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Lesson 72
From: Joe
(1) – Nice note that came in a day or so ago from DA: “I'm glad you mentioned that the questions on your site can be worked on smart phones. I just discovered it myself recently as I was preparing for Audit. That is HUGE!! I can practice anywhere I can get service! No excuses!”
And one from HA: “Thank you! I passed AUDIT 82! I love this feeling of sending an e-mail to let you know how much I appreciate you. I am so fortunate to have come across your free website. I want all the CPA candidates in the world to know about this wonderful web site and want them to experience how I feel. I feel great! Joe, your questions and explanations are the best to put things together to provide me with the whole picture; your explanation helps me to understand the concept which I am then able to apply. So, you set me free from suffering from the vast amount of memorization and being overwhelmed. Thank you. I passed REG and BEC last time by studying your website. Unfortunately, I failed FARE 71 this time. But, I know I can pass FARE my next attempt as long as I practice your questions! Thanks for motivating me and .. helping me " NOT TO GIVE UP." Finally, I feel I am close to accomplishing my goal... it has been about 15 years. Again, thanks very very much.”
I love getting emails like these. This second person came in after struggling in the past and used our website and passed three and needs only four more points to pass that last exam. This is just great!!!
And, you can be the next – get to work and get those points and go do it!!
(2) – Okay, let’s assume you come to me and say “I want to pass the first part of the exam in 5-6 weeks from right now. I want to try my very best to pass this first part without spending a penny. I have a job and a family but I’m willing to put in 1-3 hours each evening. If I fail, I may do something different next time but, first, I want to try to do it quick and dirty and free. What would you recommend? I want to pass the first part in 5-6 weeks, I can spend 1-3 hours per day, and I want to keep my money for my spouse and kids. I don’t need to make 99 or even 76; I just want to make 75.”
Fair question – in fact, I’m surprised that I don’t get asked this question more: the quick and dirty and free approach to passing.
--Pick the part of the exam that you like best.
--Start by trying to work 30 questions each day at www.CPAreviewforFREE.com. If it turns out that you don’t have time for 30, pick some other daily goal that is reasonable for you: 25 or 20, for example.
--When studying, never guess at the answer. Read the question carefully. If you think you can get the answer, go for it.
--Read through the answer carefully. If you got the question right, move on. Don’t dwell on success. If you missed the question, write down 10 words or less that should give you a better chance to get the answer correct the next time. That’s how you add points and “adding points” is the name of the game.
--Get a supportive friend or your spouse or even a parent to play the role of your parental advisor. Lots of friends want to help—give one of the them a chance to do that. Every night when you get finished studying, email this “parental advisor” with the number of questions you did during that day. “Did 32 today” for example– keep it short. There is something about having to report your progress to a parental figure that will make you work harder.
--Ask your parental advisor to respond to every one of these emails but with just a few words. If you managed to hit your daily goal, the person should write back some congratulations. “Wonderful, I knew you could do it.” “That’s the way to make 75.” “Not easy but you made it.” “I’m very proud of you.”
--If you were not able to hit your daily goal, ask the parent to give you some support/encouragement. “you are making progress; you’ll get there,” “don’t get down, we all know you can do it,” “look for those open moments during the day when you can get a question done,” “try to work just a little harder tomorrow.” That kind of encouragement can be ever so helpful.
--If you’ll follow this regiment, you can work all of the questions in a section of www.CPAreviewforFREE.com TWICE in roughly five weeks. There’s obviously no guarantee but if you work all the questions twice in a fairly short period of time and take a few notes to help you add points, I think you’ve got a wonderful chance to make 75 and get on to the next part WITHOUT SPENDING ANY MONEY.
(3) – I send out these emails about every 7 to 10 days to nearly 13,500 accountants around the world. Please feel free to stay on the list just as long as you want. I’ve been writing these emails, off and on now, for about a dozen years – I’m pretty sure I can go for another dozen. However, if you are ever ready to unsubscribe, scroll to the bottom of the page and click on the appropriate link.
(4) – Went to a movie a few days ago about one of my favorite artist: Vincent van Gogh. Absolutely beautiful work – unbelievable, what a wonderful talent. However, one of the things that I found the most interesting was that van Gogh painted around 900 paintings but only managed to sell one. Of course, these same paintings now sell for tens of millions but when he was alive and working, 899 out of 900 (.999) of his work no one wanted to buy. What a horrible batting average.
Think how discouraging that must have been. He did all that work and no one thought the results were worth buying. What would you have done?
In such cases, most people would have given up and assumed they were wasting their time. Fortunately, van Gogh did not give up and our world is richer for his persistence.
When you are studying for the CPA Exam, you’ll often hit patches were you will miss a lot of questions (although I’m not sure any of us will ever miss .999 of the questions we work). As you probably already know, it is really easy to get discouraged and decide that you are wasting your time. It is always easy to push yourself forward when you are getting positive results. If you get question after question right, everyone enjoys doing the work—keeping going is easy. There is no challenge to that.
