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March 25, 2010

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Lesson 66

From: Joe


(1) – We are now officially OVER 10,000,000 PAGE VIEWS – Now, ON TO 100 MILLION.


(2) – Don’t forget that you can always pay a small fee at www.CPAreviewforFREE.com (an amount which helps us to maintain our site) and download all of the
questions and answers so you can carry them with you wherever you go. I realize that it is not always possible to be on the Internet. With downloads, you
can study any time you wish. Just go to www.CPAreviewforFREE.com and click on Store in the upper right hand corner.


(3) – If you are an educator and live in the Cincinnati area, I will be giving a live program on teaching effectiveness next Tuesday, March 30, (followed by a
panel discussion) at Northern Kentucky University. I think it should be a lot of fun. I love to talk about teaching. It is open to the public. If you would
like the place and time, drop me a note at Jhoyle@richmond.edu.


(4) – I have received a lot of wonderful emails recently. Here are just a few:

From LB: “I just want to say THANK YOU for posting all this review info for free. Do you have any idea how much this means to an unemployed person with no
source of income, to have this kind of information available? I feel empowered to change my future.”

From MV: “I wanted to thank you yet again for your great site in helping me pass another section. I received my BEC score today and scored an 83. Your
questions specifically on the CAPM model were a big plus as my review software didn't cover this and I gained a few points from this. Also, your explanations
on the cost accounting questions got me over the hurdle in understanding them finally. I have struggled with cost accounting since college and felt if I was
going to pass this section the cost accounting questions would make or break me. I am now moving to the auditing section and hope for another passing score.
Thank you for your help and continue the great work.”

From AM: “I wanted to say THANK YOU for making this resource available to the general public. It was key in helping me grasp big picture concepts as pertains
to the Tax Exam and so in the end, facilitating a passing grade! Thanks!!!!!”

From MT: “Thank you for supporting so many CPA candidates. I just passed my last exam with 1 day until the 18 month deadline. Yahoo! I used study materials
throughout the process from 3 other 'big' name providers. What I found is that most of the questions were similar to your website. For some subjects I needed
video lectures, so I would stay awake! But I always ended the day with your website. Or if I had absolutely no energy, then I would go to CPA review for free
for just 20 questions. It worked! Thank you again for a wonderful resource.”

From: JL: “I passed BEC and am studying for FAR now. I use your CPA Review for Free website all the time. I find that working through tons of practice
problems has been the best way for me to study and that website has been an awesome tool to have.”


(5) – Here’s a question that I want to pose: How do you become the person that you really want to be? Everyone talks about becoming better but how do you
actually do that? Let me make a suggestion that might have a bit of an impact. Okay, it won’t turn you into Bill Gates over night but it will, I believe,
help you focus on what you really want to become. And, I think that is so important.

After you go to bed tonight, lie there for a few minutes and think of a few adjectives that you would like to have describe you. What personal adjectives
would you like to have people use when they talk about you:
--Energetic
--Productive
--Caring
--Helpful
--Successful
--Dependable
--Efficient
--Hard-working

Come up with your own list. Keep it to about five and just repeat them over and over as you visualize the person that you are.

Do it every night – come up with different adjectives or keep the same ones but always picture the words being applied to you.

The first thing this does is make you aware of what you want to become. Often if you talk to people about their aspirations, they are so vague as to be
totally meaningless. When I do this personally, I find that I really do want to be energetic, productive, and caring. It helps me focus on the “me” I want
to become. Just saying “I want to be better” doesn’t do anyone any good.

Second, I believe there is something about associating yourself with such adjectives that makes them easier to attain. If you picture yourself every night and
repeat energetic, productive, and caring (or whatever adjectives you want for yourself), I think it makes it more likely that you will take on those
attributes. You will gradually move toward your adjectives.

Try it for a few nights. You only need to do it for a minute or two – you may be surprised to find that you start gaining those characteristics in yourself
that you admire.


