Doing Ordinary Things Extraordinarily Well--CPA Review for FREE
Try us FIRST before you spend your hard-earned money.
October 20, 2009
CPA Review for FREE
www.CPAreviewforFREE.com
Shoot for Excellence
68 Weeks of Operation and 6,294,777 Page Views (without a penny spent on
marketing)
Lesson 51
From: Joe
(1) - How is the CPA Exam graded? That is always an important question.
The more you know about grading, the better off you are. So, we have a
brand new survey on-line this week at
www.cpareviewforfree.blogspot.com/
Our survey question for this week relates to how the CPA exam is actually
graded. Go to the URL, read the question and put in your answer and I'll
provide you with the real answer in my next email lesson.
How much do you really know about the grading?
(2) - The top five countries using our website last week were as follows (as
well as the amount of time that the average visitor spent on our website):
---United States - 26 minutes and 57 seconds
---Philippines - 30 minutes and 35 seconds
---Canada - 31 minutes and 49 seconds
---India - 18 minutes and 11 seconds
---Saudi Arabia - 34 minutes and 45 seconds
Congratulations to the future CPAs in Saudi Arabia. You folks did the most
work (or at least spent the most time) on our site last week of the top
five. And, all of you future CPAs in India need to answer a few more
questions and read a few more answers before you log off. It's a free
site-stay awhile longer with us.
(3) - Some emails - don't think I've shared these with you yet.
FROM EG: "I just wanted to mention that I used CPAreviewforfree extensively
in my preparation for the CPA examination. I cleared all four sections in my
first attempt. I did not take any review courses. My college text books, a
CPA review book, and CPAreviewforfree are what helped me to prepare for
these exams. Thank you for this wonderful website."
FROM BS: "Thank you so much. Just received my Reg result, which is my final
exam, I passed. That means I passed all the exams within 6 months with my
first attempt. Your website helped me a lot. Thank you for all your
encouraging and memorable words."
(4) - If you need to unsubscribe, scroll to the end of this email and just
click on the indicated link.
(5) - I was visiting a relative in the hospital on Saturday. There were
some posters on the wall and one of them caught my attention immediately:
"Excellence is doing ordinary things extraordinarily well"
a statement that was attributed to John Gardner.
We often think that excellence only comes from extraordinary people: the
Van Goghs and the William Faulkners and Tiger Woods of the world. That's
nonsense. There are very few people who are truly extraordinary. If we
wait around for them, we'll never get anywhere. We are all basically
ordinary people. But, we are all capable of achieving excellence. You, me,
and everyone else. We can be excellent.
As I was standing in that hospital room, I just had to agree with the quote
on the wall.
--If we cook dinner and we take care and do it extraordinarily well, we have
achieved excellence.
--If we take photographs and we do it extraordinarily well, we have achieved
excellence.
--If we go to work and we do it extraordinarily well, we have achieved
excellence.
You don't have to climb Mt. Everest or swim the English Channel to be
excellent. Take every small thing you do and work to do it extraordinarily
well and you will experience the joy of excellence.
What could be more ordinary in life than studying
accounting/auditing/tax/law/finance? You read a problem, you try to work
it, you read the answer, and you make a note on how to do it better next
time. It is very slow and very methodical. It is just plain ordinary.
--However, you can do that process about as poorly as possible. You can be
unfocused and bored and let your mind wander and waste a lot of time. You
can realize after 10 minutes, you don't remember the last 10 minutes.
Or, you can do that process extraordinarily well.
You can think about the question. What information is being given?
What are they asking? What rules come into play here and how do I apply
them? Are there any tricks that might catch you off guard?
You can read the answer very carefully. What did I get right? What
did I get wrong? What can I learn from this answer? How should I have
handled the question differently? How could this question be asked in
a different way next time? What should I watch for more closely?
Studying for the CPA Exam is just one ordinary step after another.
But, you have a choice.
--You can do those ordinary steps poorly.
--Or, you can do those ordinary steps extraordinarily well.
When you get to where the most ordinary event is done extraordinarily well,
you will know that you have achieved excellence.
When you work to answer questions extraordinarily well, you will be headed
toward excellence on the CPA Exam.
(6) - Practice - every question should help you add a point.
FAR - As usual, here's something we will be doing in intermediate accounting
tomorrow.
A company reports a warranty expense in Year One of $300,000 that is not
deductible for tax purposes until Year Four. The enacted tax rate is 30
percent. Which of the following is true?
A - It must be more likely than not that the company will have income to
reduce in Year Four before a deferred income tax asset of $90,000 is
recognized in Year One.
B - Because the benefit will not take place until Year Four, there is no
deferred tax asset recognized in Year One.
C - It must be certain that the company will have income to reduce in Year
Four before a deferred income tax asset of $90,000 is recognized in Year
One.
D - In all cases, a deferred tax asset of $90,000 should be recognized in
Year One.
Answer is A
The ability to deduct the $300,000 from taxable income in Year Four is a
temporary tax difference that leads to a deferred income tax asset of
$90,000 based on the 30 percent rate. However, accounting is conservative
and only allows companies to recognize that asset if it is more likely than
not that the benefit will be received by having income to reduce for tax
purposes in Year Four. We sometimes refer to that as the "51 percent rule"
because that is the level at which it becomes more likely than not.
Auditing & Attestation
The CPA firm of Jeter and Cano is auditing the Angel Corporation.
Currently, the auditors are looking at current liabilities that were
recording shortly after the end of the fiscal year. They are concerned that
some of these liabilities were actually owed by the reporting company at the
end of the year under audit. Which financial statement assertion are the
auditors most likely to be attempting to substantiate?
A - Existence
B - Disclosure
C - Completeness
D - Allocation
Answer is C
Whenever the auditor is concerned that transactions have been left out of an
account balance, it is the completeness assertion that is most likely being
tested. Here, the auditors are concerned that the liabilities reported on
the year-end balance sheet are not complete because some of these amounts
were not recorded until the subsequent period.
Regulation
A taxpayer is studying both a traditional individual retirement account
(IRA) and a Roth IRA. Which of the following is true?
A - Contributions to both are tax deductible when made.
B - Distributions from both are tax free when received.
C - Contributions to a traditional IRA are tax deductible but eventual
distributions are taxable while contributions to a Roth IRA are not tax
deductible but eventual distributions are tax free.
D - Contributions to a Roth IRA are tax deductible but eventual
distributions are taxable while contributions to a traditional IRA are not
tax deductible but eventual distributions are tax free.
Answer is C
For a traditional IRA, contributions reduce taxable income in the current
year. However, when the money is eventually received as a distribution, it
is taxable income. For a Roth IRA, there is no reduction in taxable income
when the contribution is made. But, when the money is eventually received
as a distribution, it is nontaxable income. (As with most tax laws, some
exceptions do exist in both cases.)
BEC
A company spends $200,000 and produces 10,000 pounds of product X and 20,000
pounds of product Y. The joint cost will be allocated between these two
based on units produced. The company also produced 1,000 pounds of
product Z that can be sold for $6 per pound after spending $1 per pound to
put into appropriate packages. Product Z is viewed as a by-product and
recorded at net realizable value. What portion of the joint cost is
allocated to product X?
A - $60,000
B - $64,250
C - $65,000
D - $66,667
Answer is C
The by-product must be handled first. This company records it at net
realizable value-the net amount of cash that can be received. Each pound is
sold for $6 after spending $1 so the net realizable value is $5 per pound or
$5,000 for the entire 1,000 pounds. That part of the $200,000 is recorded
for the by-product. That leaves $195,000 to be split between product X
and product Y. According to the information, the company allocates this
joint cost based on units. One-third of the units (10,000 pounds out of
a total of 30,000 pounds for the two major products) comes from product X.
So, 1/3 of the joint cost or $65,000 (1/3 times $195,000) is assigned to
product X.
Have a great week.
Shoot for excellence in everything you do.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
Wednesday, October 21, 2009
Wednesday, October 14, 2009
Upbeat and Positive
Try us FIRST before you spend your hard-earned money.
October 13, 2009
CPA Review for FREE
www.CPAreviewforFREE.com
Take It!!!
67 Weeks of Operation and 6,102,049 Page Views (without a penny spent on marketing)
Lesson 50
From: Joe
(1) – SOMETHING NEW. We are always trying to think up new ways to make our site more efficient in order to help you pass the CPA Exam. So, we are going to start having occasional surveys. Sometimes they will be to help us learn how to help you better and sometimes they will be to help us spread information to you folks about the CPA Exam. Do us a favor – read the question and give us your response. Should take less than 10 seconds and we’d greatly appreciate it.
Just go to www.cpareviewforfree.blogspot.com/ -- read the question and click on an answer.
This week we are thinking about creating new “subject content.” We would pick out the topics where most people have trouble and come up with as much guidance as possible and then offer to sell it to you for a small amount. So, for example, if people seem to stumble on consolidation questions, we would write everything we could about consolidations and you could download it for a small fee if you chose. All of our questions and answers would be free but there would be a small fee for the subject content.
Would you do that? Tell us what you think. Go to
www.cpareviewforfree.blogspot.com/
The question is in the upper left hand corner. Give us an honest answer – it would help us learn how to help you.
If we get a good number of responses, I’ll try to come up with a question directly relating to the CPA Exam for next week.
(2) – We went over 6 million (over 6.1 million to be a bit more exact) page views this past week. We keep growing at about twice the rate that I expected.
