Make Each Day Your Masterpiece

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Lesson 79

From: Joe

(1) – Friday, on our Facebook.com page (CPAreviewforFREE), I issued the following challenge to all of our friends and fans. What interested me most was how many people wrote in to say they would make that commitment, they would accept my challenge of getting the CPA Exam passed by this time next year. I hereby put the same challenge out to you. Make that commitment!!! Do it now!!!

Facebook: “I want to challenge you (yes, YOU), right here today on 8/27/10, to make a commitment that you are going to finish the CPA exam in the next 12 months. You are going to pass it all. One year from today, I want you to write me and say ‘I am finished!’ It will take work, sacrifice and some serious self-discipline. But, the way you start to achieve this success is to make that commitment. Do it!! Today!! Right now!”


(2) – We had a huge week last week. We had (by far) our largest number of visitors and approximately 325,000 page views. We had visitors from 102 countries – I’m not sure I even knew there were that many countries. (Well, yeah, I really did.)


(3) – Why are we experiencing such rapid growth? Here are a couple of recent emails that I received that should explain this. Trust me, this is not an accident.

From JW: “Passed FAR with a 77. . . . After trying XXXX self-review software and XXXXXX flash cards, the time I spend answering questions on your site is truthfully the most valuable review I've done. I chose to use your site exclusively during my final exam preparation for FAR, because I knew I understood the material after working through the more complex questions.”

From JT: “Thank you so much for this excellent (FREE) website. The questions did a great job preparing me for the exam and the drill-down capabilities were fantastic, allowing me to work harder on the sections I wasn't as well-versed in. I sure am glad I didn’t waste $2,500 and 1,000 hours of my life studying with XXXXXX – I was able to pass all four parts of the exam, first try, with nothing more than this website and some year-old borrowed XXXXX books.”


(4) – Don’t forget that for a mere $15 per month you can access our on-line FAR content. Over 620 content slides. Why use a borrowed book that may be out of date? We will have the other three parts of the exam available very soon (over the next few weeks).


(5) – I am going to give you a piece of advice that most of those other big-name review courses are not giving. I guess the word on the street is to take BEC if you can in October or November before it is extended by 30 minutes and three written communications questions are added. There seems to be a flood of people rushing to take BEC before the end of 2010.

From my experience, most college graduates (even accounting majors) write pretty well. They know how to create a business letter or a memorandum. Okay, I don’t meet many Shakespeare's in accounting but you don’t have to be Shakespeare to write a business letter.

Remember, as long as a written communication question is “on topic,” the content is not graded—-only the use of the English language.

So, in looking at BEC, you have a choice:

--Take in 2010 – 100 percent of the grade is based on knowledge of content
--Take in 2011 – 85 percent of the grade is based on knowledge of content and 15 percent is based on the ability to use the English language properly.

I think most blanket advice is wrong and stupid. It seems to me that those of you who really write poorly (you know who you are) should take the BEC exam in 2010. However, those of you who write reasonably well (and, yes, you know who you are) might well prefer to wait until 2011 and take advantage of that writing skill.

Forget blanket advice. Think about which exam suits your skills and talents best.


(6) – I received an email from a dear friend a few days back. He ended it with a quote from John Wooden, the legendary UCLA basketball coach. Apparently, Wooden’s father gave him this advice when he was a small boy and it stuck with him throughout his adult life.

“Make each day your masterpiece.”

We spend a lot of time dwelling on the past.
We spend a lot of time planning for the future.
But when it comes down to accomplishing something, making something happen, the only day that actually counts is today. The only day where you can add points to your score is today. The only day that really makes any difference is today.

And, one of the absolutely great things about life is that every day is a new day. When you wake up each morning, you do have the chance to make that day your masterpiece. Even if yesterday was awful and a waste time, you can still make great use of today. You have the opportunity to make today a special day, one to remember – that one day when you knock it out of the park.

No matter how bad yesterday was—every new day provides the remarkable offer of a new chance.

Even if you didn’t add a single point yesterday; you can still add them today.

I know that you can’t climb Mt. Everest every day or create a new invention every day but you can make the most of the time you are given.

In a basketball game, if a team is behind at halftime by a lot of points, the coach will invariably explain to the team that they cannot catch up all at once. They have to work slowly to catch up, one minute or one possession at a time.

No matter how far behind you are – you can start catching up today.

