Lesson 41
From: Joe
(1) – Greetings from Richmond, Virginia – hope you are having a great day. We only have a finite number of days. You might as well put the best spin on each one of them that you can. Seriously, are you a “glass is half full” or “glass is half empty” type of person? I hope you are a “half full” type because life is just so much better that way. It is all a question of attitude and you can help make yourself feel better (and everyone around you feel better) just based on your attitude.
**
Okay, back to the CPA Exam. Last week, President Obama was giving a speech to the (I think) NAACP. I only heard a couple of sentences on the radio but I thought they were just great. I even stopped exercising to run get a pencil and write them down.
“No one has written your destiny for you. Your destiny is in your own hands.”
Whether you are conservative or liberal, whether you are a Democrat or Republican, you’ve got to like those sentiments. No one has written your destiny for you. Your destiny is in your own hands.
I know that we have a lot of people who receive these lessons who are going to be taking the CPA Exam during the last days of July and then into August. The time is now. People all across the country and the rest of the world are preparing for THE exam, right now—today. Roughly half of those people will pass. Roughly have of the people will fail. The math is simple. Which will you be? To a large extent, your destiny really is in your own hands. When all is said and done, it is up to you as to which half you will be in.
You don’t have to make 100.
You don’t have to be perfect.
You don’t have to know everything.
You don’t have to be at the top of the class.
You just have to be in the upper half. Anywhere in the upper half is probably good enough to get 75 points and pass.
When you are preparing for the CPA Exam, you cannot do anything about your age, your education, your intelligence. But, on the CPA Exam, those are not terribly important. Their value is vastly overstated. The great thing is that you can do something about the most important ingredient: how many hours you study and how much you concentrate during those hours. Both of those are in your hands and your hands only.
I would bet that the half of the candidates who study the most hours and study them with the most focus will be the half that is going to pass. It is not a guarantee, it is not an absolute but, for the most part, that is who is going to pass. It is just common sense. Amount of hours and quality of those hours. Tell me where you rank on those two and I’ll tell you whether you are going to pass.
So, your destiny really is in your hands. If you can push yourself to put in those hours and really stay focused, you can get into that upper half and, then, you can PASS.
In a recent one of these email lessons, I talked about the importance of “urgency.” That is something I have been practicing myself: figuring out what I want to get done each day and then trying to realize that it is urgent to get it accomplished.
Figure out what you want your destiny to be and then put in some urgency to get yourself moving in that direction.
Goals Plus Urgency = Success
(2) – Back on February 3, I talked about how to use CPA Review for FREE to pass the CPA Exam. I realized this morning as I started this lesson that probably half of the folks who get these email lessons have signed up since that time. So, I want to repeat my instructions. I’d love to see you use www.CPAreviewforFREE.com and save yourself thousands of dollars.
From my February 3, 2009 lesson: In case you have not really tried CPA Review for FREE yet, let me make the following suggestion. Put your money back in your pocket. Then, use us for one part of the exam and see how you do. We think you will be very pleased and you will have saved thousands of dollars. It makes no sense to pay for a program (especially a mediocre program) and then realize that you could have gotten the points you need to pass for FREE.
Here is one way that we recommend using CPA Review for FREE.
(a) – Make sure that you are qualified to take the CPA Exam. Start the process by going to www.nasba.org and review the requirements of your state. It is probably going to take a month or so for the state to review your application so get this process started quickly.
(b) – Pick the part of the exam that you like the most. It is always easier to get started with a part you like. I am personally a big fan of starting with Financial Accounting. Getting started is often the toughest step in the whole process. Don’t set the wall too high at the beginning.
(c) – Once you get your official Notice to Schedule indicating that your application has been approved, schedule to take that first part of the exam in roughly 40 days. There is absolutely no reason to study for six months. That is inefficient; you’ll forget it all. Let’s get started now and get it done. Pick a day in about 6 weeks and reserve your seat. Having a date set will get you fired up to do the work. (You might want to go back to Lesson 40 and read about buying marbles and putting them into a jar—that really is helpful.)
(d)—Go to www.CPAreviewforFREE.com and read all the information under “resources.” It is all important so read it.