Here are a couple of emails that I received recently.
FROM CS: “I love your website and use it quite a bit as I work through my intermediate accounting classes. I'm in my final year to get my bachelor's degree in Accounting and plan to continue until I can take the CPA exam. As an older student (early 40s), I appreciate and value the website tremendously.”
FROM MQ: “I use your website religiously on my lunch break and have recommended it to everyone I know. Although I am studying with (major review program), I find your questions to provide a more in-depth explanation of principles. I have passed REG and BEC and am studying for FAR (have the exam scheduled already).”
FROM VT: “Thank you! I used CPAreviewforFREE for my audit section (since [major program] cancelled my license after 1 year) and I passed! I am so happy I found this website! Your website is a big help!”
(3) – In case you missed this, NASBA has a checklist for CPA Exam candidates titled “Ready for the Uniform CPA Examination?” which can be downloaded at the following URL. Probably can help make sure you have gotten everything done that you need to do.
www.nasba.org/nasbaweb/NASBAWeb.nsf/PLD/0852C1ACE2826BA2862576460050A1A2?OpenDocument
(4) – To unsubscribe, just scroll to the bottom of this form and click on the link. Or, forward the email to every accountant you know so that we can get every accountant in the world to pass the CPA Exam so that I can retire. Your choice.
(5) – I do not follow women’s pro basketball very carefully but I do know that the Phoenix Mercury recently won the championship. Diana Taurasi is one of the superstars in the league and plays for Phoenix. After the championship game, Taurasi was asked about the victory and she said something like: “the coach wrote two words on the board and they were ‘TAKE IT’ and we went out and did just that.”
That immediately caught my attention. We often use “go for it” as a sign of encouragement or “do your best” or “try hard.” However, those all come up a little short of “Take It.”
“Go for it” means to try to do your best so that you will be proud of your effort if you lose.
“Take it” means don’t be satisfied with anything less than victory.
“Go for it” means to work hard and hope that is good enough.
“Take it” means that you ARE good enough so go get it.
“Go for it” is all about trying.
“Take it” is all about winning.
“Go for it” means that you pray you don’t get beaten.
“Take it” means that you plan to do the beating.
I know that a lot of people are taking one or more parts of the CPA Exam in the October/November window. It is a fact that roughly half will pass and roughly half will fail. Which side are you on?
You have heard me say often that, in 29 years, I have never met anyone who couldn’t pass the CPA Exam and that includes YOU.
Don’t go for it. You only have to be in the top half!! For heaven’s sake, you know that is within YOUR ability. Take it. Push to the victory. Make it happen. Make it happen starting today. Lay yourself on the line. Tell yourself that YOU are going to pass and you are going to start passing today.
TAKE IT
(6) – When you work with people, especially people who are preparing for the CPA Exam, there is a lot of doom and gloom. “I may fail.” “I am going to fail.” “I’m going to have a bad day.” “I am going to get topics that I won’t know.” “I’m going to make 74.” “I just can never pass.”
I love reading the comedian Woody Allen. I was reading an essay last night that he wrote over 30 years ago – back, I suppose, in the good old days when life was simpler and everyone was in a better mood.
“More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly. I speak, by the way, not with any sense of futility, but with a panicky conviction of the absolute meaningless of existence which could easily be misinterpreted as pessimism.”
Okay, when Woody Allen writes this, the absurdity is funny—especially knowing that this was written over 30 years ago when (a) we weren’t in a recession while (b) we fought two wars and (c) we tried to deal with the high cost of health care. However, I know plenty of people who sound exactly like this for real. I bet you do also. They are just angry at everything; they rage at everything: doctors, politicians, umpires, the CPA Exam. The world is hopeless and they are going to let everyone know about it.
Well, Woody Allen is still alive 30 years later and neither utter hopelessness nor total extinction have taken place. My guess is that we are going to get through current times and, in 30 years, we’ll look back on 2009 as the “good old days.”
So, don’t get totally bent out of shape complaining about things that you may look back on in the future rather fondly. Enjoy it while you are here. I actually know a lot of people who tell me now how much they enjoyed the challenge of studying for the CPA Exam. It was mentally invigorating.
Studying for the CPA Exam can be full of pain and heartache or it can be an interesting mental exercise. You are at a crossroads; choose wisely. Why don’t you choose “interesting mental exercise?” It will help you to do better. It is all a matter of how you look at it.
Learning all this material can feel like a waste of time or it can seem to be helping you to become smarter so that you know more about accounting and related areas. You are at a crossroads; choose wisely. Why don’t you choose “seems to be helping me become smarter and know more.”
My point is this: the CPA Exam, and life in general, just work better if you have a good attitude. Being in a rage all the time doesn’t add any points to your CPA Exam score. The only thing that is going to add points is to sit down and work some problems and learn from the answers. We’ve got hundreds of questions and answers waiting on you. And, that process goes better if you have the right attitude.
So, time for a reality check: if the people who are around you all the time were polled and asked about your attitude, how would they score you: Upbeat and Positive or Whiny and Snarly.
Life will feel better and you’ll have a better chance of passing if Upbeat and Positive win out. If they don’t, why don’t you make it your goal to move in that direction?
(7) – PRACTICE
FAR (don’t tell my students but we are going to work this problem tomorrow in my class at the university)
On January 1, Year One, a machine is bought for $100,000 with a 10-year and a $20,000 salvage value. The company uses straight-line depreciation. If the company had used double-declining balance, how much lower would total assets be on the company’s December 31, Year Two balance sheet?
A - $10,000
B - $12,800
C - $16,000
D - $20,000
Answer is D
Straight-line depreciation is $8,000 per year ($100,000 less $20,000 allocated over 10 years) or $16,000 at the end of Year Two. For Year One, double-declining balance depreciation is $20,000 ($100,000 times 2/10). For Year Two, the book value falls to $80,000 ($100,000 less $20,000) so depreciation is $16,000 ($80,000 times 2/10). Total accumulated depreciation is $36,000 ($20,000 plus $16,000) for double-declining balance. This is $20,000 more than for straight-line depreciation. The reduction is greater so total assets will be $20,000 smaller.
BEC
Last year, a company made 100,000 widgets and sold them for $20 each. The fixed costs were $500,000 and the company made a profit of $100,000. In the new year, the company plans to raise the price to $25 per unit but sell only 90,000. What is the anticipated profit?
A - $110,000
B - $250,000
C - $320,000
D - $490,000
Answer is D
Last year the company had sales of $2 million (100,000 times $20 each). Fixed costs were $500,000 so the amount left over to cover variable costs and produce a profit was $1.5 million. The profit was $100,000 so the variable cost must have been $1.4 million. That is $14 per unit (since it is a variable cost). This year, sales are $2,250,000 ($25 times 90,000) but fixed costs (because they are fixed) remain at $500,000. Variable cost is $14 per unit or $1,260,000 ($14 times 90,000). The profit is $490,000 ($2,250,000 less $1,260,000 and less $500,000).
Auditing and Attestation
During an audit engagement, the auditor should document all findings or issues that are judged to be significant. Which of the following is least likely to be viewed as a significant audit finding or issue?
A – Evidence of the validity of internal control procedures developed and followed by the company to ensure that nonfinancial tasks are performed in an effective manner.
B – Audit adjustments
C – Selection of accounting principles
D – Lack of original company documentation when investigating the accounting for a major transaction.
Answer is A
The auditor views audit adjustments made to a company’s financial statements and the selection of accounting principles as significant events that must be documented. The lack of the original documents to provide supporting evidence about the handling of a major transaction is a troubling discovery which should also be noted. Many internal control procedures are of interest to the auditor but the ones that pertain to nonfinancial matters often have no relevance to the production of financial statements and, thus, do not necessarily fall under the boundaries of an audit engagement.
Regulation
If a material event occurs with respect to a company that is covered by the 1934 Securities Exchange Act (for example, the change of the CEO or termination of independent auditing firm), the SEC requires that the company promptly issue
A. An 8-K filing that reflects these changed conditions
B. A 10-K report of the change
C. A 10-Q report of the event by the end of the fiscal quarter
D. No report unless the company is traded on one of the major stock exchanges such as the New York Stock Exchange
Answer is A
Form 8-K is a report which must be filed with the US Securities and Exchange Commission by public companies pursuant to the Securities Exchange Act of 1934. After a significant event occurs, a public company generally must file a Current Report on Form 8-K within four business days to provide an update to previously filed quarterly reports on Form 10-Q and/or annual reports on Form 10-K.
Have a great week.
Don’t forget to answer our survey question. Just go to
www.cpareviewforfree.blogspot.com/.
Remember---every point you get may be the one that moves you from 74 to 75 so go get those points.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
October 13, 2009
CPA Review for FREE
www.CPAreviewforFREE.com
Take It!!!
67 Weeks of Operation and 6,102,049 Page Views (without a penny spent on marketing)
Lesson 50
From: Joe
(1) – SOMETHING NEW. We are always trying to think up new ways to make our site more efficient in order to help you pass the CPA Exam. So, we are going to start having occasional surveys. Sometimes they will be to help us learn how to help you better and sometimes they will be to help us spread information to you folks about the CPA Exam. Do us a favor – read the question and give us your response. Should take less than 10 seconds and we’d greatly appreciate it.
Just go to www.cpareviewforfree.blogspot.com/ -- read the question and click on an answer.
