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Lesson 115—In this lesson--Global Reach, SIMS, Focus on One Word, Joe's Text Book, Are CPAreviewforFREE's MCQ's Hard than Other Review Course MCQ's?
Lesson 115—In this lesson--Global Reach, SIMS, Focus on One Word, Joe's Text Book, Are CPAreviewforFREE's MCQ's Hard than Other Review Course MCQ's?
From: Joe
199 Weeks of Operation and 34,363,920 Page Views (an average of over 172,000 page views each and every week for nearly 4 years)
(1) – Last week CPAreviewforFREE had visitors from 99 countries. That is always amazing to me; we helped people in that one week who live in 99 different countries. And, what is even more interesting to me is that it was a normal week. We usually get people visiting our site from between 92-103 countries every single week year round.
And, of course, that’s our goal – to help everyone, absolutely everyone, to get the points they need to pass the CPA Exam. More.
SIMS, an Extension of MCQ's
(2) – I got a nice note a few days ago from a person who was getting ready to take FAR. She indicated that she had worked all of our free multiple choice questions and that she had also paid $9.99 so that she could work all of our Simulation questions.
That was probably a well invested $9.99. Since 60% of the exam are M/C questions for FAR, AUD and REG, and BEC is 85%, you should do well if you understand the concepts and receive over 75% of our questions correctly. SIMS test the same concepts in a different format. Become familiar with the exam by reviewing the Sample Test and Tutorial at the AICPA.
If you are interested in practicing on Sims as well as multiple-choice questions, go to theCPAreviewforFREE store, scroll down and you can see all of the Simulations we have available. If you are already a registered user, log into your account and click on "Manage your purchases."
(3) – I’ve had an incredibly busy spring. I’ve been working on two textbooks and also trying to educate 82 students in Intermediate Accounting and Financial Accounting. There have been many days over the past 4-5 months when I’ve woken up in the morning realizing that I needed to accomplish an awful lot that day. Not just a small amount. Not just a normal amount. There have been many days where I needed to accomplish a whole lot.
People often like to talk about what they are going to do.
People often like to plan what they are going to do.
However, at the end of the day, it is what you actually manage to do that makes the real difference. At the end of the day, saying “I planned well” doesn’t do you much good. Saying “I talked about getting stuff done” isn’t much help. What really works is to be able to say “I can’t believe all that I managed to do today.”
You can have days like that.
In fact, every day can be like that if you work at it. More...
Joe's Financial Accounting Textbook
(4) – The second edition of my Financial Accounting textbook came out a few weeks ago. I wrote it with C. J. Skender of UNC and it uses a Socratic Method to teach accounting. If you teach this course in college and would like to get a copy to consider, please send an email tofaculty@flatworldknowledge.com
(5) – My daughter and I went to a baseball game here on campus a few days ago. We sat behind the visiting dugout. Their batters had an interesting habit. They had a sledge hammer and each player would swing it for several seconds before picking up the real bat to go to the plate.
My daughter was mystified by the sledge hammer and wanted to know what they were doing. I explained that batters have long had the practice of swinging very heavy objects before they bat. When I was a kid, they would swing 2-3 bats at one time. Now, they often have a heavy object that they refer to as a “donut” that they slip on the bat to add weight. Or, apparently, they use a sledge hammer.
The purpose of swinging the weight is to loosen up and strengthen the batter’s muscles to get ready to better hit the baseball. After straining against the weight of the sledge hammer, the batter is able to swing his own bat faster and harder. I’m assuming Babe Ruth did this type of practice 90 years ago. It’s not a new idea.
I was reminded of this last week. Someone on the Internet said that she liked the review question from X course because they were easy but didn’t like ours quite as much because they were harder. I thought that a really naïve thing to say.
Are our questions really harder? More...
Add More Points!
(6) – Practice Questions.
Okay, time to add some points. Time to get just a little smarter.
FAR – this is a question that I took directly from my Intermediate Accounting II final exam that I gave to my students last week. Most of them got it right but several didn’t.
