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November 23, 2010
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Lesson 84
From: Joe
(a) – Have a great and joyous and wonderful Thanksgiving day on Thursday. Please do take time out of your busy and hectic day to reflect on all those many things that you have in your heart to be thankful for. I’m convinced that life goes better if your focus on what you are grateful for rather than stew on those things that tick you off. Too many people I know spend too much valuable time stewing.
(b) – And, here is one thing that we have to be thankful for – last week was our busiest week in our history!!! And, as always, it was done without advertising. Just think, if we had any money and could advertise like the big courses, we could really grow.
Just to put our growth into perspective, we measure a lot of things around here in page views. A page view is basically one person reading one question and one answer. So, it is a unit of measure that we can all understand. In our first week of existence, we had 1,920 page views and I was ecstatic. I thought that was unbelievable.
Last week, we had an average of 1,920 page views every 45 minutes round the clock, 24 hours per day for all 7 days of the week. That is close to a one-half million page views in that one week. (Or, as another way to look at it, we averaged 42.85 page views PER MINUTE for an entire week).
The average person stayed on our site for nearly 30 minutes and did 31.27 page views. That was THE AVERAGE PERSON.
So, don’t let the big courses kid you. We believe that 2011 will be the year where we become the most popular CPA Review program in the world. We have great plans that we will be rolling out during the next month. Stay tuned.
(c) – We get gazillions of emails and we always like to share a few with you. Speaking of those big, expensive courses, here is one that I got yesterday.
From EC: “I have to share some great news about your website. I just got my score from the BEC exam that I took on October 15. After four times of miserably failing the BEC section and after spending hundreds of dollars in mediocre CPA review materials such as XXXXXX, XXXXX XXXXXXXX, XXXX, and XXXXXX, I decided to give it a shot using your program. I did not have to spend more money I only needed to invest my time for the fifth time. I felt very comfortable during my last BEC exam but I did not want to have my hopes up since another failure would have devastated my self-esteem. I was pleasantly surprised when I saw I had passed BEC with 79. I was able to raise seven points with your program. The best I had done in the past was a 72, twice. Thank you very much for your commitment to help people like me who almost lost hope on passing BEC. I am now studying to sit for Audit on November 30, 2010, again since my credit expired last June due to the constant failure of not
passing BEC. I am now religiously studying the questions of your program. I will keep you posted as soon as I get my results. If I pass it, I will finally become a CPA and my name will be added to the CPA registry of the AICPA.” (You folks at home get points if you can figure out the four programs marked with the XXXs.)
Notes like this are what keep us working on CPAreviewforFREE.com
(1) – I love the note from EC above because the exam kept pushing him back but he wouldn’t let it get the best of him. He kept working and pushing forward and, at the end of the day, he got 79 points and he passed his nemesis – BEC.
Last Friday, in the Wall Street Journal, there was a quote from the movie Rocky Balboa:
“It ain’t how hard you hit, it’s how hard you can get hit and keep moving forward.”
Whether it is life or the CPA Exam, there are all kinds of barriers in our paths. All sorts of things that want to prevent us from succeeding. Yeah, it is easy to hit a barrier and quit and go home. The people I’m most proud of are those folks like EC who come close but fail several times and are willing to keep moving forward and doing it again until they make it happen!
If you are very smart and a great student and pass the CPA Exam pretty easily, that’s great for you. I really am pleased. But the exam didn’t truly put you to a serious test. The people I cheer for the most are those that work like dogs just to be average students. And, no matter how hard the CPA Exam pushes those folks back, they just keep moving forward and eventually they pass. And, that is truly wonderful. The CPA Exam has been a real test of their character and that character has proven to be rock solid. Now that is an accomplishment worth cheering about.
I liked the quote from the Rocky Balboa movie so well that I went to Google and found the whole quote. This quote is for all those people where the CPA Exam is truly a serious test of your intestinal fortitude. Don’t give up – don’t ever give up.
Rocky: “Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and I don't care how tough you are it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done. Now, if you know what you're worth, now go out and get what you're worth. But you gotta be willing to take the hits, and not pointing fingers saying you ain't where you wanna be because of him, or her, or anybody. Cowards do that and that ain't you. You're better than that!”
If that doesn’t get you up off the couch to go do some problems on CPAreviewforFREE, you better have someone check your pulse.
(2) – Speaking of dynamic characters, we went on a short two-day vacation about ten days. We were staying in a bed and breakfast and we were staying in the “Theodore Roosevelt Room.” If you have ever read much about President Roosevelt, he may well have been one of the most dynamic figures in history. He once was scheduled to give an important speech in a hotel. He was shot in the chest right before he was to give the speech. He refused to go to the hospital until after he gave the speech. The speech lasted for nearly two hours. He almost passed out several times during the speech but he refused to let the gunman get the best of him.
In this Theodore Roosevelt Room, they had the following quote from TR framed at the top of the stairs:
“We shall make mistakes, and if we let these mistakes frighten us from our work, we shall show ourselves weaklings.”
Yes, you are going to miss questions.
Yes, you are going to get discouraged.
Yes, it is possible that you might fail some of the CPA Exam.
Yes, you simply cannot be perfect.
But you cannot let those mistakes frighten you into giving up or not putting in your best effort.
It is easy to live your life in fear but no one ever gets better by being afraid of mistakes.
What is holding you back from doing your very best on the CPA Exam? Is it simply that you are frightened by the possibility of not being perfect? Are you afraid that you will work hard and fail? We all fail at times. We all come up short at times.
And, yes, many people really do give up and quit. Don’t let that be you. When you win, you need to be gracious. When you lose, you need to be pugnacious.
I often tell the story about Vince Lombardi (the legendary coach) in his first pro football playoff game way back when he first started coaching. Apparently, his team lost the game right at the very end when they couldn’t score a touchdown that they really should have scored. As he walked off the field, he told someone something like “my teams will never lose another playoff game.” And, they didn’t.
Now, they did lose some regular season games but when things counted most at the end of the season, a Vince Lombardi team never lost another playoff game.
Think about it, what if that mistake in the first playoff game had made Coach Lombardi tentative or afraid of losing. No one would still remember Lombardi these days. However, hee wasn’t a person to be frightened by failure and, consequently, he is remembered as one of the greatest coaches of all time.
We make mistakes – how we do in life, in large part, depends on how we react to those mistakes. In my book, you need to be pugnacious.
(3) – As always, please know that you are allowed to unsubscribe from these lessons. We have a good number of people all the time who pass the exam and do unsubscribe. Super. To unsubscribe, go to the bottom of this email lesson and click on the unsubscribe button.
Want to help – just forward this email lesson to someone who is thinking about taking the CPA Exam. That would be such a help to us. Simply say “this guy helps to run www.CPAreviewforFREE.com and this email lessons will help you know how to pass. And, they are free.” It’s hard to beat free.
(4) – In just the time it took me to write this email lesson, I got the following two emails:
From MA: “I just wanted to make sure that you know that your free questions and paid content WORK!!! The only thing I supplemented this website with for FAR was an audiobook that I downloaded to listen to in the car and at work, and found out this morning that I got a 77 on FAR (Massachusetts). Thank you Joe!!!”
From JH: “You and your team are wonderful! I am happy to announce that I have officially passed all 4 parts, but I wasn't able to do it until I found your site. Thanks a million for all you are doing for us! I have passed your information along to those I know who are taking the exam. Keep up the good work and thanks again!”
(5) – Let’s do a bit of practice. Let’s add some points. Let’s learn some material. Let’s keep moving forward.