This week we are thinking about creating new “subject content.” We would pick out the topics where most people have trouble and come up with as much guidance as possible and then offer to sell it to you for a small amount. So, for example, if people seem to stumble on consolidation questions, we would write everything we could about consolidations and you could download it for a small fee if you chose. All of our questions and answers would be free but there would be a small fee for the subject content.
Would you do that? Tell us what you think. Go to
www.cpareviewforfree.blogspot.com/
The question is in the upper left hand corner. Give us an honest answer – it would help us learn how to help you.
If we get a good number of responses, I’ll try to come up with a question directly relating to the CPA Exam for next week.
(2) – We went over 6 million (over 6.1 million to be a bit more exact) page views this past week. We keep growing at about twice the rate that I expected.
Here are a couple of emails that I received recently.
FROM CS: “I love your website and use it quite a bit as I work through my intermediate accounting classes. I'm in my final year to get my bachelor's degree in Accounting and plan to continue until I can take the CPA exam. As an older student (early 40s), I appreciate and value the website tremendously.”
FROM MQ: “I use your website religiously on my lunch break and have recommended it to everyone I know. Although I am studying with (major review program), I find your questions to provide a more in-depth explanation of principles. I have passed REG and BEC and am studying for FAR (have the exam scheduled already).”
FROM VT: “Thank you! I used CPAreviewforFREE for my audit section (since [major program] cancelled my license after 1 year) and I passed! I am so happy I found this website! Your website is a big help!”
(3) – In case you missed this, NASBA has a checklist for CPA Exam candidates titled “Ready for the Uniform CPA Examination?” which can be downloaded at the following URL. Probably can help make sure you have gotten everything done that you need to do.
www.nasba.org/nasbaweb/NASBAWeb.nsf/PLD/0852C1ACE2826BA2862576460050A1A2?OpenDocument
(4) – To unsubscribe, just scroll to the bottom of this form and click on the link. Or, forward the email to every accountant you know so that we can get every accountant in the world to pass the CPA Exam so that I can retire. Your choice.
(5) – I do not follow women’s pro basketball very carefully but I do know that the Phoenix Mercury recently won the championship. Diana Taurasi is one of the superstars in the league and plays for Phoenix. After the championship game, Taurasi was asked about the victory and she said something like: “the coach wrote two words on the board and they were ‘TAKE IT’ and we went out and did just that.”
That immediately caught my attention. We often use “go for it” as a sign of encouragement or “do your best” or “try hard.” However, those all come up a little short of “Take It.”
“Go for it” means to try to do your best so that you will be proud of your effort if you lose.
“Take it” means don’t be satisfied with anything less than victory.
“Go for it” means to work hard and hope that is good enough.
“Take it” means that you ARE good enough so go get it.
“Go for it” is all about trying.
“Take it” is all about winning.
“Go for it” means that you pray you don’t get beaten.
“Take it” means that you plan to do the beating.
I know that a lot of people are taking one or more parts of the CPA Exam in the October/November window. It is a fact that roughly half will pass and roughly half will fail. Which side are you on?
You have heard me say often that, in 29 years, I have never met anyone who couldn’t pass the CPA Exam and that includes YOU.
Don’t go for it. You only have to be in the top half!! For heaven’s sake, you know that is within YOUR ability. Take it. Push to the victory. Make it happen. Make it happen starting today. Lay yourself on the line. Tell yourself that YOU are going to pass and you are going to start passing today.
TAKE IT
(6) – When you work with people, especially people who are preparing for the CPA Exam, there is a lot of doom and gloom. “I may fail.” “I am going to fail.” “I’m going to have a bad day.” “I am going to get topics that I won’t know.” “I’m going to make 74.” “I just can never pass.”
I love reading the comedian Woody Allen. I was reading an essay last night that he wrote over 30 years ago – back, I suppose, in the good old days when life was simpler and everyone was in a better mood.
“More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly. I speak, by the way, not with any sense of futility, but with a panicky conviction of the absolute meaningless of existence which could easily be misinterpreted as pessimism.”
Okay, when Woody Allen writes this, the absurdity is funny—especially knowing that this was written over 30 years ago when (a) we weren’t in a recession while (b) we fought two wars and (c) we tried to deal with the high cost of health care. However, I know plenty of people who sound exactly like this for real. I bet you do also. They are just angry at everything; they rage at everything: doctors, politicians, umpires, the CPA Exam. The world is hopeless and they are going to let everyone know about it.
Well, Woody Allen is still alive 30 years later and neither utter hopelessness nor total extinction have taken place. My guess is that we are going to get through current times and, in 30 years, we’ll look back on 2009 as the “good old days.”
So, don’t get totally bent out of shape complaining about things that you may look back on in the future rather fondly. Enjoy it while you are here. I actually know a lot of people who tell me now how much they enjoyed the challenge of studying for the CPA Exam. It was mentally invigorating.
Studying for the CPA Exam can be full of pain and heartache or it can be an interesting mental exercise. You are at a crossroads; choose wisely. Why don’t you choose “interesting mental exercise?” It will help you to do better. It is all a matter of how you look at it.
Learning all this material can feel like a waste of time or it can seem to be helping you to become smarter so that you know more about accounting and related areas. You are at a crossroads; choose wisely. Why don’t you choose “seems to be helping me become smarter and know more.”
My point is this: the CPA Exam, and life in general, just work better if you have a good attitude. Being in a rage all the time doesn’t add any points to your CPA Exam score. The only thing that is going to add points is to sit down and work some problems and learn from the answers. We’ve got hundreds of questions and answers waiting on you. And, that process goes better if you have the right attitude.
So, time for a reality check: if the people who are around you all the time were polled and asked about your attitude, how would they score you: Upbeat and Positive or Whiny and Snarly.
Life will feel better and you’ll have a better chance of passing if Upbeat and Positive win out. If they don’t, why don’t you make it your goal to move in that direction?
(7) – PRACTICE
FAR (don’t tell my students but we are going to work this problem tomorrow in my class at the university)
On January 1, Year One, a machine is bought for $100,000 with a 10-year and a $20,000 salvage value. The company uses straight-line depreciation. If the company had used double-declining balance, how much lower would total assets be on the company’s December 31, Year Two balance sheet?
A - $10,000
B - $12,800
C - $16,000
D - $20,000
Answer is D
Straight-line depreciation is $8,000 per year ($100,000 less $20,000 allocated over 10 years) or $16,000 at the end of Year Two. For Year One, double-declining balance depreciation is $20,000 ($100,000 times 2/10). For Year Two, the book value falls to $80,000 ($100,000 less $20,000) so depreciation is $16,000 ($80,000 times 2/10). Total accumulated depreciation is $36,000 ($20,000 plus $16,000) for double-declining balance. This is $20,000 more than for straight-line depreciation. The reduction is greater so total assets will be $20,000 smaller.
BEC
Last year, a company made 100,000 widgets and sold them for $20 each. The fixed costs were $500,000 and the company made a profit of $100,000. In the new year, the company plans to raise the price to $25 per unit but sell only 90,000. What is the anticipated profit?
A - $110,000
B - $250,000
C - $320,000
D - $490,000
Answer is D
Last year the company had sales of $2 million (100,000 times $20 each). Fixed costs were $500,000 so the amount left over to cover variable costs and produce a profit was $1.5 million. The profit was $100,000 so the variable cost must have been $1.4 million. That is $14 per unit (since it is a variable cost). This year, sales are $2,250,000 ($25 times 90,000) but fixed costs (because they are fixed) remain at $500,000. Variable cost is $14 per unit or $1,260,000 ($14 times 90,000). The profit is $490,000 ($2,250,000 less $1,260,000 and less $500,000).
Auditing and Attestation
During an audit engagement, the auditor should document all findings or issues that are judged to be significant. Which of the following is least likely to be viewed as a significant audit finding or issue?
A – Evidence of the validity of internal control procedures developed and followed by the company to ensure that nonfinancial tasks are performed in an effective manner.
B – Audit adjustments
C – Selection of accounting principles
D – Lack of original company documentation when investigating the accounting for a major transaction.
Answer is A
The auditor views audit adjustments made to a company’s financial statements and the selection of accounting principles as significant events that must be documented. The lack of the original documents to provide supporting evidence about the handling of a major transaction is a troubling discovery which should also be noted. Many internal control procedures are of interest to the auditor but the ones that pertain to nonfinancial matters often have no relevance to the production of financial statements and, thus, do not necessarily fall under the boundaries of an audit engagement.
Regulation
If a material event occurs with respect to a company that is covered by the 1934 Securities Exchange Act (for example, the change of the CEO or termination of independent auditing firm), the SEC requires that the company promptly issue
A. An 8-K filing that reflects these changed conditions
B. A 10-K report of the change
C. A 10-Q report of the event by the end of the fiscal quarter
D. No report unless the company is traded on one of the major stock exchanges such as the New York Stock Exchange
Answer is A
Form 8-K is a report which must be filed with the US Securities and Exchange Commission by public companies pursuant to the Securities Exchange Act of 1934. After a significant event occurs, a public company generally must file a Current Report on Form 8-K within four business days to provide an update to previously filed quarterly reports on Form 10-Q and/or annual reports on Form 10-K.
Have a great week.
Don’t forget to answer our survey question. Just go to
www.cpareviewforfree.blogspot.com/.
