CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
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Lesson 76
From: Joe
(a) – SPECIAL ANNOUNCEMENT: SUBSCRIPTION SERVICE FOR FAR WILL BE AVAILABLE VERY SOON. As I announced in my previous email, to help us cover the cost of operating this website, in the next few days, we are going to make available a subscription service for the content that we think you need in order to pass the exam. I believe our 2,100 free questions plus our new subscription content will make this the PERFECT CPA review program. We are rolling out FAR first as we work diligently on getting the other three parts ready.
For FAR, we have created over 620 slides that you can view over the Internet that tells you exactly what we believe you need to know—this material covers the basics and gets you ready to make 75 and pass that exam.
For FAR, a subscription will be $15 per month or $30 for three months. What else can you possibly get for $15 per month? That’s 50 cents per day to get over 620 slides explaining the topics covered in the FAR part of the CPA Exam. And they are written by an educator—to help make sure you actually do understand how to answer the questions that you will face.
Of course, our 2,100 free questions will always stay free. If you are interested in subscribing for FAR, watch your email—we will send out information in a very few days that will tell you exactly what you need to know to sign up.
(b) – Last December, I posted a daily study tip on our Facebook page (search for “CPAreviewforFREE”) for over a month. I’m going to do that again for the next several weeks (although I’m not sure I can make it every day because of business travel—but I’ll try to get most days). Just a quick study tip to start off your day. Please feel free to become one of our fans to get these delivered to your wall automatically.
(c) – I’ll be in San Francisco next Tuesday morning for a meeting with the CPA Examiners who will be telling us all about the changes that will take place with the CPA Exam starting in 2011. I’ll keep you informed of anything that I learn of interest.
(d) – A week or two ago, we crossed 14 million page views here at www.CPAreviewforFREE and also had the busiest week in our entire history. The number of visitors that week was 6.4 percent higher than in any previous week of our existence. Thanks for spreading the word about www.CPAreviewforFREE.com. We hope to hit 20,000,000 page views by the end of 2010 and, with your help, we can make it!!!
(e) – Always nice to get notes from the folks who use our site.
From JC: “I just wanted to thank you for setting up this wonderful resource. It has been my primary source used to study for the CPA exam. So far I have taken 3 out of the 4 sections (Audit, BEC, and REG) and have passed them all on the first try. This website has been an invaluable tool. You really cannot be commended enough for setting up this CPA study aid.”
From LL: “I thank God for you and your site. I just found out this afternoon that I passed REG (1st try). I also passed BEC and AUD on my first try back in late February and late April. I'm now studying for FAR. I used XX books and supplemented them with XX lectures and your site. As part of the preparation of each exam, I worked through every single question on CPAreviewforFREE. Similar to some of the earlier feedback you received, I really liked the quality of your MCQs and explanations. In doing your MCQs, I felt more confident about my ability to learn and retain the information. Your regular emails also provide me the needed ongoing inspiration. Thank you!”
From CK: “This is just to pass my sincere gratitude for the great CPA review questions that you have provided for free on the website. I just received the results for my final CPA exam which I took at the end of last month and I passed it. It was AUD and I got an 86 on it. I used your questions for all the four parts. The questions are great at re-enforcing concepts. I am going to unsubscribe soon but I wanted to say THANK YOU VERY MUCH before I leave. I have encouraged a lot of my friends who want to take the CPA exam to use the questions as well. God bless you in a very special way.”
(1) – I was on vacation a few weeks ago. To pass the time in an airport, I was reading a novel. One of the characters was really into exercise and she made a statement: “I like to push myself until I’m absolutely exhausted.”
This got me to thinking about how hard we really do push ourselves each day. Oh yeah, we all talk about being exhausted but are we really? Or, are we just whining? I’m not a big believer in pushing yourself to absolute exhaustion because you have to be able to get up and do it again the next day. However, when you are studying for the CPA Exam, how hard do you really push yourself?
If you were a character in a book talking about studying for the CPA Exam, which line would be you?
--I like to push myself until I get bored.
--I like to push myself until I can think of something more interesting to do.
--I like to push myself until I get sleepy.
--I like to push myself until I can think of any excuse to quit.
Although these are probably pretty common goals, they are hardly the road to success. How much DO you push yourself to accomplish and how much SHOULD you push yourself to accomplish?
One of my problems is that if I say “I’m going to push myself until I’m absolutely exhausted,” I’m probably going to feel absolutely exhausted in about two minutes. The mind loves to play games; the mind loves to play tricks: “I’m tired; I’m bored; I’m absolutely exhausted; I’m starving to death; I don’t want to work.”
So, I prefer to set time goals for myself. For example, I might say: I’m going to study 50 minutes and then take a 10 minute break and then work for another 50 minutes. That is a very objective goal. I can prove whether I did it or not. I place my watch next to my computer. I write down when I start and when I stop and I have evidence (sounds like an auditor) of whether I put in the time. If this were a novel, maybe my character could say: “I like to push myself until I have put in the amount of time that I established as my goal.”
What I usually find is that when I do manage to hit that final time line, then I love to try to push myself for 15 more minutes. I don’t want to exhaust myself because I really do need to study again tomorrow but I want to prove that I can push myself beyond my own expectations.
First, I write down my time goals: 50 minutes, 10-minute break, 50 more minutes. When I get to the end of that stretch, I always ask: “Can’t I do just another 15 minutes—I might be able to add another point or two by answering questions for 15 more minutes.” And, yeah, when you get there, most people really are able to push themselves beyond their goal and add that extra 15 minutes. Somehow the time you put in AFTER you have reached your goal really feels worthwhile. You feel like you are stretching yourself and you are going to be a stronger person as a result.
(2) – As I have mentioned before, my wife and I went to Paris for our vacation. People have asked me what I enjoyed seeing the most. The answer is easy: the Winged Victory at the Louvre.
www.en.wikipedia.org/wiki/Winged_Victory_of_Samothrace
I love the name.
I love the power.
I love the mystery.
As you stand there in front of that statue, you really feel the strength. Somehow the sculptor captured the power and strength – you understand the majesty of the victory that this character is announcing to the world.
No one knows who created this work but it is hard to look at it without wanting that same feeling: look at what I have been able to accomplish!!!
(3) – If you want to unsubscribe from getting these weekly email lessons, just scroll to the bottom of this lesson and you’ll find an unsubscribe button. Easy as that. Click on it and your name will be removed from our list.
If you have friends who want to receive these free lessons, they can go to www.CPAreviewforFREE.com and register. When they do that, there is a box that asks if they want additional information about the CPA Exam. Make sure that box is checked because that “additional information” is our weekly email lessons.
(4) – I was in a hotel a few days ago in North Carolina having breakfast and several young people walked through the hotel. They apparently were on some type of work trip with their church (which was from Illinois). One of the young people wore a t-shirt with the question on the back: What’s Your Excuse?
I always wonder about what excuses I am using to keep myself from accomplishing things those that I want to do.
--It is easy to see the excuses that other people use.
--It is much more difficult to see the excuses that you use to hold yourself back.
So, if you have a really close friend, just ask them: What excuses do you hear me using that might be keeping me from being as successful as I would like? Do I have a tendency to put up my own personal road blocks that keep me from getting to where I want to be?
People always tell me that they know their own weaknesses, that they are able to assess themselves. I am not sure that is always true. I think it is impossible to see yourself without some type of filter – you may be too hard on yourself or you may be too easy on yourself. But I’m not sure anyone is a perfect judge of themselves.
You have to assure the friend that you will not get upset and that you really only want one piece of information (“you don’t have to tell me about all of my weaknesses”). You want to know what excuses you seem to fall back on. What excuses automatically pop out of your mouth? Excuses can almost become a speech habit that spill out to give you a reason not to move forward.
Find out—ask someone. Regardless of what they tell you, work hard (for a week or two) to avoid that excuse completely. You may well start to see a change in how you approach tasks without your built-in excuse. If you don’t have that road block standing in your way, you may well be surprised by how much you find that you really are able to accomplish.
(5) – PRACTICE TIME – Here are four more free questions to give you more chances to add points—which is really the name of this game.
FAR
The City of Linton has a general fund that reports $500,000 in assets and $200,000 in liabilities. Thus, the balance sheet for this fund shows a fund balance of $300,000 which is divided into five different categories. Which of the following is not one of those five fund balance categories?
A. Fund balance—nonspendable
B. Fund balance—committed
C. Fund balance—assigned
D. Fund balance—unrestricted
Answer is D.
The five fund balance categories are (1) fund balance-nonspendable -- reflects assets such as supplies that cannot be spent and money that has been restricted by an outside party so that it cannot be spent, (2) fund-balance restricted -- reflects money that has been restricted by an outside party for a particular purpose, (3) fund-balance committed -- reflects assets that have been designated for a specific purpose by the highest level of decision-making authority inside of the government, (4) fund-balance assigned -- reflect assets that have been designated for a specific purpose by officials within the government but not at the highest level of decision-making authority, and (5) fund-balance unassigned -- reflects all of the remaining net assets of the fund. “Unrestricted” is a term that is more often used in reporting not-for-profit organizations than it is in governmental accounting.
Auditing
A CPA has been engaged to issue a report of the findings coming from the performance of specific agreed-upon procedures. Which of the following is not true?
A. The CPA must be independent.
B. The CPA and specified parties must have agreed on criteria to be used.
C. The subject matter can be reasonably measured.
D. The report will be issued to the public in general.
Answer is D.
In these types of engagements, it is important that all relevant parties have a clear understanding of what is being done and how evaluations are being made. It is also important that the CPA has some way to make an evaluation that is not pure guesswork. The assumption is that the general public could not possibly be aware of the understanding that exists between the parties involved and, therefore, might be mislead in some way by the nature of the report. They do not possess an adequate understanding. These engagements should be clearly defined by all parties involved but, then, only those parties should receive a copy of the CPA’s report.
BEC
What is the GDP deflator?
A. An index for measuring deflation in a specific industry.
B. A method for measuring price changes in all final goods and services produced by an economy.
C. A method of measuring price changes in general markets in specific locations like New York City or the state of Wisconsin.
D. A means of measuring price changes for the goods that are obtained by consumers.
Answer is B.
According to Wikipedia, “in economics, the GDP deflator (implicit price deflator for GDP) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.”
Regulation
A company is going through bankruptcy liquidation and has the following four debts (each of which is below any maximum allowed amount): (1) - $10,000 owed to employees for working the two weeks before an order for relief was issued, (2) - $13,000 in government claims for unpaid taxes, (3) - $15,000 in administrative expenses, and (4) - $1,000 for a deposit made by a customer where the product was never delivered. Assuming that adequate money is available, in what order will these claims be paid?
A. 2, 1, 4, 3
B. 1, 3, 2, 4
C. 3, 1, 4, 2
D. 4, 2, 1, 3
Answer is C
Federal bankruptcy laws have been created to organize bankruptcies, especially when liquidation occurs, so that all parties are treated fairly. In addition, everyone should be able to go into the liquidation with some idea as to the chance of receiving payment. Certain unsecured liabilities are deemed to have priority and they are paid before other unsecured liabilities. Furthermore, these liabilities with priority are paid in a legally specified order. For these four debts, that order would be: administrative expenses, debts to employees incurred within the 180 days prior to the filing of a petition for bankruptcy (up to a maximum that is currently $10,950 per individual—any additional amount is a completely unsecured claim), deposits made by customers (up to a maximum that is currently $2,425 per claim—any additional amount is a completely unsecured claim, and government claims for unpaid taxes.
I know it is really hot throughout much of the country right now. So, stay inside and study and add points and get that CPA Exam passed.
Joe Hoyle
Co-Founder
CPA Review for FREE
Friday, July 30, 2010
Wednesday, July 14, 2010
Make that Improvement and Pass that Exam
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
105 Weeks of Operation and 13,506,577 Page Views (without a penny spent on marketing)
Lesson 75
From: Joe
(a) -OFFICIALLY BIG ANNOUNCEMENT: Ever since we first got started with CPAreviewforFREE.com, we constantly get emails like the following from so many of our candidates: "love you questions and answers-they are the best in the business but I'd love to have some content to help me to get over the rough patches."
So, this summer we have been writing content (day in and day out). We write exactly what we think you need to know to pass each part of the CPA Exam. Most review courses give you everything in the possible world and expect you to figure it out. We want to give you want we believe you need.
Unfortunately, we cannot hire the talent we need and still provide this content for free. Here is what we plan to do gradually over the remainder of the summer:
(Step One) Our 2,100 FREE questions and answers will remain absolutely free. If all you want is to use our questions and answers, nothing changes at all. Those are there for you.
(Step Two) Our new content will be available over the Internet through a one-month or three-month subscription option. No books to lug around, no outdated materials, access from anywhere: laptop, desktop, cell phone. We will provide the basics on every subject that YOU need to know to pass. We are not going to charge you the thousands of dollars that everyone else seems to want from you. We are going to keep this content as cheap as we possibly can. We will provide more information about this program and the complete details over the next few weeks.
(Step Three) We will also provide a study guide so that you can merge our free questions and answers with our new subscription service to provide you with a logical program that can get you through the CPA Exam in the most efficient (and cheapest) way possible.
Click here ( www.cpareviewforfree.com/resources.cfm?name=article&article_id=30 ) for a sample of content for FAR--Statement of Cash Flows. (This is a temporary file so it may not look as polished as our permanent files will be.)
Our philosophy is to provide you with exactly what you need in order to pass the CPA Exam. Get it done-get it over with. If you are studying for FAR, go look at the Statement of Cash Flows content and start adding even more points.
