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December 2, 2014
Lesson 157
From: Joe
Prepare NOW to Start Off With a Bang in 2015
We are now in December, an off month for the CPA Exam. Are you going to be ready for the 2015 CPA Exam? If you are not yet a CPA, make it a top priority to get those three letters after your name in 2015. There is no reason that you cannot pass the CPA Exam and move your career forward and into high gear.
I was reading a novel this morning. The main character has been involved in some unethical activities in the past but he meets a woman whom he likes and starts to wonder if he is worthy of her. He wakes up on a new day and the first thing he says to himself is “Today’s the day I either change my life or I don’t.”
What a great way to put it! We all do stuff that isn’t really moving us in a direction that we want. The question is never “should we change” but rather “will we change?” Everyone talks about change but not enough do it. When it comes to change, talk is cheap. If you have been thinking about the CPA Exam for some time now, isn’t it time that you begin to change your attitude? It is not a question of whether you can pass the CPA Exam. I’ve been in this business for over 30 years and I’ve never met anyone who couldn’t pass the CPA Exam with the right effort and the right materials. Yes, it takes time. And, it takes a genuine effort. You have to work a lot of questions and you have to study a lot of answers. You have to be methodical. You have to work those questions over and over until the process sticks solidly in your brain.
No matter how long you have tried to pass the CPA Exam or how long you have thought about the CPA Exam, are you ready to do the work that needs to be done so you can pass that exam in 2015? Why put it off any longer? Let’s get it done. When you wake up each morning, you should take a moment to bring reality into immediate focus: “Today’s the day I either change my life or I don’t.”
That’s the choice you have to make.
We here at www.CPAreviewforFREE.com are ready to help. We have over 2,600 free questions and answers created to guide you through each topic. I always tell people that, at a minimum, if they will work all of our questions twice and read each answer carefully, they should have an excellent chance of earning 75 points and passing the exam. (And, doing it for free.) There are always more things that you can do. The list is never ending. But, as a first step in passing the CPA Exam in 2015, work every question twice – pay close attention to how you got the answer or how we explain the answer – and you should be ready to give the CPA Exam a legitimate shot.
Android and Apple Smart Phone/Tablet Apps
We do have apps for the iphone/ipad AND android. We have a free light version of 50 multiple choice questions for FAR and over 400 mcq's per part for all four sections of the CPA exam for $9.99/part. While these questions are the same as the questions on the website, additional features have been included.
The best part? Once downloaded onto your smartphone/tablet, all the questions and content reside on your phone. No internet connectivity or data useage is required after the download. You can practice your questions while tucked in your sleeping bag in the middle of the Sierra Nevada mountains if you want.
 
The point is: practice anywhere at anytime for a very low cost.
New Changes for the CPA Exam in 2015
A new set of Content Specification Outlines for the CPA Exam takes over onJanuary 1, 2015. If you go to the official website (www.cpa-exam.org), you can download the 2014 version as well as the newly updated 2015 version. Some years, the changes are radical while other years the changes are less significant. It seems to me that the changes for 2015 are, for the most part, rather minor and will be discussed in future newsletters.
One of the biggest changes for 2015 is that in the FAR section of the CPA Exam, coverage will now include the liquidation basis of accounting as created by a recent FASB US GAAP Update. As a result of several well-known liquidation cases such as Circuit City, FASB decided to provide formal accounting rules for companies getting ready to be liquidated. Because many candidates do not necessarily have a great understanding of these new rules, here is information that we now provide in “The Essentials” portion of our website (that we sell to provide financial support for our free questions and answers). Liquidation Basis of Accounting changes.
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Case Study: How to Prepare for the Exam the WRONG WAY
Several years ago, I had a student in one of my Intermediate Accounting II classes. I’ll call her Katherine. Katherine seemed like a bright young person. Unfortunately, she came to class each and every day totally unprepared. She never did the assignments or read the book. She could not answer a single question that I asked during class discussions. But, she did take copious notes. I think she wrote down every word that was spoken in class each day.
