CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
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Lesson 76
From: Joe
(a) – SPECIAL ANNOUNCEMENT: SUBSCRIPTION SERVICE FOR FAR WILL BE AVAILABLE VERY SOON. As I announced in my previous email, to help us cover the cost of operating this website, in the next few days, we are going to make available a subscription service for the content that we think you need in order to pass the exam. I believe our 2,100 free questions plus our new subscription content will make this the PERFECT CPA review program. We are rolling out FAR first as we work diligently on getting the other three parts ready.
For FAR, we have created over 620 slides that you can view over the Internet that tells you exactly what we believe you need to know—this material covers the basics and gets you ready to make 75 and pass that exam.
For FAR, a subscription will be $15 per month or $30 for three months. What else can you possibly get for $15 per month? That’s 50 cents per day to get over 620 slides explaining the topics covered in the FAR part of the CPA Exam. And they are written by an educator—to help make sure you actually do understand how to answer the questions that you will face.
Of course, our 2,100 free questions will always stay free. If you are interested in subscribing for FAR, watch your email—we will send out information in a very few days that will tell you exactly what you need to know to sign up.
(b) – Last December, I posted a daily study tip on our Facebook page (search for “CPAreviewforFREE”) for over a month. I’m going to do that again for the next several weeks (although I’m not sure I can make it every day because of business travel—but I’ll try to get most days). Just a quick study tip to start off your day. Please feel free to become one of our fans to get these delivered to your wall automatically.
(c) – I’ll be in San Francisco next Tuesday morning for a meeting with the CPA Examiners who will be telling us all about the changes that will take place with the CPA Exam starting in 2011. I’ll keep you informed of anything that I learn of interest.
(d) – A week or two ago, we crossed 14 million page views here at www.CPAreviewforFREE and also had the busiest week in our entire history. The number of visitors that week was 6.4 percent higher than in any previous week of our existence. Thanks for spreading the word about www.CPAreviewforFREE.com. We hope to hit 20,000,000 page views by the end of 2010 and, with your help, we can make it!!!
(e) – Always nice to get notes from the folks who use our site.
From JC: “I just wanted to thank you for setting up this wonderful resource. It has been my primary source used to study for the CPA exam. So far I have taken 3 out of the 4 sections (Audit, BEC, and REG) and have passed them all on the first try. This website has been an invaluable tool. You really cannot be commended enough for setting up this CPA study aid.”
From LL: “I thank God for you and your site. I just found out this afternoon that I passed REG (1st try). I also passed BEC and AUD on my first try back in late February and late April. I'm now studying for FAR. I used XX books and supplemented them with XX lectures and your site. As part of the preparation of each exam, I worked through every single question on CPAreviewforFREE. Similar to some of the earlier feedback you received, I really liked the quality of your MCQs and explanations. In doing your MCQs, I felt more confident about my ability to learn and retain the information. Your regular emails also provide me the needed ongoing inspiration. Thank you!”
From CK: “This is just to pass my sincere gratitude for the great CPA review questions that you have provided for free on the website. I just received the results for my final CPA exam which I took at the end of last month and I passed it. It was AUD and I got an 86 on it. I used your questions for all the four parts. The questions are great at re-enforcing concepts. I am going to unsubscribe soon but I wanted to say THANK YOU VERY MUCH before I leave. I have encouraged a lot of my friends who want to take the CPA exam to use the questions as well. God bless you in a very special way.”
(1) – I was on vacation a few weeks ago. To pass the time in an airport, I was reading a novel. One of the characters was really into exercise and she made a statement: “I like to push myself until I’m absolutely exhausted.”
This got me to thinking about how hard we really do push ourselves each day. Oh yeah, we all talk about being exhausted but are we really? Or, are we just whining? I’m not a big believer in pushing yourself to absolute exhaustion because you have to be able to get up and do it again the next day. However, when you are studying for the CPA Exam, how hard do you really push yourself?
If you were a character in a book talking about studying for the CPA Exam, which line would be you?
--I like to push myself until I get bored.
--I like to push myself until I can think of something more interesting to do.
--I like to push myself until I get sleepy.
--I like to push myself until I can think of any excuse to quit.
Although these are probably pretty common goals, they are hardly the road to success. How much DO you push yourself to accomplish and how much SHOULD you push yourself to accomplish?
One of my problems is that if I say “I’m going to push myself until I’m absolutely exhausted,” I’m probably going to feel absolutely exhausted in about two minutes. The mind loves to play games; the mind loves to play tricks: “I’m tired; I’m bored; I’m absolutely exhausted; I’m starving to death; I don’t want to work.”
So, I prefer to set time goals for myself. For example, I might say: I’m going to study 50 minutes and then take a 10 minute break and then work for another 50 minutes. That is a very objective goal. I can prove whether I did it or not. I place my watch next to my computer. I write down when I start and when I stop and I have evidence (sounds like an auditor) of whether I put in the time. If this were a novel, maybe my character could say: “I like to push myself until I have put in the amount of time that I established as my goal.”
What I usually find is that when I do manage to hit that final time line, then I love to try to push myself for 15 more minutes. I don’t want to exhaust myself because I really do need to study again tomorrow but I want to prove that I can push myself beyond my own expectations.
First, I write down my time goals: 50 minutes, 10-minute break, 50 more minutes. When I get to the end of that stretch, I always ask: “Can’t I do just another 15 minutes—I might be able to add another point or two by answering questions for 15 more minutes.” And, yeah, when you get there, most people really are able to push themselves beyond their goal and add that extra 15 minutes. Somehow the time you put in AFTER you have reached your goal really feels worthwhile. You feel like you are stretching yourself and you are going to be a stronger person as a result.
(2) – As I have mentioned before, my wife and I went to Paris for our vacation. People have asked me what I enjoyed seeing the most. The answer is easy: the Winged Victory at the Louvre.
www.en.wikipedia.org/wiki/Winged_Victory_of_Samothrace
I love the name.
I love the power.
I love the mystery.
As you stand there in front of that statue, you really feel the strength. Somehow the sculptor captured the power and strength – you understand the majesty of the victory that this character is announcing to the world.
No one knows who created this work but it is hard to look at it without wanting that same feeling: look at what I have been able to accomplish!!!
(3) – If you want to unsubscribe from getting these weekly email lessons, just scroll to the bottom of this lesson and you’ll find an unsubscribe button. Easy as that. Click on it and your name will be removed from our list.
If you have friends who want to receive these free lessons, they can go to www.CPAreviewforFREE.com and register. When they do that, there is a box that asks if they want additional information about the CPA Exam. Make sure that box is checked because that “additional information” is our weekly email lessons.
(4) – I was in a hotel a few days ago in North Carolina having breakfast and several young people walked through the hotel. They apparently were on some type of work trip with their church (which was from Illinois). One of the young people wore a t-shirt with the question on the back: What’s Your Excuse?
I always wonder about what excuses I am using to keep myself from accomplishing things those that I want to do.
--It is easy to see the excuses that other people use.