FAR
Near the end of the Year One, a company buys two derivatives that will come due in the next year. One of these derivatives was properly designed as a cash flow hedge. The other derivative was properly designed as a fair value hedge. By the end of the year, the fair value of both of these derivatives had increased. Where will these gains be reported?
A. In net income for both hedges
B. In accumulated other comprehensive income for both hedges
C. In net income for the fair value hedge and in accumulated other comprehensive income for the cash flow hedge.
D In net income for the cash flow hedge and in accumulated other comprehensive income for the fair value hedge.
Answer is C
The fair value hedge is bought to offset a possible loss from an asset or liability that is recorded at fair value. Since the account being hedged is recorded at fair value, its gain or loss will go into net income. Thus, the offsetting gain or loss on the hedge is also put into net income. A cash flow hedge is bought to ensure that an appropriate amount of cash is received or paid. There is not a reported gain or loss to be eliminated. Therefore, any gain or loss on a cash flow hedge is temporarily put into accumulated other comprehensive income (in stockholders’ equity) until it is terminated. In this case, the gain will go from accumulated other comprehensive income to net income in Year Two when the derivative comes due.
BEC
A company needs to obtain $2 million to build a new warehouse and is trying to decide whether to issue debt or issue equity to get the money. Which of the following statements is true about that decision?
A – Financial leverage is an advantage of issuing equity.
B – The tax effects are a disadvantage of debt.
C – The potential impact on future borrowing is a disadvantage of debt.
D – The possibility of bankruptcy is a disadvantage of equity.
Answer is C
If a company borrows money, it will cause a higher debt to equity ratio. As a company’s debt to equity ratio goes up, the ability to borrow money becomes more difficult and interest rates tend to escalate. Financial leverage (using other people’s money to make money for the owners) is a primary advantage of debt. Interest on debt is tax deductible while dividends paid on equity is not so that the advantage goes to the debt. Debt (and its periodic interest) must be paid or a company can be pushed into bankruptcy. No such requirement exists in connection with equity.
Auditing & Attestation
An independent auditor is concerned about her responsibility for uncovering illegal acts that have been committed by an audit client. Which of the following statements is not true?
A - A company records false sales in its financial statements in order to obtain a bank loan. Defalcation has occurred.
B - One reason that an auditor might not be expected to discover all client illegal acts is that some of these acts may involve nonfinancial problems.
C - One reason that an auditor might not be expected to discover all client illegal acts is that some of these acts may be well hidden from the auditors.
D – A reporting company is guilty of polluting the local river and will be subjected to a heavy monetary fine if caught. This is an example of an indirect illegal act.
Answer is A
The manipulation of information to make a company look different than it actually is should be referred to as “fraudulent financial reporting.” Defalcation is theft. An auditor is not expected to uncover all illegal acts for several reasons. For example, some problems (such as pollution) simply do not refer directly to financial reporting. In addition, the audit client will often make a concerted effort to hide illegal acts so that the auditor is unaware. Finally, a direct illegal act has already had an impact on the financial statements. An indirect illegal act will only impact the financial statements if the company is ever caught and punished.
Regulation
Mr. and Mrs. Wallace T. Briarwood have asked you to prepare their federal income taxes. They have listed the following charitable contributions. Which of these four may they include in determining their itemized deductions for this year?
A - Services donated to charity having a fair value of $2,000
B - Dues paid to the American Legion of $180
C - Out-of-pocket costs associated with donated services of $300
D - Donated cash to a political party of $500
Answer is C
Donated services to a qualified charitable organization are not tax deductible but related out-of-pocket expenses are. Dues to a fraternal organization such as the American Legion is not deductible and neither are political contributions.
We have a lot of new subscribers for our email lessons this week. If you are interested in the history of CPAreviewforFREE.com, here is a link to a story about us.
thecollegianur.com/2010/11/04/accounting-professor-creates-affordable-cpa-review-website/15405/
And, if you are interesting in watching one of my videos about education (skip the introductions – you guys know who I am already) here is the URL:
www.youtube.com/watch?v=LjwHxVbZq1o
HAPPY THANKSGIVING FROM ALL OF US HERE AT WWW.CPAREVIEWFORFREE.COM -- WE LOVE YOU GUYS!!!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
Thursday, November 25, 2010
Tuesday, November 9, 2010
Hours Equal Points
November 9, 2010
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
123 Weeks of Operation and 18,488,959 Page Views (without a penny spent on marketing)
Lesson 83
From: Joe
(a) – As we mentioned yesterday on our Facebook page, the school newspaper did a story on www.CPAreviewforFREE.com. If you would like to learn our history and why we first got started in this great adventure, you can read the entire story at the following URL:
www.thecollegianur.com/2010/11/04/accounting-professor-creates-affordable-cpa-review-website/15405/
(b) – It is hard to believe that we have been offering the best possible questions and answers now for 123 weeks and, last week, was our second busiest week in history. We continue to grow as more and more people come to realize that they can pass the CPA Exam without spending thousands of dollars for mediocre materials.
(c) – I have a copy of all of our FAR questions and answers sitting beside of me right here on my desk. I was just reading through several pages and, once again, as I always note, these questions and answers are really well written. Each question and answer is potentially another point on your journey to get 75 and pass.
Remember, you can buy a download of all our questions and answers if that makes your study process easier and more efficient.
And, for FAR and Regulation (and soon for BEC and then Auditing), we have a subscription service that provides hundreds and hundreds of content slides (and, very soon, task-based simulations).
By buying these downloads and/or the subscription service, you add to the materials you can use and you help us pay for this website. And, we do appreciate it.
(1) – When you first get up in the morning, take a 3 by 5 card and write down the number of questions you want to work that day on www.CPAreviewforFREE.com. Pick a number that is challenging but realistic. Put the card in your pocket. Then, each time you work a question during the day, mark off the old number and write in the remaining number of questions to be done. For example, if you hope to do 30 questions today, write down 30. After you do the first question and read the answer, mark out the 30 and write in 29.
This does several things that help you.
--It gives you a goal right now that you can do something about. Making 75 on the CPA exam is a future goal—something you can worry about tomorrow if you wish. You want to avoid procrastination at all costs.
--It provides a sense of accomplishment. Watching those numbers drop off during each day is a clear cut indication that you are making progress. In fact, at the end of every day, tape the card to the wall above your desk. There is something about seeing all those cards that will just feel good. When you feel good about studying, it is easy to study more.
--It helps you focus on today. As you feel that card in your pocket, it will remind you that you have work to do today. One of the hardest things for any person trying to accomplish something is staying in the current moment. Today is the day you’ve got to make good things happen.
Try it – I think you’ll find that you will work more questions and feel better about the whole process.
(2) – A person that I met for about 45 minutes a few weeks ago on our campus sent me a book. I didn’t do anything to deserve a book but I was pleased to get it anyway. Never turn down a good book. The book is titled “Life Is Not A Game of Perfect.”
One of the early stories in this book is about a person who gets a scholarship to play football at a major college. Although he was a great player in high school, when he gets to college, he realizes that he is not the best—in fact, he is far from the best.
I often see this in the students in my college classes. They were great in high school without much effort but in college they are just average. How will that affect them? It is always interesting to see how a person reacts to challenges that they have not faced before. What caught my attention in this book was the reaction of the player on the football team because it is not a reaction that you often see. “I decided,” (he) remembers, “that I might get beat out, but no one would outwork me.”
“No one would outwork me” – how often can you say that, especially when you get into a real challenge? When it comes to the CPA Exam, how many people are outworking you? Often, we have exactly the opposite attitude, “if I can’t do well, why should I try so hard?”
