ry us FIRST before you spend your hard-earned money.
August 25, 2009
CPA Review for FREE
Forget Luck – It Takes Work and Belief
www.CPAreviewforFREE.com
60 Weeks of Operation/No Marketing/ 5,040,926 Page Views (and that’s an awful lot of added points)
Lesson 44
From: Joe
(1) – It has been a great week here at CPA Review for FREE (www.CPAreviewforFREE.com).
---First, the number of our visitors last week was 9.7 percent higher than in any of our previous 59 weeks. That is a lot of growth in just one week.
---Second, we crossed over 5 million page views. I am so pleased by the number of people who are using our questions and answers to pass the CPA Exam. I went back and checked and the very first week we were in business we had 1,920 page views. Now, we have averaged nearly 85,000 page views per week for our entire time in existence. We could not have achieved that type of success without you guys spreading the word. Thanks!!!!
---Third, we got a whole bunch of wonderful emails from you folks. Here are just a couple. As I always say: if these folks can do it, so can you!!! They did not do a single thing that you cannot do. As you read these emails, picture yourself writing them. It is always great to have a real sense of what success is going to feel like. You want to have that taste of success.
From DC: I just found out that I passed FAR with a score of 94! You were one of the first people that I wanted to tell because I owe it in large part to you. In studying for it, I used CPA Review for Free (which was so helpful!). I also took “big name CPA Review program” (mainly because my company paid for it), but I still found that your questions hit more areas or explained them in a better way, and definitely would not have been as prepared without them. Your weekly emails are so great, especially when I don't think I can study anymore. I'm taking Audit on Monday, so hopefully that goes as well!
From US: I am very very happy to inform you that I cleared Regulation exam with an 84 score. Thanks a trillion to CPAReviewforfree for the wonderful guidance I got. This time, as I was busy with my office work, I did not find much time to work online. Hence, I paid for your pdf print version and got the whole set of questions printed. I read them while flying to the US from Mumbai. On reaching the US, for the 3 days before the exam, I went through each and every question of CPAReviewforfree very carefully. On the actual exam, the MCQs were very tough - testing our basic understanding of the concepts - and I spent a good amount of time on them. I was left with just 50 minutes to complete the simulations. I hurried through them and the last communication question was answered in under 5 minutes. I was worried and felt helpless at the end of the exam. Honestly, I kept my fingers crossed as to the result as the MCQs were tough and I had not done full justice to the
simulation questions. I still got a score of 84! That shows that I had done very well in the MCQ! That could not have happened without CPAReviewforfree.com. Once again, thanks a lot.
From KH: Wanted to pass on some news I just got back about the CPA exam. So far I have taken BEC and REG and I just found out that I passed both! I felt okay with BEC, but I left REG feeling very unsure, especially with the simulations. As you can expect, I was incredibly relieved to see my score tonight. I got an 86 in BEC and a 95 in REG (never would have predicted that) - now I am thinking that I could have studied a few less hours and spent some time enjoying the July 4th weekend. I am taking FAR on Saturday and AUD on the 28th. These scores have given me a lot more motivation to push through this last week and a half. As always, thank you for all of your help, especially through cpareviewforfree. Your emails always serve as inspiration, and the explanations to questions on your website are very informative.
Okay, such notes should inspire everyone to work just a bit harder and knock out that exam. They did it—so can you.
(2) – One of my all-time favorite quotes comes from Thomas Jefferson (although I have seen it attributed to other folks – I’m not 100 percent sure who actually said it first):
“I'm a great believer in luck, and I find the harder I work, the more I have of it.”
The harder I work; the luckier I get. How could anything seem more true?
I started my fall classes Monday (yesterday) here at the University of Richmond. I have 64 students, 62 of whom are new to my classes. Students really do want to do well but they often seem bewildered by how to achieve success in class.
I want to do well; I’m just not sure how is a constant comment.
Students often seem to believe that there is some secret ingredient for success. If they only were lucky enough to know that secret, they would be at the top of the class.
Therefore, my goal in our first meeting is to convince them that everyone can do well (even in Intermediate Accounting II). If I cannot convince them that they can do well, I may well have lost them for the semester. “I’ve taught this class for nearly 40 years. I’m convinced that you and everyone else in this room can make an A if you do a few relatively simple things. You need to put in a reasonable amount of time, you need to focus on your goal, you need to prepare/study, you need to practice what we go over, and you need consistency.”
And, then, I stop and ask “Okay, who doesn’t have one or more of those five? Speak up now.
reasonable time,
focus,
preparation,
practice, and
consistency.”
Not surprisingly, every student knows they really do have those five—all of them. It is now their job to make use of them. I never tell them that they have to be brilliant. That’s not even interesting to me. There are not many brilliant people in the world and I’m not too sure how truly successful they are.
I just need those five. The things you need for success are in your own hands.
Those five--reasonable time, focus, preparation, practice, and consistency—are what it really takes. But you start losing points really fast if you let one (or more) of those get away from you. If you start cutting corners, the points begin to fall. If you start taking things for granted, you lose ground.
In my classes, I want everyone to make an A which means I want everyone to have all five.
In CPAreviewforFREE, I want everyone to pass the exam which means I want everyone to have all five.
Do you have those five? Sure, you certainly have the potential to do all five. There is nothing standing in your way to having all five.
Forget luck – if you will give me those five things, and then use CPA Review for FREE in the manner that I suggest, I believe you can pass and you can do so for absolutely no money at all.
(3) – Remember that you can always unsubscribe from these email lessons at any time you wish just by scrolling to the bottom of any lesson and clicking on the unsubscribe button. We have over 8,000 subscribers and we love having you but, when you are ready to go, feel free to unsubscribe.
(4) – A lot of people take the CPA Exam at the end of August. If you know someone, other than yourself, who is getting ready to take the exam, call them up or send them an email and wish them luck. It is easy to get very self-absorbed as you study to pass the CPA Exam. But life always works better if you open your eyes and notice the needs of others and try to help them out. Call someone this evening and tell them “I know you are getting ready for the CPA Exam. You’ve worked hard; I just know you’ll be successful.”
That will make that person feel better and it will make you feel better also.
(5) – Speaking of luck (I must be in a mood to point up that you don’t need luck, you just need to utilize the talents you have).
A few weeks back I went to see the relatively new Harry Potter movie. (For those of you who don’t know, Harry Potter is a boy wizard who goes to school at a wizard school). There was one scene that I found very interesting. Harry has a friend who plays on a sports team and plays rather poorly. He gets depressed about it and plays worse. He is so nervous about doing well that he gets all tight and does poorly in the first couple of games. We’ve probably all felt that way.
Harry has a vial of Liquid Luck (remember, he is a boy wizard). Right before the big sports match of the season, Harry pretends to pour the liquid luck into a glass that his friend is about to drink. The friend thinks he has consumed the liquid luck. The friend immediately goes out and plays the match of a lifetime. He is the star of the game and helps his team win. He goes from being a poor player to being a star. He is convinced that he has been lucky because of the potion. His success was all because of Liquid Luck.
But, of course, Harry Potter had fooled him. He had NOT really poured the liquid luck into the glass. The friend just thought he had.
So, luck had absolutely nothing to do with his success. Once, he believed in himself then that belief drove him to succeed. Simple concept.
This is just a quick comment. I am not going to beat this to death. If you believe in yourself, you have the chance to leap tall buildings with a single bound. However, if you truly have doubts, if you don’t really believe in yourself, your challenge is going to be so much harder. It is hard to win if you think you will lose.
Let’s do a quick test. And, you have to tell the truth. If I were to look you in the eyes and ask “on a scale of 1 to 10, how confident are you that you are going to pass the CPA Exam by this time next year?” what would you answer? Would you say that you are very confident—a 9 or a 10? Or, would you say that you are full of fear and trepidation and are closer to a 2 or 3?
How can you improve your odds? Improve that number.
This just may be the advice that you can use to add some serious points to your CPA Exam score. How can you raise your self-confidence level by JUST ONE POINT? Just that change in self-confidence will help amazingly. That could be so very important to you. If you are a 5, how could you become a six?
Well, you don’t get more confident by wishing it so. I’m sorry; it doesn’t work that way. If you are setting there, saying “geez, I really do want to have more self-confidence” that is nice but it probably doesn’t add a point.
You get more confident by doing stuff. You get more into the rhythm, you see how things tie together.
The more you work; the stronger you get. If you really want more confidence, go back to my previous list of the Big Five:
reasonable time,
focus,
preparation,
practice, and
consistency
Now, pick one of these five, and for the next week, work hard to get better at doing that one thing. Spend more time each day or work more days in the week or whenever you practice do 10 percent more questions than you used to do. Pick one of these five and get better at it this week.
At the end of just one week, if you have managed to get better at one of those Big Five, I would be willing to bet that your confidence level will be higher. Okay, you won’t go from a 1 to a 10. But, in just one week, by working on that one thing and getting better at it, you can (and will) go up in confidence.
And, as Harry Potter’s friend discovered, just adding some confidence, really does make all the difference in the world.
(6) – Time to Practice: Let’s see how you do on a couple of practice problems.
FAR
A company’s income statement shows salary expense for the current year of $400,000. The company also reported salary payable of $13,000 as of the beginning of the year but $28,000 at the end. If the company uses the direct method of reporting operating activity cash flows, what is reported in connection with this salary?
A – An addition of $15,000 to net income
B – A subtraction of $15,000 from net income
C – Salary paid to employees of $415,000.
D – Salary paid to employees of $385,000
Answer is D
If the company uses the indirect method, net income is adjusted for changes in operational assets and liabilities such as the salary payable. Since the liability went up, the company paid less and the answer would be A because of the cash savings. However, if (as is the case here) the company uses the direct method, the actual amount of cash paid or collected is shown. The expense was $400,000 but the related liability went up by $15,000. Thus, less was actually paid. The company only paid cash to its employees during the year of $385,000.
Regulation
Vikontra Corporation is having financial difficulties and is not paying its bills as they come due. The company owes Jack Winslow $11,000. He wants to push the company into Chapter7 bankruptcy by filing an involuntary petition. Which of the following is true?
A—If Vikontra has less than 12 creditors, then Jack Winslow alone can force the company into bankruptcy by filing an involuntary petition.
B—If Vikontra has 12 or more creditors, then Jack Winslow alone can force the company into bankruptcy by filing an involuntary petition.
C—If Vikontra has less than 12 creditors, then Jack Winslow alone can force the company into bankruptcy but the debt must be larger.
D—If Vikontra has 12 or more creditors, then Jack Winslow alone can force the company into bankruptcy but the debt must be larger.
Answer is C
If there are less than 12 creditors (Answers A and C), then only one creditor needs to sign the petition but that person must have a debt of $13,475. If there are 12 or more creditors (Answers B and D), then three creditors must sign but, again, the total of those debts must be at least $13,475. The $13,475 figure goes up slightly every three years, the next time in 2010. Notice, though, that the exact amount of that standard is not relevant to this question. The speculation is that the CPA Exam avoids asking questions that will change as the numbers change over time.
Auditing & Attestation
The CPA firm of Terry & Francona is auditing the financial statements of Fenway International Corporation. Fenway owns a number of unique investments where the market value is difficult to determine. The CPA firm hires a specialist in investment analysis to help determine the market value of these assets. Which of the following statements is true?
A—This investment analyst must be independent of the client company.
B—The hiring of this analyst means that the firm must provide a qualified audit opinion.
C—The hiring of this analyst means that the firm must add an extra paragraph to the end of the audit report to alert readers to the work of the specialist.
D—The firm must assess the qualifications of the specialist as part of the audit process.
Answer is D
The CPA firm is required to ensure that the specialist is truly capable of making the assessments that are being asked. The qualifications must be assessed carefully. If the analyst is not independent, the CPA firm can still make use of the information provided by the specialist but should consider carefully the impact of the relationship with the client in making that assessment. Finally, use of a specialist is a normal audit technique and does not require any change in the audit report. However, the CPA firm does have the right to make mention that a specialist was used if that information is viewed as helpful.
BEC
Able, Baker, and Cannon are partners. Able gets 70 percent of the profits and losses and has a capital balance of $100,000. Baker gets 20 percent of the profits and losses and has a capital balance of $60,000. Cannon gets 10 percent of the profits and losses and has a capital balance of $10,000. The partnership has $170,000 in assets but no liabilities. The partnership is being liquidated. Assets of $70,000 are sold for $40,000 in cash. Which of the partners gets this available cash?
A – Able gets $28,000, Baker gets $8,000, and Cannon gets $4,000
B – Able gets $13,333, Baker gets $13,333, and Cannon gets $13,334
C – Able gets $6,667 and Baker gets $33,333
D – Able gets $20,000 and Baker gets $20,000
Answer is C
The actual sale of these assets created a $30,000 loss ($70,000 less $40,000). That loss is assigned 70 percent to Able ($21,000 bringing the capital down to $79,000), 20 percent to Baker ($6,000 bringing the capital down to $54,000), and 10 percent to Cannon ($3,000 bringing the capital down to $7,000). To decide what to do with the available cash, the partnership must assume that the remaining $100,000 in assets ($170,000 less $70,000) are a total loss. In that case, this $100,000 anticipated loss is assigned 70 percent to Able ($70,000 bringing the capital down to $9,000), 20 percent to Baker ($20,000 bringing the capital down to $34,000), and 10 percent to Cannon ($10,000 bringing the capital down to a negative $3,000). Then, finally, the remaining negative $3,000 balance in Cannon’s capital must be divided between Able and Baker based on their relative profit and loss ratios or 70/90 of the $3,000 to Able or $2,333 and 20/90 of the $3,000 to Baker or $667. This
final allocation reduces Able’s capital from $9,000 to $6,667 and Baker’s capital from $34,000 to $33,333. That is how the available cash is distributed.
And, now a final quote from Thomas Jefferson that really does, in my mind, apply to all of you folks taking the CPA Exam in the final few days of August:
“Nothing gives one person so much advantage over another as to remain always cool and unruffled under all circumstances.”
Joe Hoyle
Co-Founder
CPA Review for FREE
Tuesday, September 22, 2009
Wednesday, September 16, 2009
Our Own Joe Hoyle Named toTop 100 Accounting People
Accounting Today's list of the top 100 most influential people in accounting in 2009 named our own CPAreviewforFREE co-founder Joe Ben Hoyle as a recipient of this pretigious award. Joe was named for his work as Co-Founder of CPAreviewforFREE. Kudos to you Joe for your amazing leadership, drive, compassion and dedication to the field of education and accounting.
To see the Top 100 list, visit here
How is that for amazing! Share the good news!
To see the Top 100 list, visit here
How is that for amazing! Share the good news!
Wednesday, September 9, 2009
Fight The Good Fight
Fight The Good Fight
62 Weeks of Operation/No Marketing/ 5,351,494 Page Views
Lesson 46
From: Joe
(1) – MY FAVORITE PARTS I get a lot of enjoyment out of doing CPA Review for FREE (which is good since we make no money). One of my favorite parts each week is to look at where our “customers” come from. Obviously, a vast majority come to us from the United States but we are able to teach a lot of people around the world. Last week, alone, we had visitors from 81 countries. The most common were:
The Philippines
Canada
India
South Korea
Puerto Rico
Japan
Egypt
The United Arab Emirates
Australia
The previous week, one of our most popular countries was Djibouti. I must confess that I had to go to my globe to locate Djibouti.
I really love the idea that we are all working together around the world for one goal: to get you through the CPA Exam. So, whether you come from Richmond, Virginia (my hometown ) or New York City or Australia or Djibouti, WELCOME. Get those points and pass that exam.
(2) – MY FAVORITE PARTS (PART II) Okay, there is one other thing that I really enjoy. Getting emails from the people we help. Here are just a few that we have received recently. I wish I had the space necessary to print them all.
FROM AJ: “I just wanted to take a little time out of my evening to thank you. I recently passed all 4 parts of the CPA using the questions that you provided on your website. I took REG in October 2008 and passed with a 78 using another program. I then went on to fail BEC by 1 point, FAR by 1 point and AUD by 2 points all using that same program. I almost gave up on earning my title, especially since the software that I purchased (from the other program) was only a few days away from expiring. So I did an internet search for cheaper CPA review material and came across CPAREVIEWFORFREE.COM. I really did not want to dish out another couple of thousands on this. I convinced myself to give it one more try using the free material. I did every single question that you released. I also took notes on the questions that I missed. I wrote BEC in April and passed with an 85. I then wrote FAR in May and passed with a 77 and finally wrote AUD in July and passed with an 83. I only have
the ethics exam left and then I will officially be a CPA.”
FROM AK: “I used your website over the last 5 months to pass the exam, and I wanted to say thank you. I had taken (big, expensive course) a couple of years ago but never took the tests until recently. Thanks to your free questions, I was able to supplement my review materials. Thanks again!”
FROM EW: “I was very excited when I found your website last week. Your website is just like a lighthouse flashing in the distance, giving me more hope. I am going through all the resources that you have and am saving all your published lessons in my computer like my treasure. Your encouraging words give me more confidence. Thank you and your team very much. I really appreciate your unselfish endeavor to help all people who want to reach their goal. Thanks again.”
(3) – SOME GOOD ADVICE I have been doing these email lessons for well over a decade and, as you can imagine, I always avoid politics because that is not my purpose. Whether you are liberal or conservative, I want you to pass the CPA Exam. I encourage humans to pass (all humans) and I don’t worry about your politics.
Today, though, I did watch President Obama’s speech to the school children. He made an interesting point at the beginning when he said something like “we can encourage everyone else but, in the end, your success is up to you.”