Remember---every point you get may be the one that moves you from 74 to 75 so go get those points.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
Wednesday, October 7, 2009
Don't Cling to the Past
Don’t Cling to the Past
66 Weeks of Operation and 5,916,194 Page Views (without a penny spent on marketing)
Lesson 48
From: Joe
(1) – We had a fabulous week last week here at CPA Review for FREE. We’ve been in business for 66 weeks and last week we had our second busiest week of all time. In fact, I went back six months and checked our figures because I was curious about our growth. In just the last six months, the number of weekly visitors has increased by OVER 75 PERCENT. Now, if we can grow by another 75 percent in the next six months, we’ll be getting close to working with absolutely everyone—and that’s our real goal.
We want to help EVERY SINGLE PERSON WHO IS TAKING THE CPA EXAM.
Whether you have money or not, we want to help you pass the CPA Exam. Whether you have money or not, you deserve the opportunity of becoming a CPA.
Yes, I know that some of the bigger program (that really feel threatened by us) try to put us down by claiming “oh, people just look at that site out of curiosity – no one really uses it to pass the CPA Exam.” That’s absolute nonsense. Here’s a fact. Last week the average person stayed on our site for 27 minutes and 2 seconds for each visit. That’s just the average person. Can you imagine how many people stay on it for an hour or more at a time doing nothing but ADDING POINTS?! What’s more, the average person visited our site 2.4 times last week. Not once but 2.4 times.
Thanks for passing along the message to your family and friends. Keep up the good work.
(2) – Last call – if you want to receive a copy of the 20 questions in FAR to help you determine your strengths and weaknesses, send an email to jhoyle@cpareviewforfree.com.
(3) – Couple of neat emails. I love to hear about the thrill of victory. I want each person who gets these email lessons to come to feel this same excitement.
FROM EB: “I was pleased to learn last Friday that I passed the Audit section with a score of 85. I attribute a lot of the success to your website – both the practice questions and the encouragement. I wrote earlier and told you that I’ve been taking accounting classes since 1999 and my goal is to pass the CPA exam during the year that I’m 55. Looks like I might be on track, thanks to your help.”
FROM AB: “I have some great news to share with you. I passed 3 parts of the CPA exam in the July/August window. I sat for my final part (BEC) this past Thursday so I am still waiting for that score. I am happy the exam is almost behind me. I used the self-study program which my employer pays for. However, I also made extensive use of CPA Review for Free. I found your website to be a helpful study tool. In fact, I specifically remember seeing questions on BEC that I would not have known the answer to had I not used your site. I found working your multiple choice questions to be more productive than watching a DVD lecture from that other big program.”
FROM DB: “Just wanted to let you know that I passed my second CPA exam, Audit, with a score of 95. I know you always say to get as close to 75 as possible, but it does feel good to have such a high score. Once again your website proved to be a valuable study tool. So thank you for that. I've continued to use it in my studies for my next exam, FAR, which I'm taking on the 17th. I'll be sure to let you know how that goes.”
I’m delighted to get emails from these people but I really want to get an email from YOU. I want to hear YOU talk about the excitement of getting that 75. I want to hear about how hard YOU worked but how great YOU feel to know YOU have passed. I want to hear the thrill in YOUR (email) voice. Yeah – YOU.
(4) – We have a new batch of Auditing study notes now on our site. And, as always, they are free. We have had a lot of people tell us that these are very helpful.
To find them, go to www.CPAreviewforFREE.com.
Click on Resources at the top of the page.
Click on More Articles and you will be there.
(5) – If you need to unsubscribe, just scroll to the bottom of this email lesson and click on the proper button.
If you know anyone who is thinking of taking the CPA Exam or anyone in college who is studying accounting, we would love for you to forward this lesson to them and suggest that they look into www.CPAreviewforFREE.com. If it helps you, pass along the message.
(6) – I am not a person who saves things. Oh, I have a few shirts that my wife thinks I should throw away but, for the most part, I don’t keep things very long. However, here’s the big exception to my rule.
When I was about 15 years old (probably 1963), I read a magazine article that included someone’s list of 10 things that would serve as Rules for a Successful Life. I was very young and I was intrigued by the idea of Rules for a Successful Life. I cut these rules out of the magazine and taped them to my sophomore notebook. At the end of the year, I peeled them off and taped them to my junior year notebook. I continued to read these occasionally and think about them throughout high school and then college. After college, I kept the rules with me and, again, read them now and then. And, thought about them—really thought about them.
Now, 46 years later, they are taped to the side of my file cabinet at my office at school. They are really worn and tattered but I still read them occasionally and think about them.
Today, the one that caught my attention was rule Number Eight: “Don’t cling to the past.” I think living in the past, holding on to what has already gone, is one way to keep you from succeeding at the current time.
If you have had success in the past, that is great. Good for you. Time to forget about that and have success today! I have taught now for almost 39 years and have won a number of teaching awards. That didn’t do any of my current students one bit of good when I class today. They needed for me to be as good as possible today. I couldn’t just go in and say “let me tell you well I taught back in the good old days of 1983 or 2003.” I needed to be good today. That is my goal; I need to be good every day regardless of the past.
If you have had failure in the past, I am genuinely sorry – but it is time to get over it. I know people who cling to their past failures like they are dear teddy bears that need to be clutched tightly. Failure yesterday is not failure today UNLESS YOU LET IT BE. As far as I know, there is no reason to relive a single failure from your past. Once you figure out what you might have done differently, don’t bring it back up. Don’t be haunted by past failures. No one cares and neither should you.
I know many of you have failed a part of the CPA exam or didn’t do well in some classes at school or have struggled at your jobs at one time or another. That’s in the past. It’s like Abraham Lincoln and George Washington, it is just part of the ancient past.
Your only goal when you have a failure is to sit back and go: “okay, how can I do better? What changes do I need to make? I obviously need to adjust my strategy—what should I do today that will get me a better outcome?”
You are a smart person – for the smart person, failure is just a helpful step to success. Okay, you are allowed to take one take to cry and fuss and throw things. That’s reasonable. After that one day, it should all be about changing, getting better, getting different results.
Always succeeding at everything is probably fun but it is not great fun. The greatest fun is failing and taking up the challenge and then passing. Because then you know for sure that you did it. It wasn’t luck; it wasn’t your education; it was YOU. You failed and then you fought back and you were successful.
Life is tough. Life can just beat you up. You can hide like a whipped puppy or you can fight back.
Failure should be like a trampoline that helps you spring up much higher than you can possibly jump by yourself.
Don’t cling to the past.
Get to work to change the future.
What do you want in your future? If you want to pass the CPA Exam, if that is a real goal and not just an illusion, create your plans right now for the next week, the next month, and the next six months. How are you going to make it happen? You need plans. What are you going to accomplish in the next week, in the next month, and in the next six months to turn those failures into wonderful success stories?
(7) – Very quick story that I’ve told before but I am reminded of it by the story above. One of my heroes, Vince Lombardi, was one of the all-time great football coaches. Early in his coaching career, his Green Bay team lost a playoff game that they could easily have won at the very end but didn’t. As he walked off the field, Coach Lombardi asserted “my team will never lose another playoff game.” And, they didn’t. For the rest of his career, they never lost another playoff game. They lost games but, in the playoffs, when it really counted, his teams never lost again.
Coach Lombardi didn’t dwell on the failure. He used the failure to push him to incredible success.
(8) – PRACTICE
FAR
Big Company buys Small Company and is now consolidating the financial statements as of the date of the acquisition. Each of the following four items has a fair value. Which of these is most likely to not be recognized on the consolidated balance sheet as an intangible asset at fair value as of the date of the acquisition?
A – Noncompetition agreement with a former employee
B – Unpatented technology
C – An employee who recently won the Nobel Prize for Chemistry
D – Secret formula for Small Company’s most popular product.
Answer is C
In an acquisition, every intangible should be identified if it has fair value (and all of these are said to have fair value). For recognition to be required, the parent must either gain contractual rights to the asset (such as the noncompetition agreement) or be able to separate the intangible from the subsidiary and be able to sell it (such as the unpatented technology and the secret formula). The company does not have legal rights to the employee and that person cannot be separated from the subsidiary and sold. Thus, the employee cannot be reported as an intangible asset, regardless of the value to the organization. However, if the company has an employment contract with the person, that does provide a contractual right and that contract (not the person but the contract) would be an intangible asset. No employment contract is mentioned in this problem.
Auditing and Attestation
In an audit engagement, the independent auditor should get a management representation letter as part of the normal audit procedures. Which of the following is not true?
A – The letter must be signed by the chair of the board of directors
B – The letter should be dated no earlier than the date of the auditor’s report
C – The letter should indicate that all significant estimates known to management have been properly disclosed.
D – If the management is not willing to issue this letter, the independent auditor ordinarily gives a disclaimer of opinion.
Answer is A
The management representation letter should be signed by the chief executive officer and the chief financial officer because they are the leaders of the management. It is normally signed on the last day of audit fieldwork (the audit report date) but can be signed later if management is not available on that date. However, it cannot be signed any earlier than that date. Among other things, it indicates the completeness of the financial records and underlying transactions. It also indicates that all items such as significant estimates, plans, guarantees, violations, and the like have been properly disclosed to the auditors. Because of its importance, the independent auditor cannot give an unqualified opinion without getting a signed representation letter and ordinarily gives a disclaimer.
BEC
What is a scattergraph?