Many of you are preparing for the CPA Exam right now. It is often a struggle. Few people ever face anything like the CPA Exam until they are actually preparing for it. It is often discouraging. Be honest—what is your attitude? How are you responding to this challenge? More importantly, are you letting other people outwork you?
“No one would outwork me” or “If I can’t do well, what should I try so hard?”
How you answer that question tells a lot about who you really are. Your answer depends a lot on how you think about the hard work of studying. If you think that studying is painful and something to be avoided, it is very hard to outwork anyone.
On the other hand, if you think that studying is rewarding because it makes your mind better, then outworking other people is not as hard as it might seem at first.
Everything starts with your attitude. All success comes back eventually to your attitude.
In the case of the CPA Exam, it all comes back to how you look at study time. If it is punishment. If it is tiring. If it is excruciating. Then, you have a real mountain to climb. Putting in the time will be quite difficult.
On the other hand, if you can adopt a different attitude, you’ll find that studying is not nearly as hard. If you view studying as getting a better brain. If you view studying as a game where you see whether you get more wins (correct answers) than losses (incorrect answers). If you view studying as an interesting mental exercise. Then, the ability to put in the necessary hours is just going to be so much easier.
When you compare yourself to all of the people around the world today who are studying for the CPA Exam, where is your attitude?
Is it with the group who says: “No one would outwork me”
Or, are you more aligned with that large body of people who sigh pathetically and doubt themselves by asking: “If I can’t do well, what should I try so hard?”
(3) – We are beginning to gear up for the 2011 CPA Exam. As always, we will continue to send out these email lessons every 1-2 weeks. We are delighted to have you with us. We hope we add points and provide encouragement. However, you do have the right to unsubscribe at any time that you wish. If you should want to unsubscribe, scroll to the bottom of this email lesson (or any email lesson) and click on the appropriate link.
(4) – I have the great good fortune on Thursday of leading a 3 1/2 hour teaching workshop for 150 brand new teachers in the Virginia Community College System. One of the things I hope to introduce them to is “Joe’s Theorem of Success.” In teaching, as well as in most other things in life such as the CPA Exam, I think this theorem is true:
If it takes X hours to be average at a task
Then it will take 2X hours to be good at that task
And 3X hours to be truly truly excellent
The question is not how to achieve excellence. We are all more than capable of achieving excellence. I am sure of that. The question is whether we want excellence badly enough to put in a sufficient amount of time.
Everyone on this email list can pass the CPA Exam. I’ve worked in this business for 30 years and I’ve never met anyone who couldn’t pass. The only question is whether you want to pass badly enough to put in sufficient time.
As I have said dozens of times in these email lessons - HOURS EQUAL POINTS
I can give you all kinds of helpful advice. In the end, the best thing I can tell you (quite honestly) is that the more time you spend, the better your grade will be.
Don’t procrastinate
Don’t put it off
Put in those hours and learn those questions and answers. In the long run, that is probably the best advice that anyone can give you.
(5) – Speaking of putting in the time, let’s do some practice. If you get these questions correct, then move on. If you miss them, turn that lack of knowledge into real knowledge because that is the only way you really add points on the CPA Exam.
FAR – I opened up my intermediate accounting textbook at random and wrote this question based on what I found on the first page I read.
Pepitone Corporation buys equipment for $900,000 on January 1, Year One. Depreciation for book purposes is $300,000 per year. However, for tax purposes, depreciation was $500,000 in Year One and $200,000 in Year Two and $200,000 in Year Three. The enacted tax rate is 30 percent for Year One and Year Two but 32 percent for Year Three. Which of the following is found on the company’s balance sheet at the end of Year One?
A. Deferred tax asset-current of $30,000 and deferred tax asset-noncurrent of $32,000
B. Deferred tax asset-noncurrent of $62,000
C. Deferred tax liability-current of $30,000 and deferred tax liability-noncurrent of $32,000
D. Deferred tax liability-noncurrent of $62,000
Answer is D
For tax purposes, this company will have $100,000 less depreciation expense in Year Two so taxable income will be $100,000 higher. At a 30 percent tax rate, that is a deferred tax liability of $30,000. For tax purposes, this company also will have $100,000 less depreciation expense in Year Three so taxable income will be $100,000 higher. At a 32 percent tax rate, that is a deferred tax liability of $32,000. The total liability is $62,000. Where that amount is shown on a balance sheet depends on what account caused the difference. Here, it was caused by the equipment that was depreciated. Equipment is a noncurrent account. Hence, all related deferred income tax liabilities or assets will also be reported as noncurrent.
Auditing and Attestation
The Wishton Corporation’s financial statements are audited by the CPA firm of Mansen and Dallas. Wishton has a subsidiary located 1,800 miles from the company’s headquarters. The financial statements of this subsidiary are consolidated with the statements of the parent for external reporting purposes. The subsidiary’s assets and revenues make up approximately 16 percent of the total for the consolidated entity. The subsidiary’s financial statements are audited by a local CPA firm and that audit report has now been forwarded to Mansen and Dallas. In providing the audit report for the consolidated financial statements, Mansen and Dallas has decided to make reference to the work done by the other CPA firm. Which of the following statements is true?
A. The audit report should make reference to the other auditors in the introductory paragraph only.
B. The audit report should make reference to the other auditors in the scope paragraph only.
C. The audit report should make reference to the other auditors in the introductory, scope, and opinion paragraphs only.
D. The audit report should make reference to the other auditors in a separate explanatory paragraph only.
Answer is C
When reference is made to other auditors, the introductory paragraph indicates that the principal auditors did not audit a portion of the consolidated statements and indicates the size of that portion by specifying the amount of assets and revenues audited by the other firm. The scope paragraph is changed to indicate that the principal auditor’s audit and the report of the other auditors provided a reasonable basis for opinion. The opinion paragraph indicates that the opinion being rendered is based on the principal auditor’s audit and the report of the other auditors.
Regulation
Matthews is a 40 percent partner in the WestBrook Partnership. Matthews has a tax basis (capital share) in the partnership of $45,000. Matthews has not loaned the partnership any money but is responsible for her share of the debts. The partnership has $100,000 in assets and $60,000 in liabilities. This year, the partnership reported an ordinary business loss of $120,000. What amount of that loss can Matthews deduct on her individual income tax return this year?
A. $40,000
B. $44,000
C. $45,000
D. $48,000
Answer is D
A partner can deduct the ownership percentage of any partnership ordinary business loss but only up to the person’s “at-risk balance.” The “at-risk balance” is the tax basis in the partnership ($45,000) plus any loans to the partnership (0) plus the owner’s share of the debts of the business (40 percent of $60,000 or $24,000). Here, the “at-risk balance” is a total of $69,000. That is more than this partner’s percentage of the loss. The partner can deduct the entire 40 percent of the $120,000 ordinary business loss (or $48,000).
BEC
The Lynch Company started the current year with 10,000 units in process that were 60 percent complete as to direct labor costs. As to direct labor, these units had a cost at that time of $45,000. During the year, another 50,000 units were started and direct labor cost for the period was $320,000. At the end of the year, the company had 4,000 units still in process which were 20 percent complete as to direct labor. If the company uses a FIFO system, what is the cost of a unit this year as to direct labor costs?
