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From: Joe
Lesson 113: CPA Study Strategies, Mobile App Info, Discount On Points to Pass
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NEW iPHONE/iPAD AND ANDROID FAR APPS
Here’s some great news that we announced recently. As always, we try to come up with more and different ways so that you can better prepare for the CPA Exam. We want you to pass and we want to help.
Now it is easier than ever to access the questions on
CPAreviewforFREE. We just launched new phone apps for iPhones, iPads, and Android phones that will allow you to work hundreds of multiple choice questions. So far we released (a) FAR Lite and (b) the full FAR app. The other parts will follow soon.
To help even more, we rate each question as easy, medium difficulty, or hard within each category or all categories. That way you can work all the easy questions first and then work your way up to the more difficult questions (or you can always work questions selected randomly).
The FAR Lite app is FREE and available at Google Play (for Android phones) and iTunes (for iPhones/iPads). Open an account, browse apps. Once installed, you can select which type of question difficulty you want for each FAR category. If you like what you see with the 50 question FAR Lite app, the full FAR app is only $9.99. The full version offers over 600 multiple-choice questions to enable you to master the essential material so you can make 75 and pass FAR.
Talk about convenience. You can easily use the app while waiting for a bus or standing in a line or eating a hamburger at a local fast food restaurant. NOT while driving! Squeezing in a few extra minutes now and then throughout the day can really increase your study time! Always remember the three keys to success on the CPA Exam: practice, practice, practice.
We will be rolling out the other parts of the CPA exam over the next couple of months. Stay tuned.
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THE POWER OF WORDS
Words are just words, of course. But words tend to have real power—both for good and for bad.
In today’s lesson, I want to throw out some words that I want you to think about as you move closer and closer to passing the CPA Exam. Some have negative connotations but some are very positive. See which ones are most likely found in your vocabulary.
TOMORROW (bad word) – When studying, it is easy to find reasons to put off doing the hard work. There is always tomorrow available. When it comes to doing the tough stuff, tomorrow always sounds a lot better than today. If you are serious about passing the CPA Exam, you have to find a way to make it happen today. Not just this one day but every day. Make the most of today and tomorrow will take care of itself.
THRILL (good word) – When you get that fourth and final passing grade on the CPA Exam, there is such a complete thrill that you will remember it forever. It is very helpful to keep that thrill in mind while you are studying. It gives you the energy to keep pushng forward. It is like gas in your tank. I once wrote about Orville Wright who said something like “All of those long hours of thinking about flying were even better than actually flying.” You want to anticipate that thrill every day. You want to use that anticipation to give you the energy to keep pushing forward.
GUILT (bad word) – I talk with so many people who are preparing for the CPA Exam who seem completely tied in knots by their own guilt. They feel guilty when they miss a question. They feel guilty when they aren’t studying all the time. They feel guilty if they aren’t doing as well as they hoped. They feel guilty that they are ignoring their family and friends to study. I am convinced that guilt drains away your energy. Preparing for the exam needs to be a positive and not a negative. Somehow we have evolved into a society that is driven by guilty feelings. I think guilt is a useless and counterproductive emotion. Get rid of it. I would say “you should feel guilty about feeling guilty” but you might think I was serious.
FORWARD (good word) – If you are moving forward, you will eventually get to where you can pass the CPA Exam. It is not a question of “will I make it?” but only of “when will I make it?” I think you should focus each day on adding points, adding knowledge, adding understanding. Emotionally it is so important to realize that you are moving closer and closer to passing. At the end of each day, write down a few of the things you did during the day to help you add points. Seeing that list grow over time can be very helpful. It is great to have a feeling of accomplishment.
PERFECT (bad word) – Somehow students get it in their minds that the goal of education is perfection. That feeling then carries over to the CPA Exam and it is just not true. If you are seeking perfection, you might as well give up now because you are not going to make it. On the CPA Exam, your one and only goal is to pass. That means you only need to make 75 points. That is a long way from perfection. Don’t set up a benchmark that is so high that you cannot get there. Don’t set a benchmark that is so much higher than what you need to attain.
SCHEDULE (good word) – In the helter skelter world that we all live in, it is very easy to get through an entire day and have seemingly accomplished nothing. There’s always some distraction that calls us away from our work. Each and every morning list out (a) how much time you want to spend on the CPA Exam that day, (b) indicate what you want to accomplish during those minutes/hours, and (maybe most importantly) (c) when you plan to get the work done. Don’t leave work up to chance. The pass rate on the CPA Exam is under 50 percent – with those odds, you cannot just study now and then. This has to be a crusade. Make a plan each day and then be certain to follow that plan religiously.