(b) - During the first week of July, we had over 300,000 page views for the first time in our history. In our first week of existence in 2008, we had 1,920 page views. Last week, we had 311,106 page views. And, we did that, with no money spent on advertising. Think about that. People recognize our quality. Build a better mousetrap and the world will beat a path to your door.
(c) - I was looking at a website this morning (for an artist, no less) and he had the following quote.
"Your dream isn't big enough if it doesn't scare you."
I read a lot and see a lot of quotes. Most are nice but don't really touch me. That was a quote that really meant something to me. I pass it along to you for that reason.
(1) - I was in Paris last week for a vacation. I do not speak French. I worried that I would not be able to get around because I could not speak the language. And, sure enough, the first day was rough. I was afraid that I might starve to death. But, gradually, subtly, without me even noticing, I started to pick up a few new words in French each day and I started recognizing what people were trying to say to me. By the end of the trip, I could even get through the subway system and order a meal without too much difficulty.
Learning is like that. It is subtle. It happens without your noticing. People don't learn in big chunks. People learn in tiny grains. However, through persistence, it is amazing how quickly those tiny grains add up and come together and start creating actual knowledge and understanding.
People who study for the CPA Exam are often looking for that "AHA" moment where they go from not knowing to knowing. Their dream is: "One minute I did not understand leases and then suddenly I understood it all with such wonderful clarity. I am so happy." Yeah, that would be nice but learning almost never happens that way. You start off understanding 40 percent of what you read. You answer a few questions and you read the answers and, without really noticing, you actually understand 45 percent and then 50 percent and so on. Eventually, you can become an expert that way.
It is easy to get discouraged because we all want "instant knowledge." The human brain just does not work that efficiently. Your brain learns gradually and constantly. Kind of like the sun rising-it happens so steadily that you don't even notice the change. But, it is dark one minute and then it begins to get lighter and lighter and, suddenly, the sun is up. And, you never really saw any movement.
--How do you pass the CPA Exam? Put in 60-100 hours of good quality study for each part. The brain will take care of the rest.
--Why does that work? As you read and answer questions, your mind gradually comes to understand the various topics. Not all at once but little by little.
--Why do you keep missing questions? The learning is slow and steady-no one jumps directly into brilliance. For example, if you are going to study 100 hours for FAR, it is perfectly logical that you will make 1 percent of the needed improvement for every full hour that you study. Yeah, that seems slow but if you make 1 percent improvement every hour, before you know it you will understand more than enough to pass.
I did not starve to death in Paris. I learning some of the language and had a great time.
Make that 1 percent improvement every hour and you'll pass the CPA Exam.
(2) - Here are a couple of wonderful emails that I got recently. Always love to hear from you:
From NN: "I received today the results of my REG exam: 84!!! Not bad!! I am so happy!!! And, I was so worried because I did not complete one of the tabs. I also passed FAR in April. And, I am working on AUD and BEC for the July/August window. Now, I know that I really can do it!!! I can accomplish my favorite goal: 'Successful completion of the four exams in the first attempt.'"
From RM: "I am writing you to update you on my progress with the CPA exam and it is with great pride that I can tell you that I have successfully passed all four parts! I took FAR shortly after a vacation in St. Thomas (where I spent the entire time studying) and anxiously waited for the scores. I found out that I passed FAR with a 79 as I was studying for my REG exam which I was to take the next morning. I can't tell you how big of a boost that was, knowing that the REG exam was going to be my last section. Just last week I found out that I passed REG with a 78, and I am finally done. It took me just about a year, and it is my proudest accomplishment yet. A close friend took me out for a celebratory dinner, and my family, co-workers, and friends were all elated that I had passed. CPA Review for Free was a huge help in that and your weekly emails kept me motivated."
Studying while in St. Thomas-now that is true dedication and self-discipline.
(3) - Formal and official announcement so that we don't break any laws: You are always able to unsubscribe at any time you wish from these email lessons. We love interacting with so many thousands of people around the world (well over 13,000) but you certainly can unsubscribe whenever you wish. Just scroll to the bottom of the page and click on the link. And, poof, you are unsubscribed.
(4) - My younger daughter went to work camp this past week where a group of about 200 youth gathered to fix up houses that needed repair in a poorer neighborhood. At the end of the week, the group made a presentation of what they had accomplished. The presentation was in a gymnasium of a school. When I walked in on Saturday morning for that presentation, the very first thing I noticed was a big banner that read:
You Can
When You Believe You Can
I am always of the opinion that humans have almost unlimited capabilities. People have the capacity to do almost anything that they set their minds to do.
The one thing that stands in the way for most people is their own belief in what they can accomplish.
You know your own weaknesses better than anyone else.
You know what scares you.
You know all of those things that you really don't know.
It is easy to believe: I can't.
On the outside, you probably resemble a person in complete control of every situation but, if you are like most people, you are always a bit tentative and scared. It is always easy, when thinking about ourselves, to dwell on those weaknesses that only we know about.
That is just going to hold you back. You are a very capable person. You are obviously not perfect but you have more than enough (a) brain power, (b) self discipline, (c) desire, and (d) energy to pass the CPA Exam. What else is needed?
You have the brain power.
You have the self discipline.
You have the desire.
You have the energy.
What else could you possibly need to pass the CPA Exam?
You Can
When You Believe You Can.
(5) - Okay, time for a little practice. If you get these all correct, good for you. If you miss one or more, then you have a wonderful opportunity to add a point to your score.
FAR
A company has the following three cash flows: $10,000 received as interest revenue, $20,000 paid as interest expense, and $40,000 received as dividend revenue. How are these three reported on a statement of cash flows?
A - $50,000 cash inflow from investing activities and a $20,000 cash outflow for financing activities.
B - $50,000 cash inflow from investing activities and a $20,000 cash outflow for operating activities
C - $40,000 cash inflow from investing activities and a $10,000 cash outflow for operating activities.
D - $30,000 cash inflow from operating activities
Answer is D
FASB has held that interest revenue, interest expense, and dividend revenue should all be reported on the statement of cash flows as operating activities. That classification system has not always been popular but it is GAAP.
Regulation
A taxpayer is divorced but currently provides all of the care for an invalid sister who lived in a hospital all year but who still qualifies as the taxpayer's dependent. The taxpayer wants to file as a head of household but cannot. Which of the following is the most likely reason for not being able to file as a head of household?
A - The taxpayer is divorced; a person who is a head of household can never have been married.
B - The person being cared for is a sister rather than a son or daughter.
C - The sister is a dependent which means that a different tax status is required.
D - The sister does not live in a home maintained by the taxpayer.
Answer is D
The following comes from the IRS publication explaining how to qualify as head of household: "You may be able to file as head of household if you meet all the following requirements. You are unmarried or 'considered unmarried' on the last day of the year. You paid more than half the cost of keeping up a home for the year. A 'qualifying person' lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the 'qualifying person' is your dependent parent, he or she does not have to live with you." The sister is a qualifying person. Thus, because she did not live with the taxpayer, the taxpayer only qualifies as a head of household if the dependent had been a parent who was living in the hospital.
Auditing
An auditor is studying events that occurred in the period just after the end of the year under audit but before the financial statements were issued. At present, the auditor is looking for significant events that occurred that had no impact on the year-end balances reported by the client. What is the most likely purpose of the auditor's work?
A - The auditor is looking for any needed adjusting entries that should be made to reported figures.
B - The auditor is looking for evidence that will impact the audit for the subsequent year.
C - The auditor is looking for information that must be disclosed in the financial statements soon to be released.
D - The auditor is looking for evidence that impacts the balance sheet and income statement figures to be reported.
Answer is C
Because the information in the problem indicates that these events had no impact on the year-end balances reported by the client, this work is unlikely to provide either significant audit evidence about reported balances or the necessity of adjusting entries. Instead, these transactions or other events-although not directly related to the financial statements under audit-are significant to the readers of the financial statements and must be disclosed. The auditor is making certain that all events that need to be disclosed in the financial statements are included.
BEC
A US company sells its goods in France and also buys goods in France and sells them in the US. At one point in time, 1 Euro can be exchanged for $1.20. Later, 1 Euro can be exchanged for $1.30. What is the impact on this company of the change in the exchange rate?
A - Goods bought in France will need to sell for more in the US.
B - Goods manufactured in the US will need to sell for more in France.
C - Goods bought in the US will cost the company more money to acquire.
D - The US dollar has become more valuable.
Answer is A
One Euro used to be worth $1.20 but now has grown in value and is worth $1.30. One Euro buys more dollars. Therefore, the Euro is worth more in comparison to the dollar and the dollar is worth less in comparison to the Euro. Inside of each country there is no impact. The effect is created by going from one country's currency to the other. Goods bought in France will be paid for with the more valuable Euro. However, when sold in the US, the company will receive the less valuable dollar. To maintain its profit margin, the company will have to sell the goods in the US for more of those less valuable dollars.
I cannot think of anything better to tell you in leaving than what I've already said: "Your dream isn't big enough if it doesn't scare you."
Have a great week to all of you!!!
Joe Hoyle
President
CPA Review for FREE
www.CPAreviewforFREE.com
105 Weeks of Operation and 13,506,577 Page Views (without a penny spent on marketing)
Lesson 75
From: Joe
(a) -OFFICIALLY BIG ANNOUNCEMENT: Ever since we first got started with CPAreviewforFREE.com, we constantly get emails like the following from so many of our candidates: "love you questions and answers-they are the best in the business but I'd love to have some content to help me to get over the rough patches."
So, this summer we have been writing content (day in and day out). We write exactly what we think you need to know to pass each part of the CPA Exam. Most review courses give you everything in the possible world and expect you to figure it out. We want to give you want we believe you need.
Unfortunately, we cannot hire the talent we need and still provide this content for free. Here is what we plan to do gradually over the remainder of the summer:
(Step One) Our 2,100 FREE questions and answers will remain absolutely free. If all you want is to use our questions and answers, nothing changes at all. Those are there for you.
(Step Two) Our new content will be available over the Internet through a one-month or three-month subscription option. No books to lug around, no outdated materials, access from anywhere: laptop, desktop, cell phone. We will provide the basics on every subject that YOU need to know to pass. We are not going to charge you the thousands of dollars that everyone else seems to want from you. We are going to keep this content as cheap as we possibly can. We will provide more information about this program and the complete details over the next few weeks.
(Step Three) We will also provide a study guide so that you can merge our free questions and answers with our new subscription service to provide you with a logical program that can get you through the CPA Exam in the most efficient (and cheapest) way possible.
Click here ( www.cpareviewforfree.com/resources.cfm?name=article&article_id=30 ) for a sample of content for FAR--Statement of Cash Flows. (This is a temporary file so it may not look as polished as our permanent files will be.)
Our philosophy is to provide you with exactly what you need in order to pass the CPA Exam. Get it done-get it over with. If you are studying for FAR, go look at the Statement of Cash Flows content and start adding even more points.
(b) - During the first week of July, we had over 300,000 page views for the first time in our history. In our first week of existence in 2008, we had 1,920 page views. Last week, we had 311,106 page views. And, we did that, with no money spent on advertising. Think about that. People recognize our quality. Build a better mousetrap and the world will beat a path to your door.
(c) - I was looking at a website this morning (for an artist, no less) and he had the following quote.
"Your dream isn't big enough if it doesn't scare you."
I read a lot and see a lot of quotes. Most are nice but don't really touch me. That was a quote that really meant something to me. I pass it along to you for that reason.
(1) - I was in Paris last week for a vacation. I do not speak French. I worried that I would not be able to get around because I could not speak the language. And, sure enough, the first day was rough. I was afraid that I might starve to death. But, gradually, subtly, without me even noticing, I started to pick up a few new words in French each day and I started recognizing what people were trying to say to me. By the end of the trip, I could even get through the subway system and order a meal without too much difficulty.
Learning is like that. It is subtle. It happens without your noticing. People don't learn in big chunks. People learn in tiny grains. However, through persistence, it is amazing how quickly those tiny grains add up and come together and start creating actual knowledge and understanding.
People who study for the CPA Exam are often looking for that "AHA" moment where they go from not knowing to knowing. Their dream is: "One minute I did not understand leases and then suddenly I understood it all with such wonderful clarity. I am so happy." Yeah, that would be nice but learning almost never happens that way. You start off understanding 40 percent of what you read. You answer a few questions and you read the answers and, without really noticing, you actually understand 45 percent and then 50 percent and so on. Eventually, you can become an expert that way.
It is easy to get discouraged because we all want "instant knowledge." The human brain just does not work that efficiently. Your brain learns gradually and constantly. Kind of like the sun rising-it happens so steadily that you don't even notice the change. But, it is dark one minute and then it begins to get lighter and lighter and, suddenly, the sun is up. And, you never really saw any movement.
--How do you pass the CPA Exam? Put in 60-100 hours of good quality study for each part. The brain will take care of the rest.
--Why does that work? As you read and answer questions, your mind gradually comes to understand the various topics. Not all at once but little by little.
--Why do you keep missing questions? The learning is slow and steady-no one jumps directly into brilliance. For example, if you are going to study 100 hours for FAR, it is perfectly logical that you will make 1 percent of the needed improvement for every full hour that you study. Yeah, that seems slow but if you make 1 percent improvement every hour, before you know it you will understand more than enough to pass.
I did not starve to death in Paris. I learning some of the language and had a great time.
Make that 1 percent improvement every hour and you'll pass the CPA Exam.
