Success is Not How Much More Money You Spend; Free Practice Questions

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March 3, 2015

 

Lesson 160

 

From:   Joe

 

Success is Not on How Much Money You Spend

 

It is snowing here in Richmond, Virginia, today.   We have at least 6 inches of snow on the ground.  It is cold and still snowing.   So, I have a day that I can use.   I am stuck here at the house.   How should I spend my time?   I have decided to talk with you about how to achieve success on the CPA Exam.   For me, that’s an extremely good use of time.  

 

After being in the CPA Review business now for 35 years, what is my advice to you?   Not the person beside of you, or the person in front of you, or the person behind you.   No, what is my advice to you?

 

This morning my wife and I were having breakfast at our kitchen table.   The newspaper did not arrive so she was reading from her iPad.   “Here is something” she informed me “that sounds like advice that you might pass along to CPA Exam candidates.”

 

It was a few words from John C. Maxwell.   And, she was right.   This is what I want to say to you today.

 

“You’ll never change your life until you change something you do daily.   The secret of your success or happiness is found in your daily routine.”  

 

At the university, I am always amazed by how many students want to make better grades without making any changes in their study habits.  

--Study a little, make a bad grade.  

--Study a little, make a bad grade.  

Then, they come to me, often in tears, and confess “I guess I am just not cut out for this accounting stuff.”   That’s pure nonsense.   No one ever makes improvement without making change.   And that improvement will be much more effective if it becomes part of your daily regimen.  

 

I have always argued that I could help anyone learn to pass the CPA Exam but that is true only if the person is willing to change.

 

Let’s say that you are planning to take a part of the CPA Exam at the beginning of April—in about five weeks.  However, you’ve already failed that part previously.   And, you don’t see how you can improve.   You are stalled.   You are sure you are going to fail yet again.   Unfortunately, for most candidates, their next response seems to be:   SPEND MORE MONEY.   They assume that they need another expensive study program that will show them exactly the same information that the last expensive program provided.   That’s not a change.   It is just throwing money away.

 

Success is not based on how much money you spend.   Success is based on how efficiently you spend your moments on this planet.   If things are not going as you would prefer, YOU MUST MAKE A CHANGE.   Daily life should be built in such a way as to bring you the success that you truly want.   If you are not willing to change, you probably don’t really want the success.

 

So, what is my advice?   First, 

 

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Super – now let’s do a little practice   

 

Answering questions and reading answers is always the perfect way to add points.  The answers are below all questions.

 

FAR

 

The Allen Company reports the disposal of a discontinued operation in its financial statements.   Which of the following is least likely to qualify for that type of financial reporting?

 

A.   The sale of a subsidiary.

B.   The sale of all businesses within a major geographical area

C.   The sale of a major line of business

D.   The sale of a major equity method investment.

 

 

REGULATION

 

Susan James has graduated from college and is now paying off her student loans.   This past year, she paid interest on those loans and plans to take this interest as a deduction to arrive at her adjusted gross income for federal income tax purposes.   Which of the following is true?

 

A.   The interest can relate to the cost of tuition but not room and board.

B.   The interest can relate to the cost of room and board but not books and supplies

C.   The interest can relate to the cost of tuition but not books and supplies.

D.   The interest can relate to both the cost of tuition and books and supplies.

 

AUDITING

 

According to the standards of the Public Company Accounting Oversight Board, which of the following is not a reason for the independent auditor to establish an understanding with the audit committee of the client company in connection with the appointment or retention of the independent auditor?

A.   To communicate the objective of the audit

B.   To communicate the cost of the audit

C.   To communicate the responsibilities of the auditor

D.   To communicate the responsibilities of the management of the reporting entity.

 

BEC

 

The Logan Corporation produced 1,000 widgets during the past year at a total cost of $165,000.   After the job had been completed, an inspection indicated that 100 of these units were seriously defective and would have to be destroyed with no residual value.   Which of the following is true?

 

A.   If the spoilage of these 100 units was considered abnormal, the cost of the company’s inventory should be recorded at an amount greater than $165 per unit.

B.   If the spoilage of these 100 units was considered abnormal, the cost of the company’s inventory should be recorded at an amount less than $165 per unit.

C.   If the spoilage of these 100 units was considered normal, the cost of the company’s inventory should be recorded at an amount greater than $165 per unit.

D.   If the spoilage of these 100 units was considered normal, the cost of the company’s inventory should be recorded at exactly $165 per unit.

 

 

Answers

 

FAR

 

Answer is A

 

This area of US GAAP has been adjusted recently.   The applicable Accounting Standards Update states:   Only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results will be reported as discontinued operations in the financial statements.   The disposal of a major geographical area, the sale of a major line of business, and the sale of a major equity method investment are all listed as examples.   A subsidiary is not included because, without more information, it is not possible to tell whether the sale of a single subsidiary is a significant shift in an entity’s operations and financial results.   The company might have multiple subsidiaries that perform similar functions so that a current disposal is made purely for economic and efficiency reasons.

 

REGULATION

 

Answer is D

 

According to Publication 970 of the Internal Revenue Service (IRS):   “For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. They include amounts paid for the following items.

 

--Tuition and fees.

--Room and board.

--Books, supplies, and equipment.

--Other necessary expenses (such as transportation).

 

AUDITING

 

Answer is B

 

According to paragraph 5 of PCAOB Auditing Standard Number 16, the “auditor should establish an understanding of the terms of the audit engagement with the audit committee. This understanding includes communicating to the audit committee the following:

 

--The objective of the audit;

--The responsibilities of the auditor; and

--The responsibilities of management.

 

BEC

 

Answer is C

 

If the spoilage is viewed by the company as abnormal, the cost of these 100 units should be separated and reported directly as a period cost to reduce current net income.   The remaining 900 units should still cost $165 per unit because they have not absorbed any of the cost of the lost units.   Those units are neither penalized nor rewarded because other units were lost in some unexpected way.   However, if the spoilage is viewed as normal, the cost of the remaining good units must absorb this additional cost.   The $165,000 total cost was spent to create 900 good units, an amount that is greater than $165 per unit. 

 

 

Joe Hoyle, President

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