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August 22, 2011
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Lesson 102
From: Joe
(1) – There are about 10 days left in the July-August testing window for the CPA Exam. Because many people wait until the very end of the window to take the exam, I realize that a lot of you who are reading this email are getting very close to the time to enter the exam site. A few last minute thoughts.
--Many people get close to 75. Therefore, the points you add here at the end may well be the difference between passing and failing. Keep adding points for as long as you can. Each question might be the difference between 74 and 75.
--Try to review all of the material briefly within the last week of the exam. You want every single topic to be fresh in your mind. Any topic that you have not looked at in the last week is probably a bit stale.
--It is far better to be relaxed and rested than it is to over-study. One of the biggest mistakes that people make is trying to push themselves to complete exhaustion right before the exam and then they are mystified by how many careless mistakes they make during the actual exam. Few people do well at any 3-4 hour task if they start out very tired. Use the last 24 hours to get relaxed and rested.
--Few things on the exam are more important than time management. Have a plan for how quickly you want to work each question and then stay aware of your time throughout the exam.
--Read the information that they send you about taking the test in advance and follow their rules precisely. You don’t want anything upsetting your calmness on the day of the exam. You want this to be an entirely calm and uneventful experience.
--By the way they grade, you can miss a lot of questions and still pass. In fact, they expect you to miss quite a significant number. Don’t let weird topics and odd questions rattle you. Too many candidates get four questions they know and one that they don’t know and become obsessed (and badly distracted) by the one they didn’t know. If it really is an odd question, eliminate as many answers as possible and take a guess.
At the end, walk away and tell yourself: “I gave it my very best and that’s all I can do and I’m not going to spend another second worrying about it.”
(2) – Remember, if you really don’t want to pay a fortune for mediocre CPA Review, we have a number of products that can help you gain the points you need to pass at a very low price.
---For $15 per month per part, you can get our Essentials. For each part, the Essentials contains:
a. Hundreds of slides of content to cover all of the topics you need to know to pass.
b. A study guide that merges all our free questions and answers with the content material that is provided in the Essentials and tells you what to do at each study session.
c. Approximately 10 examples of simulations (for each part other than BEC) and written communication questions (for BEC)
---For $29.99 per month, you can get (for FAR only so far) our Points to Pass software program. This computer program allows you to practice 250 of our most important questions an infinite number of times, each time with different numbers and answers. To work an example of our Points to Pass program, click here and start automatically working a demo question on leases. To our knowledge, no other review course has this software testing program.
Work that basic question over and over until you can do the problem in your sleep. You’ll be surprised how quickly you can master even the most complicated question using Points to Pass.
d. Remember that we have 250 specially picked questions in the Points to Pass program just like the demo question that you can work dozens of time until you can work each one backwards and forwards.
(3) – I was in a meeting two weeks back with the CPA Examiners. Here are the pass rates for the first two quarters of 2011. As you can see, they are a little lower than in recent years. The folks from the AICPA said they had expected a slight drop because of the various changes made in January 2011 in the exam (adding task based simulations, moving the written communications questions to BEC, adding IFRS, and the like). They said that when a licensing exam changes in some way the scores usually drop for a quarter or two until candidates adapt. So, they expect higher pass rates to come back very soon.
--AUD – 46 percent
--BEC – 45 percent
--FAR – 43 percent
--REG – 43 percent
(4) – This is our 102nd lesson and we have literally had people get all 102 of these lessons over the last few years. For others of you, this is probably your first email lesson from CPAreviewforFREE. We want everyone to know that you always have the right to unsubscribe whenever you wish. Scroll to the bottom of this or any other lesson and you’ll find a link that allows you to unsubscribe.
We love having you, especially if you stay around for 102 lessons. However, you do have the legal right to unsubscribe and we want you to know that we honor that right.
(5) - Today (Monday, August 22), classes begin here at the University of Richmond. It is my 41st year as a college teacher. I always love the start of a new year. Students come into class and every single person has the ability to do well. When students walk in on the first day, every one of them could make an A or a B simply by putting in the time and doing the work. There is the universal opportunity for people to succeed. I will like that feeling as I stare out at my students today. The only thing that stands between each of those students and success are the stumbling blocks that they place there themselves.
When you deal with college students, you eventually hear every possible excuse and then some. I don’t want excuses. I’m not trying to be a hard guy but I want success.
I want them to do a moderate amount of work and think about that material (“debits are on the left and credits are on the right – there are only two variables here, how tough can this be?”) If they do the work and do it consistently, they’ll all make an A or a B.
For me, it is all about the start of a new year. No matter how bad things have been in the past, we start over and everyone is on an even playing field. No matter what you did in previous classes, everyone starts off at the same spot and what you make of it is up to you. Whether you have been an A+ student in the past or a C- student, this is a new year and this is a new opportunity to show what you can do.
One of the things I like, though, is to try to extend this “newness.” Why focus on a new year? Every day is a new day. Every day holds infinite possibilities. Every day brings the chance that you can make something wonderful happen.
I think we all get locked into negative thinking – “this is a bad week,” “this is a bad month,” “2011 has been a tough year for me,” “I’ve always struggled with standardized tests.” I sometimes hear this negative thinking as a litany that just colors a person’s entire existence.
