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Lesson 128 January 15, 2013
From: Joe
Take Out a Sheet of Paper Right Now
Greetings– It's time to get a new year started and headed in the right direction. If you have not yet passed the CPA Exam, take out a sheet of paper right now. On that paper write down the day on which you want to have the exam passed. Be realistic – when is a legitimate point in the future for you to be done with the CPA Exam. Whether it is July 4, 2013 or March 22, 2014 or whenever, write it down. Next, open up a calendar and determine the number of days until you will get to that point in time keeping in mind that you need 60-100 hours of preparation per part. Under the date on your paper, write down the number of days that you have left.
Now, tape that piece of paper to your wall where you can see it every day. Make it obvious, something you cannot miss; the bathroom mirror, dashboard of your car, kitchen table. Then, as each day passes, mark out the number and pencil in one less day. Create a visual countdown.
I have always said that the real key to passing the CPA Exam (heck, the real key to success in almost everything you want to accomplish in life) is to more...
2012 Pass Rates for the CPA Exam, Pass in 2013
If you go to the AICPA official website, the examiners have released the pass rates for the year of 2012. A goodly portion of the candidates (about 1/2) do manage to pass:
--Auditing – 46.89 percent
--BEC – 52.83 percent
--Financial Accounting and Reporting – 47.97 percent
--Regulation – 48.15 percent
Okay, it is obviously a challenging exam but passing the CPA Exam is very much within your reach. Since you are allowed to take each of the parts four times every year, most people who put in the work can get this exam passed in a reasonable period of time. I say that because I believe it is important to go into your preparation with a sense of optimism. Back 15-40 years ago when the exam was given only twice a year on very specific days and the pass rate was just about 33 percent, being successful was much more of a challenge. You can do it!
Now, today, if you put in the work, you should feel good about your chances of getting this exam passed. You may have to take a part more than once (and there is no sin in that) but, if passing is your goal, don’t go into the exam with a sense of impossibility. It is clearly a passable exam, but you need to start preparing and stop procrastinating.
Arm Yourself with Info About the Exam to Feel More Confident
Speaking of the AICPA official website, one thing you might want to do is to read and digest their answers to Frequently Asked Questions in the left navigation bar under "Quick Links." In fact, they have FAQs for both NASBA (the folks who monitor the exam) and the AICPA (the folks who write the questions).
I just always think that the more you know about the CPA Exam the better off you are when it comes to getting the preparation done right. The information is free and will give you more confidence walking into the exam room.
Create a Solid Foundation
Joel Weldon is a motivational speaker. I have never heard him speak personally but I have read some of his words. I read something recently that he had said that caught my attention:
“When I used to work in construction, my supervisor told me, ‘If we put our foundation in right, the rest of the building is easy.’ That philosophy has really guided us. If we pay our dues, take our time, do our homework, and do it right and with quality, whatever we put on top of this will have something to support it.”
Just to repeat: “If we pay our dues, take our time, do our homework, and do it right and with quality, whatever we put on top of this will have something to support it.”
As you can imagine, I talk with college students virtually every single day. I also talk with a lot of CPA Exam candidates. I am often struck by their attitude. Many do not want to pay their dues or take their time. Many look for shortcuts so they don’t have to do any real homework. They are not terribly interested in doing their work the right way and with quality.
And, then they are stunned when things don’t work out so well. They are upset when they get to the CPA Exam (or an intermediate accounting test) and they don’t have a strong enough understanding so they can answer the questions. They have not created a firm foundation of understanding that will support the level of knowledge they need to be successful.
If it is important enough to do, if success on the CPA Exam truly means something to you, then it is important enough to do the preparation the right way.
Okay, what is the right way to prepare for the CPA Exam? Here is some solid advice that WILL prepare you for success. More....
Time to do some practice.
FAR
The city of Kellysburg is producing a statement of net position (used to be known as a statement of net assets) for its government-wide financial statements. What are the two columns that are most likely to be presented first?
A. General Fund and Special Revenue Fund
B. Governmental Funds and Proprietary Funds
C. Governmental Activities and Business-Type Activities
D. General Fund and Internal Service Funds
Answer is C
The government-wide financial statements are designed to look at the state or local government as a whole. The only distinction that is made is between activities such as the fire department that are created to serve the public and activities such as a toll road that have an external user charge. All service activities are grouped into a single column called “governmental activities” and activities open to outside users for a fee are brought together as “business-type activities.”
Auditing
Which of the following bodies produces ISAs (International Standards on Auditing)?
A. International Auditing and Assurance Standards Board (IAASB)
B. International Conference Board on Auditing (ICBA)
C. International Financial & Auditing Board of Standards (IFAB)
D. International Standards for Independent Audit Engagements (ISIAE)
Answer is A
International Standards on Auditing (ISAs) are professional standards created to provide guidance concerning the independent auditor's responsibilities when conducting an audit of financial statements. These ISAs are produced by the IAASB. In March 2009, the IAASB completed its Clarity Project and released its full set of 36 clarified ISAs.
Regulation
Mr. and Mrs. McAdoo reported adjusted gross income for 2012 of $90,000. In March, they had a casualty loss on a piece of property that proved to be a complete loss of $6,000. In May, they had another casualty so that a garage (with a tax basis of $32,000) dropped in fair value from $35,000 to $17,000. Neither property was insured. What amount can they take as an itemized deduction on their joint tax return as a result of these two casualties?
A. Zero
B. $8,000
C. $14,800
D. $15,000
Answer is C
The first loss is $6,000. The second loss is $18,000 (the drop in value is used because it is lower than the tax basis of the property). Each loss is reduced by $100 to $5,900 and $17,900. These losses are then combined ($23,800) and reduced further by 10 percent of the taxpayers’ adjustment gross income ($9,000). The itemized deduction for the casualty loss is $14,800 or $23,800 less $9,000.
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BEC
A company issues a $10,000 bond with a stated annual interest of 10 percent with this interest to be paid at the end of one year. However, the interest to be paid is compounded every three months. What amount of interest is paid at the end of one year?
A. $1,000.00
B. $1,020.00
C. $1,032.40
D. $1,038.12
Answer is D
One way to work this question is to say that the balance for the first three months is $10,000 and the interest is 2.5 percent of that balance (10 percent times 1/4 of a year) or $250.00. That amount is not paid at that time so it is compounded (added to the balance). Thus, the balance for the second three months is $10,250 which is multiplied by 2.5 percent or $256.25. That is compounded to bring the balance up to $10,506.25 and the interest for the third quarter (at 2.5 percent) is $262.66. That is also compounded to bring the balance up to $10,768.47 and the interest for the fourth quarter (at 2.5 percent) is $269.21. Total interest to be paid for that year based on compounding every three months is $250 + $256.25 + $262.66 + $269.21 or $1,038.12. As an alternative, the following formula can be used to determine the interest to be paid: (1 + .10/4) raised to the fourth power and then 1 is subtracted from that total. The .10 is the annual interest rate and the 4 is the number of compounding periods. (1 + .10/4) raised to the fourth power is 1.103812. Then, if you subtract 1, you are left with .103812 which is an interest rate for the year of 10.3812. Multiply that rate times $10,000 and the interest to be paid is $1,038.12.
Have a great week – add points, add points, and then add some more points.