The Houston Company has maintained a defined-benefit pension plan for its employees for a number of years. At the end of the most recent year, the following information was available:
--Service cost $279,000
--Expected return on plan assets 52,000
--Actual return on plan assets
--Funding 220,000
--Interest on projected benefit obligation 75,000
--Amortization of prior service cost (created
when a contractual provision was amended which
reduced the projected benefit obligation) 21,000
What should be reported by the company as the pension expense for the year?
A. $274,000
B. $279,000
C. $281,000
D. $316,000
Answer is C
Pension expense (also known as net pension cost) is normally the service cost plus interest on the projected benefit obligation less earnings on the plan assets plus any amortization of a prior service cost (or net gain or loss). There are two keys, though, to answering the above question. First, when the problem gives both expected and actual earnings, pension expense is computed using the expected number. And, second, amortization increases pension expense but only if the prior service cost is a loss. Here, the prior service cost caused the projected benefit obligation to go down (rather than up). The liability is less which means that the prior service cost here is a gain. Thus, the amortization of that prior service cost reduces the expense instead of increases it. Pension expense is $279,000 - $52,000 + $75,000 - $21,000 or $281,000.
Auditing
Janine Haimston, CPA is performing an audit and is currently examining the reporting company’s bank reconciliation which was completed by a company employee. Haimston discovers that several checks were outstanding at the end of the year but were omitted from the bank reconciliation. It still reconciled. Which of the following is most likely to be the risk that Haimston should consider?
A. The company is attempting to inflate its sales figure for the year.
B. The company is trying to reduce the reported balance of its liabilities.
C. The company wants to report expenses in the subsequent period and not in the current period.
D. The company plans to record sales figures in two different periods to improve its financial position.
Answer is C
The recording of checks deals with cash payments and, therefore, has nothing to do with sales so that neither A nor D can be correct. Because the checks are outstanding, they have not cleared the bank. Thus, the only way that the bank and book figures will reconcile (despite leaving off the outstanding checks) is if those checks have not yet been recorded by the company in its accounting records. They were not recorded on the books so they could not be included as outstanding on the bank reconciliation. Why would a company leave off recording its cash payments? Many expenses are not recorded until cash is paid. If the check is not recorded in a timely manner, the expense will not be reported in the current period. However, the bank reconciliation will not reconcile unless the checks are also left off the list of outstanding checks.
Regulation
Lucy Tyler is completing her current form 1040 tax return. Below are listed some items and the schedule on which they are reported. Which of these schedules is incorrect for her use?
A. Schedule C – net income from a business that she operates as a partnership with her sister.
B. Schedule D – the gain on the sale of 100 shares of Ford Motor Company stock held by 8 months
C. Schedule D – the loss on the sale of 200 shares of IBM stock held for 15 months
D. Schedule E – royalty income she received from a textbook that she had written.
Answer is A
A partnership will file its own separate tax return on Form 1065. The partners then report their share of the income on form 1040 Schedule E. The proportionate share of certain pass through items such as capital gains and charitable contributions are reported individually on each partner’s tax return. The business income, though, is not included on Schedule C. That form is used for sole propriertorships.
BEC
A CPA goes to a conference and one of the speakers states that CPAs can help their clients “by making sure they are able to manage all movement and storage of raw materials, work-in-process inventory, and finished goods all the way from the point of origin to the point of consumption.” Which of the following terms was the speaker most likely discussing?
A. Supply chain management
B. User consumption theory
C. Quality assurance and management practices (QAMP)
D. Harvard Theory of Optimum Practices
Answer is A
Supply chain management is a method of achieving a competitive advantage by ensuring that all aspects of the supply chain (both those inside a company and those inside other companies with which they work) are operating as efficiently and effectively as possible. Historically, companies only worried about operations inside their own company. Supply chain management extends that thinking to include the interaction between all related companies so that products can be produced as well and as cheaply as possible. Thus, the operations of the companies that supply raw materials to a business are considered in the planning process as well as the shipping companies that eventually take finished goods to customers.
Have a great week – work hard – add points.
Joe Hoyle
CoFounder
CPA Review for FREE