--It is much more difficult to see the excuses that you use to hold yourself back.
So, if you have a really close friend, just ask them: What excuses do you hear me using that might be keeping me from being as successful as I would like? Do I have a tendency to put up my own personal road blocks that keep me from getting to where I want to be?
People always tell me that they know their own weaknesses, that they are able to assess themselves. I am not sure that is always true. I think it is impossible to see yourself without some type of filter – you may be too hard on yourself or you may be too easy on yourself. But I’m not sure anyone is a perfect judge of themselves.
You have to assure the friend that you will not get upset and that you really only want one piece of information (“you don’t have to tell me about all of my weaknesses”). You want to know what excuses you seem to fall back on. What excuses automatically pop out of your mouth? Excuses can almost become a speech habit that spill out to give you a reason not to move forward.
Find out—ask someone. Regardless of what they tell you, work hard (for a week or two) to avoid that excuse completely. You may well start to see a change in how you approach tasks without your built-in excuse. If you don’t have that road block standing in your way, you may well be surprised by how much you find that you really are able to accomplish.
(5) – PRACTICE TIME – Here are four more free questions to give you more chances to add points—which is really the name of this game.
FAR
The City of Linton has a general fund that reports $500,000 in assets and $200,000 in liabilities. Thus, the balance sheet for this fund shows a fund balance of $300,000 which is divided into five different categories. Which of the following is not one of those five fund balance categories?
A. Fund balance—nonspendable
B. Fund balance—committed
C. Fund balance—assigned
D. Fund balance—unrestricted
Answer is D.
The five fund balance categories are (1) fund balance-nonspendable -- reflects assets such as supplies that cannot be spent and money that has been restricted by an outside party so that it cannot be spent, (2) fund-balance restricted -- reflects money that has been restricted by an outside party for a particular purpose, (3) fund-balance committed -- reflects assets that have been designated for a specific purpose by the highest level of decision-making authority inside of the government, (4) fund-balance assigned -- reflect assets that have been designated for a specific purpose by officials within the government but not at the highest level of decision-making authority, and (5) fund-balance unassigned -- reflects all of the remaining net assets of the fund. “Unrestricted” is a term that is more often used in reporting not-for-profit organizations than it is in governmental accounting.
Auditing
A CPA has been engaged to issue a report of the findings coming from the performance of specific agreed-upon procedures. Which of the following is not true?
A. The CPA must be independent.
B. The CPA and specified parties must have agreed on criteria to be used.
C. The subject matter can be reasonably measured.
D. The report will be issued to the public in general.
Answer is D.
In these types of engagements, it is important that all relevant parties have a clear understanding of what is being done and how evaluations are being made. It is also important that the CPA has some way to make an evaluation that is not pure guesswork. The assumption is that the general public could not possibly be aware of the understanding that exists between the parties involved and, therefore, might be mislead in some way by the nature of the report. They do not possess an adequate understanding. These engagements should be clearly defined by all parties involved but, then, only those parties should receive a copy of the CPA’s report.
BEC
What is the GDP deflator?
A. An index for measuring deflation in a specific industry.
B. A method for measuring price changes in all final goods and services produced by an economy.
C. A method of measuring price changes in general markets in specific locations like New York City or the state of Wisconsin.
D. A means of measuring price changes for the goods that are obtained by consumers.
Answer is B.
According to Wikipedia, “in economics, the GDP deflator (implicit price deflator for GDP) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.”
Regulation
A company is going through bankruptcy liquidation and has the following four debts (each of which is below any maximum allowed amount): (1) - $10,000 owed to employees for working the two weeks before an order for relief was issued, (2) - $13,000 in government claims for unpaid taxes, (3) - $15,000 in administrative expenses, and (4) - $1,000 for a deposit made by a customer where the product was never delivered. Assuming that adequate money is available, in what order will these claims be paid?
A. 2, 1, 4, 3
B. 1, 3, 2, 4
C. 3, 1, 4, 2
D. 4, 2, 1, 3
Answer is C
Federal bankruptcy laws have been created to organize bankruptcies, especially when liquidation occurs, so that all parties are treated fairly. In addition, everyone should be able to go into the liquidation with some idea as to the chance of receiving payment. Certain unsecured liabilities are deemed to have priority and they are paid before other unsecured liabilities. Furthermore, these liabilities with priority are paid in a legally specified order. For these four debts, that order would be: administrative expenses, debts to employees incurred within the 180 days prior to the filing of a petition for bankruptcy (up to a maximum that is currently $10,950 per individual—any additional amount is a completely unsecured claim), deposits made by customers (up to a maximum that is currently $2,425 per claim—any additional amount is a completely unsecured claim, and government claims for unpaid taxes.
I know it is really hot throughout much of the country right now. So, stay inside and study and add points and get that CPA Exam passed.
Joe Hoyle
Co-Founder
CPA Review for FREE
Friday, July 30, 2010
Wednesday, July 14, 2010
Make that Improvement and Pass that Exam
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
105 Weeks of Operation and 13,506,577 Page Views (without a penny spent on marketing)
Lesson 75
From: Joe
(a) -OFFICIALLY BIG ANNOUNCEMENT: Ever since we first got started with CPAreviewforFREE.com, we constantly get emails like the following from so many of our candidates: "love you questions and answers-they are the best in the business but I'd love to have some content to help me to get over the rough patches."
So, this summer we have been writing content (day in and day out). We write exactly what we think you need to know to pass each part of the CPA Exam. Most review courses give you everything in the possible world and expect you to figure it out. We want to give you want we believe you need.
Unfortunately, we cannot hire the talent we need and still provide this content for free. Here is what we plan to do gradually over the remainder of the summer:
(Step One) Our 2,100 FREE questions and answers will remain absolutely free. If all you want is to use our questions and answers, nothing changes at all. Those are there for you.
(Step Two) Our new content will be available over the Internet through a one-month or three-month subscription option. No books to lug around, no outdated materials, access from anywhere: laptop, desktop, cell phone. We will provide the basics on every subject that YOU need to know to pass. We are not going to charge you the thousands of dollars that everyone else seems to want from you. We are going to keep this content as cheap as we possibly can. We will provide more information about this program and the complete details over the next few weeks.
(Step Three) We will also provide a study guide so that you can merge our free questions and answers with our new subscription service to provide you with a logical program that can get you through the CPA Exam in the most efficient (and cheapest) way possible.
Click here ( www.cpareviewforfree.com/resources.cfm?name=article&article_id=30 ) for a sample of content for FAR--Statement of Cash Flows. (This is a temporary file so it may not look as polished as our permanent files will be.)
Our philosophy is to provide you with exactly what you need in order to pass the CPA Exam. Get it done-get it over with. If you are studying for FAR, go look at the Statement of Cash Flows content and start adding even more points.
(b) - During the first week of July, we had over 300,000 page views for the first time in our history. In our first week of existence in 2008, we had 1,920 page views. Last week, we had 311,106 page views. And, we did that, with no money spent on advertising. Think about that. People recognize our quality. Build a better mousetrap and the world will beat a path to your door.