We arrived at the first test and Katherine made a low D. I wasn’t surprised. She had been merely an observer in class and not a participant. You cannot learn accounting by just taking notes.
I honestly expected Katherine’s work to improve. I figured the D would scare her into doing better. I was wrong. She continued to show up each day having done absolutely no preparation in advance but she sure could take great notes.
Consequently, Katherine made another D on the second test. By that time, I just assumed she was going to make a D in the course. She seemed determined to continue heading down a path that was not bringing her good results.
After receiving her grade on the second test, Katherine showed up in my office nearly hysterical. She told me that she had never made either a C or a D on any test in her life and didn’t understand why she had made D’s on both of my first two tests.
I told her the truth: She never prepared for class and, therefore, couldn’t really follow the subtle issues that we discussed in class. She was not able to learn what we were talking about because she was too busy trying to write down every word so she could memorize them.
She responded that she had always prepared in this way. In middle school, high school, and college, she didn’t waste her time reading the textbook and preparing. Instead, she paid close attention in class. She wrote it all down and then memorized it. And, of course, she had then made virtually all A’s on her examinations.
Okay, let’s say the story stops right there. What lessons can we learn from Katherine? More...
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Practice, Practice, Practice
Time to add some points as we get you ready for the 2015 CPA Exam.
FAR
The Moon Corporation believes that bankruptcy is imminent. The company has a building in New York that will have to be sold to help pay for the company’s debts. On a statement of net assets in liquidation, how will this land be reported?
A. At historical cost
B. At net book value
C. At fair value
D. At net realizable value
Auditing and Attestation
The CPA firm of Able and Body is studying the program change controls that a client company maintains in connection with its computer processing department. Which of the following is not a reason for this examination?
A. The auditors want to make certain that all changes to computer programs are made in accordance with the company’s policies.
B. The auditors want to make certain that all changes to computer programs are approved by the computer operators.
C. The auditors want to make certain that all changes to computer programs have been properly documented.
D. The auditors want to make certain that all changes to computer programs are properly validated before being placed into operations.
Regulation
Right before the end of the current year, the Rose Corporation (located in Oregon) received an unexpected cash dividend of $40,000 from the DiMaggio Corporation (located in Idaho). Rose owns 18 percent of the outstanding common stock shares of DiMaggio. How did this late collection impact the amount of taxable income to be reported by Rose?
A. No change is caused in taxable income.
B. Taxable income will go up by $7,200
C. Taxable income will go up by $8,000
D. Taxable income will go up by $12,000
BEC
The Hammerhall Corporation is considering the possibility of investing in a new project. If the project is undertaken, sales will amount to $70,000 per year. Variable cash operating expenses are expected to be 60 percent of that amount. Fixed operating expense (made up of only depreciation expense) will be $12,000 per year. The company’s effective tax rate is 30 percent. What is the annual after-tax cash inflow that is anticipated if this project moves forward?
A. $11,200
B. $13,800
C. $19,600
D. $23,200
Answers
FAR
Answer is D
In liquidation, the debtors and other interested parties are primarily interested in the amount of cash that will become available. Therefore, assets are reported at the amount of cash that will be received from the liquidation which is often referred to as the net realizable value. Fair value is not used for this reporting because officials might be in a hurry to conclude the liquidation and be forced to sell the building before they have time to get the actual fair value from the property.
Auditing & Attestation
Answer is B
Changes in computer programs should be properly authorized but that normally is by the programmers and the departments that are actually involved with the transactions. Computer operators should have only limited information about the specific workings of computer programs because they have direct physical access to the computers. By limiting what they know about the workings of critical programs, they are less likely to be able to manipulate those programs in some fraudulent manner. However, the programs should be created in accordance with company policies and should be properly tested and documented.