A. $5.63
B. $6.30
C. $6.40
D. $6.43
Answer is B
In a FIFO system, the cost per unit is the cost expended this period divided by the number of equivalent units created during the period. The current cost for direct labor is $320,000. The number of equivalent units starts with the number of units completed. Here, since no units are mentioned as being lost, that number must have been 56,000 (10,000 beginning plus 50,000 started less 4,000 ending working in process). Total direct labor done is 56,000 completed units plus 800 units still in ending working in process (4,000 units that are 20 percent complete) or a total of 56,800 units of work. To get the work done just in this current period (which is used by FIFO), the amount of work in beginning work in process is subtracted. That is 10,000 units times 60 percent completion or 6,000 units done last year. The amount of work done this period is 56,800 total minus 6,000 done last year to arrive at 50,800 units of work done this period. The cost per unit using
FIFO is $320,000/50,800 or $6.30.
GET THAT EXAM OUT OF YOUR WAY!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
123 Weeks of Operation and 18,488,959 Page Views (without a penny spent on marketing)
Lesson 83
From: Joe
(a) – As we mentioned yesterday on our Facebook page, the school newspaper did a story on www.CPAreviewforFREE.com. If you would like to learn our history and why we first got started in this great adventure, you can read the entire story at the following URL:
www.thecollegianur.com/2010/11/04/accounting-professor-creates-affordable-cpa-review-website/15405/
(b) – It is hard to believe that we have been offering the best possible questions and answers now for 123 weeks and, last week, was our second busiest week in history. We continue to grow as more and more people come to realize that they can pass the CPA Exam without spending thousands of dollars for mediocre materials.
(c) – I have a copy of all of our FAR questions and answers sitting beside of me right here on my desk. I was just reading through several pages and, once again, as I always note, these questions and answers are really well written. Each question and answer is potentially another point on your journey to get 75 and pass.
Remember, you can buy a download of all our questions and answers if that makes your study process easier and more efficient.
And, for FAR and Regulation (and soon for BEC and then Auditing), we have a subscription service that provides hundreds and hundreds of content slides (and, very soon, task-based simulations).
By buying these downloads and/or the subscription service, you add to the materials you can use and you help us pay for this website. And, we do appreciate it.
(1) – When you first get up in the morning, take a 3 by 5 card and write down the number of questions you want to work that day on www.CPAreviewforFREE.com. Pick a number that is challenging but realistic. Put the card in your pocket. Then, each time you work a question during the day, mark off the old number and write in the remaining number of questions to be done. For example, if you hope to do 30 questions today, write down 30. After you do the first question and read the answer, mark out the 30 and write in 29.
This does several things that help you.
--It gives you a goal right now that you can do something about. Making 75 on the CPA exam is a future goal—something you can worry about tomorrow if you wish. You want to avoid procrastination at all costs.
--It provides a sense of accomplishment. Watching those numbers drop off during each day is a clear cut indication that you are making progress. In fact, at the end of every day, tape the card to the wall above your desk. There is something about seeing all those cards that will just feel good. When you feel good about studying, it is easy to study more.
--It helps you focus on today. As you feel that card in your pocket, it will remind you that you have work to do today. One of the hardest things for any person trying to accomplish something is staying in the current moment. Today is the day you’ve got to make good things happen.
Try it – I think you’ll find that you will work more questions and feel better about the whole process.
(2) – A person that I met for about 45 minutes a few weeks ago on our campus sent me a book. I didn’t do anything to deserve a book but I was pleased to get it anyway. Never turn down a good book. The book is titled “Life Is Not A Game of Perfect.”
One of the early stories in this book is about a person who gets a scholarship to play football at a major college. Although he was a great player in high school, when he gets to college, he realizes that he is not the best—in fact, he is far from the best.
I often see this in the students in my college classes. They were great in high school without much effort but in college they are just average. How will that affect them? It is always interesting to see how a person reacts to challenges that they have not faced before. What caught my attention in this book was the reaction of the player on the football team because it is not a reaction that you often see. “I decided,” (he) remembers, “that I might get beat out, but no one would outwork me.”
“No one would outwork me” – how often can you say that, especially when you get into a real challenge? When it comes to the CPA Exam, how many people are outworking you? Often, we have exactly the opposite attitude, “if I can’t do well, why should I try so hard?”
Many of you are preparing for the CPA Exam right now. It is often a struggle. Few people ever face anything like the CPA Exam until they are actually preparing for it. It is often discouraging. Be honest—what is your attitude? How are you responding to this challenge? More importantly, are you letting other people outwork you?
“No one would outwork me” or “If I can’t do well, what should I try so hard?”
How you answer that question tells a lot about who you really are. Your answer depends a lot on how you think about the hard work of studying. If you think that studying is painful and something to be avoided, it is very hard to outwork anyone.
On the other hand, if you think that studying is rewarding because it makes your mind better, then outworking other people is not as hard as it might seem at first.
Everything starts with your attitude. All success comes back eventually to your attitude.
In the case of the CPA Exam, it all comes back to how you look at study time. If it is punishment. If it is tiring. If it is excruciating. Then, you have a real mountain to climb. Putting in the time will be quite difficult.
On the other hand, if you can adopt a different attitude, you’ll find that studying is not nearly as hard. If you view studying as getting a better brain. If you view studying as a game where you see whether you get more wins (correct answers) than losses (incorrect answers). If you view studying as an interesting mental exercise. Then, the ability to put in the necessary hours is just going to be so much easier.
When you compare yourself to all of the people around the world today who are studying for the CPA Exam, where is your attitude?
Is it with the group who says: “No one would outwork me”
Or, are you more aligned with that large body of people who sigh pathetically and doubt themselves by asking: “If I can’t do well, what should I try so hard?”
(3) – We are beginning to gear up for the 2011 CPA Exam. As always, we will continue to send out these email lessons every 1-2 weeks. We are delighted to have you with us. We hope we add points and provide encouragement. However, you do have the right to unsubscribe at any time that you wish. If you should want to unsubscribe, scroll to the bottom of this email lesson (or any email lesson) and click on the appropriate link.
(4) – I have the great good fortune on Thursday of leading a 3 1/2 hour teaching workshop for 150 brand new teachers in the Virginia Community College System. One of the things I hope to introduce them to is “Joe’s Theorem of Success.” In teaching, as well as in most other things in life such as the CPA Exam, I think this theorem is true:
If it takes X hours to be average at a task
Then it will take 2X hours to be good at that task
And 3X hours to be truly truly excellent
The question is not how to achieve excellence. We are all more than capable of achieving excellence. I am sure of that. The question is whether we want excellence badly enough to put in a sufficient amount of time.
Everyone on this email list can pass the CPA Exam. I’ve worked in this business for 30 years and I’ve never met anyone who couldn’t pass. The only question is whether you want to pass badly enough to put in sufficient time.
As I have said dozens of times in these email lessons - HOURS EQUAL POINTS
I can give you all kinds of helpful advice. In the end, the best thing I can tell you (quite honestly) is that the more time you spend, the better your grade will be.
Don’t procrastinate
Don’t put it off
Put in those hours and learn those questions and answers. In the long run, that is probably the best advice that anyone can give you.
(5) – Speaking of putting in the time, let’s do some practice. If you get these questions correct, then move on. If you miss them, turn that lack of knowledge into real knowledge because that is the only way you really add points on the CPA Exam.
FAR – I opened up my intermediate accounting textbook at random and wrote this question based on what I found on the first page I read.
Pepitone Corporation buys equipment for $900,000 on January 1, Year One. Depreciation for book purposes is $300,000 per year. However, for tax purposes, depreciation was $500,000 in Year One and $200,000 in Year Two and $200,000 in Year Three. The enacted tax rate is 30 percent for Year One and Year Two but 32 percent for Year Three. Which of the following is found on the company’s balance sheet at the end of Year One?