(2) - Here are a couple of wonderful emails that I got recently. Always love to hear from you:
From NN: "I received today the results of my REG exam: 84!!! Not bad!! I am so happy!!! And, I was so worried because I did not complete one of the tabs. I also passed FAR in April. And, I am working on AUD and BEC for the July/August window. Now, I know that I really can do it!!! I can accomplish my favorite goal: 'Successful completion of the four exams in the first attempt.'"
From RM: "I am writing you to update you on my progress with the CPA exam and it is with great pride that I can tell you that I have successfully passed all four parts! I took FAR shortly after a vacation in St. Thomas (where I spent the entire time studying) and anxiously waited for the scores. I found out that I passed FAR with a 79 as I was studying for my REG exam which I was to take the next morning. I can't tell you how big of a boost that was, knowing that the REG exam was going to be my last section. Just last week I found out that I passed REG with a 78, and I am finally done. It took me just about a year, and it is my proudest accomplishment yet. A close friend took me out for a celebratory dinner, and my family, co-workers, and friends were all elated that I had passed. CPA Review for Free was a huge help in that and your weekly emails kept me motivated."
Studying while in St. Thomas-now that is true dedication and self-discipline.
(3) - Formal and official announcement so that we don't break any laws: You are always able to unsubscribe at any time you wish from these email lessons. We love interacting with so many thousands of people around the world (well over 13,000) but you certainly can unsubscribe whenever you wish. Just scroll to the bottom of the page and click on the link. And, poof, you are unsubscribed.
(4) - My younger daughter went to work camp this past week where a group of about 200 youth gathered to fix up houses that needed repair in a poorer neighborhood. At the end of the week, the group made a presentation of what they had accomplished. The presentation was in a gymnasium of a school. When I walked in on Saturday morning for that presentation, the very first thing I noticed was a big banner that read:
You Can
When You Believe You Can
I am always of the opinion that humans have almost unlimited capabilities. People have the capacity to do almost anything that they set their minds to do.
The one thing that stands in the way for most people is their own belief in what they can accomplish.
You know your own weaknesses better than anyone else.
You know what scares you.
You know all of those things that you really don't know.
It is easy to believe: I can't.
On the outside, you probably resemble a person in complete control of every situation but, if you are like most people, you are always a bit tentative and scared. It is always easy, when thinking about ourselves, to dwell on those weaknesses that only we know about.
That is just going to hold you back. You are a very capable person. You are obviously not perfect but you have more than enough (a) brain power, (b) self discipline, (c) desire, and (d) energy to pass the CPA Exam. What else is needed?
You have the brain power.
You have the self discipline.
You have the desire.
You have the energy.
What else could you possibly need to pass the CPA Exam?
You Can
When You Believe You Can.
(5) - Okay, time for a little practice. If you get these all correct, good for you. If you miss one or more, then you have a wonderful opportunity to add a point to your score.
FAR
A company has the following three cash flows: $10,000 received as interest revenue, $20,000 paid as interest expense, and $40,000 received as dividend revenue. How are these three reported on a statement of cash flows?
A - $50,000 cash inflow from investing activities and a $20,000 cash outflow for financing activities.
B - $50,000 cash inflow from investing activities and a $20,000 cash outflow for operating activities
C - $40,000 cash inflow from investing activities and a $10,000 cash outflow for operating activities.
D - $30,000 cash inflow from operating activities
Answer is D
FASB has held that interest revenue, interest expense, and dividend revenue should all be reported on the statement of cash flows as operating activities. That classification system has not always been popular but it is GAAP.
Regulation
A taxpayer is divorced but currently provides all of the care for an invalid sister who lived in a hospital all year but who still qualifies as the taxpayer's dependent. The taxpayer wants to file as a head of household but cannot. Which of the following is the most likely reason for not being able to file as a head of household?
A - The taxpayer is divorced; a person who is a head of household can never have been married.
B - The person being cared for is a sister rather than a son or daughter.
C - The sister is a dependent which means that a different tax status is required.
D - The sister does not live in a home maintained by the taxpayer.
Answer is D
The following comes from the IRS publication explaining how to qualify as head of household: "You may be able to file as head of household if you meet all the following requirements. You are unmarried or 'considered unmarried' on the last day of the year. You paid more than half the cost of keeping up a home for the year. A 'qualifying person' lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the 'qualifying person' is your dependent parent, he or she does not have to live with you." The sister is a qualifying person. Thus, because she did not live with the taxpayer, the taxpayer only qualifies as a head of household if the dependent had been a parent who was living in the hospital.
Auditing
An auditor is studying events that occurred in the period just after the end of the year under audit but before the financial statements were issued. At present, the auditor is looking for significant events that occurred that had no impact on the year-end balances reported by the client. What is the most likely purpose of the auditor's work?
A - The auditor is looking for any needed adjusting entries that should be made to reported figures.
B - The auditor is looking for evidence that will impact the audit for the subsequent year.
C - The auditor is looking for information that must be disclosed in the financial statements soon to be released.
D - The auditor is looking for evidence that impacts the balance sheet and income statement figures to be reported.
Answer is C
Because the information in the problem indicates that these events had no impact on the year-end balances reported by the client, this work is unlikely to provide either significant audit evidence about reported balances or the necessity of adjusting entries. Instead, these transactions or other events-although not directly related to the financial statements under audit-are significant to the readers of the financial statements and must be disclosed. The auditor is making certain that all events that need to be disclosed in the financial statements are included.
BEC
A US company sells its goods in France and also buys goods in France and sells them in the US. At one point in time, 1 Euro can be exchanged for $1.20. Later, 1 Euro can be exchanged for $1.30. What is the impact on this company of the change in the exchange rate?
A - Goods bought in France will need to sell for more in the US.
B - Goods manufactured in the US will need to sell for more in France.
C - Goods bought in the US will cost the company more money to acquire.
D - The US dollar has become more valuable.
Answer is A
One Euro used to be worth $1.20 but now has grown in value and is worth $1.30. One Euro buys more dollars. Therefore, the Euro is worth more in comparison to the dollar and the dollar is worth less in comparison to the Euro. Inside of each country there is no impact. The effect is created by going from one country's currency to the other. Goods bought in France will be paid for with the more valuable Euro. However, when sold in the US, the company will receive the less valuable dollar. To maintain its profit margin, the company will have to sell the goods in the US for more of those less valuable dollars.
I cannot think of anything better to tell you in leaving than what I've already said: "Your dream isn't big enough if it doesn't scare you."
Have a great week to all of you!!!
Joe Hoyle
President
CPA Review for FREE
www.CPAreviewforFREE.com
Saturday, July 3, 2010
Becoming a Champion
Becoming a Champion
From: Joe
(a) – I fully realize that our economic times are quite scary at the moment. I truly hope that everyone who gets these emails is doing okay financially. If you are like me, you are both mystified and a bit wary. I am confident that things are going to get better and that the economy will come back strong. However, we will all feel better when things start to look better. I just hope that you have not been facing truly difficult financial issues in the last couple of weeks.
I am old enough to have seen a number of economic ups and downs over the years. One thing that always happens in such times is that people get more interested in making their resumes look better. Makes perfectly good sense. One of the best ways to improve that resume is to add the letters C P A after your name. Whether you are in Walla Walla or Katmandu, those three letters mean something important.
So, if you know someone who is struggling with the economy at the moment, one recommendation is to take the CPA Exam and get it passed. Not a bad way to spend some time. Those three letters will put you ahead of the pack if you are looking for a new job or a promotion.
The problem, of course, is that CPA review can be extremely expensive. Today, people are not in position to shell out several thousand dollars for prep programs (especially mediocre programs). It’s a tough call: I need to pass versus I cannot afford to prepare.
But, wait a minute!!! CPA Review For FREE (www.CPAreviewforFREE.com) provides you with a full range of practice questions to allow you to prepare for the CPA Exam for FREE (“free” as in no cost). You can get those three important letters after your name and you can prepare for free. What a deal; what an opportunity.
Now is the perfect time to get started. Move to the head of the class: pass the CPA Exam.
I once had a friend who had years and years of experience in CPA Review give me some good advice: “Anyone who works 2,000 well-written questions and carefully studies the answers should be able to pass the CPA Exam.” I hate to tell you this but much of the huge amount of materials that other review courses provide is just to allow them to jack up the price and charge you so much money. I know it looks impressive but if your goal is to pass the exam all that material can be overkill. “Anyone who works 2,000 well-written questions and carefully studies the answers should be able to pass the CPA Exam.”
(b) – As always, thanks for forwarding our emails along. www.CPAreviewforFREE.com gets more and more visitors every week. Last week, for example, we had a 42 percent jump in the number of pages that were viewed over our previous high. 42 percent jump in one week!!! People are clearly discovering how well our questions and answers help them to prepare.
(1) – We all have heroes. One of mine has always been the legendary football coach Vince Lombardi, who became famous in the 60s for coaching the Green Bay Packers to a number of championships.
What I like about Lombardi is not that he won a lot of football games. Many people do that. Plus, after all, football is really just a game. What I really like was his attitude. He believed that every person was capable of winning if they simply prepared themselves in the proper way. In fact, he was probably best known as a coach who took average players and turned them into champions. What a wonderful thing to be remembered for.
Anyone can win if they have the best players. That is no trick; that is no challenge. The excitement comes from taking average people and pushing them to do their best. And, I have found, in my life, that when people really do their best, things go very well.
If you have read these emails for long (I have been doing them off and on now for over ten years), I have always held that everyone can pass the CPA Exam. That is not an idle statement. It takes work, it takes focus, it takes dedication, it takes desire, it takes sacrifice, it takes good materials, it takes hours, it takes confidence. But it can be done.
Work
Focus
Dedication
Desire
Sacrifice
Good Materials
Hours
Confidence
There is no reason, if you have those eight magic ingredients, that you cannot mix up a brew that will turn you into a CPA. The trouble is that people come to the table with only 3 or 4 and then decide that they are not good enough to be CPAs. Baloney!!! As Shakespeare so aptly says in Julius Caesar: “The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.” When you have these eight, YOU can succeed at virtually anything you attempt. You really can leap tall buildings with a single bound.
So, where does this lead us?
--Make a plan. By when do you want to have the CPA Exam passed? Stop being random. Set a firm goal. Always start at the end and work backwards.
--Ask yourself what you need to accomplish to get to that goal. Be reasonable: working 28 hours per day is not going to work. If you read these emails, you know that I recommend 250-400 hours to pass all four parts of the exam. When are you going to spend those hours? What are you going to do in those hours?
--Once you have a plan in place, have an honest conversation with yourself and ask a couple of serious questions and give truthful answers.
Can I do this as currently set up? If not, go back and rearrange the schedule. There is no reason to get started doing something that you simply cannot do. That is a loser from the start. Create a plan that is doable and will turn you into a winner.
What will be my biggest obstacles? What can I do at the start to lessen the problems that those obstacles pose? You know yourself. What is really going to hold you back and how do you get around that? Don’t be naïve; understand your weaknesses and address them before they cause a problem.
Why do I want to do this? It is very important to have a clear understanding of why you are seeking to become a CPA. When times get tough and you get tired and sick of it, it is easy to quit if you don’t have a well defined purpose for the study.
Can I have the right attitude? If you go into your preparation thinking it is going to be the worst few months of your life, this journey can be miserable. It is hard to be successful when you are miserable. If you go into this thinking it will be an interesting mental challenge, everything gets easier. Trust me on that. How do you go about setting up a positive mental attitude?
How can I reward myself along the way? Most people are not used to performing long tasks without a break. You can just wear down and become completely inefficient. I am a big believer that taking breaks is good for you. You need to study well. Don’t study more than 3-4 days straight without a day off. Don’t study more than 90 minutes straight without a 15 minute break. During those breaks, think what you can do that will make you feel better. You want to use the breaks to refresh yourself. They don’t give you points for wearing out.
How can I make sure I believe in myself? We are all very aware of our failings. Every person has some concern that they are not good enough. How do you go about making sure that you have the confidence you need to succeed at such a challenging task? One answer is to do the work and realize how much stronger you are becoming as you move through the process. Step back and make an honest appraisal of all that you have accomplished. It is not where you start that counts but the progress that you make toward your goal that truly does matter.
I am not a huge baseball fan but I have been intrigued by the Tampa Bay team. They are playing Boston at the moment and I have no idea who will win. However, Tampa Bay did something that I always find interesting. In one year, they have gone from the worst record to the best record in their division. That is truly amazing.
How do you do something like that? You work hard, you believe in yourself, you spend time practicing to get better.
Face it; there are no real secrets to becoming successful. We all know what it takes.
(2)-Just a reminder. If you want or need to unsubscribe, just scroll to the bottom of this email lesson and you will find a link that pulls your name off our list. We are glad to have you with us but you are more than entitled to unsubscribe whenever you wish.
(3)-Let’s do some practice work. Here are a few new questions that I want to add to our database at www.CPAreviewforFREE.com. You will get a chance to practice on them before they hit our website.
Regulation
Mary, a single individual, has provided more than half of the support for the following three people. Her mother who lives in a nursing home and who earned $10,000 in social security and $2,000 in interest income. Her son who is 19 and a full-time student who received $20,000 in scholarship income. Her friend who is in the process of getting a divorce. She has no income and is not filing a joint return with her estranged husband. How many dependents can Mary include on her personal tax return?
A – Zero
B – One
C – Two
D – Three
Answer is D
The mother is a dependent because she earned such a low amount of income that was subject to taxation. The son is a dependent because he is under 24 and a full-time student so that the amount of income is not a factor. The friend is a dependent because she does not file a joint return. There are five basic rules for being a dependent and these individuals meet the specific rule that appears to be in question for them.
