72 Weeks of Operation and 7,045,237 Page Views (without a penny spent on marketing)
Lesson 54
From: Joe
(a) - I won't tell you who I am watching but my NFL team is ahead right now. But, I'm going to write this email and only watch the game every 10 minutes for about a minute. I guess I want you to pass more than I want to sit and watch a football team play.
(1) - At least in the United States, this coming Thursday is Thanksgiving Day. Wherever you live, it is not a bad idea to take a few moments and think about the many things you have to give thanks for. Somehow our society seems to have become obsessed with the problems of life. It is hard to turn on television or the radio or pick up a newspaper without having 20 different people telling us all the things that are wrong with life today. I am amazed by how many people make their livelihoods screaming about how bad things are.
You know, if you hear that enough, it is easy to start believing it.
Okay, I'm not naïve. I know that the world has problems and that each of us has our own problems. But, I'm not ready to spend 24 out of each day beating my head over those problems.
When I was growing up, I would often complain to my father about how bad things were in the world. His response was always the same: "I lived through the Great Depression where we had no money, little or no food, outdoor toilets, no running water, and most people died before they were 50. To me, life today doesn't seem all that bad."
Maybe that is the problem. Maybe we have so very much to be thankful for that we just take it for granted. So, on Thursday, don't take it for granted. Sit down and make a list of the 10 or 20 things that really make your life special.
You'll feel better. I guarantee it.
(2) - We here at www.CPAreviewforFREE.com are grateful for all of you guys. We moved over 7 million page views this past week. (7 million!!!!!) That's a lot of page hits in just 72 weeks (WITH NO ADVERTISING).
We could not have made the splash without you guys spreading the word. So:
THANKS!!!!!!
(3) - A couple of nice notes from several of our "customers:"
FROM BC: As evidence of the quality of your CPA review questions, I just made a 91 on the FAR. Didn't go to any of those review classes, just used two sources: your website, and the Wiley book. Thank you so much for your service and your inspirational emails. I will continue to use your website as I prepare for BEC, REG, and AUD.
FROM MH: Thank you for your dedication in helping us to pass the CPA exam. I am an international student from Mexico, I took classes in Belize Central America and it has been a long process to get approved to sit for the exam. My "big name" review is expiring - I am so thankful to have a good alternative to continue studying. Thank you. When I pass the CPA exam, you will be one of the first persons that will know. I hope you are well, thank you for sharing the chalk art by your son. It was fun!
FROM GS: I am currently working on the FAR exam and I noticed your questions and explanations seem to be better than the (big major CPA review program) material.
(4) - As always, just a reminder: if you want to unsubscribe from getting these CPA Review for FREE email lessons every week or so, just scroll to the bottom of this email and click on the link that is provided.
(5) - I am always fascinated by people who have been successful over a long period of time. A lot of people are successful once and then never again. Almost like it was an accident. But, in every profession, you find a few people who seem to be at the top consistently. Those are the people that I want to learn from.
I figure that they must have some kind of special secret and I am always looking for that secret.
Last week on National Public Radio, Roy Williams-who is the coach of the University of North Carolina basketball team-was interviewed. He is clearly one of the real winners in college basketball. His teams have done well for a long time. Although I went to a school that is a rival of UNC, I must admit that he knows how to build a winning program.
During the interview, he said two things that I thought showed why he was a winner. He made two points that I need to make to myself.
They asked him what his team yells whenever they break out of a huddle. It wasn't "win" or "beat them" or "go team." It was "HARD WORK!!" I think you can learn right there from Roy Williams what it takes to be good at something for a long period of time. If you can figure out how to make "Hard Work" your motto, I think you will have taken a giant step toward success.
If you have followed these email lessons for long, you probably know that my ultimate secret for passing is CPA Exam is always the same: "Hours Equal Points."
--Work all of the questions
--Work them again.
--Take notes
--Carry those notes with you and study them whenever you have a free moment.
What you need to do to pass the CPA Exam is not rocket science. The hard part is just doing it day in and day out. The hard part is doing it and not wasting time or losing focus.
That's why I am always so thrilled when someone writes to tell me that they have passed the CPA Exam; I know how hard they have worked. I know the time and energy they have sacrificed. I know how much they have done to gain those points. Hard work is never easy.
It is not about an expensive review course (or even a free review course), it is all about hard work. The willingness to do it.
Hard work is no guarantee that you will pass. However, if you don't put in the hard work, you are almost guaranteed that you will not pass.
The second thing that Coach Williams said that caught my attention was when he said that he always told his players not to come back to the locker room after the game wishing about what they had done differently. Do it right the first time. Do it to the best of your ability the first time. Win or lose, give it all you've got the first time.
If you are going to do it, if you are going to put in the hard work, then, do that work before you take the exam and don't wish about doing it after you take the exam.
Let's break it down to right now: How many hours can you legitimately spend studying for the CPA Exam over the next week?
Set up that goal. Make it a real, honest goal.
Okay - go do it!!!
(6) - I had an appointment this past week and I got to the place a bit early. So, I sat in the waiting room and they had a copy of Sports Illustrated from a couple of weeks back. To kill a few minutes, I opened it up. The very first thing I saw was this description of a professional basketball player (a guy named Chris Andersen-a person that I don't think I had ever heard of):
---"Here's a guy who plays harder than anyone on the court and he does it every night."