(c) - I was looking at a website this morning (for an artist, no less) and he had the following quote.
"Your dream isn't big enough if it doesn't scare you."
I read a lot and see a lot of quotes. Most are nice but don't really touch me. That was a quote that really meant something to me. I pass it along to you for that reason.
(1) - I was in Paris last week for a vacation. I do not speak French. I worried that I would not be able to get around because I could not speak the language. And, sure enough, the first day was rough. I was afraid that I might starve to death. But, gradually, subtly, without me even noticing, I started to pick up a few new words in French each day and I started recognizing what people were trying to say to me. By the end of the trip, I could even get through the subway system and order a meal without too much difficulty.
Learning is like that. It is subtle. It happens without your noticing. People don't learn in big chunks. People learn in tiny grains. However, through persistence, it is amazing how quickly those tiny grains add up and come together and start creating actual knowledge and understanding.
People who study for the CPA Exam are often looking for that "AHA" moment where they go from not knowing to knowing. Their dream is: "One minute I did not understand leases and then suddenly I understood it all with such wonderful clarity. I am so happy." Yeah, that would be nice but learning almost never happens that way. You start off understanding 40 percent of what you read. You answer a few questions and you read the answers and, without really noticing, you actually understand 45 percent and then 50 percent and so on. Eventually, you can become an expert that way.
It is easy to get discouraged because we all want "instant knowledge." The human brain just does not work that efficiently. Your brain learns gradually and constantly. Kind of like the sun rising-it happens so steadily that you don't even notice the change. But, it is dark one minute and then it begins to get lighter and lighter and, suddenly, the sun is up. And, you never really saw any movement.
--How do you pass the CPA Exam? Put in 60-100 hours of good quality study for each part. The brain will take care of the rest.
--Why does that work? As you read and answer questions, your mind gradually comes to understand the various topics. Not all at once but little by little.
--Why do you keep missing questions? The learning is slow and steady-no one jumps directly into brilliance. For example, if you are going to study 100 hours for FAR, it is perfectly logical that you will make 1 percent of the needed improvement for every full hour that you study. Yeah, that seems slow but if you make 1 percent improvement every hour, before you know it you will understand more than enough to pass.
I did not starve to death in Paris. I learning some of the language and had a great time.
Make that 1 percent improvement every hour and you'll pass the CPA Exam.
(2) - Here are a couple of wonderful emails that I got recently. Always love to hear from you:
From NN: "I received today the results of my REG exam: 84!!! Not bad!! I am so happy!!! And, I was so worried because I did not complete one of the tabs. I also passed FAR in April. And, I am working on AUD and BEC for the July/August window. Now, I know that I really can do it!!! I can accomplish my favorite goal: 'Successful completion of the four exams in the first attempt.'"
From RM: "I am writing you to update you on my progress with the CPA exam and it is with great pride that I can tell you that I have successfully passed all four parts! I took FAR shortly after a vacation in St. Thomas (where I spent the entire time studying) and anxiously waited for the scores. I found out that I passed FAR with a 79 as I was studying for my REG exam which I was to take the next morning. I can't tell you how big of a boost that was, knowing that the REG exam was going to be my last section. Just last week I found out that I passed REG with a 78, and I am finally done. It took me just about a year, and it is my proudest accomplishment yet. A close friend took me out for a celebratory dinner, and my family, co-workers, and friends were all elated that I had passed. CPA Review for Free was a huge help in that and your weekly emails kept me motivated."
Studying while in St. Thomas-now that is true dedication and self-discipline.
(3) - Formal and official announcement so that we don't break any laws: You are always able to unsubscribe at any time you wish from these email lessons. We love interacting with so many thousands of people around the world (well over 13,000) but you certainly can unsubscribe whenever you wish. Just scroll to the bottom of the page and click on the link. And, poof, you are unsubscribed.
(4) - My younger daughter went to work camp this past week where a group of about 200 youth gathered to fix up houses that needed repair in a poorer neighborhood. At the end of the week, the group made a presentation of what they had accomplished. The presentation was in a gymnasium of a school. When I walked in on Saturday morning for that presentation, the very first thing I noticed was a big banner that read:
You Can
When You Believe You Can
I am always of the opinion that humans have almost unlimited capabilities. People have the capacity to do almost anything that they set their minds to do.
The one thing that stands in the way for most people is their own belief in what they can accomplish.
You know your own weaknesses better than anyone else.
You know what scares you.
You know all of those things that you really don't know.
It is easy to believe: I can't.
On the outside, you probably resemble a person in complete control of every situation but, if you are like most people, you are always a bit tentative and scared. It is always easy, when thinking about ourselves, to dwell on those weaknesses that only we know about.
That is just going to hold you back. You are a very capable person. You are obviously not perfect but you have more than enough (a) brain power, (b) self discipline, (c) desire, and (d) energy to pass the CPA Exam. What else is needed?
You have the brain power.
You have the self discipline.
You have the desire.
You have the energy.
What else could you possibly need to pass the CPA Exam?
You Can
When You Believe You Can.
(5) - Okay, time for a little practice. If you get these all correct, good for you. If you miss one or more, then you have a wonderful opportunity to add a point to your score.
FAR
A company has the following three cash flows: $10,000 received as interest revenue, $20,000 paid as interest expense, and $40,000 received as dividend revenue. How are these three reported on a statement of cash flows?
A - $50,000 cash inflow from investing activities and a $20,000 cash outflow for financing activities.
B - $50,000 cash inflow from investing activities and a $20,000 cash outflow for operating activities
C - $40,000 cash inflow from investing activities and a $10,000 cash outflow for operating activities.
D - $30,000 cash inflow from operating activities
Answer is D
FASB has held that interest revenue, interest expense, and dividend revenue should all be reported on the statement of cash flows as operating activities. That classification system has not always been popular but it is GAAP.
Regulation
A taxpayer is divorced but currently provides all of the care for an invalid sister who lived in a hospital all year but who still qualifies as the taxpayer's dependent. The taxpayer wants to file as a head of household but cannot. Which of the following is the most likely reason for not being able to file as a head of household?
A - The taxpayer is divorced; a person who is a head of household can never have been married.
B - The person being cared for is a sister rather than a son or daughter.
C - The sister is a dependent which means that a different tax status is required.
D - The sister does not live in a home maintained by the taxpayer.
Answer is D
The following comes from the IRS publication explaining how to qualify as head of household: "You may be able to file as head of household if you meet all the following requirements. You are unmarried or 'considered unmarried' on the last day of the year. You paid more than half the cost of keeping up a home for the year. A 'qualifying person' lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the 'qualifying person' is your dependent parent, he or she does not have to live with you." The sister is a qualifying person. Thus, because she did not live with the taxpayer, the taxpayer only qualifies as a head of household if the dependent had been a parent who was living in the hospital.
Auditing
An auditor is studying events that occurred in the period just after the end of the year under audit but before the financial statements were issued. At present, the auditor is looking for significant events that occurred that had no impact on the year-end balances reported by the client. What is the most likely purpose of the auditor's work?
