Monday, October 11, 2010

Go After That Exam Boldly

Try us FIRST before you spend your hard-earned money.

October 10, 2010

CPA Review for FREE
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Lesson 81

From: Joe


(A) - Great News - last week was the second biggest week in our history in terms of the number of visitors. More and more people seem to be finding out about the 2,100 excellent and FREE questions and answers to be found at www.CPAreviewforFREE.com. Just out of curiosity, I went back exactly one year to see how much we had grown in that time. In the last year, the weekly number of visitors to come to our website is up by over 57 percent.

And, as we always say, we do this without spending one penny on marketing. Just think how good XXX review program or YYY review program could be if they would stop spending so much money on marketing and spent it, instead, on improving their materials.


(B) - And, the number of people using our subscription services for FAR and Regulation grows and grows. Each program is only $15 per month and, together, they provide you with over 1,400 slides including all of the the content you could ever want. You really don't need to spend $2,500 for materials. A slightly more reasonable price is $15 per month.

Remember - if you do sign up for one of our subscription services, come all the way down to the bottom of the table of contents and you'll find the study program. Please read that first so you will know what to do.

We are working madly on BEC and Auditing. We will have those subscription services up and available as quickly as possible.


(1) - One of my partners sent along the following note which I thought was very helpful. If you have not taken the exam before, this might be a good way to spend 7 minutes, just to get a feel for how the check-in process at the Prometrics site works.

Joe - Below is a video produced by Prometrics on what the candidate can expect when they arrive to take the exam. I thought you might want to pass this along to the candidates as it might take away some of their pretest anxiety. Lynn

www.youtube.com/watch?v=9DZTVuGgLh8


(2) - And, here are a couple of recent emails from our candidates. I want YOU to pass and then write a letter just like one of these.

From SL: "I'm writing ecstatically, because I just got my score for FAR... an 81! I passed on my first try!!! I will have you know that I used your 'content' slides almost exclusively in my preparation... with a bit of help from XX books (supplemental MC questions, or further discussion for confusing topics). I am SO overjoyed. I seriously wanted to cry when I got done with that exam, and for weeks have been expecting a score of between 60 and 70. I could NOT believe my eyes when I first saw it. I screamed so loud, I probably woke the neighbors! Thanks so much for all the hard work you put into those subscription content slides and all the free MC questions on your site -- seriously, I don't think I could have done it my first try without you!"

From BP: "Thanks to your site I passed all 4 parts of the exam. This site is amazing and as an adjunct professor for fraud, I inform my students of this site and explain to them how this has helped me. Of course the school pushes (big course) review. I told them I bought self-study books for 140 dollars and this site and was able to pass no problem. Thank you again, I could not have done it without you."


(3) - I went to Washington DC yesterday to pick apples with two of my grandchildren. On the way back to Richmond last night, I was listening to one of the baseball playoff games on the radio. The Tampa Bay team had lost the first two games and really looked dead. If they lost again last night, they were out; their season was finished. One of the reporters asked a coach or player before the game how they were going to be able to come back and win three straight games.

The person who responded gave the perfect answer. "We are not even thinking about winning three straight. We are thinking about winning TONIGHT. This is the ONLY game we can play right now. Tomorrow, we will worry about tomorrow."

In studying for the CPA Exam, it is easy to get caught up in "how can I get 75 points?" "how can I ever learn all of this material?" "how can I ever pass all four of these parts and get this exam finished?"

Those are all the wrong questions. Those questions just waste your time and energy and make you feel lost and hopeless. Focus on what you can accomplish right now. What are the right questions? Easy?
--What can I learn from this question I'm working right now?
--As soon as I finish this question, how can I make sure I work another question and don't get distracted?
--How much time should I study today and how can I make sure I actually make use of that much time?
--How many points should I add today and how can I make sure to do the work necessary?

Now, those are great questions.

There are a lot of good questions that you should be considering but none of them have to do with the entire CPA Exam. They all have to do with NOW - a time that you really can use to add points. You need to be in the moment.

So, as you study, make sure you are asking yourself the right questions. Make sure you are not wasting your time worrying about things that you cannot control. Focus your attention on adding points today.