Of course, that sounds like my feelings. We provide the materials. We even provide our materials for free. But, it is up to you to invest the time and energy. It is up to you to manage your lives so that you can put in the required hours. It is up to you to provide the self-discipline. No matter how much we do, it is ultimately up to you.
So, I actually sat down and listened to his entire speech. And, toward the end, he said a few things and I said to myself “I wish all the CPA Exam candidates could hear this part.” With the wonders of modern technology, I found the speech on the Internet and here is the part that I thought was relevant to YOU. I full realize that you are not in elementary school or middle school or high school but you face a really serious academic challenge. So, in some ways, you are like the school students.
And, of course, encouragement and challenging words are always helpful.
From President Obama:
“Whatever you resolve to do, I want you to commit to it. I want you to really work at it.
“I know that sometimes, you get the sense from TV that you can be rich and successful without any hard work -- that your ticket to success is through rapping or basketball or being a reality TV star, when chances are, you're not going to be any of those things.
“But the truth is, being successful is hard. You won't love every subject you study. You won't click with every teacher. Not every homework assignment will seem completely relevant to your life right this minute. And you won't necessarily succeed at everything the first time you try.
“That's OK. Some of the most successful people in the world are the ones who've had the most failures. JK Rowling's first Harry Potter book was rejected twelve times before it was finally published. Michael Jordan was cut from his high school basketball team, and he lost hundreds of games and missed thousands of shots during his career. But he once said, ‘I have failed over and over and over again in my life. And that is why I succeed.’
“These people succeeded because they understand that you can't let your failures define you - you have to let them teach you. You have to let them show you what to do differently next time. If you get in trouble, that doesn't mean you're a troublemaker, it means you need to try harder to behave. If you get a bad grade, that doesn't mean you're stupid, it just means you need to spend more time studying.
“No one's born being good at things, you become good at things through hard work. You're not a varsity athlete the first time you play a new sport. You don't hit every note the first time you sing a song. You've got to practice. It's the same with your schoolwork. You might have to do a math problem a few times before you get it right, or read something a few times before you understand it, or do a few drafts of a paper before it's good enough to hand in.
“Don't be afraid to ask questions. Don't be afraid to ask for help when you need it. I do that every day. Asking for help isn't a sign of weakness, it's a sign of strength. It shows you have the courage to admit when you don't know something, and to learn something new. So find an adult you trust - a parent, grandparent or teacher; a coach or counselor - and ask them to help you stay on track to meet your goals.
“And even when you're struggling, even when you're discouraged, and you feel like other people have given up on you - don't ever give up on yourself. Because when you give up on yourself, you give up on your country.
“The story of America isn't about people who quit when things got tough. It's about people who kept going, who tried harder, who loved their country too much to do anything less than their best.”
And, my own addition to the president’s words: I have not given up on you so don’t you ever give up on yourself.
(4) – As always, you are free to unsubscribe to these email lessons. Just scroll to the bottom of this (or any other) lesson and click on the appropriate link.
(5) – Do us a favor. We have about 8,000 readers – we’d love 8,000 more. Forward this email to an accountant or an accounting student or someone who is thinking about taking the CPA Exam or someone who just failed the CPA Exam and is very discouraged. Tell them: this guy has a website that can help you pass the CPA Exam and, believe it or not, it is free. Register at www.cpareviewforfree.com and you’ll get these email lessons every week or two.
(6) – PRACTICE -- Let’s add some points.
FAR – I was working on my new textbook today and was explaining the handling of foreign currency. I used a question much like this one.
A US company has the US dollar as its functional currency. It buys inventory on February 1 from Japan for 10 million yen to be paid on April 1. One yen can be exchanged for $.01 on February 1 and one yen can be exchanged for $.012 on April 1. The inventory is sold in this country on March 31 for $210,000. On April 1, the company pays the 10 million yen that were owed. When the US company reports its financial statements, which of the following is not true?
A – Cost of goods sold is reported as $120,000.
B – A loss of $20,000 is reported in connection with the payable for the inventory
C – No gain is reported in connection with the inventory that was held.
D – The company should report a gross profit of $110,000.
Answer is A
This is a remeasurement because the company is dealing in transactions denominated in a currency outside of its normal currency (its functional currency). Both the inventory and the accounts payable are initially recorded at $100,000, the exchange value at that time (10 million yen times $.01). In a remeasurement, cash, receivables, and payables are remeasured up or down whenever the exchange rate changes. Here, the rate changes so the payable is increased to $120,000 (10 million yen times $.012). The rise in the payable creates a $20,000 loss. However, the inventory is not cash, a receivable, or a payable so it stays at $100,000. Eventually, when sold, it becomes cost of goods sold of $100,000. The gross profit is the $210,000 sales price less the $100,000 cost of goods sold or $110,000.
Regulation
A corporation gives an owner a nonliquidating distribution. It gives the owner land with a basis of $11,000 and a fair market value of $19,000. What is the tax effect to the corporation and to the owner?
A – Neither party has a tax effect
B – The owner has $11,000 in taxable income and the corporation has an $11,000 tax deduction.
C – The owner has $19,000 in taxable income and the corporation has a $19,000 tax deduction.
D – The owner has $19,000 in taxable income and the corporation has $8,000 in taxable income.
Answer is D
The owner reports dividend income of $19,000 which is the fair market value of the property received. The land then has a basis of $19,000 to the owner. The corporation reports a taxable gain of $8,000. If the corporation had sold the property, it would have had an $8,000 gain ($19,000 value minus tax basis of $11,000). That gain cannot be avoided simply by giving the property away to an owner.
Auditing & Attestation
In the early stages of an audit engagement, the independent CPA must obtain a general understanding of internal control. Which of the following is not studied as part of that step in the audit process?
A – Control environment
B – Risk assessment
C – Control activities
D – Internal independence
Answer is D
The five areas to be studied in gaining a general understanding of internal control are the control environment, risk assessment, control activities, information and communications, and monitoring.
BEC
A company produces bottles of orange juice. This year the company spent $30,000 to produce 21,000 bottles of orange juice. However, 1,000 bottles of juice were lost when a valve on a machine broke. So, only 20,000 bottles of juice were actually shipped to the stores. Of that amount, 18,000 bottles were sold and 2,000 bottles remain on the shelf. The company believes that breakage and loss of up to 10 percent of the final output is normal. Any breakage and loss of above 10 percent is viewed as abnormal. What is the cost of the company’s ending inventory?
A - $2,857
B - $2,943
C - $2,988
D - $3,000
Answer is D
The company only lost 5 percent of its output (1,000 bottles versus 20,000 bottles as final output). That is within the normal range and is viewed as a cost of producing the good units. The cost of lost units is only separated and put into a loss account if it is viewed as abnormal. Here, 20,000 units cost $30,000 to produce which is $1.50 per bottle. The company still has 2,000 bottles left. At $1.50 per bottle, that is an ending inventory of $3,000.
I will do something a bit different today. I will leave you with a Bible verse. In the end, when you walk out of that exam center, this is how I want you to feel. It comes from Second Timothy, chapter 4, verse 7:
"I have fought the good fight,
I have finished the race,
I have kept the faith."
Have a great week!!! Add points!!!!
Joe Hoyle
www.youtube.com/watch?v=LjwHxVbZq1o
Co-Founder
CPA Review for FREE
62 Weeks of Operation/No Marketing/ 5,351,494 Page Views
Lesson 46
From: Joe
(1) – MY FAVORITE PARTS I get a lot of enjoyment out of doing CPA Review for FREE (which is good since we make no money). One of my favorite parts each week is to look at where our “customers” come from. Obviously, a vast majority come to us from the United States but we are able to teach a lot of people around the world. Last week, alone, we had visitors from 81 countries. The most common were:
The Philippines
Canada
India
South Korea
Puerto Rico
Japan
Egypt
The United Arab Emirates
Australia
The previous week, one of our most popular countries was Djibouti. I must confess that I had to go to my globe to locate Djibouti.
I really love the idea that we are all working together around the world for one goal: to get you through the CPA Exam. So, whether you come from Richmond, Virginia (my hometown ) or New York City or Australia or Djibouti, WELCOME. Get those points and pass that exam.
(2) – MY FAVORITE PARTS (PART II) Okay, there is one other thing that I really enjoy. Getting emails from the people we help. Here are just a few that we have received recently. I wish I had the space necessary to print them all.
FROM AJ: “I just wanted to take a little time out of my evening to thank you. I recently passed all 4 parts of the CPA using the questions that you provided on your website. I took REG in October 2008 and passed with a 78 using another program. I then went on to fail BEC by 1 point, FAR by 1 point and AUD by 2 points all using that same program. I almost gave up on earning my title, especially since the software that I purchased (from the other program) was only a few days away from expiring. So I did an internet search for cheaper CPA review material and came across CPAREVIEWFORFREE.COM. I really did not want to dish out another couple of thousands on this. I convinced myself to give it one more try using the free material. I did every single question that you released. I also took notes on the questions that I missed. I wrote BEC in April and passed with an 85. I then wrote FAR in May and passed with a 77 and finally wrote AUD in July and passed with an 83. I only have
the ethics exam left and then I will officially be a CPA.”
FROM AK: “I used your website over the last 5 months to pass the exam, and I wanted to say thank you. I had taken (big, expensive course) a couple of years ago but never took the tests until recently. Thanks to your free questions, I was able to supplement my review materials. Thanks again!”
FROM EW: “I was very excited when I found your website last week. Your website is just like a lighthouse flashing in the distance, giving me more hope. I am going through all the resources that you have and am saving all your published lessons in my computer like my treasure. Your encouraging words give me more confidence. Thank you and your team very much. I really appreciate your unselfish endeavor to help all people who want to reach their goal. Thanks again.”
(3) – SOME GOOD ADVICE I have been doing these email lessons for well over a decade and, as you can imagine, I always avoid politics because that is not my purpose. Whether you are liberal or conservative, I want you to pass the CPA Exam. I encourage humans to pass (all humans) and I don’t worry about your politics.
Today, though, I did watch President Obama’s speech to the school children. He made an interesting point at the beginning when he said something like “we can encourage everyone else but, in the end, your success is up to you.”
Of course, that sounds like my feelings. We provide the materials. We even provide our materials for free. But, it is up to you to invest the time and energy. It is up to you to manage your lives so that you can put in the required hours. It is up to you to provide the self-discipline. No matter how much we do, it is ultimately up to you.
So, I actually sat down and listened to his entire speech. And, toward the end, he said a few things and I said to myself “I wish all the CPA Exam candidates could hear this part.” With the wonders of modern technology, I found the speech on the Internet and here is the part that I thought was relevant to YOU. I full realize that you are not in elementary school or middle school or high school but you face a really serious academic challenge. So, in some ways, you are like the school students.
And, of course, encouragement and challenging words are always helpful.
From President Obama:
“Whatever you resolve to do, I want you to commit to it. I want you to really work at it.
“I know that sometimes, you get the sense from TV that you can be rich and successful without any hard work -- that your ticket to success is through rapping or basketball or being a reality TV star, when chances are, you're not going to be any of those things.
“But the truth is, being successful is hard. You won't love every subject you study. You won't click with every teacher. Not every homework assignment will seem completely relevant to your life right this minute. And you won't necessarily succeed at everything the first time you try.
“That's OK. Some of the most successful people in the world are the ones who've had the most failures. JK Rowling's first Harry Potter book was rejected twelve times before it was finally published. Michael Jordan was cut from his high school basketball team, and he lost hundreds of games and missed thousands of shots during his career. But he once said, ‘I have failed over and over and over again in my life. And that is why I succeed.’
“These people succeeded because they understand that you can't let your failures define you - you have to let them teach you. You have to let them show you what to do differently next time. If you get in trouble, that doesn't mean you're a troublemaker, it means you need to try harder to behave. If you get a bad grade, that doesn't mean you're stupid, it just means you need to spend more time studying.
“No one's born being good at things, you become good at things through hard work. You're not a varsity athlete the first time you play a new sport. You don't hit every note the first time you sing a song. You've got to practice. It's the same with your schoolwork. You might have to do a math problem a few times before you get it right, or read something a few times before you understand it, or do a few drafts of a paper before it's good enough to hand in.
“Don't be afraid to ask questions. Don't be afraid to ask for help when you need it. I do that every day. Asking for help isn't a sign of weakness, it's a sign of strength. It shows you have the courage to admit when you don't know something, and to learn something new. So find an adult you trust - a parent, grandparent or teacher; a coach or counselor - and ask them to help you stay on track to meet your goals.
“And even when you're struggling, even when you're discouraged, and you feel like other people have given up on you - don't ever give up on yourself. Because when you give up on yourself, you give up on your country.
“The story of America isn't about people who quit when things got tough. It's about people who kept going, who tried harder, who loved their country too much to do anything less than their best.”
And, my own addition to the president’s words: I have not given up on you so don’t you ever give up on yourself.
(4) – As always, you are free to unsubscribe to these email lessons. Just scroll to the bottom of this (or any other) lesson and click on the appropriate link.
(5) – Do us a favor. We have about 8,000 readers – we’d love 8,000 more. Forward this email to an accountant or an accounting student or someone who is thinking about taking the CPA Exam or someone who just failed the CPA Exam and is very discouraged. Tell them: this guy has a website that can help you pass the CPA Exam and, believe it or not, it is free. Register at www.cpareviewforfree.com and you’ll get these email lessons every week or two.
(6) – PRACTICE -- Let’s add some points.
FAR – I was working on my new textbook today and was explaining the handling of foreign currency. I used a question much like this one.
A US company has the US dollar as its functional currency. It buys inventory on February 1 from Japan for 10 million yen to be paid on April 1. One yen can be exchanged for $.01 on February 1 and one yen can be exchanged for $.012 on April 1. The inventory is sold in this country on March 31 for $210,000. On April 1, the company pays the 10 million yen that were owed. When the US company reports its financial statements, which of the following is not true?
A – Cost of goods sold is reported as $120,000.
B – A loss of $20,000 is reported in connection with the payable for the inventory
C – No gain is reported in connection with the inventory that was held.
D – The company should report a gross profit of $110,000.
Answer is A
This is a remeasurement because the company is dealing in transactions denominated in a currency outside of its normal currency (its functional currency). Both the inventory and the accounts payable are initially recorded at $100,000, the exchange value at that time (10 million yen times $.01). In a remeasurement, cash, receivables, and payables are remeasured up or down whenever the exchange rate changes. Here, the rate changes so the payable is increased to $120,000 (10 million yen times $.012). The rise in the payable creates a $20,000 loss. However, the inventory is not cash, a receivable, or a payable so it stays at $100,000. Eventually, when sold, it becomes cost of goods sold of $100,000. The gross profit is the $210,000 sales price less the $100,000 cost of goods sold or $110,000.
Regulation
A corporation gives an owner a nonliquidating distribution. It gives the owner land with a basis of $11,000 and a fair market value of $19,000. What is the tax effect to the corporation and to the owner?
A – Neither party has a tax effect
B – The owner has $11,000 in taxable income and the corporation has an $11,000 tax deduction.
C – The owner has $19,000 in taxable income and the corporation has a $19,000 tax deduction.
D – The owner has $19,000 in taxable income and the corporation has $8,000 in taxable income.
Answer is D
The owner reports dividend income of $19,000 which is the fair market value of the property received. The land then has a basis of $19,000 to the owner. The corporation reports a taxable gain of $8,000. If the corporation had sold the property, it would have had an $8,000 gain ($19,000 value minus tax basis of $11,000). That gain cannot be avoided simply by giving the property away to an owner.
Auditing & Attestation
In the early stages of an audit engagement, the independent CPA must obtain a general understanding of internal control. Which of the following is not studied as part of that step in the audit process?
A – Control environment
B – Risk assessment
C – Control activities
D – Internal independence
Answer is D
The five areas to be studied in gaining a general understanding of internal control are the control environment, risk assessment, control activities, information and communications, and monitoring.
BEC
A company produces bottles of orange juice. This year the company spent $30,000 to produce 21,000 bottles of orange juice. However, 1,000 bottles of juice were lost when a valve on a machine broke. So, only 20,000 bottles of juice were actually shipped to the stores. Of that amount, 18,000 bottles were sold and 2,000 bottles remain on the shelf. The company believes that breakage and loss of up to 10 percent of the final output is normal. Any breakage and loss of above 10 percent is viewed as abnormal. What is the cost of the company’s ending inventory?
A - $2,857
B - $2,943
C - $2,988
D - $3,000
Answer is D
The company only lost 5 percent of its output (1,000 bottles versus 20,000 bottles as final output). That is within the normal range and is viewed as a cost of producing the good units. The cost of lost units is only separated and put into a loss account if it is viewed as abnormal. Here, 20,000 units cost $30,000 to produce which is $1.50 per bottle. The company still has 2,000 bottles left. At $1.50 per bottle, that is an ending inventory of $3,000.
I will do something a bit different today. I will leave you with a Bible verse. In the end, when you walk out of that exam center, this is how I want you to feel. It comes from Second Timothy, chapter 4, verse 7:
"I have fought the good fight,
I have finished the race,
I have kept the faith."
Have a great week!!! Add points!!!!
Joe Hoyle
www.youtube.com/watch?v=LjwHxVbZq1o
Co-Founder
CPA Review for FREE
Wednesday, August 26, 2009
Forget Luck - It Takes Work and Belie
Forget Luck - It Takes Work and Belief
www.CPAreviewforFREE.com
60 Weeks of Operation/No Marketing/ 5,040,926 Page Views (and that's an
awful lot of added points)
Lesson 44
From: Joe
(1) - It has been a great week here at CPA Review for FREE
(www.CPAreviewforFREE.com).
