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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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Tuesday, August 12, 2014
Joe's Videos Explain How to Add Four Points to Your Score
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