A - The auditor is looking for any needed adjusting entries that should be made to reported figures.
B - The auditor is looking for evidence that will impact the audit for the subsequent year.
C - The auditor is looking for information that must be disclosed in the financial statements soon to be released.
D - The auditor is looking for evidence that impacts the balance sheet and income statement figures to be reported.
Answer is C
Because the information in the problem indicates that these events had no impact on the year-end balances reported by the client, this work is unlikely to provide either significant audit evidence about reported balances or the necessity of adjusting entries. Instead, these transactions or other events-although not directly related to the financial statements under audit-are significant to the readers of the financial statements and must be disclosed. The auditor is making certain that all events that need to be disclosed in the financial statements are included.
BEC
A US company sells its goods in France and also buys goods in France and sells them in the US. At one point in time, 1 Euro can be exchanged for $1.20. Later, 1 Euro can be exchanged for $1.30. What is the impact on this company of the change in the exchange rate?
A - Goods bought in France will need to sell for more in the US.
B - Goods manufactured in the US will need to sell for more in France.
C - Goods bought in the US will cost the company more money to acquire.
D - The US dollar has become more valuable.
Answer is A
One Euro used to be worth $1.20 but now has grown in value and is worth $1.30. One Euro buys more dollars. Therefore, the Euro is worth more in comparison to the dollar and the dollar is worth less in comparison to the Euro. Inside of each country there is no impact. The effect is created by going from one country's currency to the other. Goods bought in France will be paid for with the more valuable Euro. However, when sold in the US, the company will receive the less valuable dollar. To maintain its profit margin, the company will have to sell the goods in the US for more of those less valuable dollars.
I cannot think of anything better to tell you in leaving than what I've already said: "Your dream isn't big enough if it doesn't scare you."
Have a great week to all of you!!!
Joe Hoyle
President
CPA Review for FREE
www.CPAreviewforFREE.com
105 Weeks of Operation and 13,506,577 Page Views (without a penny spent on marketing)
Lesson 75
From: Joe
(a) -OFFICIALLY BIG ANNOUNCEMENT: Ever since we first got started with CPAreviewforFREE.com, we constantly get emails like the following from so many of our candidates: "love you questions and answers-they are the best in the business but I'd love to have some content to help me to get over the rough patches."
So, this summer we have been writing content (day in and day out). We write exactly what we think you need to know to pass each part of the CPA Exam. Most review courses give you everything in the possible world and expect you to figure it out. We want to give you want we believe you need.
Unfortunately, we cannot hire the talent we need and still provide this content for free. Here is what we plan to do gradually over the remainder of the summer:
(Step One) Our 2,100 FREE questions and answers will remain absolutely free. If all you want is to use our questions and answers, nothing changes at all. Those are there for you.
(Step Two) Our new content will be available over the Internet through a one-month or three-month subscription option. No books to lug around, no outdated materials, access from anywhere: laptop, desktop, cell phone. We will provide the basics on every subject that YOU need to know to pass. We are not going to charge you the thousands of dollars that everyone else seems to want from you. We are going to keep this content as cheap as we possibly can. We will provide more information about this program and the complete details over the next few weeks.
(Step Three) We will also provide a study guide so that you can merge our free questions and answers with our new subscription service to provide you with a logical program that can get you through the CPA Exam in the most efficient (and cheapest) way possible.
Click here ( www.cpareviewforfree.com/resources.cfm?name=article&article_id=30 ) for a sample of content for FAR--Statement of Cash Flows. (This is a temporary file so it may not look as polished as our permanent files will be.)
Our philosophy is to provide you with exactly what you need in order to pass the CPA Exam. Get it done-get it over with. If you are studying for FAR, go look at the Statement of Cash Flows content and start adding even more points.
(b) - During the first week of July, we had over 300,000 page views for the first time in our history. In our first week of existence in 2008, we had 1,920 page views. Last week, we had 311,106 page views. And, we did that, with no money spent on advertising. Think about that. People recognize our quality. Build a better mousetrap and the world will beat a path to your door.
(c) - I was looking at a website this morning (for an artist, no less) and he had the following quote.
"Your dream isn't big enough if it doesn't scare you."
I read a lot and see a lot of quotes. Most are nice but don't really touch me. That was a quote that really meant something to me. I pass it along to you for that reason.
(1) - I was in Paris last week for a vacation. I do not speak French. I worried that I would not be able to get around because I could not speak the language. And, sure enough, the first day was rough. I was afraid that I might starve to death. But, gradually, subtly, without me even noticing, I started to pick up a few new words in French each day and I started recognizing what people were trying to say to me. By the end of the trip, I could even get through the subway system and order a meal without too much difficulty.
Learning is like that. It is subtle. It happens without your noticing. People don't learn in big chunks. People learn in tiny grains. However, through persistence, it is amazing how quickly those tiny grains add up and come together and start creating actual knowledge and understanding.
People who study for the CPA Exam are often looking for that "AHA" moment where they go from not knowing to knowing. Their dream is: "One minute I did not understand leases and then suddenly I understood it all with such wonderful clarity. I am so happy." Yeah, that would be nice but learning almost never happens that way. You start off understanding 40 percent of what you read. You answer a few questions and you read the answers and, without really noticing, you actually understand 45 percent and then 50 percent and so on. Eventually, you can become an expert that way.
It is easy to get discouraged because we all want "instant knowledge." The human brain just does not work that efficiently. Your brain learns gradually and constantly. Kind of like the sun rising-it happens so steadily that you don't even notice the change. But, it is dark one minute and then it begins to get lighter and lighter and, suddenly, the sun is up. And, you never really saw any movement.
--How do you pass the CPA Exam? Put in 60-100 hours of good quality study for each part. The brain will take care of the rest.
--Why does that work? As you read and answer questions, your mind gradually comes to understand the various topics. Not all at once but little by little.
--Why do you keep missing questions? The learning is slow and steady-no one jumps directly into brilliance. For example, if you are going to study 100 hours for FAR, it is perfectly logical that you will make 1 percent of the needed improvement for every full hour that you study. Yeah, that seems slow but if you make 1 percent improvement every hour, before you know it you will understand more than enough to pass.
I did not starve to death in Paris. I learning some of the language and had a great time.
Make that 1 percent improvement every hour and you'll pass the CPA Exam.
(2) - Here are a couple of wonderful emails that I got recently. Always love to hear from you:
From NN: "I received today the results of my REG exam: 84!!! Not bad!! I am so happy!!! And, I was so worried because I did not complete one of the tabs. I also passed FAR in April. And, I am working on AUD and BEC for the July/August window. Now, I know that I really can do it!!! I can accomplish my favorite goal: 'Successful completion of the four exams in the first attempt.'"
