to be revisited.

I know a lot other people who constantly plot and plan the future. All of their actions focus on getting ready to accomplish something in some future time. Plotting is more fun than doing. They would rather get everything lined up for future success than actually accomplish anything Today.

However, I do know people who are able to wake up with their concentration entirely on how to best utilize the time they have been given right now.

The only time you can add points is TODAY.
The only time you can learn something about a topic is TODAY.
The only time you can make progress is TODAY.

It is not easy to focus on today. I know that as well as anyone. It is easier and more fun to set up how you are going to do something and just not worry about doing it. Or, it is safer to think about past victories and not have to face the difficulty of today.

The brain is a funny thing. Thinking, working out problems, learning rules, figuring out processes is real work for the brain. Consequently, the brain (which is often lazy) wants you to think about something else, almost anything else, rather than the material at hand.

So, the brain tells you: "don't worry about computing that capitalized lease, let's think about how we did so well in high school. That will make us feel good without having to do any difficult work right now."

The brain tells you: "don't worry about determining earnings per share, we can do that tomorrow. It is always more fun to plan to do work than it is to do it. Deferral is the best way to prepare."

If you want to pass the CPA Exam and you want one word of advice that would be truly helpful, remember Today. I honestly cannot think of anything more important to dwell on. You absolutely have to make good use of Today if you are going to gain the points you need. And, that is not easy. Spending time locked away in the past or the future will make you smile and feel good but it won't get you those 75 points that you need for success.

The only time you can do that is TODAY.


(7) - Let's do a few quick practice problems.


Financial Accounting and Reporting. This first problem comes from my Intermediate Accounting class today.

A company has a defined benefit pension plan. On January 1, Year One, a contractual provision was changed and the projected benefit obligation increased at that moment by $400,000. Which of the following statements is true?

A - Pension expense is not affected on January 1, Year One, but is gradually increased over the next several years.
B - Pension expense is increased immediately by $400,000.
C - Pension expense is increased on January 1, Year One, by a portion of the $400,000 with the remaining amount added to pension expense over the next few years.
D - Pension expense is never affected because the $400,000 is retained within accumulated other comprehensive income on the balance sheet.

Answer is A.

This change in the projected benefit obligation (PBO) is known as a prior service cost and comes from a change in a contractual provision. In this case, the change makes the liability larger and should decrease net income by increasing pension expense. Because the PBO is a large estimation of questionable reliability, FASB chose not to drop the entire amount into pension expense immediately because that would cause a significant swing in reported net income. Instead, the entire prior service cost is amortized to expense over several years based on the length of employee service. This is accomplished by first recording the $400,000 in accumulated other comprehensive income on the balance sheet and then gradually moving it from that account into pension expense.


Auditing and Attestation

Blue Company hopes to sell 500,000 shares of its common stock to the public. The company has prepared the appropriate documentation for the Securities and Exchange Commission. When properly approved, the shares will be conveyed to Lance & Woodruff, an underwriting firm that will actually sell the shares to the public. Hammer and Dove CPAs is the firm that audits Blue Company. Hammer and Dove have been hired to provide a comfort letter. Which of the following is not true?

A - The comfort letter will be addressed to Lance & Woodruff, the underwriting firm.
B - The comfort letter is a restatement of the final audit report prepared for Blue Company.
C - The comfort letter is not included in the documentation provided to the public in connection with the sale of these securities.
D - The comfort letter is likely to include negative assurance on unaudited information in the materials given to the SEC.

Answer is B

The underwriter is legally required to get expert advice on the financial information presented by the issuing company. The comfort letter, addressed and provided to the underwriter, meets this requirement. It provides reasonable assurance on much of the financial information that is included by the client because an audit has been carried out. However, it also provides negative assurance ("nothing came to our attention that would indicate a material difference from US generally accepted accounting principles") on some information where an audit is not possible.


Regulation

Walters owns land with a tax basis of $125,000 but a value of $160,000. This land is traded for like-kind land with a value of $150,000. To even up the trade, cash of $10,000 is also conveyed to Walters. What taxable gain should Walters report on the exchange in filing his federal income taxes?

A - Zero
B - $10,000
C - $25,000
D - $35,000

Answer is B

Normally, the exchange of like-kind property is tax free. However, Walters also received boot (the $10,000 in cash) that was not like-kind. The receipt of boot changes the rule. Then, the taxable gain is the lower of the boot ($10,000) or the exchange gain. The exchange gain is the difference in the fair value received ($150,000 plus $10,000 or $160,000) and its tax basis ($125,000). The exchange gain is $35,000 ($160,000 less $125,000). That is more than the cash collected so the lower number (the $10,000 in cash) is the taxable gain.


BEC

On January 1, Year One, the Aragoni Company is given the opportunity to pay $50,000 today to get a four-year annuity paying $20,000 per year for four years with each payment made on December 31. The company has a desired rate of return of 8 percent per year. The present value of a four-year ordinary annuity of $1 at an 8 percent annual rate is 3.3121. The present value of a four-year annuity due of $1 at an 8 percent annual rate is 3.5771. The present value of $1in four years at an 8 percent annual rate is .7350. Aragoni believes this to be a good investment. Which of the following statements is true?

A - The net present value is a positive $8,800.
B - The net present value is a positive $16,242.
C - The net present value is a positive $21,542.
D - The net present value is a positive $30,000.

Answer is B.

Since the payments are made at the end of each year, this is an ordinary annuity and the present value of the future cash flows is $66,242 ($20,000 times 3.3121). Net present value is the difference in the cost of an investment ($50,000) and the present value of the future cash flows ($66,242) or $16,242. If the present value is larger, this net present value is said to be positive and the investment meets the investment criterion of the company.


Have a great week and make each Today count.

Joe Hoyle
Co-Founder
CPA Review for FREE