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99 Weeks of Operation and 12,124,462 Page Views (without a penny spent on marketing)

Lesson 71

From: Joe


(a) – We officially went over 12,000,000 page views last week!!! Hard to believe we’ve been able to do this without advertising but you guys have made it happen. Thanks a million (well 12 million)!!!

And, last week, yet again, our traffic set a new all time high. The average (“average” not “highest”) candidate came to our site 2.39 times during the week and looked at a total of 62.5 pages of information.

That’s a lot of points added and every single one of those points was added for F*R*E*E. Free, Free, Free. Don’t you know that the folks who run those other courses charging $2,800 really hate the word “FREE.”


(1) – Here in the United States, Monday is Memorial Day—a national day that commemorates the men and women who have been willing to die for their country while in the military service. We here at www.CPAreviewforFREE.com want to salute all of the folks (and their families) who serve and sacrifice so that we can stay free. If you know someone in the military or, perhaps, a family who has had a love one die in the military, please pass along a kind, grateful word.


(2) – One of the most common questions that I get concerning www.CPAreviewforFREE.com is “I’m ready to give it a try. I’d like to keep my money in my pocket. What do I have to lose???? How should I get started?”

Good question. Here’s what I would do:
--Go to www.CPAreviewforFREE.com
--Click on “resources” at the top of the screen.
--You should see a section called “Articles”
--Click on “Using CPAreviewforFREE to prepare for success on the CPA Exam”
--Read every word of that essay carefully.
--Click on “Register” and get started.
--Pick a topic
--Start answering questions – when you study, never guess at an answer
--If you get the question right, read the answer quickly and then move on
--If you do not get the question right, read the answer carefully. This is by far the most important part of the entire process. Try to pick up at least one factor that would help you to get this question right if you were to see it again in 2-3 weeks. Preparation is all about improving your ability to get questions right. That is your only goal. Add points. Add points. Add points.
--When you read an answer for a question you missed, try to write down something to help you get the question right the next time. Limit what you write to 10 words or less per question. Don’t write an essay—just a memory kicker (“this will help me remember how to do this next time.”)
--Remember—college classes are designed to teach understand. Our goal is to help you get questions right and add points until you make 75 and pass!!!!


(3) – One of my partners sent along this message. I always want to keep the partners happy since they do all of the real work. “Please mention in your next newsletter that our site is "pf" (phone friendly) meaning that candidates can work our multiple choice questions on their smart phones (iPhone, Blackberry, Droid,etc). They can study on the go (but, of course, not behind the wheel of a car).” We want you to pass the CPA exam – not die trying.


(4) – I have become very fond of a little number game called KenKen. It is a lot like Suduko except that you have to do some simple mathematical computations that you fit together to form a box. I like to do KenKen when I take sauna baths. Doing those puzzles helps distract my mind from the fierce heat and allows me to stay in the sauna for a longer period of time.

Tuesday I got into the sauna and started working one of the KenKen puzzles. About half-way through I got stuck so I tried to quickly start over and managed to get stuck again at the same place. I started to rush through checking my numbers but I also started noticing how hot I was getting. I really wanted to finish that puzzle before I had to get out of the sauna so I started pushing myself to work faster. I kept saying “think, think –you can do this. You’re being dumb.”

I finally just gave up before I melted. I threw the puzzle on the floor and stomped off to take my shower.

Later, I came back all cooled down. I picked up the puzzle and looked at it and knew my mistake immediately. It did not take me two seconds to see that I had reversed two numbers and I then finished the puzzle successfully in just a few minutes.

Why was my problem so hard to work at first and then so easy to work later?

I often tell my students to picture their brains as a big muscle somewhat like the ones in your arm. If I give you a baseball and tell you to throw it and you keep your arm muscle loose, you can throw it for a pretty good distance. But, if you tense up your arm, it becomes more and more difficult to throw the ball. In fact, if you tense up those muscles enough, you cannot even move your arm.

The brain is the same way. If you tense it up, it becomes less and less able to function until, with enough tension, it won’t move at all. It just shuts down. But, if you can loosen it up, it works like the natural marvel it is. Your goal should always be to have a brain that is focused but loose. Focused so you don’t get distracted but loose so it is able to move around and do the thinking necessary. No brain thinks better than a focused but loose brain.

When I was trying to work the KenKen puzzle, I started to get upset and tense because I was hot and in a hurry. The more I rushed, the more tense my brain became. Eventually, there was no chance in the world that I could complete the puzzle. My brain just was not going to work because of the tension I was exerting. However, when I moved on to something else and came back, my brain was back to a loose but focused state. I had the right frame of mind to get it done and, sure enough, I did. The problem was actually easy.

I always tell my students “if your jaw is clenched, your brain is probably too tense. If your jaw is loose, your brain probably is also.”

Whether you are studying tonight or taking the CPA Exam tomorrow, don’t let a tense brain block your chance of making 75 and passing. Keep the jaw loose and if you find yourself too tense over a question, move on to the next one. Getting upset and panicky is not helpful; it is about the worst thing you can do. Loose and focused – that’s the key to brain success.