Financial Accounting
Ace Company buys inventory on December 18, Year One for 20,000 vilsecks, a foreign currency. On that day, one vilseck is worth $.24. At the end of Year One, the inventory is still held and the debt is not yet paid. On that date, one vilseck is worth $.25. Ace might be a foreign subsidiary that is being consolidated with a US parent company so that translation is appropriate. Ace might be a US company making a purchase from a foreign supplier so that a remeasurement is appropriate. What gain or loss is reported in each case at the end of Year One?
A – If this is a translation, there is a $200 gain. If this is a remeasurement, there is a $200 loss.
B – If this is a translation, there is no gain or loss. If this is a remeasurement, there is a $200 loss.
C – If this is a translation, there is no gain or loss. If this is a remeasurement, there is no gain or loss.
D – If this is a translation, there is a $200 gain. If this is a remeasurement, there is a $200 gain.
Answer is B
In the translation of a foreign subsidiary, all assets and liabilities are adjusted at year-end to the new exchange rate. Therefore, both balances at December 18 are equal to 20,000 times $.24 or $4,800. At December 31, both are translated at 20,000 times $.25 or $5,000. The $200 gain in the reported value of the inventory is offset by the $200 loss in the reported amount of the payable. In contrast, in the remeasurement of an individual transaction, only monetary assets and liabilities (cash, payables, receivables, and accounts reported at fair value) are adjusted to new exchange rates. Again, both balances at December 18 are equal to 20,000 times $.24 or $4,800. However, at December 31, only the payable is adjusted to 20,000 times $.25 or $5,000. The increase in the liability creates a $200 loss. The inventory remains at $4,800 for reporting purposes.
Auditing and Attestation
A company is talking with a local CPA about doing either a compilation or a review of its financial statements for the current period. Which of the following statements is true?
A – In a compilation, the CPA provides limited (sometimes referred to as negative) assurance.
B – For the most part, a compilation is limited to making inquiries and carrying out analytical procedures.
C – A review is a presentation of client information in the form of financial statements.
D – A review might well include a comparison of the results for the current period to anticipated numbers in a budget or forecast.
Answer is D
A review consists primarily of inquiry of company officials and the performance of analytical procedures. In this way, the CPA is able to provide limited assurance that nothing was noted that indicated the presence of any material modifications that needed to be made to be in conformity with generally accepted accounting principles. Comparing current figures to anticipated figures helps to highlight balances that do not appear to be correct or normal. In contrast a compilation is primarily the presentation of the client numbers in the form of financial statements with no assurance at all being given.
BEC
On January 1, Year One, a company spends $60,000 on an investment that will return $20,000 on each December 31 of Years One, Two, and Three as well as an additional $30,000 on December 31, Year Three. The company has a desired rate of return of 10 percent per year. The present value of $1 paid in three periods at a 10 percent rate of return is .751. The present value of an annuity due of $1 paid over three periods at a 10 percent rate of return is 2.736. The present value of an ordinary annuity of $1 paid over three periods at a 10 percent rate of return is 2.487. Which of the following statements is true?
A – The investment has a positive net present value of $ 7,590.
B – The investment has a positive net present value of $12,270.
C – The investment has a positive net present value of $16,860.
D – The investment has a positive net present value of $17,250.
Answer is B
A positive net present value indicates that the present value of the future cash flows determined based on a desired rate of return is higher than the cost of making the investment. These specific cash flows have a present value of $20,000 times 2.487 ($49,740) plus $30,000 times .751 ($22,530) for a total of $72,270. The first three payments are an ordinary annuity since they begin one period after the investment is bought. The cost of the investment is $60,000 so that the net present value is the excess $12,270. Investments with a positive net present value are viewed as good investments.
Have a great week. Do not let the roller coaster ride of the economy distract you from getting the points you need to pass the CPA Exam.
Joe Hoyle
Co-Founder
CPA Review For FREE
From: Joe
(a) – I fully realize that our economic times are quite scary at the moment. I truly hope that everyone who gets these emails is doing okay financially. If you are like me, you are both mystified and a bit wary. I am confident that things are going to get better and that the economy will come back strong. However, we will all feel better when things start to look better. I just hope that you have not been facing truly difficult financial issues in the last couple of weeks.
I am old enough to have seen a number of economic ups and downs over the years. One thing that always happens in such times is that people get more interested in making their resumes look better. Makes perfectly good sense. One of the best ways to improve that resume is to add the letters C P A after your name. Whether you are in Walla Walla or Katmandu, those three letters mean something important.
So, if you know someone who is struggling with the economy at the moment, one recommendation is to take the CPA Exam and get it passed. Not a bad way to spend some time. Those three letters will put you ahead of the pack if you are looking for a new job or a promotion.
The problem, of course, is that CPA review can be extremely expensive. Today, people are not in position to shell out several thousand dollars for prep programs (especially mediocre programs). It’s a tough call: I need to pass versus I cannot afford to prepare.
But, wait a minute!!! CPA Review For FREE (www.CPAreviewforFREE.com) provides you with a full range of practice questions to allow you to prepare for the CPA Exam for FREE (“free” as in no cost). You can get those three important letters after your name and you can prepare for free. What a deal; what an opportunity.
Now is the perfect time to get started. Move to the head of the class: pass the CPA Exam.
I once had a friend who had years and years of experience in CPA Review give me some good advice: “Anyone who works 2,000 well-written questions and carefully studies the answers should be able to pass the CPA Exam.” I hate to tell you this but much of the huge amount of materials that other review courses provide is just to allow them to jack up the price and charge you so much money. I know it looks impressive but if your goal is to pass the exam all that material can be overkill. “Anyone who works 2,000 well-written questions and carefully studies the answers should be able to pass the CPA Exam.”
(b) – As always, thanks for forwarding our emails along. www.CPAreviewforFREE.com gets more and more visitors every week. Last week, for example, we had a 42 percent jump in the number of pages that were viewed over our previous high. 42 percent jump in one week!!! People are clearly discovering how well our questions and answers help them to prepare.
(1) – We all have heroes. One of mine has always been the legendary football coach Vince Lombardi, who became famous in the 60s for coaching the Green Bay Packers to a number of championships.
What I like about Lombardi is not that he won a lot of football games. Many people do that. Plus, after all, football is really just a game. What I really like was his attitude. He believed that every person was capable of winning if they simply prepared themselves in the proper way. In fact, he was probably best known as a coach who took average players and turned them into champions. What a wonderful thing to be remembered for.
Anyone can win if they have the best players. That is no trick; that is no challenge. The excitement comes from taking average people and pushing them to do their best. And, I have found, in my life, that when people really do their best, things go very well.
If you have read these emails for long (I have been doing them off and on now for over ten years), I have always held that everyone can pass the CPA Exam. That is not an idle statement. It takes work, it takes focus, it takes dedication, it takes desire, it takes sacrifice, it takes good materials, it takes hours, it takes confidence. But it can be done.
Work
Focus
Dedication
Desire
Sacrifice
Good Materials
Hours
Confidence
There is no reason, if you have those eight magic ingredients, that you cannot mix up a brew that will turn you into a CPA. The trouble is that people come to the table with only 3 or 4 and then decide that they are not good enough to be CPAs. Baloney!!! As Shakespeare so aptly says in Julius Caesar: “The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.” When you have these eight, YOU can succeed at virtually anything you attempt. You really can leap tall buildings with a single bound.
So, where does this lead us?
--Make a plan. By when do you want to have the CPA Exam passed? Stop being random. Set a firm goal. Always start at the end and work backwards.
--Ask yourself what you need to accomplish to get to that goal. Be reasonable: working 28 hours per day is not going to work. If you read these emails, you know that I recommend 250-400 hours to pass all four parts of the exam. When are you going to spend those hours? What are you going to do in those hours?
--Once you have a plan in place, have an honest conversation with yourself and ask a couple of serious questions and give truthful answers.
Can I do this as currently set up? If not, go back and rearrange the schedule. There is no reason to get started doing something that you simply cannot do. That is a loser from the start. Create a plan that is doable and will turn you into a winner.
What will be my biggest obstacles? What can I do at the start to lessen the problems that those obstacles pose? You know yourself. What is really going to hold you back and how do you get around that? Don’t be naïve; understand your weaknesses and address them before they cause a problem.
Why do I want to do this? It is very important to have a clear understanding of why you are seeking to become a CPA. When times get tough and you get tired and sick of it, it is easy to quit if you don’t have a well defined purpose for the study.
Can I have the right attitude? If you go into your preparation thinking it is going to be the worst few months of your life, this journey can be miserable. It is hard to be successful when you are miserable. If you go into this thinking it will be an interesting mental challenge, everything gets easier. Trust me on that. How do you go about setting up a positive mental attitude?
How can I reward myself along the way? Most people are not used to performing long tasks without a break. You can just wear down and become completely inefficient. I am a big believer that taking breaks is good for you. You need to study well. Don’t study more than 3-4 days straight without a day off. Don’t study more than 90 minutes straight without a 15 minute break. During those breaks, think what you can do that will make you feel better. You want to use the breaks to refresh yourself. They don’t give you points for wearing out.
How can I make sure I believe in myself? We are all very aware of our failings. Every person has some concern that they are not good enough. How do you go about making sure that you have the confidence you need to succeed at such a challenging task? One answer is to do the work and realize how much stronger you are becoming as you move through the process. Step back and make an honest appraisal of all that you have accomplished. It is not where you start that counts but the progress that you make toward your goal that truly does matter.
I am not a huge baseball fan but I have been intrigued by the Tampa Bay team. They are playing Boston at the moment and I have no idea who will win. However, Tampa Bay did something that I always find interesting. In one year, they have gone from the worst record to the best record in their division. That is truly amazing.
How do you do something like that? You work hard, you believe in yourself, you spend time practicing to get better.
Face it; there are no real secrets to becoming successful. We all know what it takes.
(2)-Just a reminder. If you want or need to unsubscribe, just scroll to the bottom of this email lesson and you will find a link that pulls your name off our list. We are glad to have you with us but you are more than entitled to unsubscribe whenever you wish.
(3)-Let’s do some practice work. Here are a few new questions that I want to add to our database at www.CPAreviewforFREE.com. You will get a chance to practice on them before they hit our website.
Regulation
Mary, a single individual, has provided more than half of the support for the following three people. Her mother who lives in a nursing home and who earned $10,000 in social security and $2,000 in interest income. Her son who is 19 and a full-time student who received $20,000 in scholarship income. Her friend who is in the process of getting a divorce. She has no income and is not filing a joint return with her estranged husband. How many dependents can Mary include on her personal tax return?
A – Zero
B – One
C – Two
D – Three
Answer is D
The mother is a dependent because she earned such a low amount of income that was subject to taxation. The son is a dependent because he is under 24 and a full-time student so that the amount of income is not a factor. The friend is a dependent because she does not file a joint return. There are five basic rules for being a dependent and these individuals meet the specific rule that appears to be in question for them.
Financial Accounting
Ace Company buys inventory on December 18, Year One for 20,000 vilsecks, a foreign currency. On that day, one vilseck is worth $.24. At the end of Year One, the inventory is still held and the debt is not yet paid. On that date, one vilseck is worth $.25. Ace might be a foreign subsidiary that is being consolidated with a US parent company so that translation is appropriate. Ace might be a US company making a purchase from a foreign supplier so that a remeasurement is appropriate. What gain or loss is reported in each case at the end of Year One?
A – If this is a translation, there is a $200 gain. If this is a remeasurement, there is a $200 loss.
B – If this is a translation, there is no gain or loss. If this is a remeasurement, there is a $200 loss.
C – If this is a translation, there is no gain or loss. If this is a remeasurement, there is no gain or loss.
D – If this is a translation, there is a $200 gain. If this is a remeasurement, there is a $200 gain.
Answer is B
In the translation of a foreign subsidiary, all assets and liabilities are adjusted at year-end to the new exchange rate. Therefore, both balances at December 18 are equal to 20,000 times $.24 or $4,800. At December 31, both are translated at 20,000 times $.25 or $5,000. The $200 gain in the reported value of the inventory is offset by the $200 loss in the reported amount of the payable. In contrast, in the remeasurement of an individual transaction, only monetary assets and liabilities (cash, payables, receivables, and accounts reported at fair value) are adjusted to new exchange rates. Again, both balances at December 18 are equal to 20,000 times $.24 or $4,800. However, at December 31, only the payable is adjusted to 20,000 times $.25 or $5,000. The increase in the liability creates a $200 loss. The inventory remains at $4,800 for reporting purposes.
Auditing and Attestation
A company is talking with a local CPA about doing either a compilation or a review of its financial statements for the current period. Which of the following statements is true?
A – In a compilation, the CPA provides limited (sometimes referred to as negative) assurance.
B – For the most part, a compilation is limited to making inquiries and carrying out analytical procedures.
C – A review is a presentation of client information in the form of financial statements.
D – A review might well include a comparison of the results for the current period to anticipated numbers in a budget or forecast.
Answer is D
A review consists primarily of inquiry of company officials and the performance of analytical procedures. In this way, the CPA is able to provide limited assurance that nothing was noted that indicated the presence of any material modifications that needed to be made to be in conformity with generally accepted accounting principles. Comparing current figures to anticipated figures helps to highlight balances that do not appear to be correct or normal. In contrast a compilation is primarily the presentation of the client numbers in the form of financial statements with no assurance at all being given.