CRAM (bad word) – Students in school learn that they can get by in some classes by cramming all of the material into their heads at the last minute. That might work when the amount of material is relatively small. However, on the CPA Exam, there is so very very much to learn that cramming has little impact. In other words, you cannot use the last 24 hours before the exam to make up for the work that you failed to do in the previous 24 days. I am a big believer that you should restrict your last 24 hours to relatively light review and rest. You want to go into the CPA Exam with a fresh mind. Cramming simply tires out your brain. On a genuine challenge like the CPA Exam, a tired brain is a very bad idea.
HOURS (good word) – I have said now for well over 30 years that the secret to success on the CPA Exam was easy: It is putting in enough hours of study. If you put in a sufficient number of quality hours, you greatly improve your chances of passing. If you don’t put in enough hours, you have almost no chance to pass. If you have not taken the exam previously (so that you don’t know where you stand), I recommend 60-100 hours PER PART. That is not designed for you to make 100 but rather to pass. If you are a good test taker and you recently graduated from a good accounting program, 60 hours can get you a 75. If you have been out of school for some years or you are not a great test taker, then 100 hours might be a better goal.
CARELESS (bad word) – If you miss questions on the CPA Exam because you don’t know the topic, that’s okay. There will always be questions you do not know. Once you learn the material, then you can get them right. But if you miss questions on the exam by being careless, that is just sad because you are throwing points away. Never do the work and learn the material and then miss the question by being careless. How do you limit carelessness? From Day One, when you study and practice questions, work to avoid making careless errors. I am a big believer in the old saying “the way you practice is the way you’ll play.” In other words, if you are sloppy when you practice working questions, the habit will bleed over into the actual exam itself. Don’t develop bad habits. Work to avoid carelessness every day that you study.
STEADY (good word) – People tend to run hot and cold in their endeavors. They will do great work for a few days and then they won’t study at all for a week. Preparation for the CPA Exam is so time consuming that you have to avoid running hot and cold because you are always having to relearn what you’ve already learned. No, you don’t need to study every day. I never advise that. One approach is to study 1-3 hours per day for 5 or 6 days per week. You need to keep at a steady pace. I don’t believe you should work six days one week and one day the next. The CPA Exam has to be such a high priority in your life that you will make the time, virtually every day, to put in the work that you need to pass.
OVERWRITE (bad word) – Too many candidates want to copy down or highlight absolutely everything they see during studying. To them, everything is potentially important so it is essential to write down everything. That does you no good. It takes way too long to write and it is hard for you to review later. I have often said in these email lessons that you should keep all of your notes on 3 by 5 cards with a question on one side and an answer on the other AND limit each answer to 10 words. You can carry those cards with you throughout the day and study at random times. And, by strictly observing the 10 word limit, you are forcing yourself to write down just the important stuff. You then have good notes without becoming flooded by information. Then, read the question and try to visualize the words on the other side. Some candidates literally want to copy down every word. You are not trying to become stenographers. You are trying to learn enough to pass the CPA Exam.
CONFIDENCE (good word) – It is hard to accomplish anything significant in life if you don’t believe in yourself. There is absolutely no reason why you cannot pick up the points necessary to pass. But if you let doubt constantly hang over your head, it is difficult to do the work necessary for success. Don’t let doubt hover over you like a vulture. Why work so hard if you already feel like you are going to fail? Confidence, that “can do” spirit, is an essential part of putting out the effort that is needed. I have worked in the review business now for 33 years and I’ve never met anyone who could not pass the CPA Exam. Never. Yeah, it is a challenge but it can be done with good work. However, at some point, that belief needs to radiate from you. You can do it. You should start your quest every day with that belief.
TELEVISION (bad word) – Anything in your life that is a distractor will hold you back from being the best you can be. Whether it is television or movies or beer or Facebook or whatever. We all have distractors. Those are things that seem to call our names and pull us away from doing the work we really need to do. Think about yourself – what distracts you? What pulls you away from the work that you need to do in order to be successful? Figure out your own distractors first and then put up a wall to keep those distractors from pulling you down.
VICTORY (good word) – I know March Madness basketball is going on. Occasionally, I will see a clip of a player hitting a shot at the very end of a game and watch as everyone goes wild in celebration. I love that feeling of victory. But I want that victory for myself. Watching other people succeed is fine but the victory that I want is
my victory. On the CPA Exam, you want to make 75 points so you can be the victor, so you can walk away as a CPA and never have to look back. Knowing how good that victory will feel is a great reason to log in to
CPAreviewforFREE so you can start answering questions.
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HOW ABOUT SOME PRACTICE QUESTIONS!