---First, the number of our visitors last week was 9.7 percent higher
than in any of our previous 59 weeks. That is a lot of growth in just
one week.
---Second, we crossed over 5 million page views. I am so pleased by the
number of people who are using our questions and answers to pass the CPA
Exam. I went back and checked and the very first week we were in
business we had 1,920 page views. Now, we have averaged nearly 85,000
page views per week for our entire time in existence. We could not have
achieved that type of success without you guys spreading the word.
Thanks!!!!
---Third, we got a whole bunch of wonderful emails from you folks. Here
are just a couple. As I always say: if these folks can do it, so can
you!!! They did not do a single thing that you cannot do. As you read
these emails, picture yourself writing them. It is always great to have
a real sense of what success is going to feel like. You want to have
that taste of success.
From DC: I just found out that I passed FAR with a score of 94! You
were one of the first people that I wanted to tell because I owe it in
large part to you. In studying for it, I used CPA Review for Free (which
was so helpful!). I also took "big name CPA Review program"
(mainly because my company paid for it), but I still found that your
questions hit more areas or explained them in a better way, and
definitely would not have been as prepared without them. Your weekly
emails are so great, especially when I don't think I can study anymore.
I'm taking Audit on Monday, so hopefully that goes as well!
From US: I am very very happy to inform you that I cleared Regulation
exam with an 84 score. Thanks a trillion to CPAReviewforfree for the
wonderful guidance I got. This time, as I was busy with my office work,
I did not find much time to work online. Hence, I paid for your pdf
print version and got the whole set of questions printed. I read them
while flying to the US from Mumbai. On reaching the US, for the 3 days
before the exam, I went through each and every question of
CPAReviewforfree very carefully. On the actual exam, the MCQs were very
tough - testing our basic understanding of the concepts - and I spent a
good amount of time on them. I was left with just 50 minutes to
complete the simulations. I hurried through them and the last
communication question was answered in under 5 minutes. I was worried
and felt helpless at the end of the exam. Honestly, I kept my fingers
crossed as to the result as the MCQs were tough and I had not done full
justice to the
simulation questions. I still got a score of 84! That shows that I had
done very well in the MCQ! That could not have happened without
CPAReviewforfree.com. Once again, thanks a lot.
From KH: Wanted to pass on some news I just got back about the CPA
exam. So far I have taken BEC and REG and I just found out that I passed
both! I felt okay with BEC, but I left REG feeling very unsure,
especially with the simulations. As you can expect, I was incredibly
relieved to see my score tonight. I got an 86 in BEC and a 95 in REG
(never would have predicted that) - now I am thinking that I could have
studied a few less hours and spent some time enjoying the July 4th
weekend. I am taking FAR on Saturday and AUD on the 28th. These scores
have given me a lot more motivation to push through this last week and a
half. As always, thank you for all of your help, especially through
cpareviewforfree. Your emails always serve as inspiration, and the
explanations to questions on your website are very informative.
Okay, such notes should inspire everyone to work just a bit harder and
knock out that exam. They did it-so can you.
(2) - One of my all-time favorite quotes comes from Thomas Jefferson
(although I have seen it attributed to other folks - I'm not 100 percent
sure who actually said it first):
"I'm a great believer in luck, and I find the harder I work, the more I
have of it."
The harder I work; the luckier I get. How could anything seem more
true?
I started my fall classes Monday (yesterday) here at the University of
Richmond. I have 64 students, 62 of whom are new to my classes.
Students really do want to do well but they often seem bewildered by how
to achieve success in class.
I want to do well; I'm just not sure how is a constant comment.
Students often seem to believe that there is some secret ingredient for
success. If they only were lucky enough to know that secret, they would
be at the top of the class.
Therefore, my goal in our first meeting is to convince them that
everyone can do well (even in Intermediate Accounting II). If I cannot
convince them that they can do well, I may well have lost them for the
semester. "I've taught this class for nearly 40 years. I'm convinced
that you and everyone else in this room can make an A if you do a few
relatively simple things. You need to put in a reasonable amount of
time, you need to focus on your goal, you need to prepare/study, you
need to practice what we go over, and you need consistency."
And, then, I stop and ask "Okay, who doesn't have one or more of those
five? Speak up now.
reasonable time,
focus,
preparation,
practice, and
consistency."
Not surprisingly, every student knows they really do have those five-all
of them. It is now their job to make use of them. I never tell them
that they have to be brilliant. That's not even interesting to me.
There are not many brilliant people in the world and I'm not too sure
how truly successful they are.
I just need those five. The things you need for success are in your own
hands.
Those five--reasonable time, focus, preparation, practice, and
consistency-are what it really takes. But you start losing points
really fast if you let one (or more) of those get away from you. If you
start cutting corners, the points begin to fall. If you start taking
things for granted, you lose ground.
In my classes, I want everyone to make an A which means I want everyone
to have all five.
In CPAreviewforFREE, I want everyone to pass the exam which means I want
everyone to have all five.
Do you have those five? Sure, you certainly have the potential to do
all five. There is nothing standing in your way to having all five.
Forget luck - if you will give me those five things, and then use CPA
Review for FREE in the manner that I suggest, I believe you can pass and
you can do so for absolutely no money at all.
(3) - Remember that you can always unsubscribe from these email lessons
at any time you wish just by scrolling to the bottom of any lesson and
clicking on the unsubscribe button. We have over 8,000 subscribers and
we love having you but, when you are ready to go, feel free to
unsubscribe.
(4) - A lot of people take the CPA Exam at the end of August. If you
know someone, other than yourself, who is getting ready to take the
exam, call them up or send them an email and wish them luck. It is
easy to get very self-absorbed as you study to pass the CPA Exam. But
life always works better if you open your eyes and notice the needs of
others and try to help them out. Call someone this evening and tell
them "I know you are getting ready for the CPA Exam. You've worked
hard; I just know you'll be successful."
That will make that person feel better and it will make you feel better
also.
(5) - Speaking of luck (I must be in a mood to point up that you don't
need luck, you just need to utilize the talents you have).
A few weeks back I went to see the relatively new Harry Potter movie.
(For those of you who don't know, Harry Potter is a boy wizard who goes
to school at a wizard school). There was one scene that I found very
interesting. Harry has a friend who plays on a sports team and plays
rather poorly. He gets depressed about it and plays worse. He is so
nervous about doing well that he gets all tight and does poorly in the
first couple of games. We've probably all felt that way.
Harry has a vial of Liquid Luck (remember, he is a boy wizard). Right
before the big sports match of the season, Harry pretends to pour the
liquid luck into a glass that his friend is about to drink. The friend
thinks he has consumed the liquid luck. The friend immediately goes out
and plays the match of a lifetime. He is the star of the game and
helps his team win. He goes from being a poor player to being a star.
He is convinced that he has been lucky because of the potion. His
success was all because of Liquid Luck.
But, of course, Harry Potter had fooled him. He had NOT really poured
the liquid luck into the glass. The friend just thought he had.
So, luck had absolutely nothing to do with his success. Once, he
believed in himself then that belief drove him to succeed. Simple
concept.
This is just a quick comment. I am not going to beat this to death. If
you believe in yourself, you have the chance to leap tall buildings with
a single bound. However, if you truly have doubts, if you don't really
believe in yourself, your challenge is going to be so much harder. It
is hard to win if you think you will lose.
Let's do a quick test. And, you have to tell the truth. If I were to
look you in the eyes and ask "on a scale of 1 to 10, how confident are
you that you are going to pass the CPA Exam by this time next year?"
what would you answer? Would you say that you are very confident-a 9 or
a 10? Or, would you say that you are full of fear and trepidation and
are closer to a 2 or 3?
How can you improve your odds? Improve that number.
This just may be the advice that you can use to add some serious points
to your CPA Exam score. How can you raise your self-confidence level by
JUST ONE POINT? Just that change in self-confidence will help
amazingly. That could be so very important to you. If you are a 5, how
could you become a six?
Well, you don't get more confident by wishing it so. I'm sorry; it
doesn't work that way. If you are setting there, saying "geez, I really
do want to have more self-confidence" that is nice but it probably
doesn't add a point.
You get more confident by doing stuff. You get more into the rhythm,
you see how things tie together.
The more you work; the stronger you get. If you really want more
confidence, go back to my previous list of the Big Five:
reasonable time,
focus,
preparation,
practice, and
consistency
Now, pick one of these five, and for the next week, work hard to get
better at doing that one thing. Spend more time each day or work more
days in the week or whenever you practice do 10 percent more questions
than you used to do. Pick one of these five and get better at it this
week.
At the end of just one week, if you have managed to get better at one of
those Big Five, I would be willing to bet that your confidence level
will be higher. Okay, you won't go from a 1 to a 10. But, in just one
week, by working on that one thing and getting better at it, you can
(and will) go up in confidence.
And, as Harry Potter's friend discovered, just adding some confidence,
really does make all the difference in the world.
(6) - Time to Practice: Let's see how you do on a couple of practice
problems.
FAR
A company's income statement shows salary expense for the current year
of $400,000. The company also reported salary payable of $13,000 as of
the beginning of the year but $28,000 at the end. If the company uses
the direct method of reporting operating activity cash flows, what is
reported in connection with this salary?
A - An addition of $15,000 to net income
B - A subtraction of $15,000 from net income
C - Salary paid to employees of $415,000.
D - Salary paid to employees of $385,000
Answer is D
If the company uses the indirect method, net income is adjusted for
changes in operational assets and liabilities such as the salary
payable. Since the liability went up, the company paid less and the
answer would be A because of the cash savings. However, if (as is the
case here) the company uses the direct method, the actual amount of cash
paid or collected is shown. The expense was $400,000 but the related
liability went up by $15,000. Thus, less was actually paid. The
company only paid cash to its employees during the year of $385,000.
Regulation
Vikontra Corporation is having financial difficulties and is not paying
its bills as they come due. The company owes Jack Winslow $11,000. He
wants to push the company into Chapter7 bankruptcy by filing an
involuntary petition. Which of the following is true?
A-If Vikontra has less than 12 creditors, then Jack Winslow alone can
force the company into bankruptcy by filing an involuntary petition.
B-If Vikontra has 12 or more creditors, then Jack Winslow alone can
force the company into bankruptcy by filing an involuntary petition.
C-If Vikontra has less than 12 creditors, then Jack Winslow alone can
force the company into bankruptcy but the debt must be larger.
D-If Vikontra has 12 or more creditors, then Jack Winslow alone can
force the company into bankruptcy but the debt must be larger.
Answer is C
If there are less than 12 creditors (Answers A and C), then only one
creditor needs to sign the petition but that person must have a debt of
$13,475. If there are 12 or more creditors (Answers B and D), then
three creditors must sign but, again, the total of those debts must be
at least $13,475. The $13,475 figure goes up slightly every three
years, the next time in 2010. Notice, though, that the exact amount of
that standard is not relevant to this question. The speculation is that
the CPA Exam avoids asking questions that will change as the numbers
change over time.
Auditing & Attestation
The CPA firm of Terry & Francona is auditing the financial statements of
Fenway International Corporation. Fenway owns a number of unique
investments where the market value is difficult to determine. The CPA
firm hires a specialist in investment analysis to help determine the
market value of these assets. Which of the following statements is
true?
A-This investment analyst must be independent of the client company.
B-The hiring of this analyst means that the firm must provide a
qualified audit opinion.
C-The hiring of this analyst means that the firm must add an extra
paragraph to the end of the audit report to alert readers to the work of
the specialist.
D-The firm must assess the qualifications of the specialist as part of
the audit process.
Answer is D
The CPA firm is required to ensure that the specialist is truly capable
of making the assessments that are being asked. The qualifications must
be assessed carefully. If the analyst is not independent, the CPA firm
can still make use of the information provided by the specialist but
should consider carefully the impact of the relationship with the client
in making that assessment. Finally, use of a specialist is a normal
audit technique and does not require any change in the audit report.
However, the CPA firm does have the right to make mention that a
specialist was used if that information is viewed as helpful.
BEC
Able, Baker, and Cannon are partners. Able gets 70 percent of the
profits and losses and has a capital balance of $100,000. Baker gets 20
percent of the profits and losses and has a capital balance of $60,000.
Cannon gets 10 percent of the profits and losses and has a capital
balance of $10,000. The partnership has $170,000 in assets but no
liabilities. The partnership is being liquidated. Assets of $70,000
are sold for $40,000 in cash. Which of the partners gets this
available cash?
A - Able gets $28,000, Baker gets $8,000, and Cannon gets $4,000
B - Able gets $13,333, Baker gets $13,333, and Cannon gets $13,334
C - Able gets $6,667 and Baker gets $33,333
D - Able gets $20,000 and Baker gets $20,000
Answer is C
The actual sale of these assets created a $30,000 loss ($70,000 less
$40,000). That loss is assigned 70 percent to Able ($21,000
bringing the capital down to $79,000), 20 percent to Baker ($6,000
bringing the capital down to $54,000), and 10 percent to Cannon ($3,000
bringing the capital down to $7,000). To decide what to do with the
available cash, the partnership must assume that the remaining $100,000
in assets ($170,000 less $70,000) are a total loss. In that case, this
$100,000 anticipated loss is assigned 70 percent to Able ($70,000
bringing the capital down to $9,000), 20 percent to Baker ($20,000
bringing the capital down to $34,000), and 10 percent to Cannon ($10,000
bringing the capital down to a negative $3,000). Then, finally, the
remaining negative $3,000 balance in Cannon's capital must be divided
between Able and Baker based on their relative profit and loss ratios or
70/90 of the $3,000 to Able or $2,333 and 20/90 of the $3,000 to Baker
or $667. This
final allocation reduces Able's capital from $9,000 to $6,667 and
Baker's capital from $34,000 to $33,333. That is how the available cash
is distributed.
And, now a final quote from Thomas Jefferson that really does, in my
mind, apply to all of you folks taking the CPA Exam in the final few
days of August:
"Nothing gives one person so much advantage over another as to remain
always cool and unruffled under all circumstances."
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
60 Weeks of Operation/No Marketing/ 5,040,926 Page Views (and that's an
awful lot of added points)
Lesson 44
From: Joe
(1) - It has been a great week here at CPA Review for FREE
(www.CPAreviewforFREE.com).
---First, the number of our visitors last week was 9.7 percent higher
than in any of our previous 59 weeks. That is a lot of growth in just
one week.
---Second, we crossed over 5 million page views. I am so pleased by the
number of people who are using our questions and answers to pass the CPA
Exam. I went back and checked and the very first week we were in
business we had 1,920 page views. Now, we have averaged nearly 85,000
page views per week for our entire time in existence. We could not have
achieved that type of success without you guys spreading the word.
Thanks!!!!
---Third, we got a whole bunch of wonderful emails from you folks. Here
are just a couple. As I always say: if these folks can do it, so can
you!!! They did not do a single thing that you cannot do. As you read
these emails, picture yourself writing them. It is always great to have
a real sense of what success is going to feel like. You want to have
that taste of success.
From DC: I just found out that I passed FAR with a score of 94! You
were one of the first people that I wanted to tell because I owe it in
large part to you. In studying for it, I used CPA Review for Free (which
was so helpful!). I also took "big name CPA Review program"
(mainly because my company paid for it), but I still found that your
questions hit more areas or explained them in a better way, and
definitely would not have been as prepared without them. Your weekly
emails are so great, especially when I don't think I can study anymore.
I'm taking Audit on Monday, so hopefully that goes as well!
From US: I am very very happy to inform you that I cleared Regulation
exam with an 84 score. Thanks a trillion to CPAReviewforfree for the
wonderful guidance I got. This time, as I was busy with my office work,
I did not find much time to work online. Hence, I paid for your pdf
print version and got the whole set of questions printed. I read them
while flying to the US from Mumbai. On reaching the US, for the 3 days
before the exam, I went through each and every question of
CPAReviewforfree very carefully. On the actual exam, the MCQs were very
tough - testing our basic understanding of the concepts - and I spent a
good amount of time on them. I was left with just 50 minutes to
complete the simulations. I hurried through them and the last
communication question was answered in under 5 minutes. I was worried
and felt helpless at the end of the exam. Honestly, I kept my fingers
crossed as to the result as the MCQs were tough and I had not done full
justice to the
simulation questions. I still got a score of 84! That shows that I had
done very well in the MCQ! That could not have happened without
CPAReviewforfree.com. Once again, thanks a lot.
From KH: Wanted to pass on some news I just got back about the CPA
exam. So far I have taken BEC and REG and I just found out that I passed
both! I felt okay with BEC, but I left REG feeling very unsure,
especially with the simulations. As you can expect, I was incredibly
relieved to see my score tonight. I got an 86 in BEC and a 95 in REG
(never would have predicted that) - now I am thinking that I could have
studied a few less hours and spent some time enjoying the July 4th
weekend. I am taking FAR on Saturday and AUD on the 28th. These scores
have given me a lot more motivation to push through this last week and a
half. As always, thank you for all of your help, especially through
cpareviewforfree. Your emails always serve as inspiration, and the
explanations to questions on your website are very informative.
Okay, such notes should inspire everyone to work just a bit harder and
knock out that exam. They did it-so can you.
(2) - One of my all-time favorite quotes comes from Thomas Jefferson
(although I have seen it attributed to other folks - I'm not 100 percent
sure who actually said it first):
"I'm a great believer in luck, and I find the harder I work, the more I
have of it."
