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June 26, 2013
Lesson 135
Lesson 135
From: Joe
Pledge to Yourself to Sit for the Exam this Testing Window
The July testing window will be opening in a few days. Are you ready? Each new window offers you the opportunity of getting some parts passed. I’ve always liked that word “opportunity” because it indicates a potential benefit but not a sure thing. You have the opportunity to move forward, you have the chance to make something great happen. But it is up to you. The opportunity is available but what you do with that opportunity is up to you.
For better or worse, it won’t be long until it is the end of August and this opportunity will have passed. Will you be thrilled by what you have accomplished in those few weeks? Or, will you be disappointed in yourself because you let the time slip away? Whether you pass or not, you need to make the most of the opportunity. I fully realize that there are so very many things in life that can steal your time from you – the Internet alone provides at least 1,000 ways to waste time without adding a single point to your CPA Exam score. Television is just as bad.
Make it your pledge as you start into this new window that you will not get to the end of August disappointed in yourself. You will not lose this opportunity.
Throw away these lines:
--“I could have done better.”
--“I don’t know how I could have lost so much study time.”
--“I don’t know why I find so many other things to do rather than study.”
--“I kept promising myself that I would get to work but I just never made it happen.”
In many ways, I think, success comes NOT from all that you get done but rather by avoiding the negatives. It is those negatives that drag us down. What is worse is that we allow that to happen. We make excuses for ourselves. “I’m just so disorganized.” “I’ve always been lazy.” “I don’t know why I’m not able to sit and study.” Excuses that give you permission to fail.
Those are just reasons you are giving yourself not to try very hard. Most people (not all but most, for sure) who “try very hard” do well on the CPA Exam. I don’t care what review course you are using or how much you paid for it. Most review programs where you “try very hard” have good results.
So, the key is: try very hard. No matter what anyone tells you, those three words are really the key: try very hard. Unfortunately, you cannot give yourself 1,000 excuses not to do the work and still take advantage of the opportunity. You cannot always put it off until tomorrow. You have to have the intestinal fortitude to sit down and do the work today (now).
I cannot make you any promises but if you will just “try very hard,” you have a wonderful chance for success. Okay, you might not make 99 or 100 but if you put in the effort, you have a great chance to pass. That’s the only real goal.
But, if you don’t “try very hard” your chances of success fall dramatically.
So, the only thing you should be focused on as you move into the July-August window is that you will “try very hard” so that when you get to the end of August, you will have no regrets.
Focus on avoiding setting up excuses for yourself. Just sit down and start answering those questions.
Try very hard.
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Are you willing to do the work necessary to achieve your goal of passing the CPA Exam?
A new movie is coming out called Before Midnight. This movie is a continuation of two earlier movies: Before Sunrise and Before Sunset. I really liked the first two movies so I am looking forward to seeing the third movie. To get ready for this new movie, I recently went back and watched the first two again so I could easily remember everything that happened.
There was a line in Before Sunset that I must have missed when I watched it years ago but it really caught my attention this time. I was so impressed by it that I stopped the video so that I could write it down.
These movies are about a man and woman who fall in love. In Before Sunset, the woman talks about people where their love eventually fails: “They enjoy the goal but not the process. But the reality of it is that the true work of improving things is in the little achievements of the day.”
Okay, she was talking about being in love and staying in love but she could have been talking about passing the CPA Exam. Over the past 34 years, I have had thousands of people tell me “I am so excited about the possibility of passing the CPA Exam. That has long been my goal.”
Then a couple of weeks will pass and I will ask them how their studies are going and they will say “I am so excited about the possibility of passing the CPA Exam. That has long been my goal.” But when I press them about their actual studying, they will confess that they have not yet even started to study.
They are in love with the goal of passing the CPA Exam but not the process. That is simply not enough. Wanting something, by itself, is never enough. You have to do enough work, answer enough questions, so that you make a little improvement each day. If you can successfully make a little improvement every day, you will be amazed by how quickly you will be able to pass the CPA Exam.
But you have to take that second step. Yes, you really do have to have a goal that is meaningful to you. However, you have to take that second step and get into the process. You have to be excited enough about the goal that you are willing to do the work. A goal without work is not a goal but a fantasy. A goal where there is not enough energy to work questions is just hollow – it is not real.