---"He swoops in for rebounds, pounces on loose balls and plays with an almost jarring amount of energy."
Wouldn't it be great to be known as:
--a guy who plays harder than anyone
--a guy who plays harder than anyone every night
--a guy who plays with an almost jarring amount of energy.
Okay, here is my question for YOU (yes, you) right now. If someone were watching you and how you study for the CPA Exam, what would that person say? How would they describe you? Would they call you someone who works harder than anyone every night, someone who studies with an almost jarring amount of energy?
When the people around you start saying this about you, your chances for success have gone sky high. And, the best thing: this does not require money or talent. No matter who you are; you are not at a disadvantage when it comes to working hard. It only requires you to get some energy into your life and do the work necessary to add those points.
That is something that everyone (yes, YOU) can do.
(7) - PRACTICE!!!!
FAR
The Seattle Company reports assets of $500,000 on January 1, Year One and liabilities of $100,000. However, one building with a book value of $150,000 and a remaining life of 10 years is really worth $270,000. The Polono Company acquires 30 percent of the outstanding shares of Seattle for $156,000. This ownership gives Polono the ability to apply significant influence to the operating and financing decisions of Seattle. At the end of Year One, Seattle reports net income of $130,000 and pays cash dividends of $40,000. What amount of income should Polono recognize as a result of its ownership?
A - $12,000
B - $27,000
C - $35,400
D - $39,000
Answer is C
Because Polono has the ability to apply significant influence, this investment is recorded by means of the equity method. That means that income recognized each year is the owner's share of the reported income less any amortization resulting from the purchase price. Seattle had a book value of $400,000 ($500,000 less $100,000). Polono bought 30 percent which equates to a price of $120,000. However, Polono paid an extra $36,000 ($156,000 less $120,000). That added price is explained by the building. It was worth $120,000 more than book value ($270,000 less $150,000). Since Polono bought 30 percent, the assumption is that an extra $36,000 was paid to compensate for the extra building value ($120,000 times 30 percent). The building has a ten-year life so Polono's cost is amortized at the rate of $3,600 per year. Thus, the owner recognizes $39,000 in income (30 percent of the $130,000 reported) less $3,600 in amortization on the extra payment because of the building or
a net amount of $35,400.
Auditing & Attestation
The CPA firms of Gibbs and Spurrier is auditing a large company located in New Jersey. One subsidiary is located in California and the CPA firm of Landry and Company audited this subsidiary. Landry and Company has a great reputation and is independent of the audit client. A partner in the firm of Gibbs and Spurrier flies to California to review the audit program followed by Landry and Company in auditing the subsidiary. What is the most likely reason for this trip?
A - Gibbs and Spurrier do not plan to make reference to the work of Landry and Company in the audit opinion of the consolidated company.
B - Gibbs and Spurrier must always make this type of trip when another audit firm has done part of the audit work.
C - Gibbs and Spurrier plan to make reference to the work of Landry and Company in the audit opinion of the consolidated company.
D - Gibbs and Spurrier should not have made this trip since each firm is responsible for their own work.
Answer is A
When another firm does part of the audit work, the firm that is going to provide the overall audit opinion on the consolidated statements must take several actions in connection with the other firm: make inquiries about its professional reputation, get representation that the firm is independent of the audit client, and make sure the other firm knows that the audited financial information will be included in the consolidated statements. However, if the audit firm that is going to issue the audit report does not plan to make reference to the other firm, several other actions should be considered including review of the audit program and the resulting working papers. They are not required but they should be considered.
Regulation
On a Form 1120, what is the purpose of Schedule M-2?
A - Reconciles net income to taxable income.
B - Reconciles unappropriated retained earnings from the beginning of year to the end.
C - Reconciles revenue per books to revenue reported on the tax return.
D - Reconciles total expenses on the financial statements to the ordinary and necessary expenses reported on the tax return.
Answer is B
Schedule M-1 on the form 1120 reconciles the income on the corporation's financial statements to the taxable income being reported. Then, Schedule M-2 analyzes the changes in unappropriated retained earnings from the first day of the year to the last.
BEC
A company is studying a possible investment opportunity. The company can spend $22,000 and then get $5,000 in cash at the end of each of the next 8 years. The company has a target rate on such investments of 6 percent per year. The present value of an annuity due of $1 per year at 6 percent annual interest for 8 years is 6.58. The present value of an ordinary annuity of $1 per year at 6 percent annual interest for 8 years is 6.21. Which of the following is true?
A - Company should buy the investment because it has a net present value of $9,050.
B - Company should buy the investment because it has a net present value of $10,900.
C - Company should buy the investment because the present value of 6.58 is larger than 6.0
D - Company should buy the investment because the present value of 6.21 is larger than 6.0.
Answer is A
Net present value is one technique used by some companies to evaluate the wisdom of an investment. Because payments are made at the end of each period, this is an ordinary annuity. The present value of the cash flows is $5,000 times 6.21 or $31,050. Because the cost is $22,000, the extra amount ($9,050 or $31,050 less $22,000) is called the net present value. Investments with a positive net present value are viewed as good choices.
HARD WORK!!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
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