Would your friends say that you are a positive person or would your friends say that you are a negative person? True me – it is always better to be a positive, optimistic, upbeat person. If your friends would refer to you as a negative person, today is a good day to start making a change.
Today is Monday, August 21. I don’t know what happened to you on August 20 or 19 or any other day and I don’t really care. I just care about today. It is such a wonderful opportunity. At the end of this day, you can be different – you can be better. And, you can help make the people around you better. You can be different and you can make a difference.
I don’t care how much or how little you have studied for the CPA Exam in the past. You’ve got a new day to add points. I always say that any day where you can add 2-3 points is a great day. Maybe it didn’t happen yesterday but, gosh, it can happen today.
Go and start working questions. Don’t put it off. Don’t give me excuses. Imagine your grade getting slightly higher and higher as you work each new question. Read the question, come up with your answer, read my answer, make a few notes (10 words or less) if you need to. Then, move on to the next question. This is not rocket science. It is learning how to answer questions. And the best way to learn how to answer questions is to read questions, come up with your answer, read my answer, take a few notes.
Make it happen.
Today!!!
Today!!!
Today!!!
It is a new day – make it a great one.
(6) – Need some encouragement. Need some ideas. Read “Tips for Success.” Read a tip or three every day. I think they’ll give you an energy boost.
(7) – Time to practice. Let’s get started on adding those 2-3 points for today.
FAR
Smile Today is a private not-for-profit organization. In Year One, Smile Today receives a check for $24,000 that must be used to pay for dental work for impoverished children. In Year Two, the money is paid to a local dentist for work that she did on 180 local children who could not afford to have proper dental care. What is recorded within unrestricted net assets during Year Two as reported by Smile Today?
A. Nothing is reported.
B. A decrease of $24,000 to be pay for the dental work.
C. An increase of $24,000 as a result of the original donation.
D. Both an increase and a decrease of $24,000.
Answer is D
In a private not-for-profit organization, a designated gift of this type is initially (Year One) recorded as an increase in temporarily restricted net assets. Subsequently, when the money is spent as specified or when the required time period has passed, this amount is removed from temporarily restricted net assets and added to unrestricted net assets. At the same time, the $24,000 paid to the dentist for the work done is reported as an expense within unrestricted net assets. Consequently, both the support and the expense are reported in unrestricted net assets in Year Two when the money is properly spent.
Auditing and Attestation
The January Company is a small corporation that sells men’s clothing in Billings, Montana. The company does not issue securities to the public and is not required to have audited financial statements. However, Jeter and Cano, CPAs are hired to do a review of the company’s annual financial statements. In performing the review, the CPAs discover that a material amount of expenses was capitalized during the year. How does this impact the report issued by the CPAs?
A. An adverse opinion must be rendered because the company did not follow U.S. GAAP.
B. A disclaimer of opinion must be rendered because the company did not follow U.S. GAAP.
C. The material misstatement must be disclosed by the CPAs in a separate paragraph to their report.
D. The CPAs must decide between a qualified opinion and an adverse opinion based on the magnitude and nature of the problem.
Answer is C
An opinion is given as the result of an audit. The CPAs carried out a review and not an audit so no type of opinion can be rendered at all. For a review, CPAs are required to include an extra explanatory paragraph in their report to draw attention to any material departure from U.S. GAAP.
Regulation
The Morganton Corporation has revenues of $100,000, expenses of $80,000, and charitable contributions of $5,000. Which of the following is true?
A. Taxable income is $18,000 and $3,000 in contributions can be carried over for five years.
B. Taxable income is $20,000 and $5,000 in contributions can be carried over indefinitely.
C. Taxable income is $15,000 and there are no amounts to be carried over.
D. Taxable income is $19,000 and $4,000 in contributions can be carried over for three years.
Answer is A
A corporation first computes its net income without the contributions taken into consideration. Here, that is $20,000 ($100,000 less $80,000). Charitable contributions of up to 10 percent of that figure ($2,000 in this case) can then be deducted. That drops taxable income to $18,000. The remainder of the contributions ($3,000) can be carried forward for up to five years.
BEC
The Lenoir Company produces several types of widgets in two departments. In the first department, there are three separate activities and, in the second department, there are four separate activities. The production process has a significant amount of overhead and officials believe that it is especially important to assign the overhead to each type of widget as precisely as possible. If activity-based costing is used, which of the following statements is true?
A. Overhead is assigned one time, at the end of the process in the second department.
B. Overhead is assigned two times, at the end of each of the two departments.
C. Overhead is assigned for each separate activity, three times in the first department and four times in the second.
D. One continuous overhead rate is applied as each widget moves through the production process.
Answer is C
Activity-based costing attempts to assign overhead as accurately as possible by dividing up the entire process into activities, each with its own identified cost driver. For example, in the first activity in department one, officials may believe that overhead is caused by direct labor hours and should be assigned in that way. In the second activity in department one, perhaps overhead is assumed to be related to the cost of direct materials and is assigned that way. Whenever overhead is particularly large, its assignment to individual products becomes especially important. Activity-based costing does that using separate cost drivers for each identifiable activity.
Have a great week!!
Remember that each new day is a wonderful opportunity so make the most of it!!
Joe Hoyle
www.CPAreviewforFREE.com
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