BEC
On January 1, Year One, a company spends $60,000 on an investment that will return $20,000 on each December 31 of Years One, Two, and Three as well as an additional $30,000 on December 31, Year Three. The company has a desired rate of return of 10 percent per year. The present value of $1 paid in three periods at a 10 percent rate of return is .751. The present value of an annuity due of $1 paid over three periods at a 10 percent rate of return is 2.736. The present value of an ordinary annuity of $1 paid over three periods at a 10 percent rate of return is 2.487. Which of the following statements is true?
A – The investment has a positive net present value of $ 7,590.
B – The investment has a positive net present value of $12,270.
C – The investment has a positive net present value of $16,860.
D – The investment has a positive net present value of $17,250.
Answer is B
A positive net present value indicates that the present value of the future cash flows determined based on a desired rate of return is higher than the cost of making the investment. These specific cash flows have a present value of $20,000 times 2.487 ($49,740) plus $30,000 times .751 ($22,530) for a total of $72,270. The first three payments are an ordinary annuity since they begin one period after the investment is bought. The cost of the investment is $60,000 so that the net present value is the excess $12,270. Investments with a positive net present value are viewed as good investments.
Have a great week. Do not let the roller coaster ride of the economy distract you from getting the points you need to pass the CPA Exam.
Joe Hoyle
Co-Founder
CPA Review For FREE
Sunday, June 27, 2010
Life Calls you to be Successful
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
103 Weeks of Operation and 12,933,091 Page Views (without a penny spent on marketing)
Lesson 74
From: Joe
(1) - Nice note that I got recently from MG in Los Angeles: "I received the results from the Auditing exam over the weekend and I was so happy to find out that I got a score of 81!! I took this test 3 times already but it is only during this 4th time that I used your review questions. I also can't believe that my score is higher than the BEC and Financial which I passed last year! I regret those times when I should have started with this review rather than paying for the much more pricey review. But everything happens for a reason. I also want to THANK YOU for your encouraging emails. I really get a lot of inspiration from them. I even apply your tips by encouraging other friends to NOT GIVE UP!! I still have one more test to take - REGULATION and I will definitely be using your review as my starting point. ALL THE BEST TO YOU AND YOUR STAFF!!!"
And a note also from MV: "I received my score for AUD and got an 89. I know a lot of people say that is over-studying, but I'll gladly take it. Your site again was stellar at preparing for the exam. Since I have switched over in using your site for my review (I use both XX review program and your site, but your site is what I primarily use whenever I get stuck on a section or concept). I have been 3 in row in REG, BEC, and AUD. I'm taking FAR next and feel overwhelmed with the information in it. I'm going to continue review through your site and looking forward to another passing score. I also recommended this site to an old co-worker of mine who has failed two sections straight. He was amazed with the quality of your explanations and now is running through questions on his blackberry on the go. Thanks again for creating such a wonderful site. I look forward to passing my 4th in a row with your site."
(2) - As many of you might know, John Wooden died on June 4, just a few months short of being 100 years old. In my mind, he was the best basketball coach in history. And, he was the best because his teams (at UCLA) won by doing things the right way. He didn't rage up and down the side lines. He didn't scream and shout and curse. He calmly showed his players how to play basketball the right way so that they formed a team and got the most out of their talent. The way he coached basketball is the way I would love to teach accounting.
One of Coach Wooden's most famous statements is one that I really try to follow: "Don't let what you cannot do interfere with what you can do."
When I work with students or with CPA Exam candidates, they seem to invariably want to tell me what they cannot do, what they are not good at. It becomes confession time. There must be some human psychology that feels a need to list out personal weaknesses:
--I don't write very well.
--I don't read fast enough.
--I can never answer enough questions.
--I did not learn enough of this stuff in school.
What good does it do you to spend time thinking about what you cannot do?
Here's a suggestion. Stop right now and write down on a sheet of paper your three "favorite" weaknesses. That is those things that you tend to use most often as your excuse for not succeeding. Yeah, you know what they are. I sometimes call them conversation starters: "Hi, I'm Joe and I am awfully weak at .." Or "I just cannot seem to succeed because of .."
Write the top three on a sheet of paper. Then, tear that paper into small shreds and flush them all down the toilet. After that, NEVER MENTION THEM AGAIN IN YOUR WHOLE LIFE.
You'll be so much better off to throw off those self-imposed weaknesses. They do you no good. Why do you hang onto them with such devotion? Why are you so fond of your personal weaknesses?
Whether you have 4 points at the moment or 74 points, your only goal should be to add points. Get on with it. Forget about weaknesses. Life calls you to be successful. Holding onto your weaknesses is just a crutch. Throw them away and let's get this CPA Exam passed.
There is a famous line by Shakespeare in the play Othello: "go, make money." If I were writing the play, the line would be: "go, add points."
(3) - I had someone mention to me recently that our questions tend to have more words than the questions she had seen on the CPA Exam. The person who mentioned this seemed puzzled. My response was "well, of course - they have two entirely different purposes." CPA Exam questions only have one goal-to see what you know. If I want to see if you know the capital of Montana, the question only has to be: "What is the capital of Montana?"
At www.CPAreviewforFREE.com, though, we are trying to teach you what you need to know in order to get 75 points and pass. Our questions are for teaching. Our questions take a lot more thought: You drive 1,043 miles from the capital of Washington (Olympia) to the capital of North Dakota (Bismarck). Along the way, you stop at the capital of Montana. Where did you stop?
Yeah, our question has about 25 more words, but we have taught you four things: the capitals of three states and the distance from Olympia to Bismarck. (Plus, our questions are more interesting to work which is important when you have to sit there studying for hour after hour.)
Some people seem obsessed "I want to see something that looks exactly like the CPA Exam." Wrong goal. Wrong goal. Wrong goal. The correct goal is "I want to see something that will help me add enough points to pass the CPA Exam."
(4) - In case you are ready to stop receiving these email lessons, you can always scroll to the bottom of a lesson and click on the unsubscribe button. It is there; it is always there. We love having you but you are certainly free to unsubscribe. We have nearly 14,000 subscribers - we like having each of you. But, you have the right to unsubscribe. Please know that.
(5) - For no particularly good reason, I just went and checked my email and, lo and behold, got several more notes from CPA Exam candidates.
From SH: "Greetings from CA. I got my score today for my Regulations and I want you to know that I have been your avid follower in CPAReviewforfree since last year. I passed the Regulation exam with an 88 (with barely 2 hours of sleep before my exam.) I thank God that He has given you to us to give us moral support and motivation when we are down and struggling to study each of the sections of the CPA exam."
From LJ: "I just wanted to let you know that I have finally passed all 4 parts of the CPA exam. When my state license came I realized that it's really real. Your emails and words of wisdom and inspiration always helped. Especially when I was feeling down, one of your emails would come and remind me that a few extra minutes a day could help give me the extra point I needed to pass. I used your site many times to help understand the subject matter that is tested on the exam."
From AO: "I wanted to drop you a note and thank you again for your support and encouragement, as well as the great material on cpareviewforfree.com. I just received my passing grade on the last section of the exam [first try on BEC (80) AUD (81) REG (90) and second try on FAR (77)] and I can say with 100% confidence that without your material and your approach to readiness for the exam, I wouldn't have passed. Even though I did spend "thousands of dollars" on a review class, the questions from your site were the most effective way of learning the material. Your sound advice, encouraging e-mails and your ability to communicate the essence of the topics is simply brilliant. I have and will continue to promote "cpareviewforfree.com" and be a huge fan, but most of all I will always be a believer in Joe Hoyle's approach."
Before too much more time has passed, I want to hear from you that you have passed!!!!
(6) - Since I am in a mood to think about Coach John Wooden, here is another quote from him. One of the emails that I get the most is "I'm so discouraged; I keep missing questions." I know that can be tough but missed questions are the best way for you to learn. I know that can be painful but reading a question and getting it right does not make you one bit better. Here's what Coach Wooden said "If you're not making mistakes, then you're not doing anything. I'm positive that a doer makes mistakes."
When it comes to passing the CPA Exam, you want to be a "doer." That is a person who makes good things happen that can bring about improvement. Yeah, I can give you questions that you can get right ("What is two plus two? What is the name of the ocean off the coast of Virginia?") but what good is that? That doesn't stretch you; that doesn't make you better; that doesn't add points; that doesn't lead to improvement. I'd rather ask "how do you go about accounting for a derivative?" and, if you miss it, then you can learn something.
Don't worry about mistakes.
Don't worry about missing questions.
Don't let yourself get discouraged.
The whole game is about pushing forward and getting better.
BE A DOER!!
(7) - Practice
FAR
How do you go about accounting for a derivative?
A - All derivatives are recorded as assets at fair value
B - Derivatives are not reported on a company's balance sheet.
C - All derivatives are recorded as liabilities at fair value
D - All derivatives are reported as either assets or liabilities at fair value
Answer is D
Derivatives are financial instruments that derive their value from some other security or index. For example, a contract to buy gold at a specific point in the future at a specified price is a derivative because its value will be based on the market price of gold. If the price of gold rises, the contract has a positive value (you can buy the gold for less than its market price). If the price of gold falls, the contract has a negative value (you must pay more than market price for the gold). All derivatives (no exceptions) are carried on the balance sheet as either assets (positive value) or liabilities (negative value) at fair value.
BEC
The Tazem Company delivers donuts throughout the city of Chicago every day during the year to various outlets. The company has one truck and it was driven for 76,650 miles during the most recent year. On the average, the company delivered 720 dozen donuts per day. The company estimates that the cost of driving its truck for one mile is $.38. In setting its prices, what cost should the company use for delivering one dozen donuts?
A - $.1108
B - $.1288
C - $.1358
D - $.1478
Answer is A
The total delivery cost for the year is 76,650 miles times $.38 per mile or $29,127. The total number of dozen donuts delivered this year is 720 times 365 days or 262,800. If it cost the company $29,127 to deliver 262,800 dozen donuts, that is $.1108 per dozen.
Auditing and Attestation
The CPA firm of Donovan and Dempsey is auditing the financial statements for the Wynklin Corporation The auditors have decided to qualify the audit report for the current year because not enough evidence could be obtained to substantiate the balance reported for inventory. The CPA firm is also auditing the financial statements of Salander Corporation. The auditors have decided to qualify the audit report for the current year because the inventory account contains a material misstatement. Which of the following statements is not true?
A - The introductory paragraph for both reports will not be affected by these problems.
B - The score paragraph for both reports will need to be changed to reflect the problems.
C - The opinion paragraph for both reports will need to be changed to reflect the problems.
D - An explanatory paragraph will be added in both cases just before the opinion paragraph.
Answer is B
In qualified opinions, the introductory paragraphs are not changed. However, in both cases, an explanatory paragraph is added between the score paragraph and the opinion paragraph and the wording of the opinion paragraph is changed because of the qualification. In a scope qualification (such as with the Wynklin audit), the scope paragraph must also be changed. With a departure from GAAP (such as with the Salander audit), the scope paragraph is not affected.
Regulation
In Year One, Mr. and Mrs. Rothchild filed their federal income tax return. They had only salary income of $63,700. They had one itemized deduction, state income tax payments, of $7,200. Since that amount was larger than the standard deduction of $6,300, they subtracted the itemized deduction. In Year Two, they received a cash refund of $1,200 from the filing of their Year One state income tax return. Which of the following is true?
A - The $1,200 should be recognized as an addition to taxable income in Year Two.
B - $900 should be recognized as an addition to taxable income in Year Two.
C - The Year One tax return should be amended to report the standard deduction rather than the itemized deduction.
D - The refund causes no tax effect on either Year One or Year Two.
Answer is B
Under normal conditions, if itemized deductions are taken in one year but a state income tax refund is received in the following year, the refund is reported as income in that second year. However, here, the refund drops the tax benefit of the payments from $7,200 to $6,000 which is lower than the standard deduction amount. That creates less benefit than they are entitled to receive. So, the income to be recognized in Year Two is only the amount that reduces the benefit from $7,200 to $6,300. That $900 is income in the year received.
Have a great week - it is supposed to get to 104 degrees here in Richmond, Virginia today. That makes it a good day to stay inside and study!!!
Be a doer!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
103 Weeks of Operation and 12,933,091 Page Views (without a penny spent on marketing)
Lesson 74
From: Joe
(1) - Nice note that I got recently from MG in Los Angeles: "I received the results from the Auditing exam over the weekend and I was so happy to find out that I got a score of 81!! I took this test 3 times already but it is only during this 4th time that I used your review questions. I also can't believe that my score is higher than the BEC and Financial which I passed last year! I regret those times when I should have started with this review rather than paying for the much more pricey review. But everything happens for a reason. I also want to THANK YOU for your encouraging emails. I really get a lot of inspiration from them. I even apply your tips by encouraging other friends to NOT GIVE UP!! I still have one more test to take - REGULATION and I will definitely be using your review as my starting point. ALL THE BEST TO YOU AND YOUR STAFF!!!"
And a note also from MV: "I received my score for AUD and got an 89. I know a lot of people say that is over-studying, but I'll gladly take it. Your site again was stellar at preparing for the exam. Since I have switched over in using your site for my review (I use both XX review program and your site, but your site is what I primarily use whenever I get stuck on a section or concept). I have been 3 in row in REG, BEC, and AUD. I'm taking FAR next and feel overwhelmed with the information in it. I'm going to continue review through your site and looking forward to another passing score. I also recommended this site to an old co-worker of mine who has failed two sections straight. He was amazed with the quality of your explanations and now is running through questions on his blackberry on the go. Thanks again for creating such a wonderful site. I look forward to passing my 4th in a row with your site."