A. Deferred tax asset-current of $30,000 and deferred tax asset-noncurrent of $32,000
B. Deferred tax asset-noncurrent of $62,000
C. Deferred tax liability-current of $30,000 and deferred tax liability-noncurrent of $32,000
D. Deferred tax liability-noncurrent of $62,000
Answer is D
For tax purposes, this company will have $100,000 less depreciation expense in Year Two so taxable income will be $100,000 higher. At a 30 percent tax rate, that is a deferred tax liability of $30,000. For tax purposes, this company also will have $100,000 less depreciation expense in Year Three so taxable income will be $100,000 higher. At a 32 percent tax rate, that is a deferred tax liability of $32,000. The total liability is $62,000. Where that amount is shown on a balance sheet depends on what account caused the difference. Here, it was caused by the equipment that was depreciated. Equipment is a noncurrent account. Hence, all related deferred income tax liabilities or assets will also be reported as noncurrent.
Auditing and Attestation
The Wishton Corporation’s financial statements are audited by the CPA firm of Mansen and Dallas. Wishton has a subsidiary located 1,800 miles from the company’s headquarters. The financial statements of this subsidiary are consolidated with the statements of the parent for external reporting purposes. The subsidiary’s assets and revenues make up approximately 16 percent of the total for the consolidated entity. The subsidiary’s financial statements are audited by a local CPA firm and that audit report has now been forwarded to Mansen and Dallas. In providing the audit report for the consolidated financial statements, Mansen and Dallas has decided to make reference to the work done by the other CPA firm. Which of the following statements is true?
A. The audit report should make reference to the other auditors in the introductory paragraph only.
B. The audit report should make reference to the other auditors in the scope paragraph only.
C. The audit report should make reference to the other auditors in the introductory, scope, and opinion paragraphs only.
D. The audit report should make reference to the other auditors in a separate explanatory paragraph only.
Answer is C
When reference is made to other auditors, the introductory paragraph indicates that the principal auditors did not audit a portion of the consolidated statements and indicates the size of that portion by specifying the amount of assets and revenues audited by the other firm. The scope paragraph is changed to indicate that the principal auditor’s audit and the report of the other auditors provided a reasonable basis for opinion. The opinion paragraph indicates that the opinion being rendered is based on the principal auditor’s audit and the report of the other auditors.
Regulation
Matthews is a 40 percent partner in the WestBrook Partnership. Matthews has a tax basis (capital share) in the partnership of $45,000. Matthews has not loaned the partnership any money but is responsible for her share of the debts. The partnership has $100,000 in assets and $60,000 in liabilities. This year, the partnership reported an ordinary business loss of $120,000. What amount of that loss can Matthews deduct on her individual income tax return this year?
A. $40,000
B. $44,000
C. $45,000
D. $48,000
Answer is D
A partner can deduct the ownership percentage of any partnership ordinary business loss but only up to the person’s “at-risk balance.” The “at-risk balance” is the tax basis in the partnership ($45,000) plus any loans to the partnership (0) plus the owner’s share of the debts of the business (40 percent of $60,000 or $24,000). Here, the “at-risk balance” is a total of $69,000. That is more than this partner’s percentage of the loss. The partner can deduct the entire 40 percent of the $120,000 ordinary business loss (or $48,000).
BEC
The Lynch Company started the current year with 10,000 units in process that were 60 percent complete as to direct labor costs. As to direct labor, these units had a cost at that time of $45,000. During the year, another 50,000 units were started and direct labor cost for the period was $320,000. At the end of the year, the company had 4,000 units still in process which were 20 percent complete as to direct labor. If the company uses a FIFO system, what is the cost of a unit this year as to direct labor costs?
A. $5.63
B. $6.30
C. $6.40
D. $6.43
Answer is B
In a FIFO system, the cost per unit is the cost expended this period divided by the number of equivalent units created during the period. The current cost for direct labor is $320,000. The number of equivalent units starts with the number of units completed. Here, since no units are mentioned as being lost, that number must have been 56,000 (10,000 beginning plus 50,000 started less 4,000 ending working in process). Total direct labor done is 56,000 completed units plus 800 units still in ending working in process (4,000 units that are 20 percent complete) or a total of 56,800 units of work. To get the work done just in this current period (which is used by FIFO), the amount of work in beginning work in process is subtracted. That is 10,000 units times 60 percent completion or 6,000 units done last year. The amount of work done this period is 56,800 total minus 6,000 done last year to arrive at 50,800 units of work done this period. The cost per unit using
FIFO is $320,000/50,800 or $6.30.
GET THAT EXAM OUT OF YOUR WAY!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
Tuesday, November 2, 2010
Make the Resolution: I AM GOING TO PASS!!!
Try us FIRST before you spend your hard-earned money.
November 2, 2010
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
122 Weeks of Operation and 18,167,740 Page Views (without a penny spent on marketing)
Lesson 82
From: Joe
(1) – The big news in the world of the CPA Exam is that the exam will start to be given internationally in 2011.
I’ve pieced together two parts of their announcement to provide the basic information:
Beginning in the second half of 2011, candidates who qualify will be allowed to schedule their CPA Exam at select international locations. Initially, the CPA Examination will be offered in Japan, Bahrain, Kuwait, Lebanon and the United Arab Emirates. The international exam will be the same as the one offered in the U.S., using the same computerized format and administered in English. As in the U.S., the purpose of taking the examination will be to qualify for licensure as a CPA through U.S. state boards of accountancy.
It is my understanding that additional locations in additional countries will become available over time.
If you want more information, the AICPA has a Frequently Asked Questions site which can be accessed here
http://m1e.net/c?122902087-aSuUx1nMRL016%405871928-wo.JUcjMWFsYw
(2) – As probably everyone knows, the CPA Exam will be making several significant changes in 2011. Here are two of the most important:
--Each FAR, Regulation, and Auditing and Attestation exam will go from having two simulations to having 6-7 shorter task-based simulations.
--Written communications will drop out of FAR, Regulation, and Auditing and Attestation and only appear as three written communications questions in BEC.
Thus, as you can imagine, there is significant interest in (a) the new task-based simulations and (b) written communications questions (for BEC).
Consequently, over the past month, we have created 30 brand new task-based simulations (10 for FAR, 10 for Regulation, and 10 for Auditing and Attestation) and 35 written communications questions for BEC. We have tried to make these as picture perfect as we could get. The AICPA only gives hints about their actual appearance so we have tried to imagine what they are going to look like. I have been really pleased with the results. Over the next month or so, we will be loading all of these into our subscription service.
Currently, our subscription service is open for FAR and Regulation. Each is a mere $15 per month (50 cents per day). For that, you get access to a study guide and hundreds of content slides. Over the next few weeks, we will also open up subscription services for Auditing and Attestation and BEC. And, then, we will load in all of our new task-based simulations and written communications questions and answers.
However, always keep in mind that our 2,100 multiple-choice questions and answers continue and will always be free, free, free, and (free).
(3) – If you live in the United States, it is election day – go out and vote. It is one important way to keep democracy strong.
(4) – When we started CPAreviewforFREE, my first dream was to have 10 million page views in a single calendar year. I figured it would take us five years at a minimum. We are now early in our third year of operation. For 2010 alone, we went over 10 million page views during the month of October. I couldn’t believe it – thanks to you folks, we have been more successful than I could ever have dreamed/hoped/anticipated.
(5) – I drove by an exercise facility yesterday that had this sign upfront: “It is 60 days until New Year’s. Why not get a head start and make your resolutions today?” I always wonder how much better we really want to be if we only make improvement resolutions on one day out of each year. Doesn’t that just allow us to be lazy and under-productive the rest of the time? Why can’t we make “new week resolutions” at the start of each week? Or, even “new day resolutions” when we first awake each morning?