By the way - Tampa Bay has now won two straight games and they will play in the next day or two to see which team moves on to the next round. I don't personally care whether Tampa Bay or Texas wins but I do find it interesting that Tampa Bay has managed to come back by taking it one game at a time.


(4) - I was reading something the other day and saw a line that I really liked. I am not even sure who said it: "You can't be a winner and be afraid to lose." As you can imagine, I talk with a lot of people about the CPA Exam. You hear all kinds of attitudes. There are some that I really love "I'm just doing my work each and every day." "I'm adding points - that's my goal." "I'm learning to enjoy working those questions; it is like exercise-it actually starts to feel good."

There are some, though, that I prefer not to hear "I'm so afraid that I am going to fail," "I worry about letting my friends and family down" and "I just know that I cannot make it."

I know it is sometimes hard to do but you cannot play afraid. It ties you into knots. It puts too much pressure on you. It makes you timid and afraid. It takes away your confidence.

Yeah, you can fail the CPA Exam. And, yeah, that won't make you happy. But it is not the end of the world. A lot of people who are truly successful in the accounting profession took awhile to get all the parts passed.

If you study with the fear of failure on your mind, it is ever so hard to make the most of your talents. If you are constantly worried about not passing, it is hard to put in the effort that you need. You can't live afraid and flourish. You can't be timid and conquer your goals.

So, ask yourself: when you think about the CPA Exam, what comes into your mind first: the thrill of knocking out that monster or the fear of not passing? I genuinely hope that there is a thrill to this process for you. I really hope that you can get excited about knocking out those questions one after another and getting that passing grade. It is just so much easier to do the work necessary and become a winner if you are not scared to death of the possibility of failure.


(5) - As always, do realize that you have the right to unsubscribe from these lessons. We are delighted to have you with us and we really appreciate you passing along the good word to other folks you know who are taking the CPA Exam. However, if you are tired of getting these email lessons every week or two, just scroll down to the bottom of this lesson and click on the appropriate link.


(6) - PRACTICE TIME

Let's see if we can't add a point or two to your CPA Exam score. A point or two per day will get you to 75 before you know it.

If you get the questions right, that tells you that you already have the knowledge needed in those areas. If you miss a question, that tells you that you have a wonderful opportunity to read the answer carefully and work on getting this correct the next time. And, of course, it might well be the next time that actually counts.

FAR

The Gibbs Construction Company is in the process of building an 80 story office building for a client. The job should take approximately three years. The first year has just been completed. Because of uncertainty around this job, accountants for Gibbs do not believe that they can make reasonable estimates about the degree of completion that has been achieved in this job to date. What method of accounting must Gibbs use under US GAAP and what method must Gibbs use under IFRS?

A. Percentage of completion under US GAAP and completed contract under IFRS
B. Completed contract under US GAAP and cost recovery under IFRS
C. Cost recovery under US GAAP and percentage of completion under IFRS
D Completed contract under US GAAP and completed contract under IFRS


Answer is B

In both US GAAP and IFRS, the percentage of completion method is used as long as the reporting company can make reliable estimates of the amount of the work that has been completed as well as the costs that remain to be incurred. Under US GAAP, if those estimates cannot be made, then the completed contract method is used. Only if collection of the money from the customer is significantly uncertain is the cost recovery method required. Under IFRS, if the estimates cannot be made, then the cost recovery method must be used. IFRS does not recognize the completed contract method because it waits until the last day to recognize all of the profit on the job.


Auditing

A CPA firm is auditing a client that sells merchandise on credit to a wide variety of customers. Last year, the accounts receivable turnover ratio was 5.9 but this year it has fallen to 4.1. The auditor is concerned by the significance of that change and hopes to find a logical explanation. Which of the following is most likely to explain the cause of that change?

A - The company has dropped its sales prices but shortened the length of time a customer is given to pay before a late charge is assessed.
B - The company accountant has fraudulently tried to boost reported net income by debiting inventory and crediting sales when no transaction took place.
C - The company is making a higher percentage of its sales for cash.
D - The company started making sales on consignment this year and recording those transactions as credit sales at the time of shipment to the consignee although no cash has yet been collected.