(2) - As many of you might know, John Wooden died on June 4, just a few months short of being 100 years old. In my mind, he was the best basketball coach in history. And, he was the best because his teams (at UCLA) won by doing things the right way. He didn't rage up and down the side lines. He didn't scream and shout and curse. He calmly showed his players how to play basketball the right way so that they formed a team and got the most out of their talent. The way he coached basketball is the way I would love to teach accounting.
One of Coach Wooden's most famous statements is one that I really try to follow: "Don't let what you cannot do interfere with what you can do."
When I work with students or with CPA Exam candidates, they seem to invariably want to tell me what they cannot do, what they are not good at. It becomes confession time. There must be some human psychology that feels a need to list out personal weaknesses:
--I don't write very well.
--I don't read fast enough.
--I can never answer enough questions.
--I did not learn enough of this stuff in school.
What good does it do you to spend time thinking about what you cannot do?
Here's a suggestion. Stop right now and write down on a sheet of paper your three "favorite" weaknesses. That is those things that you tend to use most often as your excuse for not succeeding. Yeah, you know what they are. I sometimes call them conversation starters: "Hi, I'm Joe and I am awfully weak at .." Or "I just cannot seem to succeed because of .."
Write the top three on a sheet of paper. Then, tear that paper into small shreds and flush them all down the toilet. After that, NEVER MENTION THEM AGAIN IN YOUR WHOLE LIFE.
You'll be so much better off to throw off those self-imposed weaknesses. They do you no good. Why do you hang onto them with such devotion? Why are you so fond of your personal weaknesses?
Whether you have 4 points at the moment or 74 points, your only goal should be to add points. Get on with it. Forget about weaknesses. Life calls you to be successful. Holding onto your weaknesses is just a crutch. Throw them away and let's get this CPA Exam passed.
There is a famous line by Shakespeare in the play Othello: "go, make money." If I were writing the play, the line would be: "go, add points."
(3) - I had someone mention to me recently that our questions tend to have more words than the questions she had seen on the CPA Exam. The person who mentioned this seemed puzzled. My response was "well, of course - they have two entirely different purposes." CPA Exam questions only have one goal-to see what you know. If I want to see if you know the capital of Montana, the question only has to be: "What is the capital of Montana?"
At www.CPAreviewforFREE.com, though, we are trying to teach you what you need to know in order to get 75 points and pass. Our questions are for teaching. Our questions take a lot more thought: You drive 1,043 miles from the capital of Washington (Olympia) to the capital of North Dakota (Bismarck). Along the way, you stop at the capital of Montana. Where did you stop?
Yeah, our question has about 25 more words, but we have taught you four things: the capitals of three states and the distance from Olympia to Bismarck. (Plus, our questions are more interesting to work which is important when you have to sit there studying for hour after hour.)
Some people seem obsessed "I want to see something that looks exactly like the CPA Exam." Wrong goal. Wrong goal. Wrong goal. The correct goal is "I want to see something that will help me add enough points to pass the CPA Exam."
(4) - In case you are ready to stop receiving these email lessons, you can always scroll to the bottom of a lesson and click on the unsubscribe button. It is there; it is always there. We love having you but you are certainly free to unsubscribe. We have nearly 14,000 subscribers - we like having each of you. But, you have the right to unsubscribe. Please know that.
(5) - For no particularly good reason, I just went and checked my email and, lo and behold, got several more notes from CPA Exam candidates.
From SH: "Greetings from CA. I got my score today for my Regulations and I want you to know that I have been your avid follower in CPAReviewforfree since last year. I passed the Regulation exam with an 88 (with barely 2 hours of sleep before my exam.) I thank God that He has given you to us to give us moral support and motivation when we are down and struggling to study each of the sections of the CPA exam."
From LJ: "I just wanted to let you know that I have finally passed all 4 parts of the CPA exam. When my state license came I realized that it's really real. Your emails and words of wisdom and inspiration always helped. Especially when I was feeling down, one of your emails would come and remind me that a few extra minutes a day could help give me the extra point I needed to pass. I used your site many times to help understand the subject matter that is tested on the exam."
From AO: "I wanted to drop you a note and thank you again for your support and encouragement, as well as the great material on cpareviewforfree.com. I just received my passing grade on the last section of the exam [first try on BEC (80) AUD (81) REG (90) and second try on FAR (77)] and I can say with 100% confidence that without your material and your approach to readiness for the exam, I wouldn't have passed. Even though I did spend "thousands of dollars" on a review class, the questions from your site were the most effective way of learning the material. Your sound advice, encouraging e-mails and your ability to communicate the essence of the topics is simply brilliant. I have and will continue to promote "cpareviewforfree.com" and be a huge fan, but most of all I will always be a believer in Joe Hoyle's approach."
Before too much more time has passed, I want to hear from you that you have passed!!!!
(6) - Since I am in a mood to think about Coach John Wooden, here is another quote from him. One of the emails that I get the most is "I'm so discouraged; I keep missing questions." I know that can be tough but missed questions are the best way for you to learn. I know that can be painful but reading a question and getting it right does not make you one bit better. Here's what Coach Wooden said "If you're not making mistakes, then you're not doing anything. I'm positive that a doer makes mistakes."
When it comes to passing the CPA Exam, you want to be a "doer." That is a person who makes good things happen that can bring about improvement. Yeah, I can give you questions that you can get right ("What is two plus two? What is the name of the ocean off the coast of Virginia?") but what good is that? That doesn't stretch you; that doesn't make you better; that doesn't add points; that doesn't lead to improvement. I'd rather ask "how do you go about accounting for a derivative?" and, if you miss it, then you can learn something.
Don't worry about mistakes.
Don't worry about missing questions.
Don't let yourself get discouraged.
The whole game is about pushing forward and getting better.
BE A DOER!!
(7) - Practice
FAR
How do you go about accounting for a derivative?
A - All derivatives are recorded as assets at fair value
B - Derivatives are not reported on a company's balance sheet.
C - All derivatives are recorded as liabilities at fair value
D - All derivatives are reported as either assets or liabilities at fair value
Answer is D
Derivatives are financial instruments that derive their value from some other security or index. For example, a contract to buy gold at a specific point in the future at a specified price is a derivative because its value will be based on the market price of gold. If the price of gold rises, the contract has a positive value (you can buy the gold for less than its market price). If the price of gold falls, the contract has a negative value (you must pay more than market price for the gold). All derivatives (no exceptions) are carried on the balance sheet as either assets (positive value) or liabilities (negative value) at fair value.
BEC
The Tazem Company delivers donuts throughout the city of Chicago every day during the year to various outlets. The company has one truck and it was driven for 76,650 miles during the most recent year. On the average, the company delivered 720 dozen donuts per day. The company estimates that the cost of driving its truck for one mile is $.38. In setting its prices, what cost should the company use for delivering one dozen donuts?
A - $.1108
B - $.1288
C - $.1358
D - $.1478
Answer is A
The total delivery cost for the year is 76,650 miles times $.38 per mile or $29,127. The total number of dozen donuts delivered this year is 720 times 365 days or 262,800. If it cost the company $29,127 to deliver 262,800 dozen donuts, that is $.1108 per dozen.
Auditing and Attestation
The CPA firm of Donovan and Dempsey is auditing the financial statements for the Wynklin Corporation The auditors have decided to qualify the audit report for the current year because not enough evidence could be obtained to substantiate the balance reported for inventory. The CPA firm is also auditing the financial statements of Salander Corporation. The auditors have decided to qualify the audit report for the current year because the inventory account contains a material misstatement. Which of the following statements is not true?
A - The introductory paragraph for both reports will not be affected by these problems.
B - The score paragraph for both reports will need to be changed to reflect the problems.
C - The opinion paragraph for both reports will need to be changed to reflect the problems.
D - An explanatory paragraph will be added in both cases just before the opinion paragraph.
Answer is B
In qualified opinions, the introductory paragraphs are not changed. However, in both cases, an explanatory paragraph is added between the score paragraph and the opinion paragraph and the wording of the opinion paragraph is changed because of the qualification. In a scope qualification (such as with the Wynklin audit), the scope paragraph must also be changed. With a departure from GAAP (such as with the Salander audit), the scope paragraph is not affected.
Regulation
In Year One, Mr. and Mrs. Rothchild filed their federal income tax return. They had only salary income of $63,700. They had one itemized deduction, state income tax payments, of $7,200. Since that amount was larger than the standard deduction of $6,300, they subtracted the itemized deduction. In Year Two, they received a cash refund of $1,200 from the filing of their Year One state income tax return. Which of the following is true?
A - The $1,200 should be recognized as an addition to taxable income in Year Two.
B - $900 should be recognized as an addition to taxable income in Year Two.
C - The Year One tax return should be amended to report the standard deduction rather than the itemized deduction.
D - The refund causes no tax effect on either Year One or Year Two.
Answer is B
Under normal conditions, if itemized deductions are taken in one year but a state income tax refund is received in the following year, the refund is reported as income in that second year. However, here, the refund drops the tax benefit of the payments from $7,200 to $6,000 which is lower than the standard deduction amount. That creates less benefit than they are entitled to receive. So, the income to be recognized in Year Two is only the amount that reduces the benefit from $7,200 to $6,300. That $900 is income in the year received.
Have a great week - it is supposed to get to 104 degrees here in Richmond, Virginia today. That makes it a good day to stay inside and study!!!
Be a doer!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
Thursday, June 17, 2010
Chase A Few Dreams
Try us FIRST before you spend your hard-earned money.
June 15, 2010
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
102 Weeks of Operation and 12,722,785 Page Views (without a penny spent on marketing)
Lesson 73
From: Joe
(a) - We have readers from around the world so I want to tell everyone who is following the World Cup: I hope your team goes all the way!! (You want them to win and they want you to pass the CPA Exam - seems like a fair trade.) I only wish I had a vuvuzela to use to cheer you on.
(1) - Nice email that I just got a few minutes ago. This is exactly what I want to hear from you. This note comes from S. D. "I want to thank all of your staff for building such a wonderful portal for all CPA candidates. I was initially using a well known review provider but they were not updated on most of the latest topics. I used your materials and got through the toughest parts of the exam. Again I thank you all for helping me become a CPA."
Yeah, that's a problem with those other courses - they charge you a lot of money and still are not well updated. You pay a lot for material that is mediocre at best and then blame yourself when you don't pass.
--OUR goal is to get you through the CPA Exam.
--THEIR goal is to get your money from your pocket into their pocket.
And, here's another note from a few days ago-another winner!!!! "I got my FAR score today. I got 80! Thanks for your great website, I would not be able to do well without it! I will notify other scores as soon as I receive them. Once again THANK YOU!"
(2) - Remember, if you want, that you can download all of our questions and answers for a small fee so that you can study 24/7 and not just when you are online. Just go to www.CPAreviewforFREE.com and click on "Store" in the upper right-hand corner. However, of course, the questions are always free and available on line.
(3) - As most of you probably know, we have a Facebook page (just search for CPAreviewforFREE and it'll pop up). A couple of days ago a person wrote in on Facebook to ask what percentage of the questions he should be getting correct to feel comfortable as he studied. That's a common question - people are tense and want some assurance that they are going to make it.
My response was the same one that I have given to this question since I first started in CPA review in 1980. On the CPA Exam some of the questions are relatively simple. You look at it and you wonder if you are misreading it because you automatically know the answer. Other questions are harder - some are almost impossibly hard. It is a wide-ranging test.
Here is my advice. If you are looking at a relatively easy question, you probably need to get 90 percent of those correct. You have to stay focused so that you don't make careless errors. It is easy to throw away points by missing questions that are easy. There is something about seeing an easy question that makes you stop paying close attention to it. You start thinking about what comes next. So, for the easy questions, I would want you to get close to 100 percent of them right - but let's say 90 percent. I think that is a "passing goal."
The other questions, though, are harder-often extremely hard. Obviously, if you just guess randomly you should get 25 percent of the remaining multiple-choice questions. You clearly need to do better than that. My goal, if I were taking the exam again at the current time, would be to shoot for 60 percent of the hard questions correct. Oh, it would be nice to get 90 percent of these right also but I doubt that is a reasonable goal for most of us. As I always say, I just want you to pass; I don't need for you to seek perfection. I think getting 60 percent of the tough questions would probably get you to a grade of about 75.
90 percent of the relatively easy questions
60 percent of the relatively hard questions
--I think that is a good benchmark
--And, I think it is something that you can do with enough time and effort.
--Yeah, you may have to fight for every possible point. You may have to work and think and try to squeeze out a point here and there.
--But, there is no reason why you cannot get 90 percent of the easy ones and 60 percent of the hard ones.
Go for it!!!
(4) - I got a note from a candidate (A. E.) a few days ago who said something like "I passed the CPA Exam using www.CPAreviewforFREE.com and I'm going to unsubscribe to the email lessons now but I just couldn't leave without saying thanks." As always, the kind words are very much appreciated.
We are delighted for you to stay on our subscription list forever. Delighted to have you. However, like A. E. who wrote in, you certainly have the right to unsubscribe. She had passed and was ready to move on. Wonderful!!! I was proud of her. So, please know that you can stay with us or you can unsubscribe whenever you wish. Just scroll to the bottom of any email lesson and click on the appropriate link.
(5) - I was driving through Williamsburg a couple of days ago, one of the real homes of American freedom. At the time, I was listening to one of my favorite songs on my iPod-"Virginia" by a singer named Page Wilson. (Of course, I have lived in the state of Virginia since 1976 so I am biased toward the state.) The song has one line that I like especially when the singer is talking about life: "in the end, it's just a gamble; at least you chased a few dreams."
I think people ought to chase more dreams. Life becomes too ho-hum without some dreams to chase. I like chasing dreams even if I don't really expect to catch them. (That is probably why I put $2 on the lottery every week.)