The harder I work; the luckier I get. How could anything seem more
true?
I started my fall classes Monday (yesterday) here at the University of
Richmond. I have 64 students, 62 of whom are new to my classes.
Students really do want to do well but they often seem bewildered by how
to achieve success in class.
I want to do well; I'm just not sure how is a constant comment.
Students often seem to believe that there is some secret ingredient for
success. If they only were lucky enough to know that secret, they would
be at the top of the class.
Therefore, my goal in our first meeting is to convince them that
everyone can do well (even in Intermediate Accounting II). If I cannot
convince them that they can do well, I may well have lost them for the
semester. "I've taught this class for nearly 40 years. I'm convinced
that you and everyone else in this room can make an A if you do a few
relatively simple things. You need to put in a reasonable amount of
time, you need to focus on your goal, you need to prepare/study, you
need to practice what we go over, and you need consistency."
And, then, I stop and ask "Okay, who doesn't have one or more of those
five? Speak up now.
reasonable time,
focus,
preparation,
practice, and
consistency."
Not surprisingly, every student knows they really do have those five-all
of them. It is now their job to make use of them. I never tell them
that they have to be brilliant. That's not even interesting to me.
There are not many brilliant people in the world and I'm not too sure
how truly successful they are.
I just need those five. The things you need for success are in your own
hands.
Those five--reasonable time, focus, preparation, practice, and
consistency-are what it really takes. But you start losing points
really fast if you let one (or more) of those get away from you. If you
start cutting corners, the points begin to fall. If you start taking
things for granted, you lose ground.
In my classes, I want everyone to make an A which means I want everyone
to have all five.
In CPAreviewforFREE, I want everyone to pass the exam which means I want
everyone to have all five.
Do you have those five? Sure, you certainly have the potential to do
all five. There is nothing standing in your way to having all five.
Forget luck - if you will give me those five things, and then use CPA
Review for FREE in the manner that I suggest, I believe you can pass and
you can do so for absolutely no money at all.
(3) - Remember that you can always unsubscribe from these email lessons
at any time you wish just by scrolling to the bottom of any lesson and
clicking on the unsubscribe button. We have over 8,000 subscribers and
we love having you but, when you are ready to go, feel free to
unsubscribe.
(4) - A lot of people take the CPA Exam at the end of August. If you
know someone, other than yourself, who is getting ready to take the
exam, call them up or send them an email and wish them luck. It is
easy to get very self-absorbed as you study to pass the CPA Exam. But
life always works better if you open your eyes and notice the needs of
others and try to help them out. Call someone this evening and tell
them "I know you are getting ready for the CPA Exam. You've worked
hard; I just know you'll be successful."
That will make that person feel better and it will make you feel better
also.
(5) - Speaking of luck (I must be in a mood to point up that you don't
need luck, you just need to utilize the talents you have).
A few weeks back I went to see the relatively new Harry Potter movie.
(For those of you who don't know, Harry Potter is a boy wizard who goes
to school at a wizard school). There was one scene that I found very
interesting. Harry has a friend who plays on a sports team and plays
rather poorly. He gets depressed about it and plays worse. He is so
nervous about doing well that he gets all tight and does poorly in the
first couple of games. We've probably all felt that way.
Harry has a vial of Liquid Luck (remember, he is a boy wizard). Right
before the big sports match of the season, Harry pretends to pour the
liquid luck into a glass that his friend is about to drink. The friend
thinks he has consumed the liquid luck. The friend immediately goes out
and plays the match of a lifetime. He is the star of the game and
helps his team win. He goes from being a poor player to being a star.
He is convinced that he has been lucky because of the potion. His
success was all because of Liquid Luck.
But, of course, Harry Potter had fooled him. He had NOT really poured
the liquid luck into the glass. The friend just thought he had.
So, luck had absolutely nothing to do with his success. Once, he
believed in himself then that belief drove him to succeed. Simple
concept.
This is just a quick comment. I am not going to beat this to death. If
you believe in yourself, you have the chance to leap tall buildings with
a single bound. However, if you truly have doubts, if you don't really
believe in yourself, your challenge is going to be so much harder. It
is hard to win if you think you will lose.
Let's do a quick test. And, you have to tell the truth. If I were to
look you in the eyes and ask "on a scale of 1 to 10, how confident are
you that you are going to pass the CPA Exam by this time next year?"
what would you answer? Would you say that you are very confident-a 9 or
a 10? Or, would you say that you are full of fear and trepidation and
are closer to a 2 or 3?
How can you improve your odds? Improve that number.
This just may be the advice that you can use to add some serious points
to your CPA Exam score. How can you raise your self-confidence level by
JUST ONE POINT? Just that change in self-confidence will help
amazingly. That could be so very important to you. If you are a 5, how
could you become a six?
Well, you don't get more confident by wishing it so. I'm sorry; it
doesn't work that way. If you are setting there, saying "geez, I really
do want to have more self-confidence" that is nice but it probably
doesn't add a point.
You get more confident by doing stuff. You get more into the rhythm,
you see how things tie together.
The more you work; the stronger you get. If you really want more
confidence, go back to my previous list of the Big Five:
reasonable time,
focus,
preparation,
practice, and
consistency
Now, pick one of these five, and for the next week, work hard to get
better at doing that one thing. Spend more time each day or work more
days in the week or whenever you practice do 10 percent more questions
than you used to do. Pick one of these five and get better at it this
week.
At the end of just one week, if you have managed to get better at one of
those Big Five, I would be willing to bet that your confidence level
will be higher. Okay, you won't go from a 1 to a 10. But, in just one
week, by working on that one thing and getting better at it, you can
(and will) go up in confidence.
And, as Harry Potter's friend discovered, just adding some confidence,
really does make all the difference in the world.
(6) - Time to Practice: Let's see how you do on a couple of practice
problems.
FAR
A company's income statement shows salary expense for the current year
of $400,000. The company also reported salary payable of $13,000 as of
the beginning of the year but $28,000 at the end. If the company uses
the direct method of reporting operating activity cash flows, what is
reported in connection with this salary?
A - An addition of $15,000 to net income
B - A subtraction of $15,000 from net income
C - Salary paid to employees of $415,000.
D - Salary paid to employees of $385,000
Answer is D
If the company uses the indirect method, net income is adjusted for
changes in operational assets and liabilities such as the salary
payable. Since the liability went up, the company paid less and the
answer would be A because of the cash savings. However, if (as is the
case here) the company uses the direct method, the actual amount of cash
paid or collected is shown. The expense was $400,000 but the related
liability went up by $15,000. Thus, less was actually paid. The
company only paid cash to its employees during the year of $385,000.
Regulation
Vikontra Corporation is having financial difficulties and is not paying
its bills as they come due. The company owes Jack Winslow $11,000. He
wants to push the company into Chapter7 bankruptcy by filing an
involuntary petition. Which of the following is true?
A-If Vikontra has less than 12 creditors, then Jack Winslow alone can
force the company into bankruptcy by filing an involuntary petition.
B-If Vikontra has 12 or more creditors, then Jack Winslow alone can
force the company into bankruptcy by filing an involuntary petition.
C-If Vikontra has less than 12 creditors, then Jack Winslow alone can
force the company into bankruptcy but the debt must be larger.
D-If Vikontra has 12 or more creditors, then Jack Winslow alone can
force the company into bankruptcy but the debt must be larger.
Answer is C
If there are less than 12 creditors (Answers A and C), then only one
creditor needs to sign the petition but that person must have a debt of
$13,475. If there are 12 or more creditors (Answers B and D), then
three creditors must sign but, again, the total of those debts must be
at least $13,475. The $13,475 figure goes up slightly every three
years, the next time in 2010. Notice, though, that the exact amount of
that standard is not relevant to this question. The speculation is that
the CPA Exam avoids asking questions that will change as the numbers
change over time.
Auditing & Attestation
The CPA firm of Terry & Francona is auditing the financial statements of
Fenway International Corporation. Fenway owns a number of unique
investments where the market value is difficult to determine. The CPA
firm hires a specialist in investment analysis to help determine the
market value of these assets. Which of the following statements is
true?
A-This investment analyst must be independent of the client company.
B-The hiring of this analyst means that the firm must provide a
qualified audit opinion.
C-The hiring of this analyst means that the firm must add an extra
paragraph to the end of the audit report to alert readers to the work of
the specialist.
D-The firm must assess the qualifications of the specialist as part of
the audit process.
Answer is D
The CPA firm is required to ensure that the specialist is truly capable
of making the assessments that are being asked. The qualifications must
be assessed carefully. If the analyst is not independent, the CPA firm
can still make use of the information provided by the specialist but
should consider carefully the impact of the relationship with the client
in making that assessment. Finally, use of a specialist is a normal
audit technique and does not require any change in the audit report.
However, the CPA firm does have the right to make mention that a
specialist was used if that information is viewed as helpful.
BEC
Able, Baker, and Cannon are partners. Able gets 70 percent of the
profits and losses and has a capital balance of $100,000. Baker gets 20
percent of the profits and losses and has a capital balance of $60,000.
Cannon gets 10 percent of the profits and losses and has a capital
balance of $10,000. The partnership has $170,000 in assets but no
liabilities. The partnership is being liquidated. Assets of $70,000
are sold for $40,000 in cash. Which of the partners gets this
available cash?
A - Able gets $28,000, Baker gets $8,000, and Cannon gets $4,000
B - Able gets $13,333, Baker gets $13,333, and Cannon gets $13,334
C - Able gets $6,667 and Baker gets $33,333
D - Able gets $20,000 and Baker gets $20,000
Answer is C
The actual sale of these assets created a $30,000 loss ($70,000 less
$40,000). That loss is assigned 70 percent to Able ($21,000
bringing the capital down to $79,000), 20 percent to Baker ($6,000
bringing the capital down to $54,000), and 10 percent to Cannon ($3,000
bringing the capital down to $7,000). To decide what to do with the
available cash, the partnership must assume that the remaining $100,000
in assets ($170,000 less $70,000) are a total loss. In that case, this
$100,000 anticipated loss is assigned 70 percent to Able ($70,000
bringing the capital down to $9,000), 20 percent to Baker ($20,000
bringing the capital down to $34,000), and 10 percent to Cannon ($10,000
bringing the capital down to a negative $3,000). Then, finally, the
remaining negative $3,000 balance in Cannon's capital must be divided
between Able and Baker based on their relative profit and loss ratios or
70/90 of the $3,000 to Able or $2,333 and 20/90 of the $3,000 to Baker
or $667. This
final allocation reduces Able's capital from $9,000 to $6,667 and
Baker's capital from $34,000 to $33,333. That is how the available cash
is distributed.
And, now a final quote from Thomas Jefferson that really does, in my
mind, apply to all of you folks taking the CPA Exam in the final few
days of August:
"Nothing gives one person so much advantage over another as to remain
always cool and unruffled under all circumstances."
Joe Hoyle
Co-Founder
CPA Review for FREE
Thursday, August 20, 2009
Try us FIRST before you spend your hard-earned money.
Try us FIRST before you spend your hard-earned money.
August 16, 2009
CPA Review for FREE
Get It Wrong and Then Get It Right
www.CPAreviewforFREE.com
58 Weeks of Operation/No Marketing/4,715,938 Page Views (and that’s an awful lot of added points)
Lesson 43
From: Joe
(1) – A very quick personal request. I know that a lot of you who get these weekly email lessons are still in college or have graduated from college recently.
You folks likely know some of your college accounting professors. As I have mentioned a few times in these lessons, I (along with C. J. Skender of UNC) are
coming out with a new Introduction to Financial Accounting textbook this fall. I am biased but I am extremely pleased by how it has come together.
However, it is a very crowded and competitive market so we are trying to let people know about the book. I recently did an Internet podcast to explain how the
textbook works (it is a free textbook – the company makes its money by selling supplements to the students). Below is the URL for the podcast (about 10
minutes). If you know a college accounting prof, ask them to listen. They don’t have to adopt the book but, as we always say here at CPA Review for FREE, the
more information that you have about available products, the better shopper you will be. Just tell them: “a new textbook is coming out this fall by a known
accounting textbook author; the book is free to the students and this podcast will explain why it is a better educational product than all of those other books
on the market.”
www.flatworldknowledge.com/Joe-Hoyle-Podcast
Thanks!!!
(2) – As you can imagine, I get lots of email here at www.CPAreviewforFREE.com. One of the things I hear over and over is how upset candidates get when they
miss some of the questions on our website. We have over 2,000 free (FREE) questions and answers available. Candidates will work a group of questions and
periodically they will get really upset by their mistakes. It is a natural feeling to be troubled by errors but I would strongly advise that you not get too
worried by missed questions. Concern can cause mental paralysis and that is never good. I actually think that mistakes can be beneficial part of your
preparation.
This week a friend of mine sent me the following quote. I found it so interesting that I forwarded it to my own students here at the University of Richmond
(the first day of classes begins on August 24).
Here’s what she sent:
"For the things we have to learn before we can do them, we learn by doing them." Aristotle, (written in 350 B.C.).
What the heck does that mean?
Okay, I don’t read Aristotle much but here is what I think he is saying to you. In most things in life, getting it wrong is a necessary part of eventually
gaining the insight and understanding so that you can get it right. Until you’ve worked hard and gotten it wrong, you really cannot understand or appreciate
things well enough to ever truly get them right.
Work -> wrong -> reconsider -> work -> right -> understand
I’ve taught in college now for 38 years and that’s a pretty good formula for real learning.
I believe, when preparing for the CPA Exam, you learn by doing. You learn to answer questions by answering questions. I think that was what Aristotle was
saying.
---I honestly do not think you learn to drive a car by reading a book. I think you learn to drive a car by driving a car.
---I honestly do not think you learn to play winning poker by reading a book. I think you learn to play winning poker by playing poker.
---I honestly do not think you learn to be a great chef by reading a book. I think you learn to be a great chef by going into the kitchen and cooking.
And, I strongly believe that you learn to answer questions by answering questions.
I honestly don’t think you pass the CPA Exam by reading a book or sitting in a class. That is helpful in getting an education but I do not think it is a very
effective way to pass the CPA Exam. I think you learn to answer questions by reading question after question and reading answer after answer. You learn from
doing and you especially learn from the mistakes you make. We learn by doing things again and again until we get them right.
Okay, if you want to pay lots of money, go sit in on a class and take notes
Or, get a book and start reading.
But I’ll bet you that, at the end of the day, when someone says “tell me how you learned enough to pass the CPA Exam,” you are NEVER going to say “I took a lot
of notes as some person stood in front of the room talking.” You are NEVER going to say “I went through pages and pages of material with a highlighter and
underlined a lot of that material.” That doesn’t even sound feasible.
I believe that you will inevitably say about passing “I just worked question after question after question and I read answer after answer after answer. It was
methodical and it worked.” You learn to pass the CPA Exam by working questions and reading those answers and then going back and doing those questions again
until you gain understanding.
(2) – Always love getting emails from our readers. Here are a couple that came in this week.
From TM: “It is unbelievable how much I needed your e-mail today. I take REG tomorrow and have been totally consumed with studying for the last 5 weeks. Tax
and law are not my favorites so this has been a LONG 5 weeks. I have used your questions (I purchased the PDF files) and feel like I have learned so much. Two
of my co-workers are also using your questions and answers. Each of us had purchased a Review program (XX and YY) but feel like we have learned more from your
questions than from the reviews we paid for. Thanks for the encouraging words - I was discouraged last night and feeling like I would fail. You put my hard
work into perspective and I know I will conquer this exam tomorrow. Then I will use your questions to study for FAR - did not pass it the first time using
XX.”
From SF: “I hope you are doing well. I really enjoy the inspirational e-mails you send out every week. I've become a fan of the cpa review for free site. To
tell you the truth, I was skeptical at first. How can a person not spend any money, just practice these free questions on the website and expect to pass the
cpa? Then, I tried out the questions. They really help you review well. I think the biggest mistake any cpa candidate can make is to put too much emphasis on
studying the material and not practicing any questions. I will be sitting for the CPA exam for the very first time on the 27th of August attempting to pass the
FAR section.”
(3) – As always, please understand that you can easily unsubscribe from these email lessons by scrolling to the bottom of any lesson and then clicking on the
“unsubscribe” button. Your time is valuable. We are glad to share these lessons with you for free but we certainly understand that you will eventually be
ready to unsubscribe.
And, please feel free to forward this email along to anyone that you know who is (a) an accounting student in college who needs help practicing for class tests
or (b) any accountant who is preparing for the CPA Exam or thinking about preparing for the CPA Exam.
And, if you ever want to get some encouragement by video, go to www.youtube.com and search for Joe Hoyle CPAreviewforFREE. I have three short videos that
provide a few tips on doing well. We’ve had about 15,000 views on these videos—hopefully, that equals 15,000 more points on the CPA Exam.
(4)- I mentioned last week that within 18 months or so, the written communication questions on the CPA Exam will probably all shift into BEC. But it is still
August 2009 and not late 2010. Therefore, if you are taking Auditing & Attestation or FAR or Regulation, you will have to answer a written communication
question and your grade on that assignment will make up 10 percent of your overall grade on that section of the exam. That really can be the difference in
passing and failing. Here are a few tips that I passed out last January. I thought it might be helpful to repeat some of this for all of you who are getting
ready to take the exam here at the end of the July-August window.
There is a lot of misunderstanding on the CPA Exam about the written communications questions. Currently, in each part of the exam except BEC, you get two
written communication questions (one in each simulation). You will be given a grade on your ability to write well with proper use of the English language.
That grade will make up 10 percent of your overall grade.