(6) – Please feel free to unsubscribe whenever you wish. You can always do so by scrolling down to the bottom of this email lesson and clicking on the proper
link. We have over 12,000 subscribers and we love having you also. But always know that you can unsubscribe at any time that you wish.


(7) – The following was posted this morning on our CPAreviewforFREE page at www.FaceBook.com.

Tip Fifty – Over 2,000 years ago, the poet Horace wrote “Carpe diem, quam minimum credula postero” which translates as “Seize the day, trusting tomorrow as
little as possible.” Yesterday, I talked with my college students about “deferred learning.” That is the strategy of doing just a little bit of work today
with the promise to yourself that you’ll do a whole lot more work tomorrow (or, more specifically, right before the test). As you can imagine, in college,
deferred learning is a very popular strategy. “I’ll do it tomorrow” is never far from the lips of a college student.

If you want to pass the CPA Exam, you need to follow Horace. You need to get it done today (March 25, 2010). There is no promise that you can get anything
done tomorrow. Deferring the work may feel good but (a) you lose today and (b) you open yourself up to the uncertainty of tomorrow. All kinds of things may
keep you from studying tomorrow. I always translate Horace as “Figure out what you really want and, by gosh, go get it right now” (I guess that is the
Southern translation). If you are not willing to do it right now, you probably did not really want it.

So, if you seriously want to pass the CPA Exam, seize TODAY. Add points TODAY. Make it happen TODAY. Carp diem, quam minimum credula postero!!! Great
motto.


(8) – The most common complaint that I ever get is “I just don’t have enough time in the day to do everything.” Trust me – that is a complaint that I
understand very well myself. Life is so full of stuff that it is just hard to find time to study.

When I feel overwhelmed by all the stuff I need to get done, I usually think of President Abraham Lincoln. He was only president for four years and he had to
be the commander-in-chief throughout the horrible days of the American Civil War. In addition, one of his children died during this period. Between the
war and his personal tragedy, how could anyone accomplish anything else?

What I find interesting is that he was able to do a lot of things that had nothing directly to do with the war. Even without considering the Civil War, he is
considered to have been a great president. He helped put in place the Morrill Act that led to the creation of land grant colleges around the nation such as
NC State and Virginia Tech. He supported the Homestead Act which made millions of acres of land in the West available at low prices to allow people to leave
the big cities and create their own farms. He signed the National Banking Act which established the first paper currency. He chartered the first
transcontinental railroad. The man accomplished an incredible amount AND he led the Union in the Civil War.

I quite honestly do not know how he could have possibly been the president during the Civil War and accomplished all of those major actions. It is
incredible. I do believe, though, that we are all capable (you and me, both) of doing so much more than we actually do. I think we limit ourselves by
thinking “I am working so hard; I just cannot do one more thing.” That statement right there gives us permission to stop accomplishing stuff.

Yes, we do have to be very efficient and we have to work very hard. But I firmly believe that the amount that YOU and I can accomplish is virtually
unlimited. Instead of worrying so much about all that we have to get done, we should go about getting it done. We waste an awful lot of energy worrying
about what we have to get done. Abraham Lincoln could easily have said: “I’m fighting a terrible war. I don’t have time to do one more thing. I don’t
even have the Internet or a computer to help me work faster. Someone else is going to have to get these other things done.”

Instead of whining, he helped establish some of the greatest colleges of our country and one of the truly important achievements of his time (the
transcontinental railroad).

It is easy to whine about all that needs to doing.
It is much harder just to stop whining and start doing.


(9) – PRACTICE

FAR

The city of Krzyzewski received money during the current fiscal year from a number of different revenue sources. Which of the following should be classified
for reporting purposes as an imposed nonexchange revenue?

a. A fine for improper maintenance of a building site
b. Income tax
c. Sales tax
d. A grant given by the state government


Answer: A

An imposed nonexchange revenue occurs when a state or local government receives financial resources without an underlying event or transaction such as a sale
or the creation of income. For most governments, a property tax is the main example of an imposed nonexchange since it is not a tax on an event. However,
fines and forfeitures are also mentioned specifically by GASB as other common examples. In contrast, a grant or gift has to be reported as either a
government-mandated nonexchange transaction or a voluntary nonexchange transaction.


