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Lesson 100—In this lesson--Some Survey Results, New Points to Pass Launch, Motivation, Study Aids, 4 New Practice Questions
From: Joe
SURVEY RESULTS
THANKS to everyone who took a minute to answer our CPAreviewforFREE survey. We’ll be commenting on additional results in future newsletters. Here’s one thing we discovered immediately:
A 94% approval rating. 76% of the respondents said that the quality of our content was better or the same than the other review programs they had used while another 18 percent said that we were the only review program they had used. That is a pretty impressive statistic.
One of the comments we received from Question 8 of the survey: “I have no suggestion but I will say your questions helped me pass all 4 parts on the first try. I have recommended your site to many people. You have done an excellent job.”
Gosh, that is great to hear.
POINTS TO PASS LAUNCH
We have been having great success with our new Points to Pass product designed specifically for FAR. You still have 622 free FAR questions and answers available for use at any time at www.CPAreviewforFREE.com. However, I personally selected 250 of the most important of those FAR questions. We then built the Points to Pass software program that would constantly change those 250 questions and make them 2,500 questions or even 2,500,000 questions. Computers do marvelous things. Here’s the great part: You can work those especially important questions as many times as you like until you can do them in your sleep.
You can take each question and work it over and over with different numbers and different variables until you know the process backwards and forwards.
Or, you can go to any FAR category (Financial Statement Structure of Not-for-Profit Organizations as just one example) and keep working questions in that category for hours and days and even weeks. The computer program will keep changing the numbers and other variables of the questions I selected and then feed each new question to you until you have the whole category down perfectly.
Countless questions by individual question.
Countless questions by individual category.
I have always argued that the very very very best way to pass the CPA Exam is to work questions and read answers. Everything else does help but working questions and reading answers is the best. Do that one thing long enough and you’ll pass. However, UNTIL NOW, there has not been a way to have enough good questions available to work. People run out of questions pretty quickly in every program. But Points to Pass solves that problem by providing an infinite number of variations to the 250 most important questions in FAR.
And it is only one dollar per day. Yep, $29.99 per month. For an infinite number of FAR questions.
WORDS TO STUDY BY
I was talking with a friend of mine the other day and he mentioned the seminal work by Booker T. Washington “Up From Slavery” which was his autobiography, published 110 years ago. My friend had read it recently and mentioned one line that had made a real difference to him: "I have learned that success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome while trying to succeed."
We are halfway through the July-August testing window for the CPA Exam. I realize that a lot of people who read these email lessons are gearing up to take part of the exam before the end of August.
It can be a tense time.
Many of you are worrying about passing or failing. Worry can become a constant mental distraction. As I have said often in these emails, I think your worry is misplaced. If it were me, I wouldn’t allow the words “pass” or “fail” into my vocabulary. I would worry, but only about one specific thing: adding points. How can you add a point or two today? Any other question or any other goal is probably unimportant. That should be the first thing you think about when you wake up in the morning and the last thing you evaluate when you go to sleep at night.
However, my friend’s comment from “Up From Slavery” made me start thinking about the obstacles we all face when pushing to achieve success. What obstacles do you face in your quest to pass the CPA Exam? And, what can you do to overcome those obstacles?
Maybe it is not the CPA Exam that is the problem. Maybe it is the obstacles you face each day. Maybe you let them stop you. Maybe you let them keep you from success.
Here are a couple obstacles that are pretty common in CPA Review.
--“By the time I finish all my work, I’m too tired to study.”
If possible, study first and then do your other work when you begin to get tired. Sweeping the floor can be done when you are half asleep but studying can’t. Unloading the dishwasher can be done without being too alert but studying can’t. Washing out the bath tub doesn’t take many brain cells but studying does.
--“There are just not enough hours in the day for me to do everything and get in my study time.”
Take a moment each day to evaluate what you really “must do.” People often structure their lives to stay incredibly busy. Then, when they try to add something important like the CPA Exam, there just doesn’t appear to be any available time. Perhaps some of those things that you’ve added to your life can be delayed a bit until the exam is passed. Do you have to water your plants every day or can you make it every third day? Do you have to dust your furniture quite so often? Do you have to go to the gym every single day? Can you grocery shop once a week rather than twice? When you are studying for the CPA Exam, it is not a bad idea – before you do anything other than study – to ask yourself “can this task be delayed for a day?” Yeah, there are things you really must do but not everything you do each day is a “must do.”
Think about your obstacles – those things in your life that keep you from putting in the time and effort needed to pass the CPA Exam. Then, figure out how to work your way around those obstacles. You can do it!! That is the mark of success.