Regulation
Answer is D
All dividends collected by one domestic corporation from another domestic corporation are included in taxable income. However, a dividends received deduction is also provided that then removes a portion of those same dividends. The amount of the deduction depends on the level of ownership. If ownership is below 20 percent, the deduction is 70 percent. If ownership is 20 percent or more but less than 80 percent, the deduction is 80 percent. If ownership is 80 percent or more, the dividends do not have any effect on taxable income. Because Rose owns 18 percent of DiMaggio, the $40,000 dividend is included but the dividends received deduction is 70 percent of that amount or $28,000 which leaves an increase in taxable income of $12,000.
BEC
Answer is D
The amount of income taxes to be paid must first be determined. Based on the information provided, taxable income will be the $70,000 in sales less variable cost of $42,000 (60 percent of sales) and also less $12,000 from the fixed operating expenses. That gives a taxable income of $16,000 for an income tax of $4,800 ($16,000 times 30 percent). However, in computing the after-tax cash inflow, the depreciation expense is omitted because it has no direct cash effect. Because it must be paid in cash, the income tax is included. The applicable amount is $70,000 less $42,000 less $4,800 or $23,200.
Okay, it is December. We are moving quickly toward 2015. When you wake up each morning, take a moment to bring reality into immediate focus: “Today’s the day I either change my life or I don’t.”
Now go out and go for it!
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Wednesday, December 3, 2014
See Changes to the CPA Exam for 2015; New MCQs
Tuesday, October 21, 2014
New MCQs; New Site Enhancement; Don't be a Watcher, Be a Doer
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September 16, 2014
Lesson 156
From: Joe
NEW!!
Now you can continue where you left off when working the multiple choice questions. Just log back into your account, scroll down to "select an exam category" and click on "continue last exam". Voila! It's one of the improvements we've made based on your feedback from our survey.
If you haven't completed our most recent survey, please take 2 minutes (I promise, that's it!) to help us continue to improve the site.
You Can Do It, Too!
We always love hearing from the folks who use our materials. Below and to the right are a couple of recent messages we received:
From TMM: “Thank you CPA for Free - I have finally passed all four sections of the CPA exam. I used both your free materials, and your motivational book to get me through when I almost gave up. Thank you for what you are doing for others like me. Yes, the CPA exam is a serious challenge and takes many sacrifices. It took me three years, but I made the sacrifices and finally passed. … I really need to buy your book in hard copy, so I can write notes all over it this time. It really encouraged me to keep pushing myself and working at a high level when I wanted to give up and/or have fun.”
If You Are New to the Site
If you want to know how our program works, the best way to learn is to watch the short videothat I made. It provides the ins and outs of using CPAreviewforFREE.com.
And, as long as you are watching some short videos, here is one that I made which talks about my success book (the one that TMM mentions above in her message): Don't Just Dream About Success, Stack the Odds in Your Favor.
Don't Be a Watcher. Be a Doer.
One of the great parts of my job is that I get email messages from former students, often people who were in one of my classes many years ago. It is always fun to catch up with folks who once worked so carefully with you in their quest for success. It is fascinating to see what they remember about the experience.
I got just such an email last week from a candidate who had been in my live CPA Review course in about 1990. I could not remember seeing or hearing from him in the past few decades.
This voice from the past wrote something that I immediately found fascinating, especially since he could still recall this specific advice from 25 years ago:
“In that class, in an attempt to keep us from wasting valuable time in front of the television, you said, ‘most people care more about the success of their favorite sports team than about their own.’”
Yeah, I am sure I said that. I sometimes get frustrated with CPA exam candidates and with college students when they seem so interested in sitting in front of a television screen watching other people battling to be successful. They urge these strangers to work harder without urging themselves to work any harder. These “observers” often get outrageously happy or morbidly upset by the actions of a team of athletes hundreds of miles away with whom they are not connected in the least. What’s wrong with this picture?
Many people are, indeed, extremely interested in someone else doing the hard work that is necessary to become successful while they sit passively in their chair going nowhere. I will have students who are not prepared for class because they just had to watch a college or pro football game on television. Their own passing and failing is trivial to them compared to the Green Bay Packers or Seattle Seahawks.