Answer is D

The accounts receivable turnover ratio is found by taking sales and dividing it by accounts receivable. For example, sales of $590,000 and accounts receivable of $100,000 lead to a 5.9 ratio. In D, both the sales and accounts receivable figures are incorrectly inflated because a consignment sale does not occur at the time of shipment but only when the goods are actually sold by the consignee. For example, if those sales were recorded at $60,000 and no sale to a third party has yet occurred, sales would be $650,000 ($60,000 too high) and accounts receivable would be $160,000. The accounts receivable turnover ratio would drop to 650,000/160,000 or 4.1. In A, the customers will pay quicker and the turnover ratio will increase rather than decrease. In B, the sales figure is increased but not accounts receivable and that will also cause the turnover ratio to rise. In C, sales stays the same but accounts receivable goes down which, once again, makes the turnover
ratio larger rather than smaller.



BEC

A company has revenues of $700,000, operating expenses of $400,000, interest expense of $60,000, and income tax expense of $50,000. What is this company's times-interest-earned ratio?

A - 3.2
B - 3.8
C - 4.2
D - 5.0


Answer is D

The formula for calculating the times-interest-earned ratio is the earnings figure (before both interest expense and income tax expense are subtracted) is divided by the amount reported for interest expense. Thus, income for this computation is $300,000 ($700,000 less $400,000) which is divided by $60,000 to arrive at 5.0


Regulation

John Clancey owns 20 acres of land that has a book value of $400,000 and a fair value of $700,000. He trades this land for 3 acres of land that are closer to the city and, therefore, worth more per acre. The land he gets is worth at total of $640,000. To even up the trade, Clancey also collects cash of $60,000. For tax purposes, what gain, if any, should Clancey recognize?

A - Zero
B - $60,000
C - $240,000
D - $300,000


Answer is B

In a like-kind exchange such as this one, there is normally no reported gain or loss. However, Clancey also received cash (boot) of $60,000. In that case, the taxpayer reports the gain made on the trade or the boot, whichever is less. Clancey gave up property with a book value of $400,000 and collected property with a fair value of $700,000 ($640,000 + $60,000). That is a gain of $300,000. The taxable gain is the $60,000 boot or $300,000 gain whichever is less. Thus, the $60,000 is taxable income. This rule applies when boot (an extra amount added in to even up the trade) is collected in a like-kind exchange.


Have a great day.
Make the most of the day that you have been given.
Put in the time and add those points and let's get the CPA Exam finished and out of your way.

Joe Hoyle

President - CPAreviewforFREE
www.CPAreviewforFREE.com

5 comments:

Stephanie said...

Hi all,
I have encountered a question whilst reviewing and am having a difficult time understanding why the answer is what it is. Here is the question:

On 10/1/X1 ABC Co. sold 100,000 gallons of fuel to DEF Co. at $3 a gallon. 50,000 Gallons were delivered on 12/15/X1 and the remaining 50,000 were delivered on 1/1/X2. Payment terms were 50% due on 10/1/X1, 25% due on first delivery, and the remaining 25% due on 2nd delivery. What amount of revenue should Acme recognize from the sale during Year 1?

A) 75K
B) 150K
C) 225K
D) 300K

I keep getting 225,000 as my answer, but my software is stating 150,000. They just give the explanation as 50,000 * $3= $150,000. What about the terms of the agreement? 50% upon signing agreement and 25% on first delivery etc.? Can anyone clarify this for me? Much appreciated!

Steph

Unknown said...

Hi Stephanie -- revenue is recognized when the earning process is substantially complete. In this question, only the work dealing with the first 50,000 gallons is complete. The revenue in conneciton with the second 50,000 gallons will be substantially complete when it is delivered. So, $150,000 revenue on 12/31/1 and $150,000 revenue on 1/1/2. Joe

smplcv said...

Did read anything further, just when to the CPA site and was really helpful one. Thanks a lot!


Accounting CV

Lynn said...

Thanks so much! Our goal has always been to provide quality prep materials at a low price. Cost should not prevent candidates from preparing well for the exam!

Stephanie said...

Thanks Joe!