Upbeat and Positive

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October 13, 2009

CPA Review for FREE

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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