From RM: "I am writing you to update you on my progress with the CPA exam and it is with great pride that I can tell you that I have successfully passed all four parts! I took FAR shortly after a vacation in St. Thomas (where I spent the entire time studying) and anxiously waited for the scores. I found out that I passed FAR with a 79 as I was studying for my REG exam which I was to take the next morning. I can't tell you how big of a boost that was, knowing that the REG exam was going to be my last section. Just last week I found out that I passed REG with a 78, and I am finally done. It took me just about a year, and it is my proudest accomplishment yet. A close friend took me out for a celebratory dinner, and my family, co-workers, and friends were all elated that I had passed. CPA Review for Free was a huge help in that and your weekly emails kept me motivated."
Studying while in St. Thomas-now that is true dedication and self-discipline.
(3) - Formal and official announcement so that we don't break any laws: You are always able to unsubscribe at any time you wish from these email lessons. We love interacting with so many thousands of people around the world (well over 13,000) but you certainly can unsubscribe whenever you wish. Just scroll to the bottom of the page and click on the link. And, poof, you are unsubscribed.
(4) - My younger daughter went to work camp this past week where a group of about 200 youth gathered to fix up houses that needed repair in a poorer neighborhood. At the end of the week, the group made a presentation of what they had accomplished. The presentation was in a gymnasium of a school. When I walked in on Saturday morning for that presentation, the very first thing I noticed was a big banner that read:
You Can
When You Believe You Can
I am always of the opinion that humans have almost unlimited capabilities. People have the capacity to do almost anything that they set their minds to do.
The one thing that stands in the way for most people is their own belief in what they can accomplish.
You know your own weaknesses better than anyone else.
You know what scares you.
You know all of those things that you really don't know.
It is easy to believe: I can't.
On the outside, you probably resemble a person in complete control of every situation but, if you are like most people, you are always a bit tentative and scared. It is always easy, when thinking about ourselves, to dwell on those weaknesses that only we know about.
That is just going to hold you back. You are a very capable person. You are obviously not perfect but you have more than enough (a) brain power, (b) self discipline, (c) desire, and (d) energy to pass the CPA Exam. What else is needed?
You have the brain power.
You have the self discipline.
You have the desire.
You have the energy.
What else could you possibly need to pass the CPA Exam?
You Can
When You Believe You Can.
(5) - Okay, time for a little practice. If you get these all correct, good for you. If you miss one or more, then you have a wonderful opportunity to add a point to your score.
FAR
A company has the following three cash flows: $10,000 received as interest revenue, $20,000 paid as interest expense, and $40,000 received as dividend revenue. How are these three reported on a statement of cash flows?
A - $50,000 cash inflow from investing activities and a $20,000 cash outflow for financing activities.
B - $50,000 cash inflow from investing activities and a $20,000 cash outflow for operating activities
C - $40,000 cash inflow from investing activities and a $10,000 cash outflow for operating activities.
D - $30,000 cash inflow from operating activities
Answer is D
FASB has held that interest revenue, interest expense, and dividend revenue should all be reported on the statement of cash flows as operating activities. That classification system has not always been popular but it is GAAP.
Regulation
A taxpayer is divorced but currently provides all of the care for an invalid sister who lived in a hospital all year but who still qualifies as the taxpayer's dependent. The taxpayer wants to file as a head of household but cannot. Which of the following is the most likely reason for not being able to file as a head of household?
A - The taxpayer is divorced; a person who is a head of household can never have been married.
B - The person being cared for is a sister rather than a son or daughter.
C - The sister is a dependent which means that a different tax status is required.
D - The sister does not live in a home maintained by the taxpayer.
Answer is D
The following comes from the IRS publication explaining how to qualify as head of household: "You may be able to file as head of household if you meet all the following requirements. You are unmarried or 'considered unmarried' on the last day of the year. You paid more than half the cost of keeping up a home for the year. A 'qualifying person' lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the 'qualifying person' is your dependent parent, he or she does not have to live with you." The sister is a qualifying person. Thus, because she did not live with the taxpayer, the taxpayer only qualifies as a head of household if the dependent had been a parent who was living in the hospital.
Auditing
An auditor is studying events that occurred in the period just after the end of the year under audit but before the financial statements were issued. At present, the auditor is looking for significant events that occurred that had no impact on the year-end balances reported by the client. What is the most likely purpose of the auditor's work?
A - The auditor is looking for any needed adjusting entries that should be made to reported figures.
B - The auditor is looking for evidence that will impact the audit for the subsequent year.
C - The auditor is looking for information that must be disclosed in the financial statements soon to be released.
D - The auditor is looking for evidence that impacts the balance sheet and income statement figures to be reported.
Answer is C
Because the information in the problem indicates that these events had no impact on the year-end balances reported by the client, this work is unlikely to provide either significant audit evidence about reported balances or the necessity of adjusting entries. Instead, these transactions or other events-although not directly related to the financial statements under audit-are significant to the readers of the financial statements and must be disclosed. The auditor is making certain that all events that need to be disclosed in the financial statements are included.
BEC
A US company sells its goods in France and also buys goods in France and sells them in the US. At one point in time, 1 Euro can be exchanged for $1.20. Later, 1 Euro can be exchanged for $1.30. What is the impact on this company of the change in the exchange rate?
A - Goods bought in France will need to sell for more in the US.
B - Goods manufactured in the US will need to sell for more in France.
C - Goods bought in the US will cost the company more money to acquire.
D - The US dollar has become more valuable.
Answer is A
One Euro used to be worth $1.20 but now has grown in value and is worth $1.30. One Euro buys more dollars. Therefore, the Euro is worth more in comparison to the dollar and the dollar is worth less in comparison to the Euro. Inside of each country there is no impact. The effect is created by going from one country's currency to the other. Goods bought in France will be paid for with the more valuable Euro. However, when sold in the US, the company will receive the less valuable dollar. To maintain its profit margin, the company will have to sell the goods in the US for more of those less valuable dollars.
I cannot think of anything better to tell you in leaving than what I've already said: "Your dream isn't big enough if it doesn't scare you."
Have a great week to all of you!!!
Joe Hoyle
President
CPA Review for FREE
www.CPAreviewforFREE.com
Saturday, July 3, 2010
Becoming a Champion
Becoming a Champion
From: Joe
(a) – I fully realize that our economic times are quite scary at the moment. I truly hope that everyone who gets these emails is doing okay financially. If you are like me, you are both mystified and a bit wary. I am confident that things are going to get better and that the economy will come back strong. However, we will all feel better when things start to look better. I just hope that you have not been facing truly difficult financial issues in the last couple of weeks.
I am old enough to have seen a number of economic ups and downs over the years. One thing that always happens in such times is that people get more interested in making their resumes look better. Makes perfectly good sense. One of the best ways to improve that resume is to add the letters C P A after your name. Whether you are in Walla Walla or Katmandu, those three letters mean something important.
So, if you know someone who is struggling with the economy at the moment, one recommendation is to take the CPA Exam and get it passed. Not a bad way to spend some time. Those three letters will put you ahead of the pack if you are looking for a new job or a promotion.
The problem, of course, is that CPA review can be extremely expensive. Today, people are not in position to shell out several thousand dollars for prep programs (especially mediocre programs). It’s a tough call: I need to pass versus I cannot afford to prepare.