A – A method for forecasting product demand on an X/Y axis.
B – A graph to help compute the relationship between two variables.
C – A chart designed to pinpoint unexpected changes as a result of variable costing.
D – A graphed picture created to pick up negative trends in sales figures over time.
Answer is B
Companies, especially manufacturing companies, often try to determine the relationship between two variables. For example, what is the relationship between the unemployment rate and company sales? How does a rise in temperature impact the number of units produced by a particular plant? Over time, the two variables can be plotted on a graph. When enough observations have been made, a straight-line is drawn through those points and used to indicate the perceived relationship of the variables. It is a method that lacks precision but can help management get a feel for the relationship.
Regulation
A bilateral contract is one in which
A - A promise is given in exchange for a promise
B - Both parties have fully performed
C - Either party may terminate the contract without recourse
D - A negotiable instrument is given in lieu of payment
Answer is A
A bilateral contract is one in which a promise is given in exchange for a promise. This is the most common type of contract. One party, for example, promises to deliver, in the future, goods or services; the other party promises future payment. Both parties are bound. A unilateral contract is one in which one party has already performed. For example, you purchase a motor boat, taking immediate delivery and promise payment in 60 days. The seller has already performed the action by handing over the boat; you have made the only promise—the promise to pay.
Have a great week – work hard and, for goodness sake, DON’T CLING TO THE PAST!!!
Joe Hoyle
www.youtube.com/watch?v=LjwHxVbZq1o
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
66 Weeks of Operation and 5,916,194 Page Views (without a penny spent on marketing)
Lesson 48
From: Joe
(1) – We had a fabulous week last week here at CPA Review for FREE. We’ve been in business for 66 weeks and last week we had our second busiest week of all time. In fact, I went back six months and checked our figures because I was curious about our growth. In just the last six months, the number of weekly visitors has increased by OVER 75 PERCENT. Now, if we can grow by another 75 percent in the next six months, we’ll be getting close to working with absolutely everyone—and that’s our real goal.
We want to help EVERY SINGLE PERSON WHO IS TAKING THE CPA EXAM.
Whether you have money or not, we want to help you pass the CPA Exam. Whether you have money or not, you deserve the opportunity of becoming a CPA.
Yes, I know that some of the bigger program (that really feel threatened by us) try to put us down by claiming “oh, people just look at that site out of curiosity – no one really uses it to pass the CPA Exam.” That’s absolute nonsense. Here’s a fact. Last week the average person stayed on our site for 27 minutes and 2 seconds for each visit. That’s just the average person. Can you imagine how many people stay on it for an hour or more at a time doing nothing but ADDING POINTS?! What’s more, the average person visited our site 2.4 times last week. Not once but 2.4 times.
Thanks for passing along the message to your family and friends. Keep up the good work.
(2) – Last call – if you want to receive a copy of the 20 questions in FAR to help you determine your strengths and weaknesses, send an email to jhoyle@cpareviewforfree.com.
(3) – Couple of neat emails. I love to hear about the thrill of victory. I want each person who gets these email lessons to come to feel this same excitement.
FROM EB: “I was pleased to learn last Friday that I passed the Audit section with a score of 85. I attribute a lot of the success to your website – both the practice questions and the encouragement. I wrote earlier and told you that I’ve been taking accounting classes since 1999 and my goal is to pass the CPA exam during the year that I’m 55. Looks like I might be on track, thanks to your help.”
FROM AB: “I have some great news to share with you. I passed 3 parts of the CPA exam in the July/August window. I sat for my final part (BEC) this past Thursday so I am still waiting for that score. I am happy the exam is almost behind me. I used the self-study program which my employer pays for. However, I also made extensive use of CPA Review for Free. I found your website to be a helpful study tool. In fact, I specifically remember seeing questions on BEC that I would not have known the answer to had I not used your site. I found working your multiple choice questions to be more productive than watching a DVD lecture from that other big program.”
FROM DB: “Just wanted to let you know that I passed my second CPA exam, Audit, with a score of 95. I know you always say to get as close to 75 as possible, but it does feel good to have such a high score. Once again your website proved to be a valuable study tool. So thank you for that. I've continued to use it in my studies for my next exam, FAR, which I'm taking on the 17th. I'll be sure to let you know how that goes.”
I’m delighted to get emails from these people but I really want to get an email from YOU. I want to hear YOU talk about the excitement of getting that 75. I want to hear about how hard YOU worked but how great YOU feel to know YOU have passed. I want to hear the thrill in YOUR (email) voice. Yeah – YOU.
(4) – We have a new batch of Auditing study notes now on our site. And, as always, they are free. We have had a lot of people tell us that these are very helpful.
To find them, go to www.CPAreviewforFREE.com.
Click on Resources at the top of the page.
Click on More Articles and you will be there.
(5) – If you need to unsubscribe, just scroll to the bottom of this email lesson and click on the proper button.
If you know anyone who is thinking of taking the CPA Exam or anyone in college who is studying accounting, we would love for you to forward this lesson to them and suggest that they look into www.CPAreviewforFREE.com. If it helps you, pass along the message.
(6) – I am not a person who saves things. Oh, I have a few shirts that my wife thinks I should throw away but, for the most part, I don’t keep things very long. However, here’s the big exception to my rule.
When I was about 15 years old (probably 1963), I read a magazine article that included someone’s list of 10 things that would serve as Rules for a Successful Life. I was very young and I was intrigued by the idea of Rules for a Successful Life. I cut these rules out of the magazine and taped them to my sophomore notebook. At the end of the year, I peeled them off and taped them to my junior year notebook. I continued to read these occasionally and think about them throughout high school and then college. After college, I kept the rules with me and, again, read them now and then. And, thought about them—really thought about them.
Now, 46 years later, they are taped to the side of my file cabinet at my office at school. They are really worn and tattered but I still read them occasionally and think about them.
Today, the one that caught my attention was rule Number Eight: “Don’t cling to the past.” I think living in the past, holding on to what has already gone, is one way to keep you from succeeding at the current time.
If you have had success in the past, that is great. Good for you. Time to forget about that and have success today! I have taught now for almost 39 years and have won a number of teaching awards. That didn’t do any of my current students one bit of good when I class today. They needed for me to be as good as possible today. I couldn’t just go in and say “let me tell you well I taught back in the good old days of 1983 or 2003.” I needed to be good today. That is my goal; I need to be good every day regardless of the past.
If you have had failure in the past, I am genuinely sorry – but it is time to get over it. I know people who cling to their past failures like they are dear teddy bears that need to be clutched tightly. Failure yesterday is not failure today UNLESS YOU LET IT BE. As far as I know, there is no reason to relive a single failure from your past. Once you figure out what you might have done differently, don’t bring it back up. Don’t be haunted by past failures. No one cares and neither should you.
I know many of you have failed a part of the CPA exam or didn’t do well in some classes at school or have struggled at your jobs at one time or another. That’s in the past. It’s like Abraham Lincoln and George Washington, it is just part of the ancient past.
Your only goal when you have a failure is to sit back and go: “okay, how can I do better? What changes do I need to make? I obviously need to adjust my strategy—what should I do today that will get me a better outcome?”
You are a smart person – for the smart person, failure is just a helpful step to success. Okay, you are allowed to take one take to cry and fuss and throw things. That’s reasonable. After that one day, it should all be about changing, getting better, getting different results.
Always succeeding at everything is probably fun but it is not great fun. The greatest fun is failing and taking up the challenge and then passing. Because then you know for sure that you did it. It wasn’t luck; it wasn’t your education; it was YOU. You failed and then you fought back and you were successful.
Life is tough. Life can just beat you up. You can hide like a whipped puppy or you can fight back.
Failure should be like a trampoline that helps you spring up much higher than you can possibly jump by yourself.
Don’t cling to the past.
Get to work to change the future.
What do you want in your future? If you want to pass the CPA Exam, if that is a real goal and not just an illusion, create your plans right now for the next week, the next month, and the next six months. How are you going to make it happen? You need plans. What are you going to accomplish in the next week, in the next month, and in the next six months to turn those failures into wonderful success stories?
(7) – Very quick story that I’ve told before but I am reminded of it by the story above. One of my heroes, Vince Lombardi, was one of the all-time great football coaches. Early in his coaching career, his Green Bay team lost a playoff game that they could easily have won at the very end but didn’t. As he walked off the field, Coach Lombardi asserted “my team will never lose another playoff game.” And, they didn’t. For the rest of his career, they never lost another playoff game. They lost games but, in the playoffs, when it really counted, his teams never lost again.
Coach Lombardi didn’t dwell on the failure. He used the failure to push him to incredible success.
(8) – PRACTICE
FAR
Big Company buys Small Company and is now consolidating the financial statements as of the date of the acquisition. Each of the following four items has a fair value. Which of these is most likely to not be recognized on the consolidated balance sheet as an intangible asset at fair value as of the date of the acquisition?
A – Noncompetition agreement with a former employee
B – Unpatented technology
C – An employee who recently won the Nobel Prize for Chemistry
D – Secret formula for Small Company’s most popular product.
Answer is C
In an acquisition, every intangible should be identified if it has fair value (and all of these are said to have fair value). For recognition to be required, the parent must either gain contractual rights to the asset (such as the noncompetition agreement) or be able to separate the intangible from the subsidiary and be able to sell it (such as the unpatented technology and the secret formula). The company does not have legal rights to the employee and that person cannot be separated from the subsidiary and sold. Thus, the employee cannot be reported as an intangible asset, regardless of the value to the organization. However, if the company has an employment contract with the person, that does provide a contractual right and that contract (not the person but the contract) would be an intangible asset. No employment contract is mentioned in this problem.