To give you some guidance, here is what the AICPA (at www.cpa-exam.org) says specifically about this part of the exam: “In all simulations, candidates are
presented with a situation and instructed to write a letter or memorandum on a specific topic. Written communication responses are scored on the basis of
three criteria: (1) organization (structure, ordering of ideas, linking of ideas one to another); (2) development (presentation of supporting evidence); and
(3) expression (use of standard business English).”
If you want more official information, you can check out the following site:
www.cpa-exam.org/cpa/written_communic.html
I believe that it is important for you to understand how your written communication answer will be graded. First, a grader looks over the answer to make sure
that it is “on topic.” In other words, if the question is about leases, then the answer has to be on leases and not deferred taxes or pensions. If the answer
is not on the proper topic, you get a zero for written communications and no further grading is done regardless of well written the answer is.
However, if the answer is on topic, it is turned over to a different expert who then grades it on the three criteria mentioned above.
It is important to understand this grading process because the content itself is not graded. That is not the purpose of this question (that’s the purpose of
the other 90 percent of these exams). So, if you get a written communications question and you are not too sure about the exact answer, that may not make any
difference at all. For these questions, you should worry about the writing and not the absolute precision of your answers. Absolute accuracy is not the goal.
Keep in mind also, that the computer on which you are taking the exam has “spell check” so you should not worry about misspelling words. You can check for
that.
Let me give you some of my own hints on how to answer the written communication questions in order to maximize your points.
---Restate the question. That will help focus you in on what is wanted. Plus, in business writing, it is not unusual to make sure everyone knows the issue at
hand.
---Keep your sentences as short as possible. Unless you are good at writing, once you go beyond about six or seven words, the more likely it is that you will
get into trouble. “The lease should be capitalized” is a great sentence. Avoid long and difficult sentences. Run-on sentences always make you look bad.
Keep It Simple, Stupid is especially good advice.
---Make sure each sentence logically follows the previous sentence. “The cat is in the kitchen. The cat is eating breakfast.” makes sense. “The cat is in
the kitchen. The Martian jumped out of his space ship.” does not connect well. When the sentences stop connecting well, you need to start a new paragraph.
---Avoid using words unless you are very sure of their meaning. Do not try to get fancy. You are not trying to be William Shakespeare or William Faulkner.
Don’t use a word like “exonerate” unless you are certain of its meaning and that it is used correctly in the sentence you have constructed.
---Remember that this is business writing. It should sound and look professional and formal. Slang is not appropriate. Stay away from cute – the graders do
not have a sense of humor. I also think that contractions and abbreviations should be avoided. They look sloppy. You want your writing to look professional.
“Do not” is better than “don’t” and “accounts receivable” is better than “a.r.”.
---Make sure that each sentence is complete. It should have a subject and a verb. “The cat over there in the kitchen.” has no verb. “The cat is in the
kitchen” has a subject and a verb.
---Capitalize the first letter of the first word in each sentence.
---Two to four sentences is a good length for most paragraphs.
---Unless you have strong skills as a writer, avoid semi-colons, colons, and dashes. Most people can say all they need to say with periods and a few commas.
---If you make any type of assertion, you need to justify it. “Equipment must be depreciated” is an assertion. “Equipment must be depreciated because it has
a finite life” is an assertion with an explanation.
I know a lot of people really dread the written communications questions. Personally, I think this is one place where—if you simply take it easy and do not
“overwrite”—you can do well. Just do not worry so much if you do not know the answer with absolute perfection.
(5) – And, now for some practice. Miss them all. Then read the answers carefully. Then go back and see if you can understand them all. In preparation, it
is not getting them right that is important but rather gaining understanding.
FAR – I am working on the 10th edition of my Advanced Accounting at the present time. Here is one question that I just wrote for it.
In December of Year One, the City of Abrams issued two bonds in connection with its General Fund. One was for $2 million to be repaid in 10 years. The other
was $1 million as a tax anticipation note to be repaid in 60 days. Which of the following is most likely to be true about the financial statements to be
reported at the end of Year One?
A – In the government-wide financial statements, liabilities of $3 million are reported while in the fund-based financial statements, no liabilities are
reported.
B – In the government-wide financial statements, liabilities of $2 million are reported while in the fund-based financial statements, liabilities of $1 million
are reported.
C – In the government-wide financial statements, liabilities of $3 million are reported while in the fund-based financial statements, liabilities of $1 million
are reported.
D – In the government-wide financial statements, liabilities of $2 million are reported while in the fund-based financial statements, no liabilities are
reported.
Answer is C
The government-wide financial statements measure all economic reasons and, therefore, all liabilities are reported. Fund-based financial statements (for the
governmental funds) only measure current financial resources and claims to those financial resources. The $2 million bond is not yet a claim against current
financial resources because it does not come due for 10 years. It is not reported. However, any receivable that will be collected and any debt that must be
paid in a short period of time (usually within the current year or within 60 days after the end of the year) is reported. Except for property taxes (which
always use 60 days), the exact number of days must be chosen by the reporting unit—although 60 days is very common.
Auditing & Attestation
The City of Abrams produces a comprehensive annual financial report (CAFR) that includes an independent audit report written by the CPA firm of Shephard and
Sawyer. The second paragraph of this audit report states: “We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing Standards.” Who issues those Government Auditing
Standards?
A – GASB
B – Comptroller General of the United States
C – PCAOB
D – Auditing Standards Board of the AICPA
Answer is B
The Comptroller General of the United States issues Government Auditing Standards in a volume that is sometimes referred to as the “yellow book.”
Regulation
James Jones owns an apartment house with four units. He lives in one of the four units and rents the other three. Property taxes on this apartment house
amount to $1,000 for the current year. Jones is having financial difficulties and is unable to pay this assessment. His sister, Janice, pays the entire
$1,000 on the apartment house. How much of this payment can she take as a tax deduction when computing her itemized deductions for federal income tax
purposes?
A – Zero
B - $250
C - $500
D - $1,000
Answer is A
Property taxes are deductible as itemized deductions. However, they can only be deducted by the person on whom the tax is assessed. The property did not
below to Janice so she gets no deduction. The tax was not assessed on her property.
BEC
A headline in a newspaper recently proclaimed that “LIBOR reflects the price of funds in the international market.” What is LIBOR?
A – Lowest Incremental Borrowing Ordered Rate
B – London Interbank Offered Rate
C – Lichtenstein Interest Based Offering Rate
D – Late Invested Bank Overnight Rate
Answer is B
According to Wikipedia, “the London Interbank Offered Rate (or LIBOR) is a daily reference rate based on the interest rates at which banks borrow unsecured
funds from other banks in the London wholesale money market (or interbank market). It is roughly comparable to the U.S. Federal funds rate.
Have a great week.
Work hard
But find some joy in that work.
Being miserable does not add points
So, set a goal: Add a point a day
And feel good about what you have accomplished.
Swear off whining for a week.
And see if everyone around you is not a little bit more likely to smile at you.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
August 16, 2009
CPA Review for FREE
Get It Wrong and Then Get It Right
www.CPAreviewforFREE.com
58 Weeks of Operation/No Marketing/4,715,938 Page Views (and that’s an awful lot of added points)
Lesson 43
From: Joe
(1) – A very quick personal request. I know that a lot of you who get these weekly email lessons are still in college or have graduated from college recently.
You folks likely know some of your college accounting professors. As I have mentioned a few times in these lessons, I (along with C. J. Skender of UNC) are
coming out with a new Introduction to Financial Accounting textbook this fall. I am biased but I am extremely pleased by how it has come together.
However, it is a very crowded and competitive market so we are trying to let people know about the book. I recently did an Internet podcast to explain how the
textbook works (it is a free textbook – the company makes its money by selling supplements to the students). Below is the URL for the podcast (about 10
minutes). If you know a college accounting prof, ask them to listen. They don’t have to adopt the book but, as we always say here at CPA Review for FREE, the
more information that you have about available products, the better shopper you will be. Just tell them: “a new textbook is coming out this fall by a known
accounting textbook author; the book is free to the students and this podcast will explain why it is a better educational product than all of those other books
on the market.”
www.flatworldknowledge.com/Joe-Hoyle-Podcast
Thanks!!!
(2) – As you can imagine, I get lots of email here at www.CPAreviewforFREE.com. One of the things I hear over and over is how upset candidates get when they
miss some of the questions on our website. We have over 2,000 free (FREE) questions and answers available. Candidates will work a group of questions and
periodically they will get really upset by their mistakes. It is a natural feeling to be troubled by errors but I would strongly advise that you not get too
worried by missed questions. Concern can cause mental paralysis and that is never good. I actually think that mistakes can be beneficial part of your
preparation.
This week a friend of mine sent me the following quote. I found it so interesting that I forwarded it to my own students here at the University of Richmond
(the first day of classes begins on August 24).
Here’s what she sent:
"For the things we have to learn before we can do them, we learn by doing them." Aristotle, (written in 350 B.C.).
What the heck does that mean?
Okay, I don’t read Aristotle much but here is what I think he is saying to you. In most things in life, getting it wrong is a necessary part of eventually
gaining the insight and understanding so that you can get it right. Until you’ve worked hard and gotten it wrong, you really cannot understand or appreciate
things well enough to ever truly get them right.
Work -> wrong -> reconsider -> work -> right -> understand
I’ve taught in college now for 38 years and that’s a pretty good formula for real learning.
I believe, when preparing for the CPA Exam, you learn by doing. You learn to answer questions by answering questions. I think that was what Aristotle was
saying.
---I honestly do not think you learn to drive a car by reading a book. I think you learn to drive a car by driving a car.
---I honestly do not think you learn to play winning poker by reading a book. I think you learn to play winning poker by playing poker.
---I honestly do not think you learn to be a great chef by reading a book. I think you learn to be a great chef by going into the kitchen and cooking.
And, I strongly believe that you learn to answer questions by answering questions.
I honestly don’t think you pass the CPA Exam by reading a book or sitting in a class. That is helpful in getting an education but I do not think it is a very
effective way to pass the CPA Exam. I think you learn to answer questions by reading question after question and reading answer after answer. You learn from
doing and you especially learn from the mistakes you make. We learn by doing things again and again until we get them right.
Okay, if you want to pay lots of money, go sit in on a class and take notes
Or, get a book and start reading.
But I’ll bet you that, at the end of the day, when someone says “tell me how you learned enough to pass the CPA Exam,” you are NEVER going to say “I took a lot
of notes as some person stood in front of the room talking.” You are NEVER going to say “I went through pages and pages of material with a highlighter and
underlined a lot of that material.” That doesn’t even sound feasible.
I believe that you will inevitably say about passing “I just worked question after question after question and I read answer after answer after answer. It was
methodical and it worked.” You learn to pass the CPA Exam by working questions and reading those answers and then going back and doing those questions again
until you gain understanding.
(2) – Always love getting emails from our readers. Here are a couple that came in this week.
From TM: “It is unbelievable how much I needed your e-mail today. I take REG tomorrow and have been totally consumed with studying for the last 5 weeks. Tax
and law are not my favorites so this has been a LONG 5 weeks. I have used your questions (I purchased the PDF files) and feel like I have learned so much. Two
of my co-workers are also using your questions and answers. Each of us had purchased a Review program (XX and YY) but feel like we have learned more from your
questions than from the reviews we paid for. Thanks for the encouraging words - I was discouraged last night and feeling like I would fail. You put my hard
work into perspective and I know I will conquer this exam tomorrow. Then I will use your questions to study for FAR - did not pass it the first time using
XX.”
From SF: “I hope you are doing well. I really enjoy the inspirational e-mails you send out every week. I've become a fan of the cpa review for free site. To
tell you the truth, I was skeptical at first. How can a person not spend any money, just practice these free questions on the website and expect to pass the
cpa? Then, I tried out the questions. They really help you review well. I think the biggest mistake any cpa candidate can make is to put too much emphasis on
studying the material and not practicing any questions. I will be sitting for the CPA exam for the very first time on the 27th of August attempting to pass the
FAR section.”
(3) – As always, please understand that you can easily unsubscribe from these email lessons by scrolling to the bottom of any lesson and then clicking on the
“unsubscribe” button. Your time is valuable. We are glad to share these lessons with you for free but we certainly understand that you will eventually be
ready to unsubscribe.
And, please feel free to forward this email along to anyone that you know who is (a) an accounting student in college who needs help practicing for class tests
or (b) any accountant who is preparing for the CPA Exam or thinking about preparing for the CPA Exam.
And, if you ever want to get some encouragement by video, go to www.youtube.com and search for Joe Hoyle CPAreviewforFREE. I have three short videos that
provide a few tips on doing well. We’ve had about 15,000 views on these videos—hopefully, that equals 15,000 more points on the CPA Exam.
(4)- I mentioned last week that within 18 months or so, the written communication questions on the CPA Exam will probably all shift into BEC. But it is still
August 2009 and not late 2010. Therefore, if you are taking Auditing & Attestation or FAR or Regulation, you will have to answer a written communication
question and your grade on that assignment will make up 10 percent of your overall grade on that section of the exam. That really can be the difference in
passing and failing. Here are a few tips that I passed out last January. I thought it might be helpful to repeat some of this for all of you who are getting
ready to take the exam here at the end of the July-August window.
There is a lot of misunderstanding on the CPA Exam about the written communications questions. Currently, in each part of the exam except BEC, you get two
written communication questions (one in each simulation). You will be given a grade on your ability to write well with proper use of the English language.
That grade will make up 10 percent of your overall grade.
To give you some guidance, here is what the AICPA (at www.cpa-exam.org) says specifically about this part of the exam: “In all simulations, candidates are
presented with a situation and instructed to write a letter or memorandum on a specific topic. Written communication responses are scored on the basis of
three criteria: (1) organization (structure, ordering of ideas, linking of ideas one to another); (2) development (presentation of supporting evidence); and
(3) expression (use of standard business English).”
If you want more official information, you can check out the following site:
www.cpa-exam.org/cpa/written_communic.html
I believe that it is important for you to understand how your written communication answer will be graded. First, a grader looks over the answer to make sure
that it is “on topic.” In other words, if the question is about leases, then the answer has to be on leases and not deferred taxes or pensions. If the answer
is not on the proper topic, you get a zero for written communications and no further grading is done regardless of well written the answer is.
However, if the answer is on topic, it is turned over to a different expert who then grades it on the three criteria mentioned above.
It is important to understand this grading process because the content itself is not graded. That is not the purpose of this question (that’s the purpose of
the other 90 percent of these exams). So, if you get a written communications question and you are not too sure about the exact answer, that may not make any
difference at all. For these questions, you should worry about the writing and not the absolute precision of your answers. Absolute accuracy is not the goal.
Keep in mind also, that the computer on which you are taking the exam has “spell check” so you should not worry about misspelling words. You can check for
that.
Let me give you some of my own hints on how to answer the written communication questions in order to maximize your points.
---Restate the question. That will help focus you in on what is wanted. Plus, in business writing, it is not unusual to make sure everyone knows the issue at
hand.
---Keep your sentences as short as possible. Unless you are good at writing, once you go beyond about six or seven words, the more likely it is that you will
get into trouble. “The lease should be capitalized” is a great sentence. Avoid long and difficult sentences. Run-on sentences always make you look bad.
Keep It Simple, Stupid is especially good advice.
---Make sure each sentence logically follows the previous sentence. “The cat is in the kitchen. The cat is eating breakfast.” makes sense. “The cat is in
the kitchen. The Martian jumped out of his space ship.” does not connect well. When the sentences stop connecting well, you need to start a new paragraph.
---Avoid using words unless you are very sure of their meaning. Do not try to get fancy. You are not trying to be William Shakespeare or William Faulkner.
Don’t use a word like “exonerate” unless you are certain of its meaning and that it is used correctly in the sentence you have constructed.
---Remember that this is business writing. It should sound and look professional and formal. Slang is not appropriate. Stay away from cute – the graders do
not have a sense of humor. I also think that contractions and abbreviations should be avoided. They look sloppy. You want your writing to look professional.
“Do not” is better than “don’t” and “accounts receivable” is better than “a.r.”.
---Make sure that each sentence is complete. It should have a subject and a verb. “The cat over there in the kitchen.” has no verb. “The cat is in the
kitchen” has a subject and a verb.
---Capitalize the first letter of the first word in each sentence.
---Two to four sentences is a good length for most paragraphs.
---Unless you have strong skills as a writer, avoid semi-colons, colons, and dashes. Most people can say all they need to say with periods and a few commas.
---If you make any type of assertion, you need to justify it. “Equipment must be depreciated” is an assertion. “Equipment must be depreciated because it has
a finite life” is an assertion with an explanation.
I know a lot of people really dread the written communications questions. Personally, I think this is one place where—if you simply take it easy and do not
“overwrite”—you can do well. Just do not worry so much if you do not know the answer with absolute perfection.
(5) – And, now for some practice. Miss them all. Then read the answers carefully. Then go back and see if you can understand them all. In preparation, it
is not getting them right that is important but rather gaining understanding.
FAR – I am working on the 10th edition of my Advanced Accounting at the present time. Here is one question that I just wrote for it.
In December of Year One, the City of Abrams issued two bonds in connection with its General Fund. One was for $2 million to be repaid in 10 years. The other
was $1 million as a tax anticipation note to be repaid in 60 days. Which of the following is most likely to be true about the financial statements to be
reported at the end of Year One?
A – In the government-wide financial statements, liabilities of $3 million are reported while in the fund-based financial statements, no liabilities are
reported.
B – In the government-wide financial statements, liabilities of $2 million are reported while in the fund-based financial statements, liabilities of $1 million
are reported.