Passing the CPA Exam is a little important to some candidates but watching a bunch of strangers throw a ball around is extremely important. I am always amazed to walk into a restaurant where a large gathering of people will just be screaming at the various televisions around the room. A lot of energy put to no good use.
Here’s my question: Why don’t these people get that excited about their own work and their own successes?
I don’t have a good answer for that question. As I tell my students here at the university, “You have to truly want to succeed before you have any chance of success. That desire to be at the top has to live in your heart, gnawing at your insides. You can’t ‘kinda’ want to succeed or ‘sorta’ want to succeed. That is not enough desire to provide you with the ambition needed to turn off that television set and go to work.”
I have nothing against sports. I watch a little myself. However, those three hours that we sit around passively watching someone else play a game on television is a lot of valuable time that is squandered. Would those players stop their lives just so they could cheer for you?
So, with the World Series coming up in baseball and the college football season now underway and the pro football season in full blast, where does that leave you? In life, you can be a “watcher” or you can be a “doer.” Here's how to be a doer. More..
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As the Exam Gets Closer, Be in Control, Get It Done
When I was in high school, one of the great basketball players was John Havlicek who was a star first at Ohio State and then with the Boston Celtics. He was just the hardest working player who seemed to always be at the right place at the right time.
I liked him so well that I bought his autobiography and read it when I was young. All these years later, I only remember one part of that book but I remember that part very well. I try to live that part.
Havlicek said that during a game all the other players would call for the ball because they wanted to shoot and make points. But, at the end of the game, if the score was close, many of the players would stop asking for the ball. They would look away and not make eye contact. They were afraid of messing up at the most important moment of the game. When the game was on the line, they wanted someone else to take the shot.
Havlicek went on to say...More
Practice, Practice, Practice
As always, I want to ask you a couple of practice questions just to keep up the process of adding points to your grade. Read the questions. Think about the answers. Read my explanations. Learn.
FAR – This question is actually adapted from the Intermediate Accounting II class that I taught at the university yesterday.
In Year One, Winner Company sues Loser Company for $1 million. At the end of Year One, both companies think it is probable that Winner will win $200,000 but reasonably possible that Winner will win $350,000. The suit drags on and at the end of Year Two both companies think it is now probable that Winner will win $240,000 but reasonably possible that Winner will win $410,000. What do each of these companies recognize on their income statements for Year Two?
a. Winner records zero in Year Two and Loser records a $40,000 loss.
b. Winner records a $40,000 gain in Year Two and Loser records a $40,000 loss.
c. Winner records zero in Year Two and Loser records a $60,000 loss
d. Winner records a $60,000 gain in Year Two and Loser records a $60,000 loss.
AUDITING AND ATTESTATION
Under most circumstances, a CPA cannot receive a fee that is contingent on the outcome of the work being done. Such an action is viewed as damaging to the CPA’s appearance of independence. In which of the following situations is the CPA allowed to accept a contingent fee?
a. The review of a client’s financial statements rather than an audit.
b. The preparation of a client’s federal income tax return.
c. The compilation of a client’s financial statements that the CPA expects to be used by a third party
d. The representation of a client during an IRS examination of a federal income tax return.
REGULATION
On January 1, John Jacob sold shares of Ford Motor Company to his daughter Emily. The original cost had been $11,000 to Jacob but the sale was for $7,000, the market value of those shares on that date. Emily held the shares until September 1 when she started college and sold them to an outside party for $8,300 to help pay for tuition. What does each party report on their separate federal income tax returns?
a. John reports a loss of $2,700 and Emily reports neither gain nor loss.
b. John reports a loss of $4,000 and Emily reports a gain of $1,300
c. John reports no loss and Emily reports no gain.
d. John reports no loss and Emily reports a gain of $1,300
BEC
A company sells popular books and is having trouble getting new books to its stores quickly enough to sell when they first come out and customer demand is high. Executives of the company study the process used by a large grocery chain to get fresh vegetables to its various stores when the harvesting time first takes place. What is this method of improvement called?
a. Economic development introduction
b. Haynes regression analysis
c. Benchmarking
d. Quantum re-engineering
Answers
FAR
Answer is A
Accounting tends to be a bit conservative. Therefore, companies do not recognize anticipated gains. Thus, Winner recognizes no income statement effect until the eventual settlement. On the other hand, losses are recognized when they are both probably and subject to a reasonable estimation. Loser will recognize a $200,000 loss in Year One. That figure then needs to be adjusted to $240,000 at the end of Year Two. The $40,000 increase is an additional loss recognized in Year Two.
