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Lesson 104, Exam Results, Tips for Success, New Practice Questions
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From: Joe
(1) – Always love to hear from folks!!! Here's a few success stories.
From BK: “I just received my AUD and FAR scores, and I am very excited to say that I passed both this
summer! Besides sharing the good news, I just wanted to personally thank you for providing the CPA Review services that you offer to CPA candidates. I used your material extensively in my studying, and I really appreciate having those study materials available. Thank you for providing such a valuable service to accounting students. I am very grateful!”
From KM: “It's finally in (Audit came in and I had 83). Thank you so so much! I wouldn't have done it without your help, support and encouragement. God bless you for the excellent work you're doing. Will definitely keep in touch, and would be very willing to help in any way I can, should opportunities arise.
With all my best wishes, abiding appreciation and esteem.”
From KW: “I just wanted to say THANK YOU for all your help. I just found out I passed my final section of the exam, and I could NOT have done it without you!! I have and will continue to recommend this website to everyone I know, despite their initial assumption that it can't possibly be as helpful as it really is. They quickly change their mind, as my enthusiasm says it all. My budget was extremely tight when purchasing CPA review materials, so when I realized my $600 XXXX set of books/CD-roms had all kinds of typos in them, I was disappointed. But, by [heavily] supplementing my studying of XXXX material with this website (and the extra [awesome] materials for purchase), I got the concepts down like nobody's business. I'm still in shock that I've finally passed, but I can't tell you how incredibly ridiculously wonderful it is for you to provide this INDISPENSABLE resource to everyone out there who desperately needs it! What you are doing and have done is changing people's lives. THANK YOU.”
From TS: “Hello! Just thought I'd say thanks and let you know that I passed AUD using ONLY your free website. How's that for a ROI? Time to focus on the next three! Thanks for everything.”
(2) – Just so you know – I want to get a letter like that from YOU over the next months. You can do it. We believe in you. We want this kind of good news from YOU.
(3) – By the time you read this, we will have crossed 28 million (28,000,000???!!) page views since we got started. I remember, when we first began, thinking that I’d be thrilled if we ever hit one million page views. I am so very pleased that we have been able to help so many people reach their goal of passing the CPA Exam. It is not an easy test, it can be a real challenge. But, I firmly believe that with time, effort, and good quality materials, everyone can pass.
(4) – As some of you know, I also write a blog about teaching where I talk about teaching accounting here at the University of Richmond. Last week on that blog, I quoted one of my all time favorite people – Vince Lombardi – the legendary football coach of the Green Bay Packers during the 1960s.
“A man can be as great as he wants to be. If you believe in yourself and have the courage, the determination, the dedication, the competitive drive and if you are willing to sacrifice the little things in life and pay the price for the things that are worthwhile, it can be done.”
What a wonderful quote for anyone who plans to take on a challenge as significant as the CPA Exam. It has been argued recently that the people in our world today are not willing to make sacrifices. I absolutely do not believe that. I think people are more than willing to make sacrifices if they believe they have a fair chance.
The CPA Exam is possible.
Yes, it is tough.
And, yes, sometimes people fail and have to try again.
But it is possible and it is worth the sacrifice.
As you see in the notes at the beginning of this email, the thrill of victory is magnificient.
I think Coach Lombardi tells you everything you need to know in his few lines:
---A person “can be as great as he wants to be.” You are never going to pass the CPA Exam unless you seriously want it. It is not a stroll in the park. But I firmly believe that people have unlimited potential. It takes time, it takes patience, it takes work – but you can be as great as you want. Never underestimate what you can accomplish in this life. I firmly believe that too many people set their sights way too low. Go for GREAT.
---“Believe in yourself.” No one ever accomplished anything without having a belief, somewhere deep down inside of themselves, that they could do it. If you start out expecting to fail, it is just hard to do the work that is necessary.
But YOU can pass the CPA Exam.
Others just like you have done it and so can you.
You are strong enough to do the work necessary for success.
Never let doubts slip into your thinking.
Wash those doubts away – they are counterproductive.
--- “Have the courage, the determination, the dedication, the competitive drive” – let’s assume someone went around with you all day and just watched you. What would they say about you? If someone had watched you for the past 24 hours, how would they evaluate your courage, your determination, your dedication, your competitive drive? Too often, we leave our courage and determination in our heads: “in my head, I’m a very determined person; in my head, I have a competitive drive that you wouldn’t believe.” But you don’t live inside your head. If you have these things, they need to be out in your real life. People should be able to see how competitive you are. People should see how determined you are.
Pay attention over the next couple of days—pretend that you are watching yourself. Are you really determined or is that just a fun fantasy? Do you have competitive drive or is it just something you would like to have? No one will ever ask more from you than courage, determination, dedication, and competitive drive. But, before you start claiming to have any of those, make sure they really are visible—something that is more than a dream. I once heard a basketball player say about Michael Jordan “his desire to beat you just seemed to radiant from his body.”