Regulation

Otis has a tax basis in the Barney and Otis partnership of $52,000. Title to an acre of land is conveyed to Otis as a nonliquidating distribution from this
partnership. Which of the following is correct?

a. If the land has a tax basis to the partnership of $38,000 but a fair value of $53,000, Oliver has an increase in taxable income from the distribution.
b. If the land has a tax basis to the partnership of $38,000 but a fair value of $53,000, the partnership has a taxable gain on the distribution.
c. If the land has a tax basis to the partnership of $53,000 but a fair value of $57,000, Oliver has an increase in taxable income from the distribution.
d. If the land has a tax basis to the partnership of $53,000 but a fair value of $57,000, Oliver records the land as having a tax basis of $52,000.


Answer: D

Except in some cases where cash is received, a nonliquidating distribution from a partnership creates no taxable income for either the partnership or the
partner. Normally, the partner’s tax basis in the partnership is simply reduced by the tax basis of the property received and the asset retains this same tax
basis for the partner. However, by following that rule exactly, if the tax basis of the property exceeded the tax basis of the partnership, the tax basis of
the partnership would be reduced below zero. Therefore, the tax laws make an exception at that point. If the tax basis of the property to the partnership
($53,000) is larger than the partner’s tax basis in the partnership ($52,000), the partner sets the tax basis of the new asset equal to his or her tax basis in
the partnership ($52,000) but no gain is reported.


BEC

Gray and Blue entered into a written partnership agreement to operate a book store in St. Louis, Missouri. However, this agreement made no mention of the
duration of the partnership. After some unpleasant discussions over the operation of the book store, Gray wishes to dissolve the partnership. Which of the
following statements is correct?

a. Gray may dissolve the partnership at any time.
b. Unless Blue consents to the dissolution of this partnership, Gray must apply to a court of law in order to obtain a decree that orders the dissolution.
c. Gray has no ability to bring about the dissolution of the partnership unless Blue formally consents in writing.
d. Gray may dissolve the partnership but only after formal notice of the dissolution is given to every creditor of the partnership.


Answer is A.

A partnership is dissolved whenever one of the general partners is changed. Thus, Blue can dissolve this partnership simply by withdrawing.


Auditing

The Washington Company holds a large number of accounts receivable from several different segments of its business. The auditing firm of Alexander Burr and
Associates has recently mailed out confirmations to many of the company’s customers. A positive confirmation was sent to James Monroe and a negative
confirmation was sent to Andrew Jackson. Which of the following is most likely to not be true?

a. The firm believes that James Monroe will pay close attention to the confirmation but Andrew Jackson will not.
b. The firm believes that the quality control surrounding the accounting system that maintains the record of James Monroe’s receivable is weaker than the one
that maintains the record of Andrew Jackson’s receivable.
c. The receivable balance owed by James Monroe is significantly larger than the receivable balance owed by Andrew Jackson.
d. The receivable balance owed by James Monroe is significantly larger than the receivable balance owed by Andrew Jackson.


Answer is A

Positive confirmations are viewed by auditors as more effective but they are also more costly. Therefore, positive confirmations are more likely to be
utilized whenever more risk is present. A larger receivable, an older receivable, or a receivable generated by a poorer accounting system all pose greater
risk of a material misstatement; thus, a positive confirmation is more appropriate. If James Monroe is expected to pay more attention to the confirmation than
Andrew Jackson, this factor creates less risk for the confirmation. It would cause the auditor to be more likely to make use of a negative confirmation.




Joe Hoyle
Co-Founder
CPA Review for FREE

www.cpareviewforfree.com

3351 Lady Marian Court
Midlothian, VA 23113





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