AUDITING AND ATTESTATION
Answer is D
Rule 302 of the AICPA Code of Professional Conduct prohibits contingent fees that are based on the findings of the work of a CPA. However, contingent fees are allowed in certain types of tax matters such as an IRS examination where the final outcome is set by an independent party. The work is not being performed for the benefit of the public in any way but rather the final judgment is made by the IRS, a party that is unrelated to the reporting company and does not care whether the CPA is independent.
REGULATION
Answer is C
The sale was to a related party from father to daughter. Thus, the loss has no impact as long as Emily continues to hold the shares. They are still within the family. When she sells the shares, the $4,000 loss incurred by the father can be used to reduce, or in this case, eliminate the entire $1,300 gain of the daughter. However, the remaining $2,700 loss cannot be deducted. The remaining reduction is lost.
BEC
Answer is C
When improvement is needed, company officials will often look for the best methods and processes that can be found. These best practices are then studied carefully to determine how those methods and processes can be adapted to their own companies. Here, officials are trying to get newly available products delivered to a wide variety of locations as quickly as possible. Apparently, the large grocery chain has developed systems that do that job well. Book store officials want to learn from and then utilize some of those same procedures. That is referred to as benchmarking. Because of competition, benchmarking is often done between companies in different industries.
Now go out and go for it!
Joe Hoyle,
Co-Founder CPAreviewforFREE
Tuesday, August 12, 2014
Joe's Videos Explain How to Add Four Points to Your Score
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August 1, 2014
Lesson 155
From: Joe
You can still pass all 4 parts before the end of the year!
August begins and a lot of you guys are getting ready to take one or more parts of the CPA Exam before the summer window closes. Now is the time to put on the push. Now is the time to work as many questions as possible to get yourself ready to earn those 75 points that you need in order to pass.
A great sports team gets stronger as the big game approaches.
A champion athlete gets stronger as the big match moves to its conclusion.
A great CPA Exam candidate gets stronger as the exam approaches.
You want to be at your very strongest on the day you walk into the test site.
Remember, www.CPAreviewforFREE.com has 2,500 free (yes, FREE) questions and answers. I wrote most of them myself based on my 34 years in the review business. Work them once and learn from your mistakes and then work them again. Do that and you should be ready and raring to go into that site and knock out that exam.
In hopes of adding points in the quickest possible way, I want to do something entirely different in today’s email lesson. I spent a lot of time on this lesson because I want to help you pass. At the same time, you can help us. We here at CPA Review for FREE would greatly appreciate your passing this message along to anyone that you know who is getting ready to take the CPA Exam. I think this is the quickest way that you will ever see to add points to your score.
Below, I have written four essential questions, one for each part of the exam – information that I really believe that you should know in order to demonstrate the knowledge to pass. I want you to work each question. However, instead of a written answer, I have made four short videos to guide you through each answer.
I want you to LEARN how to answer these questions. Don’t just read the answer. I want you to see how to get to the answer.
Remember, work the question first and then watch the video. I spent some real time making these videos and I did this just to help you (not the guy beside you but you) add points and pass the CPA Exam in August of 2014.
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Time for some practice.
FAR
I thought I would start with a question on determining earnings per share. The question is not easy but it is one that follows a very set pattern that you can come to understand very quickly with some practice.
The Smolich Co. is publicly held and has 20,000 shares of preferred stock outstanding and 100,000 shares of common. Preferred pays a $4.00 per share dividend while common pays $.60 per share. Net income is $600,000; the effective tax rate is 40 percent. Each preferred share can be converted into 2.5 shares of common. What is basic earnings per share and diluted EPS?