If you really want to make a change to get better, shouldn’t that be a conversation you have with yourself more often than once a year? No wonder so few new year’s resolutions are kept – if you only think about improvement once a year, you can’t be very serious about it.
So, let’s change that. When it comes to preparing for the CPA Exam, what changes do you want to make over the next three days? That’s a pretty good time period. You know what you have been doing in the past as you ready yourself to take that exam. What improvements would you like to see happen in your preparation over the next three days?
--You could study more hours.
--You could study in a different way – more problems, for example.
--You could study at times you are now wasting
You don’t have to wait for New Year’s Day to make a change.
It is so hard to make improvements if you don’t stop to assess what you have been doing and how you would like to see things be different.
One specific change that I would like to see you consider is your attitude. Usually, when people start studying, they have an “I really want this” feeling. They have an “I can do it” attitude. Those types of attitudes can give you fuel to push your study forward at the beginning. However, it is easy to get caught up in the day-to-day work and let your attitude lag. Don’t do that!!! Getting up in the morning and saying to yourself “I AM going to pass that exam!!” provides an ongoing push. If you find that you are beginning to slow down, if you are beginning to wear out, if you are getting tired of this, perhaps it is your attitude that you need to consider. Let that be your November 2 resolution: I’ll push myself more; I’m remind myself of why I want to pass; I’ll envision the excitement of getting that passing score.
I watched a bit of the World Series this past week. San Francisco just barely got into the playoffs and then they were not expected to go too far. However, the players seemed to have this great “we can do this” attitude that pushed them on to become the world champions. When the last out was made last night, I enjoyed watching how thrilled those young men were. They ran and jumped and piled up together.
There is something wonderfully exciting about taking on a true challenge and then making victory happen. That is exactly what I want you to experience. That same thrill will be yours when you get those passing scores.
So, what is your resolution for today?
(6) – Speaking of passing the CPA Exam and having that wonderful feeling, here are a few recent emails. This is exactly the thrill that I’m talking about. I want this to be YOU.
From IB: “Almost 18 years after finishing school, I'm finally a CPA! For one reason or another, I never sat for the exam until this year. You and your website made me believe that obtaining my CPA was truly an achievable goal, and you set out a plan to accomplish that goal. Using your website primarily (but also some secondary reference materials from Wiley), I was able to pass all 4 sections of the exam the first time over a period of 4 months. I cannot tell you how happy I am, after all this time, to finally be able to add those 3 initials after my name, and I have to thank you for your generosity in supplying such an outstanding (free!) resource to CPA candidates. Your site was especially valuable to me as someone who has been unemployed for almost a year...I couldn't have done it any other way. Thank you so much, Joe, for everything you've made available to us. Take care, and best of luck with everything you choose to do.”
From NV: “Thank You! Thank You! Thank You! I have finally cleared all four parts of the CPA Exam. Your free questions have helped me understand the concepts much better. If not for your site I would have been still taking these tests again and again. You are God sent! Once again thank you for helping me pass the CPA exam.
From MS: “I want to say thank you, thank you, thank you! I have finally passed all 4 parts of the CPA exam and will receive my license in the State of Ohio today October 22, 2010. I first took the CPA exam back when it was on paper and you took all parts over two days! I think I took an 8-10 year break from taking the exam and began taking it again when it was computerized. I went back to school to obtain a MBA and finally passed FAR and BEC in January 2009. I strictly used your website CPAreviewforFree and some flash cards I purchased online. I was totally exhilarated. I then took Auditing and Reg later in 2009 and failed both of them. As 2010 rolled around I realized my time to pass the other two parts was winding down before I would lose credit for the 1st two parts. I again strictly did self study using your website and the flashcards. I took Auditing in May of 2010 and received a score of 68. I was very disappointed with myself and realized I had to commit myself more! I spent the summer practicing you 500 plus questions from the website and even creating a MS word file of the answers explanations. I took Reg on Aug 5th and only had 3 weeks to study Auditing taking that on Aug 30th. I scored an 80 on the Reg exam and an 82 on the Auditing (which by the way is my least favorite part). I owe it all to your many questions that I had access to for free. I really appreciate your dedication in helping CPA candidates pass the CPA exam!”
(7) – If you would like to unsubscribe from these emails, you can scroll down to the bottom of this email and click on the appropriate link. I have been busy writing task-based simulations so I have not been sending out email lessons as often as I want. However, I do plan to get back to my normal routine of a lesson every week or two. Hope you’ll stay with us.
(8) – We have a Facebook account for CPAreviewforFREE so I’m on Facebook every day or two. I am absolutely amazed by how much time some people spend on Facebook. It not only eats up their time; it must also eat up their attention and their mental energy.
What eats up your time?
--Facebook
--Twitter
--YouTube
--Email
--Television
There must be a million things that will suck up the minutes in your day.
Okay, I’m not going to tell you to give up email or Facebook or the like. I don’t want you to become miserable. But, I do have a challenge for you. On a piece of paper (right now), list out the top four non-productive things that eat up your time. You know what they are. It is those things that you choose to do rather than study. They are always calling to you to come play.
Here’s my challenge. With those four, try to cut down your usage by half. So, instead of checking your email every hour, do it every two hours. Instead of posting something on Facebook every two hours, make it every four hours (no matter how exciting the current message is). Instead of watching two hours of television per night, stop at one hour.
I think you’ll be amazed at how much time starts to open up for study. You want to get control over the distracters in your life. Yeah, they are all interesting but they are really just distracters that keep you from making serious accomplishments with your life. They are the type of things that keep you from showing your true talents; they are the type of things that hold you back from greatness.
You don’t need to eliminate the distracters but you really do need to (1) be aware of them and (2) control them enough that you can cut the time you give them in half. The less distraction in your life, the more likely it is that you will pour your energy into passing the CPA Exam. And, if you do that, you can pass.
(9) – Let’s add some points. Let’s do some practice. Read each question below. If you get it right, then you know this area—so move on. If you miss it, read the answer very carefully so you can be successful the next time you see a similar question.
FAR
The Redstone Corporation ended Year One with sales of $800,000, bad debt expense of $30,000, accounts receivable of $200,000, and an allowance for doubtful accounts (credit balance) of $10,000. In Year Two, the company made another $900,000 in sales on credit but collected only $600,000 in cash from those accounts. During the year, one customer who owed $13,000 declared bankruptcy and that account was written off as uncollectible. At the end of Year Two, the company’s accountants believed that 2 percent of ending receivables will eventually prove to be uncollectible. What is bad debt expense?
A. $9,740
B. $12,000
C. $12,740
D. $13,000
Answer is C
At the end of Year Two, the allowance for doubtful accounts has a $3,000 debit balance ($10,000 beginning balance less the $13,000 account written off as uncollectible). Accounts receivable is now $487,000 ($200,000 beginning balance plus $900,000 in sales less $600,000 in collections less the $13,000 account written off). The company estimates that 2 percent of receivables will prove uncollectible. That amount is $9,740 or 2 percent of $487,000. The allowance has a $3,000 debit balance but needs a $9,740 credit balance. To reach the desired figure, an expense of $12,740 is recognized for the period.
Auditing and Attestation
The CPA firm of Toe and Nail is performing an audit of the annual financial statements produced by the North Wilderness Corporation. The audit team is currently testing the accounts receivable balance for evidence of any material misstatements. One of the staff members of the audit firm was assigned to look through the subsidiary ledger for amounts due from officers. What was the most likely objective of this work?
A. Determine that the accounts receivable balance is properly reduced to net realizable value.
B. Determine that the reported accounts receivable balance represents all of the amounts owed to North Wilderness as of the balance sheet date and that no accounts have been omitted.