But, wait a minute!!! CPA Review For FREE (www.CPAreviewforFREE.com) provides you with a full range of practice questions to allow you to prepare for the CPA Exam for FREE (“free” as in no cost). You can get those three important letters after your name and you can prepare for free. What a deal; what an opportunity.
Now is the perfect time to get started. Move to the head of the class: pass the CPA Exam.
I once had a friend who had years and years of experience in CPA Review give me some good advice: “Anyone who works 2,000 well-written questions and carefully studies the answers should be able to pass the CPA Exam.” I hate to tell you this but much of the huge amount of materials that other review courses provide is just to allow them to jack up the price and charge you so much money. I know it looks impressive but if your goal is to pass the exam all that material can be overkill. “Anyone who works 2,000 well-written questions and carefully studies the answers should be able to pass the CPA Exam.”
(b) – As always, thanks for forwarding our emails along. www.CPAreviewforFREE.com gets more and more visitors every week. Last week, for example, we had a 42 percent jump in the number of pages that were viewed over our previous high. 42 percent jump in one week!!! People are clearly discovering how well our questions and answers help them to prepare.
(1) – We all have heroes. One of mine has always been the legendary football coach Vince Lombardi, who became famous in the 60s for coaching the Green Bay Packers to a number of championships.
What I like about Lombardi is not that he won a lot of football games. Many people do that. Plus, after all, football is really just a game. What I really like was his attitude. He believed that every person was capable of winning if they simply prepared themselves in the proper way. In fact, he was probably best known as a coach who took average players and turned them into champions. What a wonderful thing to be remembered for.
Anyone can win if they have the best players. That is no trick; that is no challenge. The excitement comes from taking average people and pushing them to do their best. And, I have found, in my life, that when people really do their best, things go very well.
If you have read these emails for long (I have been doing them off and on now for over ten years), I have always held that everyone can pass the CPA Exam. That is not an idle statement. It takes work, it takes focus, it takes dedication, it takes desire, it takes sacrifice, it takes good materials, it takes hours, it takes confidence. But it can be done.
Work
Focus
Dedication
Desire
Sacrifice
Good Materials
Hours
Confidence
There is no reason, if you have those eight magic ingredients, that you cannot mix up a brew that will turn you into a CPA. The trouble is that people come to the table with only 3 or 4 and then decide that they are not good enough to be CPAs. Baloney!!! As Shakespeare so aptly says in Julius Caesar: “The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.” When you have these eight, YOU can succeed at virtually anything you attempt. You really can leap tall buildings with a single bound.
So, where does this lead us?
--Make a plan. By when do you want to have the CPA Exam passed? Stop being random. Set a firm goal. Always start at the end and work backwards.
--Ask yourself what you need to accomplish to get to that goal. Be reasonable: working 28 hours per day is not going to work. If you read these emails, you know that I recommend 250-400 hours to pass all four parts of the exam. When are you going to spend those hours? What are you going to do in those hours?
--Once you have a plan in place, have an honest conversation with yourself and ask a couple of serious questions and give truthful answers.
Can I do this as currently set up? If not, go back and rearrange the schedule. There is no reason to get started doing something that you simply cannot do. That is a loser from the start. Create a plan that is doable and will turn you into a winner.
What will be my biggest obstacles? What can I do at the start to lessen the problems that those obstacles pose? You know yourself. What is really going to hold you back and how do you get around that? Don’t be naïve; understand your weaknesses and address them before they cause a problem.
Why do I want to do this? It is very important to have a clear understanding of why you are seeking to become a CPA. When times get tough and you get tired and sick of it, it is easy to quit if you don’t have a well defined purpose for the study.
Can I have the right attitude? If you go into your preparation thinking it is going to be the worst few months of your life, this journey can be miserable. It is hard to be successful when you are miserable. If you go into this thinking it will be an interesting mental challenge, everything gets easier. Trust me on that. How do you go about setting up a positive mental attitude?
How can I reward myself along the way? Most people are not used to performing long tasks without a break. You can just wear down and become completely inefficient. I am a big believer that taking breaks is good for you. You need to study well. Don’t study more than 3-4 days straight without a day off. Don’t study more than 90 minutes straight without a 15 minute break. During those breaks, think what you can do that will make you feel better. You want to use the breaks to refresh yourself. They don’t give you points for wearing out.
How can I make sure I believe in myself? We are all very aware of our failings. Every person has some concern that they are not good enough. How do you go about making sure that you have the confidence you need to succeed at such a challenging task? One answer is to do the work and realize how much stronger you are becoming as you move through the process. Step back and make an honest appraisal of all that you have accomplished. It is not where you start that counts but the progress that you make toward your goal that truly does matter.
I am not a huge baseball fan but I have been intrigued by the Tampa Bay team. They are playing Boston at the moment and I have no idea who will win. However, Tampa Bay did something that I always find interesting. In one year, they have gone from the worst record to the best record in their division. That is truly amazing.
How do you do something like that? You work hard, you believe in yourself, you spend time practicing to get better.
Face it; there are no real secrets to becoming successful. We all know what it takes.
(2)-Just a reminder. If you want or need to unsubscribe, just scroll to the bottom of this email lesson and you will find a link that pulls your name off our list. We are glad to have you with us but you are more than entitled to unsubscribe whenever you wish.
(3)-Let’s do some practice work. Here are a few new questions that I want to add to our database at www.CPAreviewforFREE.com. You will get a chance to practice on them before they hit our website.
Regulation
Mary, a single individual, has provided more than half of the support for the following three people. Her mother who lives in a nursing home and who earned $10,000 in social security and $2,000 in interest income. Her son who is 19 and a full-time student who received $20,000 in scholarship income. Her friend who is in the process of getting a divorce. She has no income and is not filing a joint return with her estranged husband. How many dependents can Mary include on her personal tax return?
A – Zero
B – One
C – Two
D – Three
Answer is D
The mother is a dependent because she earned such a low amount of income that was subject to taxation. The son is a dependent because he is under 24 and a full-time student so that the amount of income is not a factor. The friend is a dependent because she does not file a joint return. There are five basic rules for being a dependent and these individuals meet the specific rule that appears to be in question for them.
Financial Accounting
Ace Company buys inventory on December 18, Year One for 20,000 vilsecks, a foreign currency. On that day, one vilseck is worth $.24. At the end of Year One, the inventory is still held and the debt is not yet paid. On that date, one vilseck is worth $.25. Ace might be a foreign subsidiary that is being consolidated with a US parent company so that translation is appropriate. Ace might be a US company making a purchase from a foreign supplier so that a remeasurement is appropriate. What gain or loss is reported in each case at the end of Year One?
A – If this is a translation, there is a $200 gain. If this is a remeasurement, there is a $200 loss.
B – If this is a translation, there is no gain or loss. If this is a remeasurement, there is a $200 loss.
C – If this is a translation, there is no gain or loss. If this is a remeasurement, there is no gain or loss.
D – If this is a translation, there is a $200 gain. If this is a remeasurement, there is a $200 gain.