STUDY AIDS
When you are working questions on www.CPAreviewforFREE.com, keep a list of all the questions you miss. Keep that list in two columns. One column is for all questions that you miss because there was some part of the question that you didn’t know. The other column is for all questions that you miss because you were careless. You read a word wrong or missed a computation or you started working before you read the entire question.
It is especially important that you train yourself to keep the “careless list” at close to zero. Over time, as you study and practice, the “don’t know list” will go down automatically. However, the “careless list” is based entirely on your ability to stay focused and pay attention. You want to train your mind and your eyes to read all of the questions and pick out the important data and put them together. If you allow yourself to be sloppy while you study, that habit will carry over into the actual exam. So, stop being careless.
Don’t let yourself pick up bad habits. Don’t let yourself get used to missing questions because you are being careless. That is an awful habit. When it comes to that one attribute of the CPA Exam, don’t settle for 75. Shoot for 100 or, in other words, as you study work to have no questions at all missed because of carelessness.
PRACTICE TIME
Let’s see if we can add four points to your scores.
FAR
The Potter Corporation has been in business for four years. The completed contract method has been used for all of those years to recognize revenue on construction projects. At the end of the fourth year, company officials decide to change to the percentage of completion method. That method would have increased income in the first three years by $80,000 and in Year Four by $30,000. How is this change in accounting principle reported?
A. Retroactively – the reported income for the first three years is increased by $80,000.
B. Currently – only the $30,000 amount for the current year is changed.
C. Cumulatively – the entire $110,000 income effect is recognized in the current year.
D. In the future – no changes are made until next year
Answer is A
This change is a change in an accounting principle. Most changes in accounting principle (such as this one) are handled retroactively. The previously reported numbers are changed to align them with the new principle. A change in an accounting estimation is different. It is handled currently and then into the future.
Auditing
The Malfoy Company makes a huge purchase of inventory near the end of Year Two that is shipped to the company on December 30, Year Two. It is sent FOB shipping point. However, no record is made of this inventory until it is received on January 9, Year Three. In looking at the company’s Year Two financial statements, which of the following is most likely to alert the auditor that a recording error has occurred?
A. The Year Two current ratio is much higher than the Year One current ratio
B. The Year Two gross profit is much lower than the Year One gross profit
C. The Year Two inventory turnover is much higher than the Year One inventory turnover
D. The Year Two working capital is much lower than the Year One working capital
Answer is C
Nothing has been recorded in Year Two even though the goods (and the related debt) belong to Malfoy because of the FOB point. The goods were not received in Year Two and, therefore, could not have been sold. Cost of goods sold was not affected by the purchase and, thus, the gross profit is correctly stated. There are only two mistakes. Inventory is too low and accounts payable is also too low by the same amount. Those mistakes offset so that both working capital and the current ratio are also correctly reported. However, inventory turnover is cost of goods sold divided by the average inventory for the period. If inventory was too low at the end of Year Two, then the average inventory will also be too low. Therefore, since cost of goods sold is correctly stated, the inventory turnover will be too high.
Regulation
Owners of the Granger Partnership have decided to liquidate and go out of business. Hermione is one of the partners who holds a partnership interest of $5,000. The only thing she receives from the liquidation is a machine with a book value of $7,000 but a fair value of $7,600. Hermione held a 20 percent ownership in the partnership. What gain does Hermione recognize for tax purposes on the receipt of this liquidation distribution?
A. Zero
B. $1,520
C. $2,000
D. $2,600
Answer is A
Normally, in a partnership liquidation where the partner only receives nonmonetary assets, the partner picks up the new property at the basis of the old partnership so that no gain is recognized. Therefore, Hermione will record the machine on her tax records as having a basis of $5,000. The old partnership basis of $5,000 goes away and is replaced by a new basis for the machine of $5,000. There is no difference so there is no taxable gain.
BEC
The Weasley Company takes 77 days on the average to sell its inventory. It takes 43 days on the average to pay for that inventory. It takes 52 days on the average to collect the money from a sale. For the Weasley Company, what is the cash conversion cycle?
A. 68 Days
B. 86 Days
C. 129 Days
D. 172 Days
Answer is B
The cash conversion cycle is the number of days that it takes a company to buy inventory and pay for it and then sell it and collect the money. Therefore, it is the time that it takes to sell inventory less the time it takes to pay for the inventory plus the time it takes to collect the resulting account receivable. Here, that would be 77 days less 43 days plus 52 days or 86 days.
August is ready to start – make it a great month. Make it the month that you study for and pass the next part of the CPA Exam.
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