What are your dreams? What dreams are you chasing at the moment?
I think that is a great question to ask yourself - and demand a serious answer.
Here at www.CPAreviewforFREE.com, we have one overriding dream. We would like, within a couple of more years, for every single person in the entire world who takes the CPA Exam to use our questions and answers to help them pass. I think that is a great goal and one that deserves to be chased. And, I see no reason why it cannot happen.
But that is our goal-what is your goal? Why dreams are you chasing?
Obviously, I hope that one of your top dreams is passing the CPA Exam. If it is a real dream of yours, that alone will give you the energy and courage needed to do the work.
--If you view this whole process as drudgery, it is awfully hard to do the work necessary.
--If you are really not enthusiastic about passing, it is hard to get up the excitement needed to push forward.
--If the CPA Exam for you is more of a nightmare than a dream, you are going to have troubles. No one chases nightmares.
I want passing the CPA Exam to be a dream that you chase. I want passing the CPA Exam to be a desire that burns in your belly. I want this to be real to you.
All over the world, people recognize what it means to pass the CPA Exam. Many people major in accounting but only a few make it all the way through the CPA Exam. It is the pinnacle of the profession. It is the Mt. Everest of accounting. If you are an accountant, passing the CPA Exam really should be a dream that you chase.
In life, attitude is everything.
If you have dreams to chase, you'll be surprised by how many of them you eventually catch and you'll have a wonderful life chasing them.
(6) - When I wrote the line above "In life, attitude is everything" I was reminded of a story that I have told before. My uncle used to tell me about joining the Marines in World War II and being sent to Parris Island, South Carolina to train. He and all the young recruits were scared to death of the obstacle course they had to run there during training. It was supposed to be impossibly hard and it was all they could talk about-how much they dreaded it.
However, after they had all been there for several weeks, they would sneak out of the barracks in the middle of the night and go run the obstacle course just for fun. After a little practice, it went from impossibly hard to something they did for fun.
The only thing that changed was their attitude toward it. Many, many people start the CPA Exam with nothing but dread. But eventually the feeling will change. I cannot possibly tell you how many people over the years have told me (about half way through the exam) "I'm actually getting to enjoy learning this material. I never understood a lot of this stuff before but now as I work through these questions, it feels good to see how much I can learn. I hated it at first but, now, I don't mind studying for a couple of hours each night. It actually feels good."
Marine obstacle course.
CPA Exam.
Same thing (well, kind of).
Don't let your attitude ruin the experience. If you tell yourself that you are going to be miserable and will only study under pain of death, then you are going to have a terrible time and probably fail. But, if you will tell yourself, I'm chasing a dream, I'm adding points, I'm actually learning some interesting stuff, the chance of passing goes way up because you won't mind putting in the work.
It is not about the exam; it is about YOU and what kind of attitude you bring to the exam.
(7) - PRACTICE - Let's have some fun practicing on a couple of questions and adding a few points.
FAR
The Markoff Company buys inventory costing $11,000 from Montclair Corporation. Markoff plans to sell this merchandise for $19,000. The goods are shipping by Montclair on December 28, Year One and received by Markoff on January 3, Year Two. They were listed as FOB shipping point. Markoff uses a periodic inventory system and, on December 28, debited Purchases of Inventory for $11,000 and credited Accounts Payable for the same amount. Markoff failed to count this inventory when it took its December 31, Year One physical count because it had yet arrived. In making its Year One financial statements, which of the following is true for Markoff?
A - Liabilities on the balance sheet is understated by $8,000.
B - Retained earnings on the balance sheet is correctly stated.
C - Net income for the period is overstated by $11,000.
D - Net income for the period is understated by $11,000.
Answer is D
Because of the FOB point, the inventory belongs to Markoff at the end of the year and the journal entry that was recorded was appropriate. However, the inventory was not counted in determining the ending inventory balance. In a periodic system, cost of goods sold is calculated by taking beginning inventory and adding purchases and then subtracting ending inventory. Purchases (as well as accounts payable) are correct because of the entry that was made. Ending inventory, though, is understated because it was not included in the count. Ending inventory is too low and it is a subtraction so the resulting cost of goods sold is too high. Cost of goods sold is an expense so the resulting net income is too low by the $11,000 cost. Because net income is too low, retained earnings is also too low by the same amount.
Regulation
Skiba is a lawyer who does work for one of her clients in Year One. The invoice price for the work done was $2,000 but she agreed to accept shares of another company as payment in full. These shares had cost the client $600 when bought two years earlier as an investment but were worth $1,900 at the time of conveyance. In Year Two, Skiba sells the shares for $2,500 in cash. What gain does Skiba have for income tax purposes at the time of sale?
A - Zero
B - $500
C - $600
D - $2,500
Answer is C
When the shares are received, Skiba records the investment at its fair value of $1,900 and reports taxable revenue of $1,900. She did work and received compensation of $1,900-that is taxable revenue. The shares have a tax basis to her of $1,900 so that when sold for $2,500, she must report a gain for tax purposes of $600.
Auditing and Attestation
The CPA firm of Bryant and Rondo are auditing the financial statements of Rivers, Inc. The CPAs send out positive confirmations of a sample of the accounts receivable being reported by the client. One confirmation of $8,000 is returned from the Jackson Company indicating that the amount is correct. However, the confirmation was returned by fax. Which action is the CPA firm most likely to take?
A - Send another confirmation to Jackson.
B - Call Jackson to confirm that the confirmation was sent by the company.
C - Accept the confirmation and do nothing further.
D - Send another confirmation to a different company that owes approximately $8,000.
Answer is B
The confirmation sent by fax is okay but there needs to be follow up to provide more assurance that the fax was actually sent by the debtor company and came from the proper representative. Usually, the CPA will call and verify that the fax copy is appropriate and also ask for the original confirmation to be mailed so that it is held by the CPA.
BEC
Carmichael Corporation needs to raise $50 million for a major construction project. The company is trying to decide whether to issue bonds to raise this money or common stock. Which of the following is the most likely reason to issue the bonds rather than the stock?
A - There is less risk involved with the debt.
B - Interest is tax deductible whereas dividend distributions are not.
C - Earnings per share will go up and, hence, stock prices will rise.
D - Interest payments can be avoided but dividend payments cannot.
Answer is B
Creditors can force a company into bankruptcy and shareholders cannot so debt is viewed as a more risky method to raise funds. Bankruptcy is possible if interest and principal payments cannot be made when due. It is hard to predict what will happen to earnings per share because the interest drives the net income down but, hopefully, the additional revenue from the completed project will push net income up. However, that rise may not happen for a number of years, if at all. The cost of interest, though, is reduced because interest expense can be deducted from income for tax purposes but dividend payments cannot.
Have a great week - it is too hot to be outside so go somewhere cool and study (and add points)!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
June 15, 2010
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
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Lesson 73
From: Joe
(a) - We have readers from around the world so I want to tell everyone who is following the World Cup: I hope your team goes all the way!! (You want them to win and they want you to pass the CPA Exam - seems like a fair trade.) I only wish I had a vuvuzela to use to cheer you on.
(1) - Nice email that I just got a few minutes ago. This is exactly what I want to hear from you. This note comes from S. D. "I want to thank all of your staff for building such a wonderful portal for all CPA candidates. I was initially using a well known review provider but they were not updated on most of the latest topics. I used your materials and got through the toughest parts of the exam. Again I thank you all for helping me become a CPA."
Yeah, that's a problem with those other courses - they charge you a lot of money and still are not well updated. You pay a lot for material that is mediocre at best and then blame yourself when you don't pass.
--OUR goal is to get you through the CPA Exam.
--THEIR goal is to get your money from your pocket into their pocket.
And, here's another note from a few days ago-another winner!!!! "I got my FAR score today. I got 80! Thanks for your great website, I would not be able to do well without it! I will notify other scores as soon as I receive them. Once again THANK YOU!"
(2) - Remember, if you want, that you can download all of our questions and answers for a small fee so that you can study 24/7 and not just when you are online. Just go to www.CPAreviewforFREE.com and click on "Store" in the upper right-hand corner. However, of course, the questions are always free and available on line.
(3) - As most of you probably know, we have a Facebook page (just search for CPAreviewforFREE and it'll pop up). A couple of days ago a person wrote in on Facebook to ask what percentage of the questions he should be getting correct to feel comfortable as he studied. That's a common question - people are tense and want some assurance that they are going to make it.
My response was the same one that I have given to this question since I first started in CPA review in 1980. On the CPA Exam some of the questions are relatively simple. You look at it and you wonder if you are misreading it because you automatically know the answer. Other questions are harder - some are almost impossibly hard. It is a wide-ranging test.
Here is my advice. If you are looking at a relatively easy question, you probably need to get 90 percent of those correct. You have to stay focused so that you don't make careless errors. It is easy to throw away points by missing questions that are easy. There is something about seeing an easy question that makes you stop paying close attention to it. You start thinking about what comes next. So, for the easy questions, I would want you to get close to 100 percent of them right - but let's say 90 percent. I think that is a "passing goal."
The other questions, though, are harder-often extremely hard. Obviously, if you just guess randomly you should get 25 percent of the remaining multiple-choice questions. You clearly need to do better than that. My goal, if I were taking the exam again at the current time, would be to shoot for 60 percent of the hard questions correct. Oh, it would be nice to get 90 percent of these right also but I doubt that is a reasonable goal for most of us. As I always say, I just want you to pass; I don't need for you to seek perfection. I think getting 60 percent of the tough questions would probably get you to a grade of about 75.
90 percent of the relatively easy questions
60 percent of the relatively hard questions
--I think that is a good benchmark
--And, I think it is something that you can do with enough time and effort.
--Yeah, you may have to fight for every possible point. You may have to work and think and try to squeeze out a point here and there.
--But, there is no reason why you cannot get 90 percent of the easy ones and 60 percent of the hard ones.
Go for it!!!
(4) - I got a note from a candidate (A. E.) a few days ago who said something like "I passed the CPA Exam using www.CPAreviewforFREE.com and I'm going to unsubscribe to the email lessons now but I just couldn't leave without saying thanks." As always, the kind words are very much appreciated.
We are delighted for you to stay on our subscription list forever. Delighted to have you. However, like A. E. who wrote in, you certainly have the right to unsubscribe. She had passed and was ready to move on. Wonderful!!! I was proud of her. So, please know that you can stay with us or you can unsubscribe whenever you wish. Just scroll to the bottom of any email lesson and click on the appropriate link.
(5) - I was driving through Williamsburg a couple of days ago, one of the real homes of American freedom. At the time, I was listening to one of my favorite songs on my iPod-"Virginia" by a singer named Page Wilson. (Of course, I have lived in the state of Virginia since 1976 so I am biased toward the state.) The song has one line that I like especially when the singer is talking about life: "in the end, it's just a gamble; at least you chased a few dreams."
I think people ought to chase more dreams. Life becomes too ho-hum without some dreams to chase. I like chasing dreams even if I don't really expect to catch them. (That is probably why I put $2 on the lottery every week.)
What are your dreams? What dreams are you chasing at the moment?
I think that is a great question to ask yourself - and demand a serious answer.
Here at www.CPAreviewforFREE.com, we have one overriding dream. We would like, within a couple of more years, for every single person in the entire world who takes the CPA Exam to use our questions and answers to help them pass. I think that is a great goal and one that deserves to be chased. And, I see no reason why it cannot happen.
But that is our goal-what is your goal? Why dreams are you chasing?
Obviously, I hope that one of your top dreams is passing the CPA Exam. If it is a real dream of yours, that alone will give you the energy and courage needed to do the work.
--If you view this whole process as drudgery, it is awfully hard to do the work necessary.
--If you are really not enthusiastic about passing, it is hard to get up the excitement needed to push forward.
--If the CPA Exam for you is more of a nightmare than a dream, you are going to have troubles. No one chases nightmares.
I want passing the CPA Exam to be a dream that you chase. I want passing the CPA Exam to be a desire that burns in your belly. I want this to be real to you.
All over the world, people recognize what it means to pass the CPA Exam. Many people major in accounting but only a few make it all the way through the CPA Exam. It is the pinnacle of the profession. It is the Mt. Everest of accounting. If you are an accountant, passing the CPA Exam really should be a dream that you chase.
In life, attitude is everything.
If you have dreams to chase, you'll be surprised by how many of them you eventually catch and you'll have a wonderful life chasing them.
(6) - When I wrote the line above "In life, attitude is everything" I was reminded of a story that I have told before. My uncle used to tell me about joining the Marines in World War II and being sent to Parris Island, South Carolina to train. He and all the young recruits were scared to death of the obstacle course they had to run there during training. It was supposed to be impossibly hard and it was all they could talk about-how much they dreaded it.
However, after they had all been there for several weeks, they would sneak out of the barracks in the middle of the night and go run the obstacle course just for fun. After a little practice, it went from impossibly hard to something they did for fun.
The only thing that changed was their attitude toward it. Many, many people start the CPA Exam with nothing but dread. But eventually the feeling will change. I cannot possibly tell you how many people over the years have told me (about half way through the exam) "I'm actually getting to enjoy learning this material. I never understood a lot of this stuff before but now as I work through these questions, it feels good to see how much I can learn. I hated it at first but, now, I don't mind studying for a couple of hours each night. It actually feels good."
Marine obstacle course.
CPA Exam.
Same thing (well, kind of).
Don't let your attitude ruin the experience. If you tell yourself that you are going to be miserable and will only study under pain of death, then you are going to have a terrible time and probably fail. But, if you will tell yourself, I'm chasing a dream, I'm adding points, I'm actually learning some interesting stuff, the chance of passing goes way up because you won't mind putting in the work.