(e)—Start answering at least 15-18 questions per day from our website. It is probably a good idea to go one topic at a time. Make a list of the categories and check them off as you go. Seeing the progress will make you feel good and give you energy. Work six days per week. Take off one day each week completely and get some real rest and relaxation. Try to average at least 90 minutes per day the rest of the week.
(f)—Do 15 minutes or so of physical exercise each day to keep the blood pumping. You will feel better and you will do better. I cannot possibly stress how important it is to get a little exercise every day. Your body and brain will wear out on you if you don’t and that’s no way to pass.
(g)—At this point, never guess at answers when you study. On the exam, you will need to guess but not when you are preparing. Guessing during study adds no value whatsoever and can mislead you about you know.
(h)—Never worry about how many questions you are getting right or wrong. That is a distraction that does not help you one bit. The only thing you want to worry about is getting better.
(i)—If you get a question correct, move on. Don’t sit and congratulate yourself.
(j)—Here’s a very important point. If you miss a question, read the answer carefully and find the step you missed and figure out what you missed in doing that step. Write down 10 words or less to help you get the question/step right the next time you see it. Don’t spend time writing pages—keep it to 10 words. You want to improve the odds that you can get the question right the next time.. Reading the answer for missed questions may be the single most important thing you do in this process. I cannot stress how important this list of 10 word explanations can be for you in the end.
(k)—As you work, keep a list of “three-second questions..” Those are the very basics—questions that you should be able to read, count to three, and give an answer off the top of your head. Having the basics down is so very vital to learning. “How is interest expense computed?” “Interest expense is the book value of the debt times the effective or yield rate.” “How is the amount of cash interest to be paid on a debt computed?” “Cash interest is the face value of the debt times the stated rate of interest.” Those are three second questions and their answers.
(l)—Never forget that you only need to get 75 points to pass. You are not seeking perfection. Because of the grading system, 75 points does not even mean 75 percent of the questions.
(m)—Once a week, walk back through your three-second questions. You just want to keep the basics fresh in your mind. You will forget things quickly; you need a way to keep the basics in your mind.
(n)—When you get to the final 7-10 days, start going methodically back through your 10 word notes. You want to work on increasing the number of questions that you can answer. That is your only real goal.
(o)—When you get to the final 7-10 days, start answering questions at www.CPAreviewforFREE.com in random mode rather than by topic. You want to get used to seeing questions move quickly from one topic to the next. That is an important step that I think too many people ignore.
(p)—When you get to the final 7-10 days, go to www.cpa-exam.org and go through the tutorial and sample tests. Read everything and just get a feel for how the questions (both multiple choice and simulations) are presented. Don’t worry about trying to figure out answers on that site, that’s not the purpose.
(q)—Make sure you read all of the information again that came with your Notice to Schedule. They really do try to explain everything to you in advance to make the testing experience less stressful. Read this material carefully.
(r)—Make sure you know the location of the testing center. Estimate how long the drive will take and what time you need to leave to get there comfortably. You want to avoid any and all stress. You want 100 percent of your energy focused on getting points.
(s)—On the night before the exam, eat normally and get a typical amount of sleep. You will think more clearly during the exam if nothing has upset the normal rhythm of your life. You will have more energy and more confidence. You want to be loose but focused. I am totally against losing sleep to study on the night or two before the exam. Sleepy people do not pass the CPA Exam.
(t)—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. On the day of the exam, time management is your biggest enemy.
(u)—If you do not know a question on the exam, eliminate as many answers as possible and take a guess. Do not let a tough question get you rattled. Don’t spend time on a question that you really do not know. No one is seeking perfection from you. But you do need to have an answer or a guess down for every question.
(v)-- When you leave the testing center, smile and say “I did it; I gave it my very best!!!” That is really the attitude that you want to have.
Try it – try CPA Review for FREE - it will work and you’ll have all of your money still in your pocket. For heaven’s sake, there is a recession going on; be a wise shopper.
(3) – Just a reminder as always: if you want to unsubscribe to these lessons, you can do that by scrolling to the end of this lesson and clicking on the appropriate link.