C. North Wilderness holds ownership of all of the reported accounts receivable at the balance sheet date.
D. The accounts receivable are properly presented in the financial statements.
Answer is D
Officers are viewed as related parties and, thus, those balances need to be disclosed as part of a proper presentation. The staff auditor is looking for evidence that any such receivables exist but have not been separately disclosed by the reporting company.
Regulation
Mr. and Mrs. William Singler are married and plan to file a joint tax return. This year, an investment in land that cost the taxpayers $100,000 (but that is currently worth $310,000) is traded for another investment in land that is worth approximately $340,000. To conclude the trade, the taxpayers also had to pay cash of $29,000. What is the taxable gain or loss on this exchange?
A. No taxable gain or loss
B. $29,000 gain
C. $210,000 gain
D. $211,000 gain
Answer is A
This is an exchange of like-kind property. In a like-kind exchange, a gain is only reported for tax purposes if boot (nonlike-kind property, such as cash) is also received. Here, the boot is paid. As a like-kind exchange with no boot being received, there is no taxable gain or loss.
BEC
The San Francisco Corporation is highly automated with many transactions from its subsidiaries around the world processed immediately through the company’s computer system. Company officials have become concerned about the possibility of a disaster such as an earthquake knocking out its computer system. A disaster recovery corporation was invited to visit the company and put forth a proposal. This outside vendor talked about creating a hot site for the company. What is meant by a hot site?
A. It is a facility owned by the vendor that is a fully equipped data center and can be up and running in a matter of hours by bringing in trained personnel.
B. It is a space that is rented so that it can become a data center but no actual hardware or software is in place—only specified plans for obtaining these items are available.
C. It is a functioning data center that mirrors all work done by the company so that operations can be switched over immediately if need be.
D. It is a site within the company where all of the data records are kept in a disaster proof location.
Answer is A.
A hot site is in a separate location from the company’s data center and has all of the hardware and software needed to begin operations. A plan for getting needed personnel is on file. If a disaster occurs, the personnel are brought in as quickly as possible so that computer operations can begin running within a matter of hours.
Have a great week. Make that resolution.
Joe Hoyle
President – CPA review for FREE
www.CPAreviewforFREE.com
The only place where you can get 2,100 high quality questions and answers for FREE.
November 2, 2010
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
122 Weeks of Operation and 18,167,740 Page Views (without a penny spent on marketing)
Lesson 82
From: Joe
(1) – The big news in the world of the CPA Exam is that the exam will start to be given internationally in 2011.
I’ve pieced together two parts of their announcement to provide the basic information:
Beginning in the second half of 2011, candidates who qualify will be allowed to schedule their CPA Exam at select international locations. Initially, the CPA Examination will be offered in Japan, Bahrain, Kuwait, Lebanon and the United Arab Emirates. The international exam will be the same as the one offered in the U.S., using the same computerized format and administered in English. As in the U.S., the purpose of taking the examination will be to qualify for licensure as a CPA through U.S. state boards of accountancy.
It is my understanding that additional locations in additional countries will become available over time.
If you want more information, the AICPA has a Frequently Asked Questions site which can be accessed here
http://m1e.net/c?122902087-aSuUx1nMRL016%405871928-wo.JUcjMWFsYw
(2) – As probably everyone knows, the CPA Exam will be making several significant changes in 2011. Here are two of the most important:
--Each FAR, Regulation, and Auditing and Attestation exam will go from having two simulations to having 6-7 shorter task-based simulations.
--Written communications will drop out of FAR, Regulation, and Auditing and Attestation and only appear as three written communications questions in BEC.
Thus, as you can imagine, there is significant interest in (a) the new task-based simulations and (b) written communications questions (for BEC).
Consequently, over the past month, we have created 30 brand new task-based simulations (10 for FAR, 10 for Regulation, and 10 for Auditing and Attestation) and 35 written communications questions for BEC. We have tried to make these as picture perfect as we could get. The AICPA only gives hints about their actual appearance so we have tried to imagine what they are going to look like. I have been really pleased with the results. Over the next month or so, we will be loading all of these into our subscription service.
Currently, our subscription service is open for FAR and Regulation. Each is a mere $15 per month (50 cents per day). For that, you get access to a study guide and hundreds of content slides. Over the next few weeks, we will also open up subscription services for Auditing and Attestation and BEC. And, then, we will load in all of our new task-based simulations and written communications questions and answers.
However, always keep in mind that our 2,100 multiple-choice questions and answers continue and will always be free, free, free, and (free).
(3) – If you live in the United States, it is election day – go out and vote. It is one important way to keep democracy strong.
(4) – When we started CPAreviewforFREE, my first dream was to have 10 million page views in a single calendar year. I figured it would take us five years at a minimum. We are now early in our third year of operation. For 2010 alone, we went over 10 million page views during the month of October. I couldn’t believe it – thanks to you folks, we have been more successful than I could ever have dreamed/hoped/anticipated.
(5) – I drove by an exercise facility yesterday that had this sign upfront: “It is 60 days until New Year’s. Why not get a head start and make your resolutions today?” I always wonder how much better we really want to be if we only make improvement resolutions on one day out of each year. Doesn’t that just allow us to be lazy and under-productive the rest of the time? Why can’t we make “new week resolutions” at the start of each week? Or, even “new day resolutions” when we first awake each morning?
If you really want to make a change to get better, shouldn’t that be a conversation you have with yourself more often than once a year? No wonder so few new year’s resolutions are kept – if you only think about improvement once a year, you can’t be very serious about it.
So, let’s change that. When it comes to preparing for the CPA Exam, what changes do you want to make over the next three days? That’s a pretty good time period. You know what you have been doing in the past as you ready yourself to take that exam. What improvements would you like to see happen in your preparation over the next three days?
--You could study more hours.
--You could study in a different way – more problems, for example.
--You could study at times you are now wasting
You don’t have to wait for New Year’s Day to make a change.
It is so hard to make improvements if you don’t stop to assess what you have been doing and how you would like to see things be different.
One specific change that I would like to see you consider is your attitude. Usually, when people start studying, they have an “I really want this” feeling. They have an “I can do it” attitude. Those types of attitudes can give you fuel to push your study forward at the beginning. However, it is easy to get caught up in the day-to-day work and let your attitude lag. Don’t do that!!! Getting up in the morning and saying to yourself “I AM going to pass that exam!!” provides an ongoing push. If you find that you are beginning to slow down, if you are beginning to wear out, if you are getting tired of this, perhaps it is your attitude that you need to consider. Let that be your November 2 resolution: I’ll push myself more; I’m remind myself of why I want to pass; I’ll envision the excitement of getting that passing score.
I watched a bit of the World Series this past week. San Francisco just barely got into the playoffs and then they were not expected to go too far. However, the players seemed to have this great “we can do this” attitude that pushed them on to become the world champions. When the last out was made last night, I enjoyed watching how thrilled those young men were. They ran and jumped and piled up together.
There is something wonderfully exciting about taking on a true challenge and then making victory happen. That is exactly what I want you to experience. That same thrill will be yours when you get those passing scores.
So, what is your resolution for today?
(6) – Speaking of passing the CPA Exam and having that wonderful feeling, here are a few recent emails. This is exactly the thrill that I’m talking about. I want this to be YOU.
