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