(5) – Here is a nice note that I received last week from ES. Always makes me smile to hear from folks: “I just wanted to let you know how much I love your emails. I've passed both BEC and AUD on my first attempt thanks to your study tips/questions and XX review. I'm currently studying for REG and am completely overwhelmed by XX review. However, I started working through your questions from the website and from some of your old emails, and I'm finding that I feel much more confident after working your questions. There is just so much detail involved with REG that it is difficult to remember every little piece of information. I kept doing XX questions and kept getting them wrong because I would forget one small thing. But with your questions, I am getting them correct and understanding your explanations as well. So thank you for helping me add points and keep my sanity while studying!”

And, here’s an email I got on the same day from FT: “Thank you for a free website and all the motivating e-mails. I passed BEC and REG using cpareviewforree.com. All personal websites are blocked at my workplace except for yours. I make sure I go through 50 questions per day. I am now struggling with audit and thank you for all those free questions. Too bad there are going to be too many CPAs and not enough jobs for them. I am not giving up though! Thank you Thank you. God sends angels in different forms.”

Well, I’m not sure if we qualify as “angels” but I do appreciate the thought!!!


(6) – As always (we are legally required to make this mention but I hope you understand that the offer is real), do know that you can very easily stop getting these email lessons by scrolling to the bottom of this lesson and clicking on the appropriate button. We want to help. We are delighted to be of assistance. But, the moment you are ready to move on, please feel free to unsubscribe.


(7) – Let’s do some practice. Let’s add some points. You CAN do it!! I know you can.

Here we go.


Financial Accounting and Reporting

The Artichoke Company expects to make $200,000 in net income this year and pay income taxes at a 30 percent rate. In the first quarter of the year, the company makes income of $40,000 and the previous estimations remain the same. In the second quarter, the company makes another $60,000 in income but now believes the effective tax rate for this tax year is probably going to be 32 percent instead of 30 percent. How much income tax expense should the company recognize in the second quarter of the year?

A. $16,000
B. $18,000
C. $19,200
D. $20,000


Answer is D

In the first quarter of the year, the company has income so far of $40,000 and expects a tax rate of 30 percent so an expense of $12,000 is recognized. By the end of the second quarter, the company has earned total income of $100,000 ($40,000 + $60,000) but the expected tax rate is now assumed to be 32 percent or a total of $32,000. In reporting the second quarter, the company has to raise its expense from $12,000 to $32,000. Thus, the expense must be increased by $20,000 for that second period.


BEC

A company has a large building in Detroit. The company can sell the building for $1.7 million or refurbish the building for $220,000 and then rent it for ten years at $370,000 per year. Company officials consider the possibilities and choose to refurbish the building for rental purposes. What is the $1.7 million?

A. A fixed cost
B. A variable cost
C. A sunk cost
D. An opportunity cost


Answer is D

In making decisions about the use of assets, benefits that are passed up are referred to as opportunity costs. In other words, the $1.7 million was an opportunity for the company and the decision was made not to take advantage of that possibility. A sunk cost is a real cost incurred in the past that cannot now be changed. A fixed cost is one that will not increase as production levels increase (within a relevant range). A variable cost is one that will increase as production levels increase.


Regulation

The firm of Assini and Grim CPAs is doing the current year tax return for Mr. and Mrs. Clarence Alexander. The return was done in the previous year by John Roberts CPA. Assini and Grim discover that a $30,000 itemized deduction was incorrectly taken by the taxpayers in the previous year. What should the new CPAs do about this mistake?

A. File an amended return for the previous year.
B. Talk with the taxpayers and urge them to file an amended return.
C. Contact John Roberts CPA and explain the problem and suggest that he take remedial action.
D. Contact the IRS so that they can contact the taxpayers about the problem.

Answer is B

The return is that of the taxpayers so the CPA firm cannot contact any outside party (the previous CPA or the IRS) and cannot file an amended return without the consent of the taxpayer. Thus, the CPA should discuss the issue with the taxpayer and provide clear advice as the appropriate action that should be taken to rectify the problem.


Auditing and Attestation

The CPA firm of Abercrombie & Fitch discovers that the president of its biggest client committed several illegal acts in the name of the company last year. He authorized the payment of bribes to officials of a competing company. The board of directors was informed of this activity but chose to take no action because the amounts were judged to be immaterial in comparison to the reported balances taken as a whole. Which of the following is the most likely decision by the CPA firm?
A. Contact the appropriate government officials to disclose the actions of the president.
B. Provide disclosure of the information in the audit report but do not change the audit opinion being rendered.
C. Provide disclosure of the information in the audit report and do change the audit report to a qualified audit opinion.
D. Consider quitting the engagement.


Answer is D

The board of directors is supposed to set the ethical standards for a company. If no action is taken in this situation when an illegal act has been performed in the name of the company, the CPA firm should consider whether it wants to be associated with an organization which appears to have ethically challenged leadership at both the board of director level as well as the presidential level. The firm might decide not to quit but they need to consider that possibility.


Have a great Memorial Day. Take a few moments out to remember those who have served and died.