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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 No books to lug around, no outdated materials, access from anywhere: laptop, desktop, cell phone.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