It seems to me that people who truly succeed:
--Learn from the past
--Plan for the future
--Focus on today.

When you got up this morning, what did you focus on?
Did you focus on having a great day where you could get in some serious study for the CPA Exam?

Or, did you whine about another defeated day?
If you expect defeat, you will get it.

But, if you expect to create a masterpiece, you have taken the very important first step to getting there.


(7) – As our lawyers always tell us – “remind your subscribers that they have the right to unsubscribe from these free email lessons whenever they wish. Tell them that they can just scroll to the bottom of the lesson and we have included a link that allows them to easily and quickly unsubscribe.”

Don’t you love lawyers?


(8) – Practice – let’s create a masterpiece.

FAR

A company owes a bank $1 million on a long-term loan that comes due on July 2, Year Two. The company is currently preparing a December 31, Year One, balance sheet that will be issued on February 17, Year Two. On January 3, Year Two, the company refinanced this entire debt with the bank by signing for a debt that will not come due until 2019. How is the original debt reported on the December 31, Year One balance sheet?

A – As a current liability under US GAAP but as a noncurrent liability under IFRS.
B – As a noncurrent liability under US GAAP but as a current liability under IFRS.
C – As a current liability under both US GAAP and IFRS.
D – As a noncurrent liability under both US GAAP and IFRS.

Answer is B

The US GAAP portion of this question could be tested now but the IFRS portion could only be tested starting in 2011. Under US GAAP, the refinancing of the debt (or the obtaining of a noncancellable agreement to refinance) must take place before the statements are issued for the debt to be moved to noncurrent. That was done—it is reported as noncurrent. Under IFRS, the company must take action before the balance sheet date. That was not done—it is reported as current.


Regulation

On January 1, Year One, the Acme Company begins operations and spends $41,000 in organization expenditures. How much of this amount can be deducted for corporate income tax purposes in Year One?

A – Zero
B - $5,000
C - $7,400
D - $41,000

Answer is C

Organizational expenditures to get a business into operation can be deducted immediately but only up to $5,000. This $5,000 amount must be reduced (but not below zero) by the amount by which organizational expenditures exceed $50,000. This is not the case here. Remaining expenditures (in this case $36,000 or $41,000 less $5,000) are deducted evenly over a 180-month period beginning with the month in which the corporation begins business. Thus, $36,000/180 months means that $200 can be deducted per month or $2,400 for the entire year. The Year One deduction is $5,000 plus $2,400 or $7,400.


Auditing

The Raleins Corporation is being audited by its CPA firm which is currently looking at accounts receivables. The auditors want to reduce the audit risk of a material misstatement existing in accounts receivable to 4 percent. That is considered an acceptable level of risk. Inherent risk has already been assessed at 50 percent. Control risk has been assessed at 40 percent. The auditors are now beginning their substantive testing of accounts receivable which will gradually reduce the assessed level of detection risk. What is the level of detection risk the auditors must achieve from their substantive tests of accounts receivable?

A. 2 percent
B. 20 percent
C. 25 percent
D. 40 percent

Answer is B

The CPA must gather evidence until overall audit risk is reduced to an appropriately low level (4 percent in this case). Mathematically, audit risk is the inherent risk times the control risk times the auditor's detection risk. Inherent risk has already been assessed by the CPAs as 50 percent and control risk as 40 percent. At this point, .50 times .40 gives .20 (or 20 percent risk). How much substantive testing is still needed to reduce detection risk so that overall audit risk drops from this 20 percent level to 4 percent (or .04)? Or, stated differently, .50 x .40 x DR = .04. Only 20 percent or .20 will reduce the current .20 down to .04. When detection risk drops to 20 percent, then .50 x .40 x .20 will equal the desired level of audit risk of 4 percent.


BEC

The Norfolk Company signs a contract to sell 10,000 barrels of a specified grade of crude oil (for example light, sweet crude oil) on May 9, Year One, to a customer for $78 per barrel regardless of the market price on that date. What type of contract is this?

A. Redeemable contract
B. Futures contract
C. Deliverable contract
D. Simultaneous contract

Answer is B

A futures contract is a contract between two parties to buy or sell a specified asset of standardized quantity and quality at a specified future date at a price agreed upon when the contract is signed.


Make today your masterpiece!!!!


Joe Hoyle
President

CPA Review for FREE

www.CPAreviewforFREE.com