However, the real test of what we are made of is when we miss a question and then miss another question and then another. It is so easy to get discouraged quickly—that is just human nature. It takes a really tough person to hang in there. That is one of the reasons that I stress so often that the goal is not to focus on where you are at right now but to concentrate on adding points. If you try three questions and get them all correct, you are probably not adding any points. If you try three questions and miss them all, you have a wonderful opportunity to add some points, to get better, to get closer to passing.
I know how hard it is, though, to keep a positive attitude when everything seems negative. That alone may be the single biggest reason why 50 percent of the people fail each of the four parts of the CPA Exam. It is hard to keep pushing when the results are not positive.
So, when you get up in the morning, you have to start out with a push. Start with the right attitude.
--I’m going to add some points today.
--I’m going to work 30 questions today and read those answers carefully.
--I’m going to learn from my mistakes and not get discouraged.
--I’m going to find spare moments when I can work a question or two.
--I can pass and I am going to pass.
In life and the CPA Exam, success is all about attitude. Go for it – you can do it!!!
(5) – Speaking of doing some questions, let’s practice a bit – here’s where you can add a point or two right now.
FAR
The Hammerstein Company produces a balance sheet. Within stockholders’ equity is a rather large figure reported as accumulated other comprehensive income. Which of the following could NOT have led to this recognition?
A. Hammerstein has a subsidiary in Japan which uses the yen as its functional currency.
B. Hammerstein has invested in a bond that was issued at a discount from its face value and is reported as a trading security.
C. Hammerstein bought shares of another company several years ago that are being reported as available for sale.
D. Hammerstein has a defined benefit pension plan where the projected benefit obligation was just increased as a result of an amendment in the plan contract.
Answer is B
Accumulated other comprehensive income is used to recognize specific income effects that are reported but not included within net income. Three of the most common sources of this reporting are foreign currency translation of the statements of a subsidiary in another country, the gains and losses in the value of investments reported as available for sale, and changes in the projected benefit obligation of a defined benefit plan because of contractual adjustments (known as a prior service cost). However, the reporting of an investment classified as a trading security only affects net income and does not impact other comprehensive income.
Regulation
Milano Corporation buys land for $34,000 from John and Susan Orteland. The president of Milano hands them a check for the appropriate amount. Which of the following is true about a check?
A – A check is a promise to pay a certain amount.
B – A check is a written order for the payment of money.
C – A check is the equivalent of an IOU.
D – A check indicates that payment will be made upon the completion of specified actions.
Answer is B
A check is an order to a bank to make cash payment of the amount specified. The Ortelands can take the check they have received and go to the bank on which it is written and receive the $34,000 (assuming that amount of money is held in the appropriate account).
BEC
Company officials for Lastinaff, Inc. are thinking about buying a machine for $300,000 that has a ten-year life and no salvage value. Ignoring any tax effects, they expect this machine to generate net income for the company of $50,000 per year. In deciding whether to make this investment, what is the best estimation of the payback period?
A – 3.75 years
B – 4.50 years
C – 5.00 years
D – 6.00 years
Answer is A
The payback period is the time that it takes a company to generate cash inflows equal to its investment. The quicker the payback period is the better the investment is. If cash is generated evenly over time, the payback period is the cost of the asset divided by the annual cash inflow. Here, the company makes a profit of $50,000 each year. However, depreciation expense is a noncash expense that is subtracted to arrive at this net income. Assuming straight-line depreciation (by far the most common method used in the business community), annual depreciation is $30,000 ($300,000/10 years). Cash revenues and expenses minus noncash revenues and expenses give net income. If the noncash depreciation is $30,000 and net income is $50,000, then the cash revenues and expenses net to $80,000 per year from the machine. The payback period is $300,000 divided by $80,000 or 3.75 years.
Auditing
Jane Simpson works for Shadowline Corporation and is paid $30 per hour. She typically works 28 hours per week but always reports that she works 32 hours per week so that she can receive additional wages from the company. Which of the following internal control activities is most likely to prevent this type of theft?
A – The company’s payroll program is tested each month with test data to ensure that it operates properly.
B – A separate paymaster delivers the checks each pay period to Jane Simpson after verifying her identity.
C – The supervisor for Jane Simpson must review her time sheet each period and indicate approval.
D – Any paychecks that are printed but not picked up must be turned over to an independent group for subsequent handling.
Answer is C
Each of these four is an internal control activity frequently found in a company’s payroll system. However, they are each designed to prevent or discover frauds of a specific type. Here, the problem is extra hours claimed by an employee so that unearned money can be received. Test data is used to verify that the payroll program is working as intended. The paymaster hands out checks to make certain that checks are being prepared for actual individuals who work for the company. That is also the case for following up on checks that are not claimed at the appropriate time. The approval by the supervisor is correct here because the supervisor is the person most likely to know how many hours the employee actually did work. That person is in a position to verify that the number of hours listed is correct.
Have a great week. Remember 30 questions per day is a great pace as you get started working to pass the CPA Exam.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.cpareviewforfree.com
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