A. $4.60 and $3.60
B. $5.00 and $4.20
C. $5.20 and $4.00
D. $5.68 and $3.79
What’s the correct answer? The goal here is not to learn to work this one question. The goal here is to learn how to work problems dealing with the computation of earnings per share. That is what you want to know.
Once you work the problem and get your answer, go here and watch my explanation. I think this video will help you to be able to work this kind of question in the future.
Auditing
I thought that a question on analytical procedures might be a good one to study here today. My guess is that is a topic that the examiners want you to know very well.
The firm of Willard and Jones CPAs is performing an audit of the North Central Corporation. The company reports accounts receivable of $700,000. The auditors are interested in assessing the risk that this figure contains a material misstatement and begin to carry out analytical procedures. Which of the following would the auditors be most likely to perform initially?
A. Compare bad debt expense reported for this year to the amount written off last year.
B. Measure the average age of accounts receivable this year versus the average age in the previous year.
C. Create a flowchart of the internal controls for accounts receivable to compare with the controls used in the previous year.
D. Determine the expected amount of accounts receivable at the present time.
After you have read the question carefully and considered the four answers, make your selection. Then watch my video as I analyze each answer until I eliminate three of the possibilities and wind up with the correct answer.
Regulation
Now, let’s work a question now dealing with partnership income taxes. Most candidates have a decent knowledge of individual and corporate taxes. Partnership income taxes get less coverage at a lot of schools and that can make the questions tougher. Here, I wanted to show you a very fundamental question on partnership income taxes.
The partnership of Shelstad and Evans had the following balances for its latest tax year: revenues - $300,000, cost of goods sold - $200,000, rent expense - $20,000, charitable contributions - $10,000, and guaranteed payments to Evans for work done - $30,000. Shelstad and Evans are both 50 percent owners. What will be the increase in Shelstad’s adjusted gross income on his individual income tax return?
A. $20,000
B. $25,000
C. $40,000
D. $50,000
If you have worked in the taxation area for a while or had a great taxation course in college, this is probably a fairly easy question. Otherwise, this is a question that might be challenging. Once again, watch the video and learn how this type of question is taken apart so that the answer can be determined.
BEC
And, finally, here is a question from the BEC section. The BEC section covers so much territory that it is hard to pick one area but I thought a cost-volume-profit question on finding the breakeven point might be helpful. This is the kind of computation that I could see a CPA helping a company to make.
The Towson Corporation produces a product that it sells for $200 per unit. Last year, it sold 200 units per month with a variable cost of $120 each. Fixed cost were $5,000 per month. This year, the company sells the same item but for $240 to help pay for an increase in fixed costs to $6,000 per month. Variable cost is not affected. How is the annual break-even point for this product affected?
A. Increases by 100 units
B. Increases by 150 units
C. Decreases by 150 units
D. Decreases by 100 units
Notice here that two things change. The sales price goes from $200 to $240 per unit while the fixed cost rises from $5,000 per month to $6,000 per month. How does that impact the break-even point? After you work the question, watch my video to see how I go about attacking this question.
Have fun – these can be interesting, challenging questions. Don’t let the study process always seem so dreary. You want to stay in a good mood. Working questions can (and should be) fun.
We here at CPAreviewforFREE.com want to help you pass the CPA Exam and do it now. It really does not have to cost thousands of dollars. Our questions are waiting for you right now for FREE.
And, if you want to see how our site works and everything we have to offer, here is one final video just to give you the guided tour:
Have a great day. Keep answering questions and adding points. Now go toCPAreviewforFREE and work more questions.
Joe Hoyle
President CPAreviewforFREE
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Five C's to Success on the CPA Exam; Free New Questions
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July 8, 2014
Lesson 154
From: Joe
Scores Recently Released--Did You Pass?