---“Willing to sacrifice the little things in life and pay the price” – success is not free. If it were, we’d be living in a world of very successful people. There is always a price to be paid. There is always a sacrifice. You give up your time. You give up your fun. Maybe you give up some sleep. The hardest part is that there is no guarantee. You can make the sacrifice but there will always be a risk. That’s what makes life exciting. But, you need to go into your exam preparation knowing that decisions will have to be made. Do I study or do I go to a movie? Do I answer questions or do I take a nap? Do I review some material or do I go have a drink with friends? Understand at the very beginning that it is a worthy goal but one that will require you to give up some things. Less nights out. Fewer parties. Less television. Fewer glasses of beer. People who succeed in life have to make that decision – what am I willing to give up?
---“It can be done.” Yes, exactly. People just like you earn those 75 points and so can you. People with your education and your smarts pass all the time and so can you. Go for it.
If you’ve not started down that path to success, there’s no better guide than coach Lombardi.
(5) – At CPAreviewforFREE, we have a section titled CPA Exam Resources. In that section, we have a column “Tips for Success” where I occasionally provide my favorite tips for being successful—especially successful on the CPA Exam. I just added Tips 31 and 32 to that list. If you need a boost, you might try reading some more of those tips.
(6) – We love having you with us. Consider passing us along to your friends. Scroll to the very bottom of this email lesson (or any other email lesson) and click on the Forward to a Friend. We feel like the Wikipedia founder who asks their followers to donate money--except we're only asking that you forward us to others. This is where you'll find the unsubscribe button as well.
(7) -- We're not sure if you saw this from Accounting Today, but "Financial Accounting Standards Board chair Leslie Seidman said that many of the priority projects slated for convergence with the International Accounting Standards Board probably will not be settled until next year at the earliest." This doesn't change what appears on the CPA exam, but we want to keep you in the loop.
(8) – Let’s do some practice; let’s add some points. Let’s make some good things happen.
FAR
On December 31, Year One, a company starts a defined benefit pension plan and gives its employees benefit for the years they have already worked. This creates a prior service cost of $200,000. An annual discount rate of 5 percent was used to arrive at this number. On that date, the workers have an average remaining work life of 10 years. Also, on the same day, the company funds the first $140,000 of this obligation with a cash transfer. Expected earnings on these assets is 8 percent per year. What appears on the Year One financial statements?
A. A decrease in income of $10,000
B. An increase in income of $11,200
C. A decrease in income of $20,000
D. A liability of $60,000
Answer is D
The projected benefit obligation is $200,000 because that is the amount created by the initial prior service cost. Plan assets are $140,000 as a result of the funding. Those two figures net together to report a liability of $60,000. The amortization of the prior service cost will increase expense in the future. The interest on the projected benefit obligation will increase expense in the future. The earnings on the plan assets will decrease income in the future.
Auditing & Attestation
During an audit, the CPA is attempting to substantiate an account balance using statistical sampling. The sample is drawn and the balance for the population is estimated and mathematically determined to be between $234,000 and $249,000. The company is reporting a balance of $243,000 so the CPA assumes that no further testing is necessary. The number falls within the appropriate range based on the sampling technique. Later, it is determined that the total for the population as a whole was materially different than the reported figure. What type of sampling risk is demonstrated here?
A. Control risk has been assessed too low
B. Control risk has been assessed too high
C. Incorrect acceptance has taken place
D. Incorrect rejection has taken place.
Answer is C
In sampling for attributes, the CPA is attempting to assess a percentage rate. That is often the error rate that occurs within a company’s internal control system. That type of testing concerns itself with assessing the level of control risk that is present. Here, it is not a percentage that is being estimated but rather a balance. That is done through sampling for variables which helps the auditor gain evidence to substantiate a reported figure. Does the sample indicate the population balance should be accepted? Does the sample indicate the population balance should be rejected? Here, the balance was accepted but really should not have been because reported figure was materially different than the population total. That is an incorrect acceptance.
Regulation
John and Wendy Wykoski filed their tax return for this year. They had total income for tax purposes of $50,000. They also had four payments: student loan interest of $100, alimony paid to ex-spouse of $200, unions due of $400, and travel required by job of $600. What is adjusted gross income for this couple?
A. $48,700
B. $49,100
C. $49,300
D. $49,700
Answer is D
Student loan interest and alimony payments are deductions that taxpayers can take in arriving at adjusted gross income. Union dues and travel required by a job are both miscellaneous itemized deductions that can only be deducted if they are greater in total than 2 percent of adjusted gross income.
BEC
Thompson Corporation is considering making an investment in a donut maker. It will cost $200,000 and last for 10 years. The company expects it to generate a positive cash inflow each year of $60,000. Depreciation expense is $20,000 per year so the donut maker will have a reported net income of $40,000 per year. The desired rate of return is 8 percent per year. The present value of $1 in 10 years at an annual rate of 8 percent is .47. The present value of an ordinary annuity of $1 per year for 10 years at an annual rate of 8 percent is 6.71. What is the net present value of this donut maker?
A. A positive $68,400
B. A positive $82,000
C. A positive $202,600
D. A positive $402,600
Answer is C
This donut maker will generate cash inflows of $60,000 per year. The present value of those cash flows at an 8 percent rate is $60,000 x 6.71 or $402,600. Since the asset costs $200,000, the present value is larger (has a positive net present value) of $402,600 less $200,000 or $202,600.
Study Hard
Be Determined
Make Good Things Happen
I want to hear from you that you have knocked out the CPA Exam.
I know you can do it.
Joe Hoyle
President and CoFounder
CPAreviewforFREE