C – In the government-wide financial statements, liabilities of $3 million are reported while in the fund-based financial statements, liabilities of $1 million
are reported.
D – In the government-wide financial statements, liabilities of $2 million are reported while in the fund-based financial statements, no liabilities are
reported.
Answer is C
The government-wide financial statements measure all economic reasons and, therefore, all liabilities are reported. Fund-based financial statements (for the
governmental funds) only measure current financial resources and claims to those financial resources. The $2 million bond is not yet a claim against current
financial resources because it does not come due for 10 years. It is not reported. However, any receivable that will be collected and any debt that must be
paid in a short period of time (usually within the current year or within 60 days after the end of the year) is reported. Except for property taxes (which
always use 60 days), the exact number of days must be chosen by the reporting unit—although 60 days is very common.
Auditing & Attestation
The City of Abrams produces a comprehensive annual financial report (CAFR) that includes an independent audit report written by the CPA firm of Shephard and
Sawyer. The second paragraph of this audit report states: “We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing Standards.” Who issues those Government Auditing
Standards?
A – GASB
B – Comptroller General of the United States
C – PCAOB
D – Auditing Standards Board of the AICPA
Answer is B
The Comptroller General of the United States issues Government Auditing Standards in a volume that is sometimes referred to as the “yellow book.”
Regulation
James Jones owns an apartment house with four units. He lives in one of the four units and rents the other three. Property taxes on this apartment house
amount to $1,000 for the current year. Jones is having financial difficulties and is unable to pay this assessment. His sister, Janice, pays the entire
$1,000 on the apartment house. How much of this payment can she take as a tax deduction when computing her itemized deductions for federal income tax
purposes?
A – Zero
B - $250
C - $500
D - $1,000
Answer is A
Property taxes are deductible as itemized deductions. However, they can only be deducted by the person on whom the tax is assessed. The property did not
below to Janice so she gets no deduction. The tax was not assessed on her property.
BEC
A headline in a newspaper recently proclaimed that “LIBOR reflects the price of funds in the international market.” What is LIBOR?
A – Lowest Incremental Borrowing Ordered Rate
B – London Interbank Offered Rate
C – Lichtenstein Interest Based Offering Rate
D – Late Invested Bank Overnight Rate
Answer is B
According to Wikipedia, “the London Interbank Offered Rate (or LIBOR) is a daily reference rate based on the interest rates at which banks borrow unsecured
funds from other banks in the London wholesale money market (or interbank market). It is roughly comparable to the U.S. Federal funds rate.
Have a great week.
Work hard
But find some joy in that work.
Being miserable does not add points
So, set a goal: Add a point a day
And feel good about what you have accomplished.
Swear off whining for a week.
And see if everyone around you is not a little bit more likely to smile at you.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
Sunday, August 9, 2009
You Don't Need Luck
You Don’t Need Luck
www.CPAreviewforFREE.com
57 Weeks of Operation -> No Marketing -> 4,572,909 Page Views (that’s an awful lot of added points)
Lesson 42
From: Joe
(1) – Here’s a great idea that I would urge you to try.
I am always fascinated by things that help people do well at whatever they seek to do. Some people just seem to have a knack for getting things right and it is always interesting to wonder what gives them that edge. Recently, I have been reading a book titled “Blink.” It is by Malcolm Gladwell who has become quite well known recently for writing another best seller “Outliers.”
“Blink” is about a lot of things but I guess you could say it is mostly about how the brain works. Gladwell talks a lot about brain research and what those findings indicate. I was reading along the other day and came to a section that I found both fascinating and exciting. From page 56: “Two Dutch researchers did a study in which they had groups of students answer forty-two fairly demanding questions from the board game Trivial Pursuit. Half were asked to take five minutes beforehand to think about what it would mean to be a professor and write down everything that came to mind. Those students got 55.6 percent of the questions right. The other half of the students were asked to first sit and think about soccer hooligans. They ended up getting 42.6 percent of the Trivial Pursuit questions right. The ‘professor’ group didn’t know more than the ‘soccer hooligan’ group. They weren’t smarter or more focused or more serious. They were simply in a ‘smart’ frame of
mind, and, clearly, associating themselves with the idea of something smart, like a professor, made it a lot easier—in that stressful instant after a trivia question was asked—to blurt out the right answer. The difference between 55.6 and 42.6 percent, it should be pointed out, is enormous. That can be the difference between passing and failing.”
Wow, isn’t that interesting? “The difference between passing and failing.” I have thought about this research probably a thousand times since I read it. Think of the implications. Whenever you are sitting down to answer questions on www.CPAreviewforFREE.com (hopefully once or twice every day), try thinking about professors or smart people for a few moments before you start. Write down whatever comes to mind about being smart and how it feels. Just use five minutes as a warm up exercise. When you are studying, getting the questions right is always better than getting them wrong because that builds your confidence and helps you develop a strong foundation level of knowledge.
But, of course, the main reason that I bring this up relates to your actually taking the CPA Exam. When you go into the Prometric Center to take the CPA Exam, you now know what to think about. Everyone seems to have a different set of rituals that they perform as they get ready to begin the test. Clearly, this research indicates that thinking about smart people can be a significant help to your score. Perhaps you can think about one of your teachers or a person you know who just always seems brilliant. Stay calm and ponder how it feels to be that person and have that level of knowledge, to seemingly have all of the right answers, to be able to see things so clearly. Don’t try to be too intense. Just let your mind think about the really smart people you have met in your life and what that was like.
As Gladwell says: the difference between 55.6 and 42.6 percent is enormous.
The research indicates that having that “smart” mindset can add some serious points to your score, even your CPA Exam score.
(2) – Last Tuesday, in New York City, the AICPA held its semi-annual meeting with the folks like myself who create preparation material for the CPA Exam just to keep us properly updated. I jotted down some notes that I thought I would pass along. However, as I always say in such cases, I was listening and writing stuff down very quickly. Do not assume any of this is 100 percent accurate without additional verification. I tried to write everything down but I’m not a stenographer by trade.
From the AICPA:
--A lot of candidates come to the exam thinking that they will be able to use Excel and Word which they already know well. However, the examiners reminded us that the exam actually uses “Excel-like” and “Word-like” programs. Not quite the same. Consequently, they really urged us to urge you guys to go to www.cpa-exam.org and go through the “Tutorial and Sample Tests” just to be comfortable with the actual features you’ll find on the exam. I agree—no matter how you prepare, I think that is a good investment of time.
--Candidate growth has been above 10 percent per year recently and they expect the numbers to continue to grow by around 8 percent per year. Because of the recession, more and more accountants want to add the CPA designation to help them get jobs or help them to retain their jobs. It is not a bad time to get the CPA Exam passed.
--The pass rate remains around 48 to 49 percent per section.
--They will start testing international standards “no earlier than 2011.” Quite obviously, more information will be made available as the time nears. At that time, they will start mixing in some international questions but they assured us that they will let everyone know the standards being tested on each question.
--Instead of the current system of having two simulations in FAR, Regulation, and Auditing & Attestation, they are going to switch over to having 6-7 “task-based” simulations. That is probably not going to happen until late in 2010. The task-based simulations will be shorter and focus on only a single subject area. More simulations but shorter ones that are more focused in a single area. Again, you can expect to get a lot more information on that well in advance of the change.
--Currently, there are two written communication questions in three sections: FAR, Regulation, and Auditing & Attestation. They have decided that they really don’t need to test your written communications skills three times (that certainly seems reasonable). So, again probably in late 2010, they are going to switch the written communications question to just BEC. I do think that will be an improvement. I will let you know as soon as I find out more about that. It is likely that they will announce the timing of some of these changes very soon.
--They asked us to remind you about “Candidate Care.” If you had a problem at the testing site, you have the right to call up and report it to them. It has to be an “exam issue” and not a content issue or an application issue. For example, if your screen freezes up and it is not fixed quickly enough or if there is too much noise in the room or it is too hot. They said to call 1-800-CPA-EXAM and ask for “Candidate Care.”
--If you are taking the CPA Exam as a New York candidate, they wanted to remind everyone that New York is changing from a 120 hour requirement to a 150 requirement this summer. You can get the new rules by going to www.nasba.org. Many states change their rules periodically so if you are planning to take the exam in the future, do check your state occasionally for changes.
--They are continuing to investigate the possibility of physically giving the CPA Exam in countries outside of the United States. They think that might happen in a few countries late in 2010. But, as you can see from a lot of what I have mentioned, they hope to have more specific information fairly soon.
As I learn more about any of these changes, I will pass them along to you through these email lessons.
(3) – Our normal reminder: if you want to unsubscribe, just scroll to the bottom of this email lesson and click on the appropriate link.
(4) – I was surfing the Internet last night and came across one of my own recent email lessons that had been posted to a site. It is always fun to see your own work up on the ‘Net on someone else’s site. Several people had made comments about how great our site was.
One guy, though, wrote something like “This motivation is great but I’m not sure I’d trust the site for my preparation.”
I just had to laugh. We’ve NEVER asked anyone to trust us. Heck, it is the people who are charging you $2,500 who are asking you for your trust. Think about that. Our site is free. You can see all the questions and answers for free. The other review courses charge you thousands BEFORE they show you anything much at all. And, this guy was worried about trusting us.
We do not ask for your trust—we are the only people in CPA Review who specifically do not ask for trust.
However, we do ask for you to be a wise consumer. We ask you to be a good steward of your own money.
Use our site for 3-4 weeks. We are free so try us first. Go back to Lesson 41 (you can find that at www.cpareviewforfree.com) and get the steps that we recommend for you to follow. After 3-4 weeks, if you still want to spend a lot of money, those other review programs will be glad to take “your trust” and your money.
Remember, we are not out for you to make 100.
We are not out for you to get every question correct.
We are not seeking perfection.
We just want you to pass. We believe we have the very best questions and answers in the business.
But, don’t trust us—try it and see for yourself.
(5) – I have a picture of Muhammad Ali here on my wall, over my computer. The saying that accompanies that picture is one that I try to remember every day: “When a man says ‘I cannot,’ he has made a suggestion to himself. He has weakened his power of accomplishing that which otherwise would have been accomplished.”
I fully realize that you are pushing yourself to pass the CPA Exam. And, I fully realize that it takes some serious work. And, I fully realize that it is easy to get discouraged. When you read a question and don’t know the answer, it is easy to think of yourself as stupid. When you miss a couple of questions in a row, you start doubting yourself.
Don’t Do That!!!!
Don’t Do That!!!!
Never doubt yourself. You CAN pass the CPA Exam. I promise you that. I won’t promise you much but I will promise you that. I have worked with thousands and thousands of candidates since 1980. With the time, energy, care, desire, and focus, every single one of them could pass. Okay, none of them could have made a 100. Heck, I couldn’t make 100. But, everyone one of them could pass. And, so can you.
It is just a journey. If you keep putting one foot in front of another, you can walk from Oregon to Florida. Your CPA preparation is just a long journey. Eventually (hopefully sooner rather than later), if you just keep reading one question after another and keep going carefully over the answers, you will add enough points to make it happen. I believe that completely. You need to believe that as well.
Doubt is a killer. As soon as you “I cannot,” you have taken 10 steps backwards. You have given yourself a reason to slack off, you have given yourself an excuse, you have pulled the plug from your own intensity.
If I could make one wish for you, it would not be that you pass the exam or that you get easy questions or that you become successful. Those are just goals; they don’t really change much. If I could make one wish, it would be that you would believe in yourself 100 percent. Because that confidence is what will carry you to accomplish any and all of your goals.
Yeah, the work is tough but it is work that you can do.
Yeah, there are sacrifices to be made but never more than you can really bear.
If you can take “I cannot” out of your vocabulary, one day you will be able to say “I passed all four sections of the CPA Exam.”
(6) – Now for a little practice. And, before I begin, let me remind you of one thing I said in my previous lesson. “If you get a question correct, move on. Don’t sit and congratulate yourself. If you miss a question, read the answer carefully and find the step you missed and figure out what you missed in doing that step. Write down 10 words or less to help you get the question/step right the next time you see it. Don’t spend time writing pages—keep it to 10 words. You want to improve the odds that you can get the question right the next time. Reading the answer for missed questions may be the single most important thing you do in this process. I cannot stress how important this list of 10 word explanations can be for you in the end.”
FAR
James Attenborough is studying the financial statements for the Hawthorne Roberts Corporation. This company owns shares in Microsoft and several other companies. Consequently, it reports an Investment in Trading Securities on its year-end balance sheet with a balance of $18,765. What does that figure represent?
A – It is impossible to tell without reading the notes to the financial statements.
B – The $18,765 was the historical cost paid for these shares.
C – The $18,765 is the fair value of the shares on the balance sheet date.
D – The $18,765 is the lower of the cost or market value of these shares at the end of the year.
Answer is C
Investments in trading securities are being held for a relatively quick sale and are reported at fair value regardless of whether that figure is above or below the cost of acquisition. Changes in the fair value are reported as gains or losses in determining the company’s net income.
Auditing & Attestation
The CPA firm of Jeter and Cano is auditing the financial statements produced by Beckett Corporation. The shares of Beckett are publicly-traded on the New York Stock Exchange. What group is in charge of setting the auditing rules that Jeter and Cano must follow in performing this audit?
A – The American Institute of Certified Public Accountants (AICPA)
B – The Auditing Standards Board (ASB)
C – The Public Company Accounting Oversight Board (PCAOB)
D – The Financial Accounting Standards Board (FASB)
Answer is C
According to www.pcaob.org, “the PCAOB is a private-sector, non-profit corporation, created by the Sarbanes-Oxley Act, to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.”
Regulation
The Fuld Company filed for bankruptcy on March 23, 2009. Company management discussed the possibility of reorganization (Chapter 11 bankruptcy) but eventually opted for liquidation (Chapter 7 bankruptcy). The company owes each of the following amounts. Within the liquidation process, which is most likely to be paid?
A – Federal income tax of $9,000.
B – Administrative expense of $8,000 due to the attorneys doing the legal work necessary for liquidation.
C - $4,000 owed as a salary to one of the company’s employees as of March 23.
D - $1,000 owed to an employee benefit plan resulting from work done in the two months prior to March 23.
Answer is B
To provide a logical structure for liquidation, bankruptcy laws put claims into a priority list with the items listed first being paid first. A partial list of those debts (in order of priority) would be: administrative expenses, wages owed at the date of the bankruptcy filing up to $10,950 per person, contributions to employee benefit plans up to $10,950, consumer deposits up to $2,425 per person, taxes, and—finally—all other unsecured claims.
BEC
A company reports sales of $800,000, operating expenses of $500,000, cash of $44,000, stockholders’ equity of $345,000, and earnings per share of $3.00. The company also has $575,000 in noncurrent liabilities and pays a cash dividend of $.75 per share to its 20,000 shares of outstanding common stock. What is the company’s dividend payout ratio?
A – 16 percent
B – 25 percent
C – 28 percent
D – 34 percent
Answer is B
The dividend payout ratio is the company’s cash dividend per share ($.75) divided by the earnings per share for the same period ($3.00). It is the percentage of the reported income that goes to the owners in the form of dividends. Here, the dividend payout ratio is 25 percent or $.75/$3.00.
I’ll leave you with one final quote from Muhammad Ali. Certainly a person who has given us an awful lot of great quotes: “Wouldn't it be a beautiful world if just 10 percent of the people who believe in the power of love would compete with one another to see who could do the most good for the most people?”
Joe Hoyle
www.youtube.com/watch?v=LjwHxVbZq1o
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
57 Weeks of Operation -> No Marketing -> 4,572,909 Page Views (that’s an awful lot of added points)
Lesson 42
From: Joe
(1) – Here’s a great idea that I would urge you to try.
I am always fascinated by things that help people do well at whatever they seek to do. Some people just seem to have a knack for getting things right and it is always interesting to wonder what gives them that edge. Recently, I have been reading a book titled “Blink.” It is by Malcolm Gladwell who has become quite well known recently for writing another best seller “Outliers.”
“Blink” is about a lot of things but I guess you could say it is mostly about how the brain works. Gladwell talks a lot about brain research and what those findings indicate. I was reading along the other day and came to a section that I found both fascinating and exciting. From page 56: “Two Dutch researchers did a study in which they had groups of students answer forty-two fairly demanding questions from the board game Trivial Pursuit. Half were asked to take five minutes beforehand to think about what it would mean to be a professor and write down everything that came to mind. Those students got 55.6 percent of the questions right. The other half of the students were asked to first sit and think about soccer hooligans. They ended up getting 42.6 percent of the Trivial Pursuit questions right. The ‘professor’ group didn’t know more than the ‘soccer hooligan’ group. They weren’t smarter or more focused or more serious. They were simply in a ‘smart’ frame of
mind, and, clearly, associating themselves with the idea of something smart, like a professor, made it a lot easier—in that stressful instant after a trivia question was asked—to blurt out the right answer. The difference between 55.6 and 42.6 percent, it should be pointed out, is enormous. That can be the difference between passing and failing.”
Wow, isn’t that interesting? “The difference between passing and failing.” I have thought about this research probably a thousand times since I read it. Think of the implications. Whenever you are sitting down to answer questions on www.CPAreviewforFREE.com (hopefully once or twice every day), try thinking about professors or smart people for a few moments before you start. Write down whatever comes to mind about being smart and how it feels. Just use five minutes as a warm up exercise. When you are studying, getting the questions right is always better than getting them wrong because that builds your confidence and helps you develop a strong foundation level of knowledge.