Do you want to pass the CPA Exam? If the answer to this first question is not a shouted “You bet I do!!!” then you probably should wait. Unless you want it pretty badly, you are setting yourself up for failure. It is hard to pass without a serious desire.
Are you willing to do the work necessary to achieve your goal of passing the CPA Exam? That is probably the most important single question that I can ask you. Are you willing to do the work? It is not easy but it certainly is not impossible. People just like you pass the CPA Exam all the time. And, it is not luck. They have a goal and they are able to translate that into a desire to do the process also. That process is answering questions and reading answers and taking short notes about the ones you missed so that you can review and get better. That’s the process – you should love it because that is the process that leads to success on the CPA Exam.
New Practice Questions
As always, let’s do a little practice. Let’s see if we can add some points to your CPA Exam score.
FAR
FASB has created a fair value hierarchy to help companies know how to determine fair value when that is required for reporting purposes. In this hierarchy, one level uses a quoted market price found in an active market. What level is that?
A. Level 1
B. Level 3
C. Level A10
D. Level A 1A
Auditing
The James and Wade CPA firm have audited the financial statement of Riley, Inc. for a number of years. Riley has consistently produced high qualify financial statements with no material misstatements. Although Riley has always been privately owned, it will have an initial public offering of shares on a stock market 4 months after the end of the current year. How does the knowledge of this initial public offering impact the work of the CPA firm?
A. It has no impact on the work of the CPA firm because of the historic quality of the work.
B. It increases the risk of a possible material misstatement.
C. It lowers risk because of the legal liability that Riley is taking on with the initial public offering.
D. It depends on what percentage of the company is being traded in the initial public offering.
Regulation
An entity files a form 1023 with the Internal Revenue Service. What is the purpose of this form?
A. It reports gains and losses by a company from the sale of its own stock.
B. It is an application for tax-exempt status.
C. It is a form used by not-for-profit entities to report the salaries received by its officers and directors.
D. It is required whenever a corporation issues a stock dividend where the owners have the option of receiving cash instead of stock.
BEC
A company produces 10,000 widgets for $90,000 and sells them for $110,000. Fixed cost is $20,000. The company plans to drop the price of a widget by $1 with the hopes that it will sell 40 percent more units. How will that decision impact net income?
A. Net income will go up by $2,000
B. Net income will go up by $10,000
C. Net income will go up by $12,000
D. Net income will go up by $14,000
ANSWERS:
FAR
Answer is A
The fair value hierarchy has three levels: 1, 2, and 3. Using 1 is the most desirable because it is the most accurate portrayal of fair value. It is described as using a quoted market price from an active market. Level 2 is a bit less desirable and suggests using other observable information such as a quoted price for a similar property in an active or inactive market. Level 3 is the least desirable because it requires the use of assumptions (rather than observations) such as guess at what a market participant might do in arriving at a price for a property. In reporting fair value, a company is supposed to use the highest level possible for each account balance.
Auditing
Answer is B
Any time that a company plans to issue shares of its own stock, it hopes to receive as much money from investors as possible. Investors will bid up the opening price of the initial public offering if Riley, Inc. looks especially profitable. Therefore, whenever an audit client is making plans to issue shares to the public, the independent auditor should be aware that the risk of a material misstatement is higher because it could be used to benefit the company and its original owners.
Regulation
Answer is B
The form 1023 is labeled as the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Section 501(c)(3) is the most common tax-exempt status.
BEC
Answer is A
Currently, net income is $110,000 less $90,000 or $20,000. Widgets are sold for $110,000/10,000 units are $11 each. Because fixed cost is $20,000, the variable cost must be the other $70,000 or $7 per unit ($70,000/10,000 units). If the price is lowered from $11 to $10, the number of units sold will go up by 40 percent from 10,000 to 14,000. Total sales will be 14,000 times $10 sales price or $140,000. Fixed cost is still $20,000 and variable costs are $7 each times 14,000 units or $98,000. Total costs are now $118,000 ($20,000 plus $98,000). The new profit will be $140,000 sales less $118,000 cost for a profit of $22,000. That is $2,000 more than the current net income.
You’ve got roughly 9 weeks in the July-August window. Let’s make the very best of that time to add points and get 75 and pass.
Joe Hoyle
Co-Founder and President
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