Auditing and Attestation
In an audit engagement, the independent auditor should get a management representation letter as part of the normal audit procedures. Which of the following is not true?
A – The letter must be signed by the chair of the board of directors
B – The letter should be dated no earlier than the date of the auditor’s report
C – The letter should indicate that all significant estimates known to management have been properly disclosed.
D – If the management is not willing to issue this letter, the independent auditor ordinarily gives a disclaimer of opinion.
Answer is A
The management representation letter should be signed by the chief executive officer and the chief financial officer because they are the leaders of the management. It is normally signed on the last day of audit fieldwork (the audit report date) but can be signed later if management is not available on that date. However, it cannot be signed any earlier than that date. Among other things, it indicates the completeness of the financial records and underlying transactions. It also indicates that all items such as significant estimates, plans, guarantees, violations, and the like have been properly disclosed to the auditors. Because of its importance, the independent auditor cannot give an unqualified opinion without getting a signed representation letter and ordinarily gives a disclaimer.
BEC
What is a scattergraph?
A – A method for forecasting product demand on an X/Y axis.
B – A graph to help compute the relationship between two variables.
C – A chart designed to pinpoint unexpected changes as a result of variable costing.
D – A graphed picture created to pick up negative trends in sales figures over time.
Answer is B
Companies, especially manufacturing companies, often try to determine the relationship between two variables. For example, what is the relationship between the unemployment rate and company sales? How does a rise in temperature impact the number of units produced by a particular plant? Over time, the two variables can be plotted on a graph. When enough observations have been made, a straight-line is drawn through those points and used to indicate the perceived relationship of the variables. It is a method that lacks precision but can help management get a feel for the relationship.
Regulation
A bilateral contract is one in which
A - A promise is given in exchange for a promise
B - Both parties have fully performed
C - Either party may terminate the contract without recourse
D - A negotiable instrument is given in lieu of payment
Answer is A
A bilateral contract is one in which a promise is given in exchange for a promise. This is the most common type of contract. One party, for example, promises to deliver, in the future, goods or services; the other party promises future payment. Both parties are bound. A unilateral contract is one in which one party has already performed. For example, you purchase a motor boat, taking immediate delivery and promise payment in 60 days. The seller has already performed the action by handing over the boat; you have made the only promise—the promise to pay.
Have a great week – work hard and, for goodness sake, DON’T CLING TO THE PAST!!!
Joe Hoyle
www.youtube.com/watch?v=LjwHxVbZq1o
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
Monday, October 5, 2009
Always Work to Get Better
> October 1, 2009
>
> CPA Review for FREE
>
> www.CPAreviewforFREE.com
> Always Work To Get Better
>
> 65 Weeks of Operation and 5,724,577 Page Views (without a penny spent on
> marketing)
>
> Lesson 48
>
> From: Joe
>
> (1) - Wow, I must have gotten a gazillion (maybe two gazillion) requests
> for the 20 FAR questions and answers that I offered last week so you could
> test your strengths and weaknesses. Enjoyed touching base with so many of
> you. I'll leave the offer open for another few days if you are
> interested. Just send the request to Jhoyle@cpareviewforfree.com.
>
>
> (2) - I also received a number of questions about the top 100 folks in the
> Accounting Profession. If you want to see the entire list, it is at
> http://m1e.net/c?109775336-WuOKNpIp53.Jk%404653719-A9yIlwNwjJ01c You will
> need to register but that is a pretty easy process.
>
>
> (3) - Last week, we had a 32.8 percent jump in the number of visitors to
> our website!!! In our 65 weeks of existence, that was by far our biggest
> single week jump. Thanks to everyone who has been so kind as to pass
> along a good word about www.CPAreviewforFREE.com to friends and neighbors.
> We spend nothing on advertising or marketing so without you folks we would
> be out of business.
>
>
> (4) - Got a couple of wonderful notes this week from excited candidates:
>
> From MR: "I absolutely love your site! It got me through FAR and I'm
> studying for AUD now. I have told every CPA candidate that I know, about
> your site! I just wanted to thank you for such a great study tool and at
> no cost!! Thank you for your efforts in helping all of us succeed!"
>
> From SN: "I would like to share with you the good news - I passed REG
> which was my last section with an 84 (thank God) in the August 2009
> window. Now I am done with all the 4 parts of the CPA exam. THANK YOU for
> making cpareviewforfree.com available for CPA candidates like myself. I
> used your website diligently for both BEC and REG. They were very helpful
> and I am very grateful to you for providing such a great website at no
> additional cost."
>
> From JD: "This website has really helped me lot. I cleared my BEC in the
> last window and am now working on FAR. Credit for my confidence and
> passing goes only to your CPAreviewforfree practice tests and your email
> tutorials. Thanks a lot."
>
> We are delighted to help!!!
>
>
> (5) - During each semester, I give three tests and then a final exam. On
> Monday of this week, I gave back the first test of the semester to all my
> students. I had grades that ranged from 100 to 49. I am always
> fascinated to see how college students react to getting their first grade.
> Some are all smiles while others sit quietly and look miserable.
>
> I don't want bad grades; I genuinely want them to learn the material. We
> all understand the goal.
>
> So, after handing back the tests, I talk with them about what I want to
> see from them starting right now. I want those who liked their grade to
> take some time to think about what they did that got them a good grade and
> then make a pledge to keep doing it. In addition, though, as they
> reflect, I want them to think about what specific adjustments might help
> to ensure that they will continue to do well.
>
> Keep pushing and make adjustments where needed. Good motto.
>
> I don't want the students who did well to get over-confident - that often
> leads them to get lazy and careless. They got a good grade. Now is NOT the
> time to get complacent. Don't rest on one good grade. What does it take
> to do well and what does it take to do even better?
>
> But, I also encourage the students who were disappointed in their grade to
> think about what improvements they should make. A bad grade is just a bad
> grade. It is not a tattoo; it is not permanent. You are not marked for
> life. They still have plenty of time to do well BUT the first test tells
> them that they need to make some changes.
>
> Doing the same thing and expecting different results makes no sense.
>
> They need to study more
> Or, they need to study better
>
> I challenge them to come up with a specific plan to get better. Analyze
> what went wrong and how they are going to be different from now on.
>
> In the end, I want the A students to remain A students and I want the B,
> C, D, and F students to become A students.
>
> Studying for the CPA Exam is a lot like studying for an accounting class
> in college. You have good days when you feel like you can lick the world
> and bad days where you feel incredibly dumb. But you need to use both
> days to keep getting better.
>
> On those days when you feel smart, ask yourself: what am I doing today
> that is helping me learn and understand this material so well? Break your
> study time down and see if you can notice anything that you are doing
> unique. At the very least, let the success of the day help you to build
> success. On those days, you can just feel that you are getting closer to
> passing.
>
> On those days when you don't feel smart, think about what is holding you
> back.
> --Are you distracted?
> --Are you working on material that you have not yet covered well?
> --Are you taking time to learn from each of your mistakes?
> --Do you need to take a short break to clear your mind and get back on the
> right track?
> --Do you need to try another room? Is there a television or music that
> is keeping you from focusing?
>
> But, if you are just making mistakes, you have one primary mission: "I
> missed this question. The next time I see this question or one like it, I
> want to be able to get it correct. What do I need to do right now so that
> I can get this question right the next time?"
>
> To me, that may be the single most important question you ever ask
> yourself as you study to take the CPA Exam: What do I need to do right now
> so that I can get this question right the next time?"
>
> Whether you are having a good day or a bad day, if you can answer that
> question often enough, you'll pass the CPA Exam. Don't get discouraged
> when you miss a question. Yes, I know it disheartening to think the
> answer is A and find out that it is really B. But, don't kick the table
> or get upset with yourself -that does no good. Instead ask yourself:
> "The next time I see this type of question, how will I know that the
> answer is B."
>
> In college, the goal is to learn the material, to gain an understanding.
> On the CPA Exam, the only goal is to learn to answer questions correctly.
> That comes from going through a litany: read the question and try to
> answer it, read the official answer, figure out--what do I need to do to
> get it right the next time.
>
>
> (6) - My typical reminder - if you wish to unsubscribe, just scroll to the
> bottom of this email and you'll find a link that'll get you off our
> mailing. That is entirely up to you. If we can help at all, please stay.
>
>
> (7) - My wife as well as another friend strongly recommended that I read
> the book "Pillars of the Earth" by Ken Follett. I knew that the book was
> a very popular, epic historical novel that a lot of people loved.
> However, it is 974 pages long. But, I finally started reading it
> yesterday. In the Preface, the author talks about the fact that he had
> written six "thriller" novels that had been quite popular before he
> decided to write a more serious piece of literature. Interestingly, a lot
> of people warned him about being "overambitious" and trying "to reach
> beyond his ability." They discouraged him from even trying for greatness.
>
> Well, that is just silly. Why shouldn't a person be ambitious? Why
> shouldn't a person try to stretch themselves to see what they can really
> accomplish? If he had listened to his friends, he would still be a
> relatively obscure writer of "thriller" novels. But, because he had the
> ambition to take on a massive task (writing a 974 page novel is incredibly
> difficult), he has become an internationally famous author. In fact, one
> of the reviews of this book puts it very well: "with this book, Follett
> risks all and comes out a clear winner."