But, of course, the main reason that I bring this up relates to your actually taking the CPA Exam. When you go into the Prometric Center to take the CPA Exam, you now know what to think about. Everyone seems to have a different set of rituals that they perform as they get ready to begin the test. Clearly, this research indicates that thinking about smart people can be a significant help to your score. Perhaps you can think about one of your teachers or a person you know who just always seems brilliant. Stay calm and ponder how it feels to be that person and have that level of knowledge, to seemingly have all of the right answers, to be able to see things so clearly. Don’t try to be too intense. Just let your mind think about the really smart people you have met in your life and what that was like.
As Gladwell says: the difference between 55.6 and 42.6 percent is enormous.
The research indicates that having that “smart” mindset can add some serious points to your score, even your CPA Exam score.
(2) – Last Tuesday, in New York City, the AICPA held its semi-annual meeting with the folks like myself who create preparation material for the CPA Exam just to keep us properly updated. I jotted down some notes that I thought I would pass along. However, as I always say in such cases, I was listening and writing stuff down very quickly. Do not assume any of this is 100 percent accurate without additional verification. I tried to write everything down but I’m not a stenographer by trade.
From the AICPA:
--A lot of candidates come to the exam thinking that they will be able to use Excel and Word which they already know well. However, the examiners reminded us that the exam actually uses “Excel-like” and “Word-like” programs. Not quite the same. Consequently, they really urged us to urge you guys to go to www.cpa-exam.org and go through the “Tutorial and Sample Tests” just to be comfortable with the actual features you’ll find on the exam. I agree—no matter how you prepare, I think that is a good investment of time.
--Candidate growth has been above 10 percent per year recently and they expect the numbers to continue to grow by around 8 percent per year. Because of the recession, more and more accountants want to add the CPA designation to help them get jobs or help them to retain their jobs. It is not a bad time to get the CPA Exam passed.
--The pass rate remains around 48 to 49 percent per section.
--They will start testing international standards “no earlier than 2011.” Quite obviously, more information will be made available as the time nears. At that time, they will start mixing in some international questions but they assured us that they will let everyone know the standards being tested on each question.
--Instead of the current system of having two simulations in FAR, Regulation, and Auditing & Attestation, they are going to switch over to having 6-7 “task-based” simulations. That is probably not going to happen until late in 2010. The task-based simulations will be shorter and focus on only a single subject area. More simulations but shorter ones that are more focused in a single area. Again, you can expect to get a lot more information on that well in advance of the change.
--Currently, there are two written communication questions in three sections: FAR, Regulation, and Auditing & Attestation. They have decided that they really don’t need to test your written communications skills three times (that certainly seems reasonable). So, again probably in late 2010, they are going to switch the written communications question to just BEC. I do think that will be an improvement. I will let you know as soon as I find out more about that. It is likely that they will announce the timing of some of these changes very soon.
--They asked us to remind you about “Candidate Care.” If you had a problem at the testing site, you have the right to call up and report it to them. It has to be an “exam issue” and not a content issue or an application issue. For example, if your screen freezes up and it is not fixed quickly enough or if there is too much noise in the room or it is too hot. They said to call 1-800-CPA-EXAM and ask for “Candidate Care.”
--If you are taking the CPA Exam as a New York candidate, they wanted to remind everyone that New York is changing from a 120 hour requirement to a 150 requirement this summer. You can get the new rules by going to www.nasba.org. Many states change their rules periodically so if you are planning to take the exam in the future, do check your state occasionally for changes.
--They are continuing to investigate the possibility of physically giving the CPA Exam in countries outside of the United States. They think that might happen in a few countries late in 2010. But, as you can see from a lot of what I have mentioned, they hope to have more specific information fairly soon.
As I learn more about any of these changes, I will pass them along to you through these email lessons.
(3) – Our normal reminder: if you want to unsubscribe, just scroll to the bottom of this email lesson and click on the appropriate link.
(4) – I was surfing the Internet last night and came across one of my own recent email lessons that had been posted to a site. It is always fun to see your own work up on the ‘Net on someone else’s site. Several people had made comments about how great our site was.
One guy, though, wrote something like “This motivation is great but I’m not sure I’d trust the site for my preparation.”
I just had to laugh. We’ve NEVER asked anyone to trust us. Heck, it is the people who are charging you $2,500 who are asking you for your trust. Think about that. Our site is free. You can see all the questions and answers for free. The other review courses charge you thousands BEFORE they show you anything much at all. And, this guy was worried about trusting us.
We do not ask for your trust—we are the only people in CPA Review who specifically do not ask for trust.
However, we do ask for you to be a wise consumer. We ask you to be a good steward of your own money.
Use our site for 3-4 weeks. We are free so try us first. Go back to Lesson 41 (you can find that at www.cpareviewforfree.com) and get the steps that we recommend for you to follow. After 3-4 weeks, if you still want to spend a lot of money, those other review programs will be glad to take “your trust” and your money.
Remember, we are not out for you to make 100.
We are not out for you to get every question correct.
We are not seeking perfection.
We just want you to pass. We believe we have the very best questions and answers in the business.
But, don’t trust us—try it and see for yourself.
(5) – I have a picture of Muhammad Ali here on my wall, over my computer. The saying that accompanies that picture is one that I try to remember every day: “When a man says ‘I cannot,’ he has made a suggestion to himself. He has weakened his power of accomplishing that which otherwise would have been accomplished.”
I fully realize that you are pushing yourself to pass the CPA Exam. And, I fully realize that it takes some serious work. And, I fully realize that it is easy to get discouraged. When you read a question and don’t know the answer, it is easy to think of yourself as stupid. When you miss a couple of questions in a row, you start doubting yourself.
Don’t Do That!!!!
Don’t Do That!!!!
Never doubt yourself. You CAN pass the CPA Exam. I promise you that. I won’t promise you much but I will promise you that. I have worked with thousands and thousands of candidates since 1980. With the time, energy, care, desire, and focus, every single one of them could pass. Okay, none of them could have made a 100. Heck, I couldn’t make 100. But, everyone one of them could pass. And, so can you.
It is just a journey. If you keep putting one foot in front of another, you can walk from Oregon to Florida. Your CPA preparation is just a long journey. Eventually (hopefully sooner rather than later), if you just keep reading one question after another and keep going carefully over the answers, you will add enough points to make it happen. I believe that completely. You need to believe that as well.
Doubt is a killer. As soon as you “I cannot,” you have taken 10 steps backwards. You have given yourself a reason to slack off, you have given yourself an excuse, you have pulled the plug from your own intensity.
If I could make one wish for you, it would not be that you pass the exam or that you get easy questions or that you become successful. Those are just goals; they don’t really change much. If I could make one wish, it would be that you would believe in yourself 100 percent. Because that confidence is what will carry you to accomplish any and all of your goals.
Yeah, the work is tough but it is work that you can do.
Yeah, there are sacrifices to be made but never more than you can really bear.
If you can take “I cannot” out of your vocabulary, one day you will be able to say “I passed all four sections of the CPA Exam.”
(6) – Now for a little practice. And, before I begin, let me remind you of one thing I said in my previous lesson. “If you get a question correct, move on. Don’t sit and congratulate yourself. If you miss a question, read the answer carefully and find the step you missed and figure out what you missed in doing that step. Write down 10 words or less to help you get the question/step right the next time you see it. Don’t spend time writing pages—keep it to 10 words. You want to improve the odds that you can get the question right the next time. Reading the answer for missed questions may be the single most important thing you do in this process. I cannot stress how important this list of 10 word explanations can be for you in the end.”
FAR
James Attenborough is studying the financial statements for the Hawthorne Roberts Corporation. This company owns shares in Microsoft and several other companies. Consequently, it reports an Investment in Trading Securities on its year-end balance sheet with a balance of $18,765. What does that figure represent?
A – It is impossible to tell without reading the notes to the financial statements.
B – The $18,765 was the historical cost paid for these shares.
C – The $18,765 is the fair value of the shares on the balance sheet date.
D – The $18,765 is the lower of the cost or market value of these shares at the end of the year.
Answer is C
Investments in trading securities are being held for a relatively quick sale and are reported at fair value regardless of whether that figure is above or below the cost of acquisition. Changes in the fair value are reported as gains or losses in determining the company’s net income.
Auditing & Attestation
The CPA firm of Jeter and Cano is auditing the financial statements produced by Beckett Corporation. The shares of Beckett are publicly-traded on the New York Stock Exchange. What group is in charge of setting the auditing rules that Jeter and Cano must follow in performing this audit?
A – The American Institute of Certified Public Accountants (AICPA)
B – The Auditing Standards Board (ASB)
C – The Public Company Accounting Oversight Board (PCAOB)
D – The Financial Accounting Standards Board (FASB)
Answer is C
According to www.pcaob.org, “the PCAOB is a private-sector, non-profit corporation, created by the Sarbanes-Oxley Act, to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.”
Regulation
The Fuld Company filed for bankruptcy on March 23, 2009. Company management discussed the possibility of reorganization (Chapter 11 bankruptcy) but eventually opted for liquidation (Chapter 7 bankruptcy). The company owes each of the following amounts. Within the liquidation process, which is most likely to be paid?
A – Federal income tax of $9,000.
B – Administrative expense of $8,000 due to the attorneys doing the legal work necessary for liquidation.
C - $4,000 owed as a salary to one of the company’s employees as of March 23.
D - $1,000 owed to an employee benefit plan resulting from work done in the two months prior to March 23.
Answer is B
To provide a logical structure for liquidation, bankruptcy laws put claims into a priority list with the items listed first being paid first. A partial list of those debts (in order of priority) would be: administrative expenses, wages owed at the date of the bankruptcy filing up to $10,950 per person, contributions to employee benefit plans up to $10,950, consumer deposits up to $2,425 per person, taxes, and—finally—all other unsecured claims.
BEC
A company reports sales of $800,000, operating expenses of $500,000, cash of $44,000, stockholders’ equity of $345,000, and earnings per share of $3.00. The company also has $575,000 in noncurrent liabilities and pays a cash dividend of $.75 per share to its 20,000 shares of outstanding common stock. What is the company’s dividend payout ratio?
A – 16 percent
B – 25 percent
C – 28 percent
D – 34 percent
Answer is B
The dividend payout ratio is the company’s cash dividend per share ($.75) divided by the earnings per share for the same period ($3.00). It is the percentage of the reported income that goes to the owners in the form of dividends. Here, the dividend payout ratio is 25 percent or $.75/$3.00.
I’ll leave you with one final quote from Muhammad Ali. Certainly a person who has given us an awful lot of great quotes: “Wouldn't it be a beautiful world if just 10 percent of the people who believe in the power of love would compete with one another to see who could do the most good for the most people?”
Joe Hoyle
www.youtube.com/watch?v=LjwHxVbZq1o
Co-Founder
CPA Review for FREE
Monday, July 27, 2009
I Want You To Pass So Get To Work -- CPA Review for FREE
Lesson 41
From: Joe
(1) – Greetings from Richmond, Virginia – hope you are having a great day. We only have a finite number of days. You might as well put the best spin on each one of them that you can. Seriously, are you a “glass is half full” or “glass is half empty” type of person? I hope you are a “half full” type because life is just so much better that way. It is all a question of attitude and you can help make yourself feel better (and everyone around you feel better) just based on your attitude.
**
Okay, back to the CPA Exam. Last week, President Obama was giving a speech to the (I think) NAACP. I only heard a couple of sentences on the radio but I thought they were just great. I even stopped exercising to run get a pencil and write them down.
“No one has written your destiny for you. Your destiny is in your own hands.”
Whether you are conservative or liberal, whether you are a Democrat or Republican, you’ve got to like those sentiments. No one has written your destiny for you. Your destiny is in your own hands.
I know that we have a lot of people who receive these lessons who are going to be taking the CPA Exam during the last days of July and then into August. The time is now. People all across the country and the rest of the world are preparing for THE exam, right now—today. Roughly half of those people will pass. Roughly have of the people will fail. The math is simple. Which will you be? To a large extent, your destiny really is in your own hands. When all is said and done, it is up to you as to which half you will be in.
You don’t have to make 100.
You don’t have to be perfect.
You don’t have to know everything.
You don’t have to be at the top of the class.
You just have to be in the upper half. Anywhere in the upper half is probably good enough to get 75 points and pass.
When you are preparing for the CPA Exam, you cannot do anything about your age, your education, your intelligence. But, on the CPA Exam, those are not terribly important. Their value is vastly overstated. The great thing is that you can do something about the most important ingredient: how many hours you study and how much you concentrate during those hours. Both of those are in your hands and your hands only.
I would bet that the half of the candidates who study the most hours and study them with the most focus will be the half that is going to pass. It is not a guarantee, it is not an absolute but, for the most part, that is who is going to pass. It is just common sense. Amount of hours and quality of those hours. Tell me where you rank on those two and I’ll tell you whether you are going to pass.
So, your destiny really is in your hands. If you can push yourself to put in those hours and really stay focused, you can get into that upper half and, then, you can PASS.
In a recent one of these email lessons, I talked about the importance of “urgency.” That is something I have been practicing myself: figuring out what I want to get done each day and then trying to realize that it is urgent to get it accomplished.
Figure out what you want your destiny to be and then put in some urgency to get yourself moving in that direction.
Goals Plus Urgency = Success
(2) – Back on February 3, I talked about how to use CPA Review for FREE to pass the CPA Exam. I realized this morning as I started this lesson that probably half of the folks who get these email lessons have signed up since that time. So, I want to repeat my instructions. I’d love to see you use www.CPAreviewforFREE.com and save yourself thousands of dollars.
From my February 3, 2009 lesson: In case you have not really tried CPA Review for FREE yet, let me make the following suggestion. Put your money back in your pocket. Then, use us for one part of the exam and see how you do. We think you will be very pleased and you will have saved thousands of dollars. It makes no sense to pay for a program (especially a mediocre program) and then realize that you could have gotten the points you need to pass for FREE.
Here is one way that we recommend using CPA Review for FREE.
(a) – Make sure that you are qualified to take the CPA Exam. Start the process by going to www.nasba.org and review the requirements of your state. It is probably going to take a month or so for the state to review your application so get this process started quickly.
(b) – Pick the part of the exam that you like the most. It is always easier to get started with a part you like. I am personally a big fan of starting with Financial Accounting. Getting started is often the toughest step in the whole process. Don’t set the wall too high at the beginning.
(c) – Once you get your official Notice to Schedule indicating that your application has been approved, schedule to take that first part of the exam in roughly 40 days. There is absolutely no reason to study for six months. That is inefficient; you’ll forget it all. Let’s get started now and get it done. Pick a day in about 6 weeks and reserve your seat. Having a date set will get you fired up to do the work. (You might want to go back to Lesson 40 and read about buying marbles and putting them into a jar—that really is helpful.)
(d)—Go to www.CPAreviewforFREE.com and read all the information under “resources.” It is all important so read it.
(e)—Start answering at least 15-18 questions per day from our website. It is probably a good idea to go one topic at a time. Make a list of the categories and check them off as you go. Seeing the progress will make you feel good and give you energy. Work six days per week. Take off one day each week completely and get some real rest and relaxation. Try to average at least 90 minutes per day the rest of the week.
(f)—Do 15 minutes or so of physical exercise each day to keep the blood pumping. You will feel better and you will do better. I cannot possibly stress how important it is to get a little exercise every day. Your body and brain will wear out on you if you don’t and that’s no way to pass.
(g)—At this point, never guess at answers when you study. On the exam, you will need to guess but not when you are preparing. Guessing during study adds no value whatsoever and can mislead you about you know.
(h)—Never worry about how many questions you are getting right or wrong. That is a distraction that does not help you one bit. The only thing you want to worry about is getting better.
(i)—If you get a question correct, move on. Don’t sit and congratulate yourself.
(j)—Here’s a very important point. If you miss a question, read the answer carefully and find the step you missed and figure out what you missed in doing that step. Write down 10 words or less to help you get the question/step right the next time you see it. Don’t spend time writing pages—keep it to 10 words. You want to improve the odds that you can get the question right the next time.. Reading the answer for missed questions may be the single most important thing you do in this process. I cannot stress how important this list of 10 word explanations can be for you in the end.
(k)—As you work, keep a list of “three-second questions..” Those are the very basics—questions that you should be able to read, count to three, and give an answer off the top of your head. Having the basics down is so very vital to learning. “How is interest expense computed?” “Interest expense is the book value of the debt times the effective or yield rate.” “How is the amount of cash interest to be paid on a debt computed?” “Cash interest is the face value of the debt times the stated rate of interest.” Those are three second questions and their answers.
(l)—Never forget that you only need to get 75 points to pass. You are not seeking perfection. Because of the grading system, 75 points does not even mean 75 percent of the questions.
(m)—Once a week, walk back through your three-second questions. You just want to keep the basics fresh in your mind. You will forget things quickly; you need a way to keep the basics in your mind.
(n)—When you get to the final 7-10 days, start going methodically back through your 10 word notes. You want to work on increasing the number of questions that you can answer. That is your only real goal.
(o)—When you get to the final 7-10 days, start answering questions at www.CPAreviewforFREE.com in random mode rather than by topic. You want to get used to seeing questions move quickly from one topic to the next. That is an important step that I think too many people ignore.
(p)—When you get to the final 7-10 days, go to www.cpa-exam.org and go through the tutorial and sample tests. Read everything and just get a feel for how the questions (both multiple choice and simulations) are presented. Don’t worry about trying to figure out answers on that site, that’s not the purpose.