We usually say they every time you go from not knowing a question to knowing a question, you add a point to your total score. So, let’s add some points.
FAR (I took this question from my Intermediate Accounting class on Friday.)
The Wallace Corporation is reporting its financial accounting information for Year One. It has one temporary tax difference: depreciation expense on a building. The books in Year Two will have $100,000 in depreciation expense and in Year Three will have $90,000 in depreciation expense. The company’s tax return for Year Two will have $50,000 in depreciation expense and in Year Three will have $30,000 in depreciation expense. The enacted tax rate for all years is 30 percent. Which of the following is reported on Wallace’s balance sheet at the end of Year One for its deferred income taxes?
a. $15,000 current liability and $18,000 noncurrent liability
b. $33,000 noncurrent liability
c. $15,000 current asset and $18,000 noncurrent liability
d. $33,000 noncurrent asset
Answer is B
Wallace has $50,000 less expense in Year Two on its tax return ($100,000 less $50,000) and $60,000 less expense in Year Three on its tax return ($90,000 less $30,000). The company will have less expense in the future and, therefore, will have to report more taxable income. Taxes will be higher in those years so a liability has to be reported now. To determine current versus noncurrent, the accountant must go back to the balance sheet cause of each difference. In this case, that is a building. Because the building is noncurrent, all related deferred tax liabilities are also noncurrent. The year in which the amount is paid is not important. The total of the two temporary differences is $110,000 ($50,000 + $60,000). At a 30 percent rate, the deferred income tax liability will be $33,000 and is reported as noncurrent.
Auditing and Attestation
The Afton Corporation is a publicly-traded business operating in Kentucky. It has just hired Susan B. Anthony as its Controller. Ms. Anthony was formerly employed by the CPA firm of Hamilton and Burr. Hamilton and Burr has been the independent auditor for the Afton Corporation in the past. Which of the following statements is false?
a. If Ms. Anthony participated in the audit of Afton Corporation, Hamilton and Burr must wait three years before auditing the company.
b. If Ms. Anthony most recently participated in the Afton Corporation audit 18 months prior to the date of the initiation of the current year audit, Hamilton and Burr can continue to audit London in the current year
c. If Ms. Anthony was an audit partner in the only office of Hamilton and Burr, but was not associated with the audit, Hamilton and Burr can audit Afton Corporation without a waiting period
d. None of the above answers is false
Answer is A
According to the Sarbanes-Oxley Act, an independent audit firm may not perform an audit for a client in the current year if its CEO, CFO, controller, CAO, or any person serving in an equivalent capacity was employed by the firm and participated in the audit of the client during a one-year period preceding the date of the initiation of the current year audit. In B and C, the firm is okay because Ms. Anthony did not participate in the audit during this one-year period. However, there is no necessity to wait as long as three years.
Regulation
On the last day of the tax year, the Alfonso Corporation received a dividend check from Winston for $10,000. Which of the following is true in connection with the filing of Alfonso’s tax return?
a. If Alfonso owns 90 of Winston but did not file a consolidated tax return, Alfonso’s taxable income goes up by $1,000
b. If Alfonso owns 40 percent of Winston and applies the equity method for financial reporting purposes, then Alfonso’s taxable income does not go up.
c. If Alfonso owns 70 percent of Winston, Alfonso’s taxable income goes up by $2,000.
d. If Alfonso owns 7 percent of Winston, Alfonso’s taxable income goes up by $2,000.
Answer is C
When dividends are paid from one corporation to another (and a consolidated tax return is not filed), the dividends are added to the taxable income of the owner but a separate dividends received deduction (DRD) is also subtracted. If the ownership is under 20 percent, the DRD is 70 percent. If ownership is 20 percent or more but less than 80 percent, the DRD is 80 percent. If ownership is 80 percent or more, the DRD is 100 percent. If ownership is 70 percent, the DRD is 80 percent and the net impact on taxable income is $2,000.
BEC
In order to impact the economy, open-market operations can be taken. What is meant by an open-market operation?
a. A reduction of tariffs to allow more trade between countries.
b. An increase in tariffs to allow US companies a greater ability to compete within this country.
c. The purchase or sale of government securities using Federal Reserve deposits.
d. The attempt by the government to prevent monopolistic activities that threaten to stifle competition.
Answer is C
If the Federal Reserve purchases government securities, there is an increase in the money supply which helps to reduce interest rates. If the Federal Reserve begins to sell government securities, it reduces the money supply. Purchasing government securities is referred to as an expansionary open-market operation. Selling government securities is referred to as a contractionary open market operation.
Have a great week – keep the good words flowing.
Joe Hoyle
Co-Founder
CPA Review for FREE