(4) – At the end of last week, we moved over 4,250,000 page views as we head toward our goal of 10 million by the end of 2009.
(5) – And, finally, as always, here is some practice to help you ADD THOSE POINTS.
Financial Accounting -- Another practice question from my new Financial Accounting textbook (if you know any college accounting profs, tell them to be on the watch. CJ Skender and I have authored an innovative new textbook that will be released this fall).
John Doe successfully creates an invention at a cost of $1.6 million and, on January 1, Year One, receives a patent that gives him the exclusive rights to that invention for 20 years. One year later, John Doe sells all rights to the patent to Nahquan Corporation for $3 million. Nahquan pays another $400,000 to a legal firm to help ensure that the right to this patent is properly transferred. Nahquan hopes to use the patent for five years and then sell it for $200,000. On December 31, Year Two, another company offers to pay Nahquan $4 million for this intangible asset but that amount is rejected as being too low. On its balance sheet at that time, what balance is reported by Nahquan for the patent?
A - $2,560,000
B - $2,760,000
C - $3,040,000
D - $3,221,053
Answer is B.
For Nahquan, the capitalized cost of this intangible asset is $3.4 million. That amount is the normal and necessary cost of acquiring the patent so that it could be used by the company to generate future revenues. The company plans to make use of it for five years and then sell it for a $200,000 residual value. Annual amortization for that period will be $640,000 per year ([$3.4 million less $200,000] divided by 5 years). After Nahquan holds the patent for its first year (Year Two), the reported value is reduced to $2,760,000 ($3.4 million less $640,000). The $4 million offer does not affect Nahquan’s reporting since it was not accepted. The amortized historical cost remains the basis for financial reporting unless the value becomes impaired.
Regulation
The Waynesboro Corporation is located in Michigan. Recently, it has begun negotiated to acquire a controlling interest in Havenford Corporation, located in Indiana. Havenford has 1,000,000 issued and outstanding shares of common stock but no shares of preferred stock. Waynesboro wants to buy enough shares so that a consolidated tax return can be filed. How many shares must Waynesboro acquire?
A – 500,001
B – 800,000
C – 950,000
D – 1,000,000
Answer is B
In order to file a consolidated tax return (which is allowed but not required), the parent must own at least 80 percent of the outstanding shares of the subsidiary. Here, is one area where financial accounting and tax accounting differ. For financial accounting, consolidation is mandated with any number of shares is acquired in excess of 50 percent. For tax accounting, consolidation is allowed once 80 percent of the stock is owned.
Auditing & Attestation
The CPA firm of Borgin & Burke is coming to the end of an audit engagement and has just mailed a letter to the client’s lawyers. What is the primary purpose of such a lawyer’s letter?
A – To discover any unreported contingent liabilities.
B – To ensure that all stock transactions engaged in by the client have been legal.
C – To confirm the legal expense balance reported by the audit client on its income statement.
D – To corroborate information obtained from the client about contingent losses.
Answer is D.
The financial information reported in financial statements is always the representation of the company’s management. The auditor seeks to gain corroborating evidence so as to provide reasonable assurance that this information contains no material misstatements according to US GAAP. Thus, the client creates a list of all contingencies and then provides estimations of the likelihood of loss as well as the most likely amounts. This information is then sent to the company’s lawyer whose response will hopefully help the firm by providing supportive evidence..
BEC
Which of the following is true about the International Monetary Fund (IMF)?
A – It prints money to be used by member countries.
B – It has a pool of currencies from which member countries can borrow to meet short-term deficits in balance of payments.
C – It serves as an investment resource for member countries allowing them to make extremely high rates of return on invested capital.
D – It allows deposits by member countries which are then allocated each year as a way to reward countries which have made the most progress economically.
Answer is B
According to its website, “the IMF promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade, and provides resources to help members in balance of payments difficulties or to assist with poverty reduction.”
I opened with a Barack Obama quote so I’ll close with one also. If you want to pass the CPA Exam, you cannot wait for someone else. You are the person that you have been waiting for.
“Change will not come if we wait for some other person or some other time. We are the ones we've been waiting for. We are the change that we seek.”