(q)—Make sure you read all of the information again that came with your Notice to Schedule. They really do try to explain everything to you in advance to make the testing experience less stressful. Read this material carefully.
(r)—Make sure you know the location of the testing center. Estimate how long the drive will take and what time you need to leave to get there comfortably. You want to avoid any and all stress. You want 100 percent of your energy focused on getting points.
(s)—On the night before the exam, eat normally and get a typical amount of sleep. You will think more clearly during the exam if nothing has upset the normal rhythm of your life. You will have more energy and more confidence. You want to be loose but focused. I am totally against losing sleep to study on the night or two before the exam. Sleepy people do not pass the CPA Exam.
(t)—During the exam, watch your time very closely. You want to finish with about 10 seconds left. Don’t waste time but don’t get too rushed. On the day of the exam, time management is your biggest enemy.
(u)—If you do not know a question on the exam, eliminate as many answers as possible and take a guess. Do not let a tough question get you rattled. Don’t spend time on a question that you really do not know. No one is seeking perfection from you. But you do need to have an answer or a guess down for every question.
(v)-- When you leave the testing center, smile and say “I did it; I gave it my very best!!!” That is really the attitude that you want to have.
Try it – try CPA Review for FREE - it will work and you’ll have all of your money still in your pocket. For heaven’s sake, there is a recession going on; be a wise shopper.
(3) – Just a reminder as always: if you want to unsubscribe to these lessons, you can do that by scrolling to the end of this lesson and clicking on the appropriate link.
(4) – At the end of last week, we moved over 4,250,000 page views as we head toward our goal of 10 million by the end of 2009.
(5) – And, finally, as always, here is some practice to help you ADD THOSE POINTS.
Financial Accounting -- Another practice question from my new Financial Accounting textbook (if you know any college accounting profs, tell them to be on the watch. CJ Skender and I have authored an innovative new textbook that will be released this fall).
John Doe successfully creates an invention at a cost of $1.6 million and, on January 1, Year One, receives a patent that gives him the exclusive rights to that invention for 20 years. One year later, John Doe sells all rights to the patent to Nahquan Corporation for $3 million. Nahquan pays another $400,000 to a legal firm to help ensure that the right to this patent is properly transferred. Nahquan hopes to use the patent for five years and then sell it for $200,000. On December 31, Year Two, another company offers to pay Nahquan $4 million for this intangible asset but that amount is rejected as being too low. On its balance sheet at that time, what balance is reported by Nahquan for the patent?
A - $2,560,000
B - $2,760,000
C - $3,040,000
D - $3,221,053
Answer is B.
For Nahquan, the capitalized cost of this intangible asset is $3.4 million. That amount is the normal and necessary cost of acquiring the patent so that it could be used by the company to generate future revenues. The company plans to make use of it for five years and then sell it for a $200,000 residual value. Annual amortization for that period will be $640,000 per year ([$3.4 million less $200,000] divided by 5 years). After Nahquan holds the patent for its first year (Year Two), the reported value is reduced to $2,760,000 ($3.4 million less $640,000). The $4 million offer does not affect Nahquan’s reporting since it was not accepted. The amortized historical cost remains the basis for financial reporting unless the value becomes impaired.
Regulation
The Waynesboro Corporation is located in Michigan. Recently, it has begun negotiated to acquire a controlling interest in Havenford Corporation, located in Indiana. Havenford has 1,000,000 issued and outstanding shares of common stock but no shares of preferred stock. Waynesboro wants to buy enough shares so that a consolidated tax return can be filed. How many shares must Waynesboro acquire?
A – 500,001
B – 800,000
C – 950,000
D – 1,000,000
Answer is B
In order to file a consolidated tax return (which is allowed but not required), the parent must own at least 80 percent of the outstanding shares of the subsidiary. Here, is one area where financial accounting and tax accounting differ. For financial accounting, consolidation is mandated with any number of shares is acquired in excess of 50 percent. For tax accounting, consolidation is allowed once 80 percent of the stock is owned.
Auditing & Attestation
The CPA firm of Borgin & Burke is coming to the end of an audit engagement and has just mailed a letter to the client’s lawyers. What is the primary purpose of such a lawyer’s letter?
A – To discover any unreported contingent liabilities.
B – To ensure that all stock transactions engaged in by the client have been legal.
C – To confirm the legal expense balance reported by the audit client on its income statement.
D – To corroborate information obtained from the client about contingent losses.
Answer is D.
The financial information reported in financial statements is always the representation of the company’s management. The auditor seeks to gain corroborating evidence so as to provide reasonable assurance that this information contains no material misstatements according to US GAAP. Thus, the client creates a list of all contingencies and then provides estimations of the likelihood of loss as well as the most likely amounts. This information is then sent to the company’s lawyer whose response will hopefully help the firm by providing supportive evidence..
BEC
Which of the following is true about the International Monetary Fund (IMF)?
A – It prints money to be used by member countries.
B – It has a pool of currencies from which member countries can borrow to meet short-term deficits in balance of payments.
C – It serves as an investment resource for member countries allowing them to make extremely high rates of return on invested capital.
D – It allows deposits by member countries which are then allocated each year as a way to reward countries which have made the most progress economically.
Answer is B
According to its website, “the IMF promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade, and provides resources to help members in balance of payments difficulties or to assist with poverty reduction.”
I opened with a Barack Obama quote so I’ll close with one also. If you want to pass the CPA Exam, you cannot wait for someone else. You are the person that you have been waiting for.
“Change will not come if we wait for some other person or some other time. We are the ones we've been waiting for. We are the change that we seek.”
From: Joe
(1) – Greetings from Richmond, Virginia – hope you are having a great day. We only have a finite number of days. You might as well put the best spin on each one of them that you can. Seriously, are you a “glass is half full” or “glass is half empty” type of person? I hope you are a “half full” type because life is just so much better that way. It is all a question of attitude and you can help make yourself feel better (and everyone around you feel better) just based on your attitude.
**
Okay, back to the CPA Exam. Last week, President Obama was giving a speech to the (I think) NAACP. I only heard a couple of sentences on the radio but I thought they were just great. I even stopped exercising to run get a pencil and write them down.
“No one has written your destiny for you. Your destiny is in your own hands.”
Whether you are conservative or liberal, whether you are a Democrat or Republican, you’ve got to like those sentiments. No one has written your destiny for you. Your destiny is in your own hands.
I know that we have a lot of people who receive these lessons who are going to be taking the CPA Exam during the last days of July and then into August. The time is now. People all across the country and the rest of the world are preparing for THE exam, right now—today. Roughly half of those people will pass. Roughly have of the people will fail. The math is simple. Which will you be? To a large extent, your destiny really is in your own hands. When all is said and done, it is up to you as to which half you will be in.
You don’t have to make 100.
You don’t have to be perfect.
You don’t have to know everything.
You don’t have to be at the top of the class.
You just have to be in the upper half. Anywhere in the upper half is probably good enough to get 75 points and pass.
When you are preparing for the CPA Exam, you cannot do anything about your age, your education, your intelligence. But, on the CPA Exam, those are not terribly important. Their value is vastly overstated. The great thing is that you can do something about the most important ingredient: how many hours you study and how much you concentrate during those hours. Both of those are in your hands and your hands only.
I would bet that the half of the candidates who study the most hours and study them with the most focus will be the half that is going to pass. It is not a guarantee, it is not an absolute but, for the most part, that is who is going to pass. It is just common sense. Amount of hours and quality of those hours. Tell me where you rank on those two and I’ll tell you whether you are going to pass.
So, your destiny really is in your hands. If you can push yourself to put in those hours and really stay focused, you can get into that upper half and, then, you can PASS.
In a recent one of these email lessons, I talked about the importance of “urgency.” That is something I have been practicing myself: figuring out what I want to get done each day and then trying to realize that it is urgent to get it accomplished.
Figure out what you want your destiny to be and then put in some urgency to get yourself moving in that direction.
Goals Plus Urgency = Success
(2) – Back on February 3, I talked about how to use CPA Review for FREE to pass the CPA Exam. I realized this morning as I started this lesson that probably half of the folks who get these email lessons have signed up since that time. So, I want to repeat my instructions. I’d love to see you use www.CPAreviewforFREE.com and save yourself thousands of dollars.
From my February 3, 2009 lesson: In case you have not really tried CPA Review for FREE yet, let me make the following suggestion. Put your money back in your pocket. Then, use us for one part of the exam and see how you do. We think you will be very pleased and you will have saved thousands of dollars. It makes no sense to pay for a program (especially a mediocre program) and then realize that you could have gotten the points you need to pass for FREE.
Here is one way that we recommend using CPA Review for FREE.
(a) – Make sure that you are qualified to take the CPA Exam. Start the process by going to www.nasba.org and review the requirements of your state. It is probably going to take a month or so for the state to review your application so get this process started quickly.
(b) – Pick the part of the exam that you like the most. It is always easier to get started with a part you like. I am personally a big fan of starting with Financial Accounting. Getting started is often the toughest step in the whole process. Don’t set the wall too high at the beginning.
(c) – Once you get your official Notice to Schedule indicating that your application has been approved, schedule to take that first part of the exam in roughly 40 days. There is absolutely no reason to study for six months. That is inefficient; you’ll forget it all. Let’s get started now and get it done. Pick a day in about 6 weeks and reserve your seat. Having a date set will get you fired up to do the work. (You might want to go back to Lesson 40 and read about buying marbles and putting them into a jar—that really is helpful.)
(d)—Go to www.CPAreviewforFREE.com and read all the information under “resources.” It is all important so read it.
(e)—Start answering at least 15-18 questions per day from our website. It is probably a good idea to go one topic at a time. Make a list of the categories and check them off as you go. Seeing the progress will make you feel good and give you energy. Work six days per week. Take off one day each week completely and get some real rest and relaxation. Try to average at least 90 minutes per day the rest of the week.
(f)—Do 15 minutes or so of physical exercise each day to keep the blood pumping. You will feel better and you will do better. I cannot possibly stress how important it is to get a little exercise every day. Your body and brain will wear out on you if you don’t and that’s no way to pass.
(g)—At this point, never guess at answers when you study. On the exam, you will need to guess but not when you are preparing. Guessing during study adds no value whatsoever and can mislead you about you know.
(h)—Never worry about how many questions you are getting right or wrong. That is a distraction that does not help you one bit. The only thing you want to worry about is getting better.
(i)—If you get a question correct, move on. Don’t sit and congratulate yourself.
(j)—Here’s a very important point. If you miss a question, read the answer carefully and find the step you missed and figure out what you missed in doing that step. Write down 10 words or less to help you get the question/step right the next time you see it. Don’t spend time writing pages—keep it to 10 words. You want to improve the odds that you can get the question right the next time.. Reading the answer for missed questions may be the single most important thing you do in this process. I cannot stress how important this list of 10 word explanations can be for you in the end.
(k)—As you work, keep a list of “three-second questions..” Those are the very basics—questions that you should be able to read, count to three, and give an answer off the top of your head. Having the basics down is so very vital to learning. “How is interest expense computed?” “Interest expense is the book value of the debt times the effective or yield rate.” “How is the amount of cash interest to be paid on a debt computed?” “Cash interest is the face value of the debt times the stated rate of interest.” Those are three second questions and their answers.
(l)—Never forget that you only need to get 75 points to pass. You are not seeking perfection. Because of the grading system, 75 points does not even mean 75 percent of the questions.
(m)—Once a week, walk back through your three-second questions. You just want to keep the basics fresh in your mind. You will forget things quickly; you need a way to keep the basics in your mind.
(n)—When you get to the final 7-10 days, start going methodically back through your 10 word notes. You want to work on increasing the number of questions that you can answer. That is your only real goal.
(o)—When you get to the final 7-10 days, start answering questions at www.CPAreviewforFREE.com in random mode rather than by topic. You want to get used to seeing questions move quickly from one topic to the next. That is an important step that I think too many people ignore.
(p)—When you get to the final 7-10 days, go to www.cpa-exam.org and go through the tutorial and sample tests. Read everything and just get a feel for how the questions (both multiple choice and simulations) are presented. Don’t worry about trying to figure out answers on that site, that’s not the purpose.
(q)—Make sure you read all of the information again that came with your Notice to Schedule. They really do try to explain everything to you in advance to make the testing experience less stressful. Read this material carefully.
(r)—Make sure you know the location of the testing center. Estimate how long the drive will take and what time you need to leave to get there comfortably. You want to avoid any and all stress. You want 100 percent of your energy focused on getting points.
(s)—On the night before the exam, eat normally and get a typical amount of sleep. You will think more clearly during the exam if nothing has upset the normal rhythm of your life. You will have more energy and more confidence. You want to be loose but focused. I am totally against losing sleep to study on the night or two before the exam. Sleepy people do not pass the CPA Exam.
(t)—During the exam, watch your time very closely. You want to finish with about 10 seconds left. Don’t waste time but don’t get too rushed. On the day of the exam, time management is your biggest enemy.
(u)—If you do not know a question on the exam, eliminate as many answers as possible and take a guess. Do not let a tough question get you rattled. Don’t spend time on a question that you really do not know. No one is seeking perfection from you. But you do need to have an answer or a guess down for every question.
(v)-- When you leave the testing center, smile and say “I did it; I gave it my very best!!!” That is really the attitude that you want to have.
Try it – try CPA Review for FREE - it will work and you’ll have all of your money still in your pocket. For heaven’s sake, there is a recession going on; be a wise shopper.
(3) – Just a reminder as always: if you want to unsubscribe to these lessons, you can do that by scrolling to the end of this lesson and clicking on the appropriate link.
(4) – At the end of last week, we moved over 4,250,000 page views as we head toward our goal of 10 million by the end of 2009.
(5) – And, finally, as always, here is some practice to help you ADD THOSE POINTS.
Financial Accounting -- Another practice question from my new Financial Accounting textbook (if you know any college accounting profs, tell them to be on the watch. CJ Skender and I have authored an innovative new textbook that will be released this fall).
John Doe successfully creates an invention at a cost of $1.6 million and, on January 1, Year One, receives a patent that gives him the exclusive rights to that invention for 20 years. One year later, John Doe sells all rights to the patent to Nahquan Corporation for $3 million. Nahquan pays another $400,000 to a legal firm to help ensure that the right to this patent is properly transferred. Nahquan hopes to use the patent for five years and then sell it for $200,000. On December 31, Year Two, another company offers to pay Nahquan $4 million for this intangible asset but that amount is rejected as being too low. On its balance sheet at that time, what balance is reported by Nahquan for the patent?
A - $2,560,000
B - $2,760,000
C - $3,040,000
D - $3,221,053
Answer is B.
For Nahquan, the capitalized cost of this intangible asset is $3.4 million. That amount is the normal and necessary cost of acquiring the patent so that it could be used by the company to generate future revenues. The company plans to make use of it for five years and then sell it for a $200,000 residual value. Annual amortization for that period will be $640,000 per year ([$3.4 million less $200,000] divided by 5 years). After Nahquan holds the patent for its first year (Year Two), the reported value is reduced to $2,760,000 ($3.4 million less $640,000). The $4 million offer does not affect Nahquan’s reporting since it was not accepted. The amortized historical cost remains the basis for financial reporting unless the value becomes impaired.
Regulation
The Waynesboro Corporation is located in Michigan. Recently, it has begun negotiated to acquire a controlling interest in Havenford Corporation, located in Indiana. Havenford has 1,000,000 issued and outstanding shares of common stock but no shares of preferred stock. Waynesboro wants to buy enough shares so that a consolidated tax return can be filed. How many shares must Waynesboro acquire?
A – 500,001
B – 800,000
C – 950,000
D – 1,000,000
Answer is B
In order to file a consolidated tax return (which is allowed but not required), the parent must own at least 80 percent of the outstanding shares of the subsidiary. Here, is one area where financial accounting and tax accounting differ. For financial accounting, consolidation is mandated with any number of shares is acquired in excess of 50 percent. For tax accounting, consolidation is allowed once 80 percent of the stock is owned.
Auditing & Attestation
The CPA firm of Borgin & Burke is coming to the end of an audit engagement and has just mailed a letter to the client’s lawyers. What is the primary purpose of such a lawyer’s letter?
A – To discover any unreported contingent liabilities.
B – To ensure that all stock transactions engaged in by the client have been legal.
C – To confirm the legal expense balance reported by the audit client on its income statement.
D – To corroborate information obtained from the client about contingent losses.
Answer is D.
The financial information reported in financial statements is always the representation of the company’s management. The auditor seeks to gain corroborating evidence so as to provide reasonable assurance that this information contains no material misstatements according to US GAAP. Thus, the client creates a list of all contingencies and then provides estimations of the likelihood of loss as well as the most likely amounts. This information is then sent to the company’s lawyer whose response will hopefully help the firm by providing supportive evidence..
BEC
Which of the following is true about the International Monetary Fund (IMF)?
A – It prints money to be used by member countries.
B – It has a pool of currencies from which member countries can borrow to meet short-term deficits in balance of payments.
C – It serves as an investment resource for member countries allowing them to make extremely high rates of return on invested capital.
D – It allows deposits by member countries which are then allocated each year as a way to reward countries which have made the most progress economically.
Answer is B
According to its website, “the IMF promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade, and provides resources to help members in balance of payments difficulties or to assist with poverty reduction.”
I opened with a Barack Obama quote so I’ll close with one also. If you want to pass the CPA Exam, you cannot wait for someone else. You are the person that you have been waiting for.
“Change will not come if we wait for some other person or some other time. We are the ones we've been waiting for. We are the change that we seek.”
Subscribe to:
Posts (Atom)