Answer is B
In the translation of a foreign subsidiary, all assets and liabilities are adjusted at year-end to the new exchange rate. Therefore, both balances at December 18 are equal to 20,000 times $.24 or $4,800. At December 31, both are translated at 20,000 times $.25 or $5,000. The $200 gain in the reported value of the inventory is offset by the $200 loss in the reported amount of the payable. In contrast, in the remeasurement of an individual transaction, only monetary assets and liabilities (cash, payables, receivables, and accounts reported at fair value) are adjusted to new exchange rates. Again, both balances at December 18 are equal to 20,000 times $.24 or $4,800. However, at December 31, only the payable is adjusted to 20,000 times $.25 or $5,000. The increase in the liability creates a $200 loss. The inventory remains at $4,800 for reporting purposes.
Auditing and Attestation
A company is talking with a local CPA about doing either a compilation or a review of its financial statements for the current period. Which of the following statements is true?
A – In a compilation, the CPA provides limited (sometimes referred to as negative) assurance.
B – For the most part, a compilation is limited to making inquiries and carrying out analytical procedures.
C – A review is a presentation of client information in the form of financial statements.
D – A review might well include a comparison of the results for the current period to anticipated numbers in a budget or forecast.
Answer is D
A review consists primarily of inquiry of company officials and the performance of analytical procedures. In this way, the CPA is able to provide limited assurance that nothing was noted that indicated the presence of any material modifications that needed to be made to be in conformity with generally accepted accounting principles. Comparing current figures to anticipated figures helps to highlight balances that do not appear to be correct or normal. In contrast a compilation is primarily the presentation of the client numbers in the form of financial statements with no assurance at all being given.
BEC
On January 1, Year One, a company spends $60,000 on an investment that will return $20,000 on each December 31 of Years One, Two, and Three as well as an additional $30,000 on December 31, Year Three. The company has a desired rate of return of 10 percent per year. The present value of $1 paid in three periods at a 10 percent rate of return is .751. The present value of an annuity due of $1 paid over three periods at a 10 percent rate of return is 2.736. The present value of an ordinary annuity of $1 paid over three periods at a 10 percent rate of return is 2.487. Which of the following statements is true?
A – The investment has a positive net present value of $ 7,590.
B – The investment has a positive net present value of $12,270.
C – The investment has a positive net present value of $16,860.
D – The investment has a positive net present value of $17,250.
Answer is B
A positive net present value indicates that the present value of the future cash flows determined based on a desired rate of return is higher than the cost of making the investment. These specific cash flows have a present value of $20,000 times 2.487 ($49,740) plus $30,000 times .751 ($22,530) for a total of $72,270. The first three payments are an ordinary annuity since they begin one period after the investment is bought. The cost of the investment is $60,000 so that the net present value is the excess $12,270. Investments with a positive net present value are viewed as good investments.
Have a great week. Do not let the roller coaster ride of the economy distract you from getting the points you need to pass the CPA Exam.
Joe Hoyle
Co-Founder
CPA Review For FREE
From: Joe
(a) – I fully realize that our economic times are quite scary at the moment. I truly hope that everyone who gets these emails is doing okay financially. If you are like me, you are both mystified and a bit wary. I am confident that things are going to get better and that the economy will come back strong. However, we will all feel better when things start to look better. I just hope that you have not been facing truly difficult financial issues in the last couple of weeks.
I am old enough to have seen a number of economic ups and downs over the years. One thing that always happens in such times is that people get more interested in making their resumes look better. Makes perfectly good sense. One of the best ways to improve that resume is to add the letters C P A after your name. Whether you are in Walla Walla or Katmandu, those three letters mean something important.
So, if you know someone who is struggling with the economy at the moment, one recommendation is to take the CPA Exam and get it passed. Not a bad way to spend some time. Those three letters will put you ahead of the pack if you are looking for a new job or a promotion.
The problem, of course, is that CPA review can be extremely expensive. Today, people are not in position to shell out several thousand dollars for prep programs (especially mediocre programs). It’s a tough call: I need to pass versus I cannot afford to prepare.
But, wait a minute!!! CPA Review For FREE (www.CPAreviewforFREE.com) provides you with a full range of practice questions to allow you to prepare for the CPA Exam for FREE (“free” as in no cost). You can get those three important letters after your name and you can prepare for free. What a deal; what an opportunity.
Now is the perfect time to get started. Move to the head of the class: pass the CPA Exam.
I once had a friend who had years and years of experience in CPA Review give me some good advice: “Anyone who works 2,000 well-written questions and carefully studies the answers should be able to pass the CPA Exam.” I hate to tell you this but much of the huge amount of materials that other review courses provide is just to allow them to jack up the price and charge you so much money. I know it looks impressive but if your goal is to pass the exam all that material can be overkill. “Anyone who works 2,000 well-written questions and carefully studies the answers should be able to pass the CPA Exam.”
(b) – As always, thanks for forwarding our emails along. www.CPAreviewforFREE.com gets more and more visitors every week. Last week, for example, we had a 42 percent jump in the number of pages that were viewed over our previous high. 42 percent jump in one week!!! People are clearly discovering how well our questions and answers help them to prepare.
(1) – We all have heroes. One of mine has always been the legendary football coach Vince Lombardi, who became famous in the 60s for coaching the Green Bay Packers to a number of championships.
What I like about Lombardi is not that he won a lot of football games. Many people do that. Plus, after all, football is really just a game. What I really like was his attitude. He believed that every person was capable of winning if they simply prepared themselves in the proper way. In fact, he was probably best known as a coach who took average players and turned them into champions. What a wonderful thing to be remembered for.
Anyone can win if they have the best players. That is no trick; that is no challenge. The excitement comes from taking average people and pushing them to do their best. And, I have found, in my life, that when people really do their best, things go very well.
If you have read these emails for long (I have been doing them off and on now for over ten years), I have always held that everyone can pass the CPA Exam. That is not an idle statement. It takes work, it takes focus, it takes dedication, it takes desire, it takes sacrifice, it takes good materials, it takes hours, it takes confidence. But it can be done.
Work
Focus
Dedication
Desire
Sacrifice
Good Materials
Hours
Confidence
There is no reason, if you have those eight magic ingredients, that you cannot mix up a brew that will turn you into a CPA. The trouble is that people come to the table with only 3 or 4 and then decide that they are not good enough to be CPAs. Baloney!!! As Shakespeare so aptly says in Julius Caesar: “The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.” When you have these eight, YOU can succeed at virtually anything you attempt. You really can leap tall buildings with a single bound.
So, where does this lead us?
--Make a plan. By when do you want to have the CPA Exam passed? Stop being random. Set a firm goal. Always start at the end and work backwards.
--Ask yourself what you need to accomplish to get to that goal. Be reasonable: working 28 hours per day is not going to work. If you read these emails, you know that I recommend 250-400 hours to pass all four parts of the exam. When are you going to spend those hours? What are you going to do in those hours?
--Once you have a plan in place, have an honest conversation with yourself and ask a couple of serious questions and give truthful answers.
