Wednesday, December 3, 2014

See Changes to the CPA Exam for 2015; New MCQs

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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.  
  • Each question is ranked easy, medium and hard which can be sorted and worked by question difficulty.
  • Each question is timed to help you pace yourself while working the questions.
  • At the end of each section, the percent correct are calculated.
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.
 
Apple App  Android App
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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In case you hadn't heard!
 
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.
 
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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