Thanks to everyone who writes in to tell us about your passing scores on the CPA Exam. We clearly didn’t get into this business to make money (“FREE” is a tough pricing strategy if making money is your goal). We got into this business to help people become successful and pass. So, thanks for all the kind messages. You make our days better.
The Five "C's"
The July-August CPA Exam testing window is now open!!! That means that candidates from all over the world are getting ready to go to an exam site to seek those essential 75 points.
I was recently on vacation in Prague and one of my favorite college students from last semester sent me an email. She said that she had been studying diligently for her first part of the CPA Exam but was getting a bit nervous. She wanted to know if I had any last minute advice.
I told her that for decades I have suggested that candidates who are getting ready to take the CPA Exam should focus on the “five C’s.” I am a big believer that anyone who puts in a sufficient amount of study time probably has enough knowledge in their head to pass. Thus, the key to success during the exam is making sure that this knowledge gets out of the head and onto the test. The five C’s can help that to happen. They can assist you in maximizing your points. And, that is really what you want – to be able to earn all of the points that you deserve.
If you are taking the CPA Exam during the July-August testing window, here are five C’s that I would like for you to think about as the day gets closer. More...
Did You Know We Support ProjectHOPE?
That's right. Project HOPE is probably best known for their hospital ships that respond to disasters. Through our community forum, we support the initatives of ProjectHOPE. If you have it in your heart to help, it would certainly help those in need. Your tax-deductible donation today not only offers a tangible way for you to give back for the help you receive through CPAreviewforFREE, it helps provides lifesaving health education and humanitarian assistance around the world.
Facebook and Ten Favorite Quotes to Keep You On Track
If you follow us on our Facebook page, you know that we post a “success” quote most days that come from my book “Don’t Just Dream About Success: Stack the Odds in Your Favor” (available for $8.99 on Amazon – both paperback and Kindle). I went back recently and looked through all the quotes for the past few months and here are ten of my very favorites:
--“Success comes to the person who makes the best use of today.”
--“Mediocrity is a disease that is easy to catch.”
--“Successful people examine their failures – not to feel guilty or assign blame – but in search of improvement.”
--“No one experiences an extraordinary life through procrastination.”
--“Avoid settling for short cuts and easy answers. We all have unlimited possibilities, but they are only available to those who are willing to push through self-imposed boundaries.”
--“Most successful people have a few Level-3 goals that light up their days and nights and push them forward, often at blinding speed.”
--“Too often, we settle for dreams that merely scratch the surface of our abilities and then wonder why we are dissatisfied with the results.”
--“The desire for success burning within the heart has to be hot enough to push the person to do the difficult work that is necessary.”
--“Some people linger in the past while others long for the future. Success always dwells in the current moment.”
--“Success always starts with a dream. The bolder the dream, the bolder the success can be.”
Attack the Day!
We were in Vienna recently as part of our vacation. We had a wonderful tour guide who met us each morning and led us through the museums, cathedrals, art galleries, and restaurants. She set a tone for us every day that provided the energy necessary to get out and experience the life of that city.
Every morning, as we gathered in the hotel (often with sleep in our eyes), our tour guide would rouse our spirits with her daily battle cry: “Let’s go out there and attack the day.”
“Attack the day” – what a great mantra for starting each day. It is very easy to be passive, to sit on a chair and hope that we don’t miss too much of life. In other words, it is very easy to be lazy.
But lazy is no way to have a life that means something. Lazy is no way to make a difference in this world. Lazy is no way to become successful. We really need to be more aggressive in our actions. We need to move forward with a more ambitious attitude. “Attack the day.”
When we get up each morning, we have the possibility of creating something great, something wonderful, something worth remembering. Every day holds that possibility. But lazy is never going to make it happen. You have to be willing to attack the day. Whether it is the CPA Exam or your job or school or some other goal that you have in mind, success only comes if you get up and make it happen.
Yes, do go out there and attack the day.
While many places offer you a practice exam tool, or a study bank, or books, our partner, Fast Forward Academy for CPA Review, offers an entire powerful and intelligent platform - everything you need to study, learn, and pass your exam on the very first try. We have tools and features that no one else has, creating an educational experience like no other.