Can I do this as currently set up? If not, go back and rearrange the schedule. There is no reason to get started doing something that you simply cannot do. That is a loser from the start. Create a plan that is doable and will turn you into a winner.
What will be my biggest obstacles? What can I do at the start to lessen the problems that those obstacles pose? You know yourself. What is really going to hold you back and how do you get around that? Don’t be naïve; understand your weaknesses and address them before they cause a problem.
Why do I want to do this? It is very important to have a clear understanding of why you are seeking to become a CPA. When times get tough and you get tired and sick of it, it is easy to quit if you don’t have a well defined purpose for the study.
Can I have the right attitude? If you go into your preparation thinking it is going to be the worst few months of your life, this journey can be miserable. It is hard to be successful when you are miserable. If you go into this thinking it will be an interesting mental challenge, everything gets easier. Trust me on that. How do you go about setting up a positive mental attitude?
How can I reward myself along the way? Most people are not used to performing long tasks without a break. You can just wear down and become completely inefficient. I am a big believer that taking breaks is good for you. You need to study well. Don’t study more than 3-4 days straight without a day off. Don’t study more than 90 minutes straight without a 15 minute break. During those breaks, think what you can do that will make you feel better. You want to use the breaks to refresh yourself. They don’t give you points for wearing out.
How can I make sure I believe in myself? We are all very aware of our failings. Every person has some concern that they are not good enough. How do you go about making sure that you have the confidence you need to succeed at such a challenging task? One answer is to do the work and realize how much stronger you are becoming as you move through the process. Step back and make an honest appraisal of all that you have accomplished. It is not where you start that counts but the progress that you make toward your goal that truly does matter.
I am not a huge baseball fan but I have been intrigued by the Tampa Bay team. They are playing Boston at the moment and I have no idea who will win. However, Tampa Bay did something that I always find interesting. In one year, they have gone from the worst record to the best record in their division. That is truly amazing.
How do you do something like that? You work hard, you believe in yourself, you spend time practicing to get better.
Face it; there are no real secrets to becoming successful. We all know what it takes.
(2)-Just a reminder. If you want or need to unsubscribe, just scroll to the bottom of this email lesson and you will find a link that pulls your name off our list. We are glad to have you with us but you are more than entitled to unsubscribe whenever you wish.
(3)-Let’s do some practice work. Here are a few new questions that I want to add to our database at www.CPAreviewforFREE.com. You will get a chance to practice on them before they hit our website.
Regulation
Mary, a single individual, has provided more than half of the support for the following three people. Her mother who lives in a nursing home and who earned $10,000 in social security and $2,000 in interest income. Her son who is 19 and a full-time student who received $20,000 in scholarship income. Her friend who is in the process of getting a divorce. She has no income and is not filing a joint return with her estranged husband. How many dependents can Mary include on her personal tax return?
A – Zero
B – One
C – Two
D – Three
Answer is D
The mother is a dependent because she earned such a low amount of income that was subject to taxation. The son is a dependent because he is under 24 and a full-time student so that the amount of income is not a factor. The friend is a dependent because she does not file a joint return. There are five basic rules for being a dependent and these individuals meet the specific rule that appears to be in question for them.
Financial Accounting
Ace Company buys inventory on December 18, Year One for 20,000 vilsecks, a foreign currency. On that day, one vilseck is worth $.24. At the end of Year One, the inventory is still held and the debt is not yet paid. On that date, one vilseck is worth $.25. Ace might be a foreign subsidiary that is being consolidated with a US parent company so that translation is appropriate. Ace might be a US company making a purchase from a foreign supplier so that a remeasurement is appropriate. What gain or loss is reported in each case at the end of Year One?
A – If this is a translation, there is a $200 gain. If this is a remeasurement, there is a $200 loss.
B – If this is a translation, there is no gain or loss. If this is a remeasurement, there is a $200 loss.
C – If this is a translation, there is no gain or loss. If this is a remeasurement, there is no gain or loss.
D – If this is a translation, there is a $200 gain. If this is a remeasurement, there is a $200 gain.
Answer is B
In the translation of a foreign subsidiary, all assets and liabilities are adjusted at year-end to the new exchange rate. Therefore, both balances at December 18 are equal to 20,000 times $.24 or $4,800. At December 31, both are translated at 20,000 times $.25 or $5,000. The $200 gain in the reported value of the inventory is offset by the $200 loss in the reported amount of the payable. In contrast, in the remeasurement of an individual transaction, only monetary assets and liabilities (cash, payables, receivables, and accounts reported at fair value) are adjusted to new exchange rates. Again, both balances at December 18 are equal to 20,000 times $.24 or $4,800. However, at December 31, only the payable is adjusted to 20,000 times $.25 or $5,000. The increase in the liability creates a $200 loss. The inventory remains at $4,800 for reporting purposes.
Auditing and Attestation
A company is talking with a local CPA about doing either a compilation or a review of its financial statements for the current period. Which of the following statements is true?
A – In a compilation, the CPA provides limited (sometimes referred to as negative) assurance.
B – For the most part, a compilation is limited to making inquiries and carrying out analytical procedures.
C – A review is a presentation of client information in the form of financial statements.
D – A review might well include a comparison of the results for the current period to anticipated numbers in a budget or forecast.
Answer is D
A review consists primarily of inquiry of company officials and the performance of analytical procedures. In this way, the CPA is able to provide limited assurance that nothing was noted that indicated the presence of any material modifications that needed to be made to be in conformity with generally accepted accounting principles. Comparing current figures to anticipated figures helps to highlight balances that do not appear to be correct or normal. In contrast a compilation is primarily the presentation of the client numbers in the form of financial statements with no assurance at all being given.
BEC
On January 1, Year One, a company spends $60,000 on an investment that will return $20,000 on each December 31 of Years One, Two, and Three as well as an additional $30,000 on December 31, Year Three. The company has a desired rate of return of 10 percent per year. The present value of $1 paid in three periods at a 10 percent rate of return is .751. The present value of an annuity due of $1 paid over three periods at a 10 percent rate of return is 2.736. The present value of an ordinary annuity of $1 paid over three periods at a 10 percent rate of return is 2.487. Which of the following statements is true?
A – The investment has a positive net present value of $ 7,590.
B – The investment has a positive net present value of $12,270.
C – The investment has a positive net present value of $16,860.
D – The investment has a positive net present value of $17,250.
Answer is B
A positive net present value indicates that the present value of the future cash flows determined based on a desired rate of return is higher than the cost of making the investment. These specific cash flows have a present value of $20,000 times 2.487 ($49,740) plus $30,000 times .751 ($22,530) for a total of $72,270. The first three payments are an ordinary annuity since they begin one period after the investment is bought. The cost of the investment is $60,000 so that the net present value is the excess $12,270. Investments with a positive net present value are viewed as good investments.
Have a great week. Do not let the roller coaster ride of the economy distract you from getting the points you need to pass the CPA Exam.
Joe Hoyle
Co-Founder
CPA Review For FREE
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