>
> I fully understand that when you decide to take the CPA Exam, it is a sign
> that you are taking a risk. You are reaching for a new goal in life. You
> are risking a lot of time and energy knowing that you can fail.
>
> Remember, if it were easy, passing would not seem so wonderful.
>
> There is nothing wrong with having a lot of ambition; there is nothing
> wrong with stretching yourself to see just how successful you can really
> be. If you never stretch yourself, if you never shoot for the stars,
> you'll just live in a rut. Who wants to live in a rut?
>
> If you are wondering whether you should have taken on the task of trying
> to pass the CPA Exam, well, I'm here to tell you that the answer is a very
> loud "YES." I know there are times you shake your head and ask "why did I
> ever think I could pass the CPA Exam?" Sure, we all have those days.
> But, you already know the answer-because you wanted to stretch yourself
> and become better. You wanted to succeed. You wanted to achieve your
> dreams. You wanted to do something special. And, there are no better
> reasons for taking the CPA Exam than those.
>
> Interestingly, Follett started this book by writing five days per week.
> He soon realized that he could never finish the book at that pace so he
> started writing six days per week. But, even then, he couldn't write fast
> enough so he pulled out all the stops and started writing seven days each
> week. As a writer myself, I cannot begin to tell you how stressful that
> can be. However, he did it and he kept doing in-day in and day out. It
> took him several years but he managed to write all 974 pages and now
> people all over the world think he is a genius.
>
> Ambition + Effort = Success
>
> He did it and so can you.
>
>
> (8) - Practice - there is always time, each day for a bit more practice.
> Every question you work moves you closer to success.
>
> FAR (from my Intermediate Accounting class for tomorrow)
>
> On December 31, Year One, the Reinhardt Company owns a tractor and leases
> it to the Smith Company. The tractor has a life of five years but the
> lease is only for four years. Which of the following statements is NOT
> true for the Reinhardt Company?
>
> A - If this is a sales-type lease, profit will be recognized immediately
> with interest revenue then recognized over the next four years.
> B - If this is a direct financing lease, no profit is recognized
> immediately but interest revenue is recognized over the next four years.
> C - Based on the information, this might be an operating lease or it might
> be a capital lease.
> D - Reinhardt must base the computation of interest revenue on the imputed
> interest rate built into the contract.
>
> Answer is C
>
> Because the lease is for 75 percent or more of the asset's life (4 out of
> 5 years or 80 percent) it must be reported as capital lease. There is no
> choice. For the lessor, all capital leases are either direct financing
> leases (the lessor is not a dealer or manufacturer) or sales type leases
> (the lessor is a dealer or manufacturer). In a direct financing lease,
> all of the profit is recognized as interest over the life of the lease.
> In a sales-type lease, the normal profit margin on a sale is recognized
> immediately with all remaining profit recognized as interest over the life
> of the control. In either case, the interest is the imputed rate built
> into the contract by the lessor when the lease payments were calculated.
>
>
> Regulation
>
> John Smoak owns a business that he operates as a sole proprietor. He has
> an asset that he uses solely in this business with a tax basis of $34,000
> but a fair value of $39,000. He trades this asset for like-kind property
> that he will also use in his business. The new asset has a fair value of
> only $36,000 so Smoak also receives cash of $3,000. What gain does Smoak
> recognize for income tax purposes as a result of this exchange?
>
> A - Zero
> B - $2,000
> C - $3,000
> D - $5,000
>
> Answer is C
>
> Like-kind exchanges are normally tax-free. However, when boot (the cash)
> is received, there is a tax effect that must be recognized. The tax
> effect is the lower of the boot received (cash of $3,000) or the gain on
> the exchange. The taxpayer gave up a tax basis of $34,000 and received
> fair value of $39,000 ($36,000 plus $3,000) so the taxpayer had a gain of
> the $5,000 difference. The $3,000 is less and is taxable.
>
>
> Auditing & Attestation
>
> A small CPA firm audits the financial statements of the Richmond Company
> and provides an unqualified audit report. A few weeks later, members of
> the firm realize that a disgruntled employee (who had since resigned) had
> not observed the taking of Richmond's physical inventory count. He
> claimed to have been there but was actually not present. What should the
> firm do first?
>
> A - Apply alternative procedures to see if sufficient evidence can be
> obtained to substantiate the inventory balance.
> B - Recall the audit report.
> C - Contact every member of the board of directors of the Richmond
> Company.
> D - Issue an adverse audit opinion.
>
> Answer is A
>
> Because of the missed observation, the firm does not have sufficient
> evident to provide an unqualified opinion. The firm does not know whether
> a material misstatement exists in this balance. If possible, the firm
> needs to ascertain the likelihood of a problem with the inventory balance.
> Alternative procedures may be available that will allow the firm to gain
> the support that is needed as a basis for the unqualified opinion.
>
>
> BEC
>
> A company begins producing widgets this year and manufacturers 30,000 and
> sells 25,000. Direct material cost $130,000 and direct labor cost
> $90,000. Factory overhead was $140,000: $80,000 variable and $60,000
> fixed. Selling and administrative expenses were $200,000: $90,000
> variable and $110,000 fixed. For internal reporting purposes, the company
> uses variable (direct) costing. What is the ending amount of finished
> goods?
>
> A - $48,000
> B - $50,000
> C - $60,000
> D - $65,000
>
> Answer is B
>
> Direct (variable) costing only considers variable manufacturing cost in
> determining the cost of inventory. To produce 30,000 units, the variable
> manufacturing costs were $300,000 (direct material of $130,000, direct
> labor of $90,000, and variable factory overhead of $80,000). That is $10
> per unit. The company produced 30,000 units but only sold 25,000 so 5,000
> units were left. At $10 each, that is a total cost (according to variable
> costing) of $50,000.
>
> Have a great week - keep making those adjustments in order to move right
> toward your goal.
>
>
> Joe Hoyle
>
> Co-Founder
> CPA Review for FREE
>
>
> CPA Review for FREE
>
> www.CPAreviewforFREE.com
> Always Work To Get Better
>
> 65 Weeks of Operation and 5,724,577 Page Views (without a penny spent on
> marketing)
>
> Lesson 48
>
> From: Joe
>
> (1) - Wow, I must have gotten a gazillion (maybe two gazillion) requests
> for the 20 FAR questions and answers that I offered last week so you could
> test your strengths and weaknesses. Enjoyed touching base with so many of
> you. I'll leave the offer open for another few days if you are
> interested. Just send the request to Jhoyle@cpareviewforfree.com.
>
>
> (2) - I also received a number of questions about the top 100 folks in the
> Accounting Profession. If you want to see the entire list, it is at
> http://m1e.net/c?109775336-WuOKNpIp53.Jk%404653719-A9yIlwNwjJ01c You will
> need to register but that is a pretty easy process.
>
>
> (3) - Last week, we had a 32.8 percent jump in the number of visitors to
> our website!!! In our 65 weeks of existence, that was by far our biggest
> single week jump. Thanks to everyone who has been so kind as to pass
> along a good word about www.CPAreviewforFREE.com to friends and neighbors.
> We spend nothing on advertising or marketing so without you folks we would
> be out of business.
>
>
> (4) - Got a couple of wonderful notes this week from excited candidates:
>
> From MR: "I absolutely love your site! It got me through FAR and I'm
> studying for AUD now. I have told every CPA candidate that I know, about
> your site! I just wanted to thank you for such a great study tool and at
> no cost!! Thank you for your efforts in helping all of us succeed!"
>
> From SN: "I would like to share with you the good news - I passed REG
> which was my last section with an 84 (thank God) in the August 2009
> window. Now I am done with all the 4 parts of the CPA exam. THANK YOU for
> making cpareviewforfree.com available for CPA candidates like myself. I
> used your website diligently for both BEC and REG. They were very helpful
> and I am very grateful to you for providing such a great website at no
> additional cost."
>
> From JD: "This website has really helped me lot. I cleared my BEC in the
> last window and am now working on FAR. Credit for my confidence and
> passing goes only to your CPAreviewforfree practice tests and your email
> tutorials. Thanks a lot."
>
> We are delighted to help!!!
>
>
> (5) - During each semester, I give three tests and then a final exam. On
> Monday of this week, I gave back the first test of the semester to all my
> students. I had grades that ranged from 100 to 49. I am always
> fascinated to see how college students react to getting their first grade.
> Some are all smiles while others sit quietly and look miserable.
>
> I don't want bad grades; I genuinely want them to learn the material. We
> all understand the goal.
>
> So, after handing back the tests, I talk with them about what I want to
> see from them starting right now. I want those who liked their grade to
> take some time to think about what they did that got them a good grade and
> then make a pledge to keep doing it. In addition, though, as they
> reflect, I want them to think about what specific adjustments might help
> to ensure that they will continue to do well.
>
> Keep pushing and make adjustments where needed. Good motto.
>
> I don't want the students who did well to get over-confident - that often
> leads them to get lazy and careless. They got a good grade. Now is NOT the
> time to get complacent. Don't rest on one good grade. What does it take
> to do well and what does it take to do even better?