Time for some practice.
Let’s see if we can add a few points to your CPA Exam scores. You can do it.
Auditing
Which of the following is an auditor allowed to do using computer-assisted auditing techniques (CAAT)?
I. Select accounts receivable to confirm with customers based on variables such as the size and age of the balance.
II. Uncover inventory quantities for extra testing because the balances seem excessively high in comparison to the sales volume.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
FAR
At the start of Year One, Vivian Knox begins to work for the Fort Louis Corporation. By the end of Year One, Knox has earned 3 vacation days and 2 sick days. She is normally paid $200 per day. Knox did not have time to take the vacation in Year One but is expected to do so in Year Two. Knox had not been sick in Year One but realizes that she might well be sick and be forced to miss work in Year Two. When she eventually quits, she cannot demand payment for unused vacation pay or sick pay. At the end of Year One, what liability (if any) does the Fort Louis Corporation have to recognize for its obligation to Know?
A. Zero
B. $400
C. $600
D. $1,000
Regulation
The Williamton Corporation is a large and successful organization that files a corporate income tax return every year using a December 31 year-end. On March 8, Year Two, the company donated cash of $12,000 to the American Heart Fund. Because of the high level of taxable income in Year One, the corporation wants to include this charitable contribution in filing its income taxes for Year One. How is that possible?
A. It is not possible. It must be reported as a charitable contribution in Year Two.
B. All contributions made before March 15 of one year can be deducted in the prior year.
C. It can only be included in Year One if the company’s board of directors authorized the contribution during Year One
D. The contribution cannot be deducted in Year One because it is a gift of cash and not a long-term capital gain property.
BEC
A company needs to raise a lot of money in a hurry. Which of the following is not an advantage of debt-financing over equity-financing?
A. Interest payments are tax deductible but dividend payments are not.
B. Payouts are usually fixed for debt but not for equity financing
C. Creditors do not automatically gain any control in a company which does happen in equity financing.
D. Bankruptcy is less likely as a result of debt financing than it is as a result of equity financing.
Answers
Auditing
Answer is C
Both of these tasks are basically mechanical and a computer can do mechanical tasks much faster and more efficiently than a human. Software can be created that allows the auditor access to the client’s digital records. The software can be programmed to make selections based on predetermined criteria such as size and age. As computers and programming become more sophisticated, the number of tasks that can be carried out using computer-assisted auditing techniques will continue to grow.
FAR
Answer is C
A compensated absence for vacation pay must be recognized if earned and will probably be taken at a later point in time and the amount can be estimated. The $600 (3 days at $200 per day) meets the criteria. However, sick pay is not accrued here because it is dependent on a future event – Knox has to get sick. She cannot otherwise demand payment. Because a future event must occur for the sick pay to be necessary, there is no liability until she actually gets sick and misses work. There is no obligation at the present time.
Regulation
Answer is C
If a contribution is authorized by a company’s board of directors in one year and the gift is made prior to March 15 (for a corporation filing with a December 31, year-end) of the following year, the gift can be deducted in the initial year of authorization. Many companies do not know the amount of their income until late in the year and, therefore, are not in position to know the precise amount of their giving until the beginning of the following year. This time extension allows them to assess the amount that they can afford to contribute.
BEC
Answer is D.
There are many advantages of debt financing. Interest payments can be deducted as expense but dividend payments are not deductible. Payments of interest and principal are usually set which is good for financial planning purposes. With equity, dividend payments might have to rise if the company becomes especially profitable. And, unless treasury stock is reacquired, eliminating equity is unlikely. When stock is issued, new stockholders are likely to be drawn in who can possibly want to be involved in the management. Creditors rarely have that opportunity unless the company has trouble making repayments. Unless that happens, the creditors are properly not involved with running the company. However, bankruptcy is always more likely in connection with debt financing because the creditors can force the company into bankruptcy if scheduled payments cannot be made as they come due.
Joe Hoyle
President CPAreviewforFREE
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