From IB: “Almost 18 years after finishing school, I'm finally a CPA! For one reason or another, I never sat for the exam until this year. You and your website made me believe that obtaining my CPA was truly an achievable goal, and you set out a plan to accomplish that goal. Using your website primarily (but also some secondary reference materials from Wiley), I was able to pass all 4 sections of the exam the first time over a period of 4 months. I cannot tell you how happy I am, after all this time, to finally be able to add those 3 initials after my name, and I have to thank you for your generosity in supplying such an outstanding (free!) resource to CPA candidates. Your site was especially valuable to me as someone who has been unemployed for almost a year...I couldn't have done it any other way. Thank you so much, Joe, for everything you've made available to us. Take care, and best of luck with everything you choose to do.”
From NV: “Thank You! Thank You! Thank You! I have finally cleared all four parts of the CPA Exam. Your free questions have helped me understand the concepts much better. If not for your site I would have been still taking these tests again and again. You are God sent! Once again thank you for helping me pass the CPA exam.
From MS: “I want to say thank you, thank you, thank you! I have finally passed all 4 parts of the CPA exam and will receive my license in the State of Ohio today October 22, 2010. I first took the CPA exam back when it was on paper and you took all parts over two days! I think I took an 8-10 year break from taking the exam and began taking it again when it was computerized. I went back to school to obtain a MBA and finally passed FAR and BEC in January 2009. I strictly used your website CPAreviewforFree and some flash cards I purchased online. I was totally exhilarated. I then took Auditing and Reg later in 2009 and failed both of them. As 2010 rolled around I realized my time to pass the other two parts was winding down before I would lose credit for the 1st two parts. I again strictly did self study using your website and the flashcards. I took Auditing in May of 2010 and received a score of 68. I was very disappointed with myself and realized I had to commit myself more! I spent the summer practicing you 500 plus questions from the website and even creating a MS word file of the answers explanations. I took Reg on Aug 5th and only had 3 weeks to study Auditing taking that on Aug 30th. I scored an 80 on the Reg exam and an 82 on the Auditing (which by the way is my least favorite part). I owe it all to your many questions that I had access to for free. I really appreciate your dedication in helping CPA candidates pass the CPA exam!”
(7) – If you would like to unsubscribe from these emails, you can scroll down to the bottom of this email and click on the appropriate link. I have been busy writing task-based simulations so I have not been sending out email lessons as often as I want. However, I do plan to get back to my normal routine of a lesson every week or two. Hope you’ll stay with us.
(8) – We have a Facebook account for CPAreviewforFREE so I’m on Facebook every day or two. I am absolutely amazed by how much time some people spend on Facebook. It not only eats up their time; it must also eat up their attention and their mental energy.
What eats up your time?
--YouTube
--Television
There must be a million things that will suck up the minutes in your day.
Okay, I’m not going to tell you to give up email or Facebook or the like. I don’t want you to become miserable. But, I do have a challenge for you. On a piece of paper (right now), list out the top four non-productive things that eat up your time. You know what they are. It is those things that you choose to do rather than study. They are always calling to you to come play.
Here’s my challenge. With those four, try to cut down your usage by half. So, instead of checking your email every hour, do it every two hours. Instead of posting something on Facebook every two hours, make it every four hours (no matter how exciting the current message is). Instead of watching two hours of television per night, stop at one hour.
I think you’ll be amazed at how much time starts to open up for study. You want to get control over the distracters in your life. Yeah, they are all interesting but they are really just distracters that keep you from making serious accomplishments with your life. They are the type of things that keep you from showing your true talents; they are the type of things that hold you back from greatness.
You don’t need to eliminate the distracters but you really do need to (1) be aware of them and (2) control them enough that you can cut the time you give them in half. The less distraction in your life, the more likely it is that you will pour your energy into passing the CPA Exam. And, if you do that, you can pass.
(9) – Let’s add some points. Let’s do some practice. Read each question below. If you get it right, then you know this area—so move on. If you miss it, read the answer very carefully so you can be successful the next time you see a similar question.
FAR
The Redstone Corporation ended Year One with sales of $800,000, bad debt expense of $30,000, accounts receivable of $200,000, and an allowance for doubtful accounts (credit balance) of $10,000. In Year Two, the company made another $900,000 in sales on credit but collected only $600,000 in cash from those accounts. During the year, one customer who owed $13,000 declared bankruptcy and that account was written off as uncollectible. At the end of Year Two, the company’s accountants believed that 2 percent of ending receivables will eventually prove to be uncollectible. What is bad debt expense?
A. $9,740
B. $12,000
C. $12,740
D. $13,000
Answer is C
At the end of Year Two, the allowance for doubtful accounts has a $3,000 debit balance ($10,000 beginning balance less the $13,000 account written off as uncollectible). Accounts receivable is now $487,000 ($200,000 beginning balance plus $900,000 in sales less $600,000 in collections less the $13,000 account written off). The company estimates that 2 percent of receivables will prove uncollectible. That amount is $9,740 or 2 percent of $487,000. The allowance has a $3,000 debit balance but needs a $9,740 credit balance. To reach the desired figure, an expense of $12,740 is recognized for the period.
Auditing and Attestation
The CPA firm of Toe and Nail is performing an audit of the annual financial statements produced by the North Wilderness Corporation. The audit team is currently testing the accounts receivable balance for evidence of any material misstatements. One of the staff members of the audit firm was assigned to look through the subsidiary ledger for amounts due from officers. What was the most likely objective of this work?
A. Determine that the accounts receivable balance is properly reduced to net realizable value.
B. Determine that the reported accounts receivable balance represents all of the amounts owed to North Wilderness as of the balance sheet date and that no accounts have been omitted.
C. North Wilderness holds ownership of all of the reported accounts receivable at the balance sheet date.
D. The accounts receivable are properly presented in the financial statements.
Answer is D
Officers are viewed as related parties and, thus, those balances need to be disclosed as part of a proper presentation. The staff auditor is looking for evidence that any such receivables exist but have not been separately disclosed by the reporting company.
Regulation
Mr. and Mrs. William Singler are married and plan to file a joint tax return. This year, an investment in land that cost the taxpayers $100,000 (but that is currently worth $310,000) is traded for another investment in land that is worth approximately $340,000. To conclude the trade, the taxpayers also had to pay cash of $29,000. What is the taxable gain or loss on this exchange?
A. No taxable gain or loss
B. $29,000 gain
C. $210,000 gain
D. $211,000 gain
Answer is A
This is an exchange of like-kind property. In a like-kind exchange, a gain is only reported for tax purposes if boot (nonlike-kind property, such as cash) is also received. Here, the boot is paid. As a like-kind exchange with no boot being received, there is no taxable gain or loss.
BEC
The San Francisco Corporation is highly automated with many transactions from its subsidiaries around the world processed immediately through the company’s computer system. Company officials have become concerned about the possibility of a disaster such as an earthquake knocking out its computer system. A disaster recovery corporation was invited to visit the company and put forth a proposal. This outside vendor talked about creating a hot site for the company. What is meant by a hot site?
A. It is a facility owned by the vendor that is a fully equipped data center and can be up and running in a matter of hours by bringing in trained personnel.
B. It is a space that is rented so that it can become a data center but no actual hardware or software is in place—only specified plans for obtaining these items are available.
C. It is a functioning data center that mirrors all work done by the company so that operations can be switched over immediately if need be.
D. It is a site within the company where all of the data records are kept in a disaster proof location.
Answer is A.
A hot site is in a separate location from the company’s data center and has all of the hardware and software needed to begin operations. A plan for getting needed personnel is on file. If a disaster occurs, the personnel are brought in as quickly as possible so that computer operations can begin running within a matter of hours.
Have a great week. Make that resolution.
Joe Hoyle
President – CPA review for FREE
www.CPAreviewforFREE.com
The only place where you can get 2,100 high quality questions and answers for FREE.
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