>
> But, I also encourage the students who were disappointed in their grade to
> think about what improvements they should make. A bad grade is just a bad
> grade. It is not a tattoo; it is not permanent. You are not marked for
> life. They still have plenty of time to do well BUT the first test tells
> them that they need to make some changes.
>
> Doing the same thing and expecting different results makes no sense.
>
> They need to study more
> Or, they need to study better
>
> I challenge them to come up with a specific plan to get better. Analyze
> what went wrong and how they are going to be different from now on.
>
> In the end, I want the A students to remain A students and I want the B,
> C, D, and F students to become A students.
>
> Studying for the CPA Exam is a lot like studying for an accounting class
> in college. You have good days when you feel like you can lick the world
> and bad days where you feel incredibly dumb. But you need to use both
> days to keep getting better.
>
> On those days when you feel smart, ask yourself: what am I doing today
> that is helping me learn and understand this material so well? Break your
> study time down and see if you can notice anything that you are doing
> unique. At the very least, let the success of the day help you to build
> success. On those days, you can just feel that you are getting closer to
> passing.
>
> On those days when you don't feel smart, think about what is holding you
> back.
> --Are you distracted?
> --Are you working on material that you have not yet covered well?
> --Are you taking time to learn from each of your mistakes?
> --Do you need to take a short break to clear your mind and get back on the
> right track?
> --Do you need to try another room? Is there a television or music that
> is keeping you from focusing?
>
> But, if you are just making mistakes, you have one primary mission: "I
> missed this question. The next time I see this question or one like it, I
> want to be able to get it correct. What do I need to do right now so that
> I can get this question right the next time?"
>
> To me, that may be the single most important question you ever ask
> yourself as you study to take the CPA Exam: What do I need to do right now
> so that I can get this question right the next time?"
>
> Whether you are having a good day or a bad day, if you can answer that
> question often enough, you'll pass the CPA Exam. Don't get discouraged
> when you miss a question. Yes, I know it disheartening to think the
> answer is A and find out that it is really B. But, don't kick the table
> or get upset with yourself -that does no good. Instead ask yourself:
> "The next time I see this type of question, how will I know that the
> answer is B."
>
> In college, the goal is to learn the material, to gain an understanding.
> On the CPA Exam, the only goal is to learn to answer questions correctly.
> That comes from going through a litany: read the question and try to
> answer it, read the official answer, figure out--what do I need to do to
> get it right the next time.
>
>
> (6) - My typical reminder - if you wish to unsubscribe, just scroll to the
> bottom of this email and you'll find a link that'll get you off our
> mailing. That is entirely up to you. If we can help at all, please stay.
>
>
> (7) - My wife as well as another friend strongly recommended that I read
> the book "Pillars of the Earth" by Ken Follett. I knew that the book was
> a very popular, epic historical novel that a lot of people loved.
> However, it is 974 pages long. But, I finally started reading it
> yesterday. In the Preface, the author talks about the fact that he had
> written six "thriller" novels that had been quite popular before he
> decided to write a more serious piece of literature. Interestingly, a lot
> of people warned him about being "overambitious" and trying "to reach
> beyond his ability." They discouraged him from even trying for greatness.
>
> Well, that is just silly. Why shouldn't a person be ambitious? Why
> shouldn't a person try to stretch themselves to see what they can really
> accomplish? If he had listened to his friends, he would still be a
> relatively obscure writer of "thriller" novels. But, because he had the
> ambition to take on a massive task (writing a 974 page novel is incredibly
> difficult), he has become an internationally famous author. In fact, one
> of the reviews of this book puts it very well: "with this book, Follett
> risks all and comes out a clear winner."
>
> I fully understand that when you decide to take the CPA Exam, it is a sign
> that you are taking a risk. You are reaching for a new goal in life. You
> are risking a lot of time and energy knowing that you can fail.
>
> Remember, if it were easy, passing would not seem so wonderful.
>
> There is nothing wrong with having a lot of ambition; there is nothing
> wrong with stretching yourself to see just how successful you can really
> be. If you never stretch yourself, if you never shoot for the stars,
> you'll just live in a rut. Who wants to live in a rut?
>
> If you are wondering whether you should have taken on the task of trying
> to pass the CPA Exam, well, I'm here to tell you that the answer is a very
> loud "YES." I know there are times you shake your head and ask "why did I
> ever think I could pass the CPA Exam?" Sure, we all have those days.
> But, you already know the answer-because you wanted to stretch yourself
> and become better. You wanted to succeed. You wanted to achieve your
> dreams. You wanted to do something special. And, there are no better
> reasons for taking the CPA Exam than those.
>
> Interestingly, Follett started this book by writing five days per week.
> He soon realized that he could never finish the book at that pace so he
> started writing six days per week. But, even then, he couldn't write fast
> enough so he pulled out all the stops and started writing seven days each
> week. As a writer myself, I cannot begin to tell you how stressful that
> can be. However, he did it and he kept doing in-day in and day out. It
> took him several years but he managed to write all 974 pages and now
> people all over the world think he is a genius.
>
> Ambition + Effort = Success
>
> He did it and so can you.
>
>
> (8) - Practice - there is always time, each day for a bit more practice.
> Every question you work moves you closer to success.
>
> FAR (from my Intermediate Accounting class for tomorrow)
>
> On December 31, Year One, the Reinhardt Company owns a tractor and leases
> it to the Smith Company. The tractor has a life of five years but the
> lease is only for four years. Which of the following statements is NOT
> true for the Reinhardt Company?
>
> A - If this is a sales-type lease, profit will be recognized immediately
> with interest revenue then recognized over the next four years.
> B - If this is a direct financing lease, no profit is recognized
> immediately but interest revenue is recognized over the next four years.
> C - Based on the information, this might be an operating lease or it might
> be a capital lease.
> D - Reinhardt must base the computation of interest revenue on the imputed
> interest rate built into the contract.
>
> Answer is C
>
> Because the lease is for 75 percent or more of the asset's life (4 out of
> 5 years or 80 percent) it must be reported as capital lease. There is no
> choice. For the lessor, all capital leases are either direct financing
> leases (the lessor is not a dealer or manufacturer) or sales type leases
> (the lessor is a dealer or manufacturer). In a direct financing lease,
> all of the profit is recognized as interest over the life of the lease.
> In a sales-type lease, the normal profit margin on a sale is recognized
> immediately with all remaining profit recognized as interest over the life
> of the control. In either case, the interest is the imputed rate built
> into the contract by the lessor when the lease payments were calculated.
>
>
> Regulation
>
> John Smoak owns a business that he operates as a sole proprietor. He has
> an asset that he uses solely in this business with a tax basis of $34,000
> but a fair value of $39,000. He trades this asset for like-kind property
> that he will also use in his business. The new asset has a fair value of
> only $36,000 so Smoak also receives cash of $3,000. What gain does Smoak
> recognize for income tax purposes as a result of this exchange?
>
> A - Zero
> B - $2,000
> C - $3,000
> D - $5,000
>
> Answer is C
>
> Like-kind exchanges are normally tax-free. However, when boot (the cash)
> is received, there is a tax effect that must be recognized. The tax
> effect is the lower of the boot received (cash of $3,000) or the gain on
> the exchange. The taxpayer gave up a tax basis of $34,000 and received
> fair value of $39,000 ($36,000 plus $3,000) so the taxpayer had a gain of
> the $5,000 difference. The $3,000 is less and is taxable.
>
>
> Auditing & Attestation
>
> A small CPA firm audits the financial statements of the Richmond Company
> and provides an unqualified audit report. A few weeks later, members of
> the firm realize that a disgruntled employee (who had since resigned) had
> not observed the taking of Richmond's physical inventory count. He
> claimed to have been there but was actually not present. What should the
> firm do first?
>
> A - Apply alternative procedures to see if sufficient evidence can be
> obtained to substantiate the inventory balance.
> B - Recall the audit report.
> C - Contact every member of the board of directors of the Richmond
> Company.
> D - Issue an adverse audit opinion.
>
> Answer is A
>
> Because of the missed observation, the firm does not have sufficient
> evident to provide an unqualified opinion. The firm does not know whether
> a material misstatement exists in this balance. If possible, the firm
> needs to ascertain the likelihood of a problem with the inventory balance.
> Alternative procedures may be available that will allow the firm to gain
> the support that is needed as a basis for the unqualified opinion.
>
>
> BEC
>
> A company begins producing widgets this year and manufacturers 30,000 and
> sells 25,000. Direct material cost $130,000 and direct labor cost
> $90,000. Factory overhead was $140,000: $80,000 variable and $60,000
> fixed. Selling and administrative expenses were $200,000: $90,000
> variable and $110,000 fixed. For internal reporting purposes, the company
> uses variable (direct) costing. What is the ending amount of finished
> goods?
>
> A - $48,000
> B - $50,000
> C - $60,000
> D - $65,000
>
> Answer is B
>
> Direct (variable) costing only considers variable manufacturing cost in
> determining the cost of inventory. To produce 30,000 units, the variable
> manufacturing costs were $300,000 (direct material of $130,000, direct
> labor of $90,000, and variable factory overhead of $80,000). That is $10
> per unit. The company produced 30,000 units but only sold 25,000 so 5,000
> units were left. At $10 each, that is a total cost (according to variable
> costing) of $50,000.
>
> Have a great week - keep making those adjustments in order to move right
> toward your goal.
>
>
> Joe Hoyle
>
> Co-Founder
> CPA Review for FREE
>
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