It is not about the exam; it is about YOU and what kind of attitude you bring to the exam.
(7) - PRACTICE - Let's have some fun practicing on a couple of questions and adding a few points.
FAR
The Markoff Company buys inventory costing $11,000 from Montclair Corporation. Markoff plans to sell this merchandise for $19,000. The goods are shipping by Montclair on December 28, Year One and received by Markoff on January 3, Year Two. They were listed as FOB shipping point. Markoff uses a periodic inventory system and, on December 28, debited Purchases of Inventory for $11,000 and credited Accounts Payable for the same amount. Markoff failed to count this inventory when it took its December 31, Year One physical count because it had yet arrived. In making its Year One financial statements, which of the following is true for Markoff?
A - Liabilities on the balance sheet is understated by $8,000.
B - Retained earnings on the balance sheet is correctly stated.
C - Net income for the period is overstated by $11,000.
D - Net income for the period is understated by $11,000.
Answer is D
Because of the FOB point, the inventory belongs to Markoff at the end of the year and the journal entry that was recorded was appropriate. However, the inventory was not counted in determining the ending inventory balance. In a periodic system, cost of goods sold is calculated by taking beginning inventory and adding purchases and then subtracting ending inventory. Purchases (as well as accounts payable) are correct because of the entry that was made. Ending inventory, though, is understated because it was not included in the count. Ending inventory is too low and it is a subtraction so the resulting cost of goods sold is too high. Cost of goods sold is an expense so the resulting net income is too low by the $11,000 cost. Because net income is too low, retained earnings is also too low by the same amount.
Regulation
Skiba is a lawyer who does work for one of her clients in Year One. The invoice price for the work done was $2,000 but she agreed to accept shares of another company as payment in full. These shares had cost the client $600 when bought two years earlier as an investment but were worth $1,900 at the time of conveyance. In Year Two, Skiba sells the shares for $2,500 in cash. What gain does Skiba have for income tax purposes at the time of sale?
A - Zero
B - $500
C - $600
D - $2,500
Answer is C
When the shares are received, Skiba records the investment at its fair value of $1,900 and reports taxable revenue of $1,900. She did work and received compensation of $1,900-that is taxable revenue. The shares have a tax basis to her of $1,900 so that when sold for $2,500, she must report a gain for tax purposes of $600.
Auditing and Attestation
The CPA firm of Bryant and Rondo are auditing the financial statements of Rivers, Inc. The CPAs send out positive confirmations of a sample of the accounts receivable being reported by the client. One confirmation of $8,000 is returned from the Jackson Company indicating that the amount is correct. However, the confirmation was returned by fax. Which action is the CPA firm most likely to take?
A - Send another confirmation to Jackson.
B - Call Jackson to confirm that the confirmation was sent by the company.
C - Accept the confirmation and do nothing further.
D - Send another confirmation to a different company that owes approximately $8,000.
Answer is B
The confirmation sent by fax is okay but there needs to be follow up to provide more assurance that the fax was actually sent by the debtor company and came from the proper representative. Usually, the CPA will call and verify that the fax copy is appropriate and also ask for the original confirmation to be mailed so that it is held by the CPA.
BEC
Carmichael Corporation needs to raise $50 million for a major construction project. The company is trying to decide whether to issue bonds to raise this money or common stock. Which of the following is the most likely reason to issue the bonds rather than the stock?
A - There is less risk involved with the debt.
B - Interest is tax deductible whereas dividend distributions are not.
C - Earnings per share will go up and, hence, stock prices will rise.
D - Interest payments can be avoided but dividend payments cannot.
Answer is B
Creditors can force a company into bankruptcy and shareholders cannot so debt is viewed as a more risky method to raise funds. Bankruptcy is possible if interest and principal payments cannot be made when due. It is hard to predict what will happen to earnings per share because the interest drives the net income down but, hopefully, the additional revenue from the completed project will push net income up. However, that rise may not happen for a number of years, if at all. The cost of interest, though, is reduced because interest expense can be deducted from income for tax purposes but dividend payments cannot.
Have a great week - it is too hot to be outside so go somewhere cool and study (and add points)!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
Monday, June 7, 2010
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Lesson 72
From: Joe
(1) – Nice note that came in a day or so ago from DA: “I'm glad you mentioned that the questions on your site can be worked on smart phones. I just discovered it myself recently as I was preparing for Audit. That is HUGE!! I can practice anywhere I can get service! No excuses!”
And one from HA: “Thank you! I passed AUDIT 82! I love this feeling of sending an e-mail to let you know how much I appreciate you. I am so fortunate to have come across your free website. I want all the CPA candidates in the world to know about this wonderful web site and want them to experience how I feel. I feel great! Joe, your questions and explanations are the best to put things together to provide me with the whole picture; your explanation helps me to understand the concept which I am then able to apply. So, you set me free from suffering from the vast amount of memorization and being overwhelmed. Thank you. I passed REG and BEC last time by studying your website. Unfortunately, I failed FARE 71 this time. But, I know I can pass FARE my next attempt as long as I practice your questions! Thanks for motivating me and .. helping me " NOT TO GIVE UP." Finally, I feel I am close to accomplishing my goal... it has been about 15 years. Again, thanks very very much.”
I love getting emails like these. This second person came in after struggling in the past and used our website and passed three and needs only four more points to pass that last exam. This is just great!!!
And, you can be the next – get to work and get those points and go do it!!
(2) – Okay, let’s assume you come to me and say “I want to pass the first part of the exam in 5-6 weeks from right now. I want to try my very best to pass this first part without spending a penny. I have a job and a family but I’m willing to put in 1-3 hours each evening. If I fail, I may do something different next time but, first, I want to try to do it quick and dirty and free. What would you recommend? I want to pass the first part in 5-6 weeks, I can spend 1-3 hours per day, and I want to keep my money for my spouse and kids. I don’t need to make 99 or even 76; I just want to make 75.”
Fair question – in fact, I’m surprised that I don’t get asked this question more: the quick and dirty and free approach to passing.
--Pick the part of the exam that you like best.
--Start by trying to work 30 questions each day at www.CPAreviewforFREE.com. If it turns out that you don’t have time for 30, pick some other daily goal that is reasonable for you: 25 or 20, for example.
--When studying, never guess at the answer. Read the question carefully. If you think you can get the answer, go for it.
--Read through the answer carefully. If you got the question right, move on. Don’t dwell on success. If you missed the question, write down 10 words or less that should give you a better chance to get the answer correct the next time. That’s how you add points and “adding points” is the name of the game.
--Get a supportive friend or your spouse or even a parent to play the role of your parental advisor. Lots of friends want to help—give one of the them a chance to do that. Every night when you get finished studying, email this “parental advisor” with the number of questions you did during that day. “Did 32 today” for example– keep it short. There is something about having to report your progress to a parental figure that will make you work harder.
--Ask your parental advisor to respond to every one of these emails but with just a few words. If you managed to hit your daily goal, the person should write back some congratulations. “Wonderful, I knew you could do it.” “That’s the way to make 75.” “Not easy but you made it.” “I’m very proud of you.”
--If you were not able to hit your daily goal, ask the parent to give you some support/encouragement. “you are making progress; you’ll get there,” “don’t get down, we all know you can do it,” “look for those open moments during the day when you can get a question done,” “try to work just a little harder tomorrow.” That kind of encouragement can be ever so helpful.
--If you’ll follow this regiment, you can work all of the questions in a section of www.CPAreviewforFREE.com TWICE in roughly five weeks. There’s obviously no guarantee but if you work all the questions twice in a fairly short period of time and take a few notes to help you add points, I think you’ve got a wonderful chance to make 75 and get on to the next part WITHOUT SPENDING ANY MONEY.
(3) – I send out these emails about every 7 to 10 days to nearly 13,500 accountants around the world. Please feel free to stay on the list just as long as you want. I’ve been writing these emails, off and on now, for about a dozen years – I’m pretty sure I can go for another dozen. However, if you are ever ready to unsubscribe, scroll to the bottom of the page and click on the appropriate link.
(4) – Went to a movie a few days ago about one of my favorite artist: Vincent van Gogh. Absolutely beautiful work – unbelievable, what a wonderful talent. However, one of the things that I found the most interesting was that van Gogh painted around 900 paintings but only managed to sell one. Of course, these same paintings now sell for tens of millions but when he was alive and working, 899 out of 900 (.999) of his work no one wanted to buy. What a horrible batting average.
Think how discouraging that must have been. He did all that work and no one thought the results were worth buying. What would you have done?
In such cases, most people would have given up and assumed they were wasting their time. Fortunately, van Gogh did not give up and our world is richer for his persistence.
When you are studying for the CPA Exam, you’ll often hit patches were you will miss a lot of questions (although I’m not sure any of us will ever miss .999 of the questions we work). As you probably already know, it is really easy to get discouraged and decide that you are wasting your time. It is always easy to push yourself forward when you are getting positive results. If you get question after question right, everyone enjoys doing the work—keeping going is easy. There is no challenge to that.
However, the real test of what we are made of is when we miss a question and then miss another question and then another. It is so easy to get discouraged quickly—that is just human nature. It takes a really tough person to hang in there. That is one of the reasons that I stress so often that the goal is not to focus on where you are at right now but to concentrate on adding points. If you try three questions and get them all correct, you are probably not adding any points. If you try three questions and miss them all, you have a wonderful opportunity to add some points, to get better, to get closer to passing.
I know how hard it is, though, to keep a positive attitude when everything seems negative. That alone may be the single biggest reason why 50 percent of the people fail each of the four parts of the CPA Exam. It is hard to keep pushing when the results are not positive.
So, when you get up in the morning, you have to start out with a push. Start with the right attitude.
--I’m going to add some points today.
--I’m going to work 30 questions today and read those answers carefully.
--I’m going to learn from my mistakes and not get discouraged.
--I’m going to find spare moments when I can work a question or two.
--I can pass and I am going to pass.
In life and the CPA Exam, success is all about attitude. Go for it – you can do it!!!
(5) – Speaking of doing some questions, let’s practice a bit – here’s where you can add a point or two right now.
FAR
The Hammerstein Company produces a balance sheet. Within stockholders’ equity is a rather large figure reported as accumulated other comprehensive income. Which of the following could NOT have led to this recognition?
A. Hammerstein has a subsidiary in Japan which uses the yen as its functional currency.
B. Hammerstein has invested in a bond that was issued at a discount from its face value and is reported as a trading security.
C. Hammerstein bought shares of another company several years ago that are being reported as available for sale.
D. Hammerstein has a defined benefit pension plan where the projected benefit obligation was just increased as a result of an amendment in the plan contract.
Answer is B
Accumulated other comprehensive income is used to recognize specific income effects that are reported but not included within net income. Three of the most common sources of this reporting are foreign currency translation of the statements of a subsidiary in another country, the gains and losses in the value of investments reported as available for sale, and changes in the projected benefit obligation of a defined benefit plan because of contractual adjustments (known as a prior service cost). However, the reporting of an investment classified as a trading security only affects net income and does not impact other comprehensive income.
Regulation
Milano Corporation buys land for $34,000 from John and Susan Orteland. The president of Milano hands them a check for the appropriate amount. Which of the following is true about a check?
A – A check is a promise to pay a certain amount.
B – A check is a written order for the payment of money.
C – A check is the equivalent of an IOU.
D – A check indicates that payment will be made upon the completion of specified actions.
Answer is B
A check is an order to a bank to make cash payment of the amount specified. The Ortelands can take the check they have received and go to the bank on which it is written and receive the $34,000 (assuming that amount of money is held in the appropriate account).
BEC
Company officials for Lastinaff, Inc. are thinking about buying a machine for $300,000 that has a ten-year life and no salvage value. Ignoring any tax effects, they expect this machine to generate net income for the company of $50,000 per year. In deciding whether to make this investment, what is the best estimation of the payback period?
A – 3.75 years
B – 4.50 years
C – 5.00 years
D – 6.00 years
Answer is A
The payback period is the time that it takes a company to generate cash inflows equal to its investment. The quicker the payback period is the better the investment is. If cash is generated evenly over time, the payback period is the cost of the asset divided by the annual cash inflow. Here, the company makes a profit of $50,000 each year. However, depreciation expense is a noncash expense that is subtracted to arrive at this net income. Assuming straight-line depreciation (by far the most common method used in the business community), annual depreciation is $30,000 ($300,000/10 years). Cash revenues and expenses minus noncash revenues and expenses give net income. If the noncash depreciation is $30,000 and net income is $50,000, then the cash revenues and expenses net to $80,000 per year from the machine. The payback period is $300,000 divided by $80,000 or 3.75 years.
Auditing
Jane Simpson works for Shadowline Corporation and is paid $30 per hour. She typically works 28 hours per week but always reports that she works 32 hours per week so that she can receive additional wages from the company. Which of the following internal control activities is most likely to prevent this type of theft?
A – The company’s payroll program is tested each month with test data to ensure that it operates properly.
B – A separate paymaster delivers the checks each pay period to Jane Simpson after verifying her identity.
C – The supervisor for Jane Simpson must review her time sheet each period and indicate approval.
D – Any paychecks that are printed but not picked up must be turned over to an independent group for subsequent handling.
Answer is C
Each of these four is an internal control activity frequently found in a company’s payroll system. However, they are each designed to prevent or discover frauds of a specific type. Here, the problem is extra hours claimed by an employee so that unearned money can be received. Test data is used to verify that the payroll program is working as intended. The paymaster hands out checks to make certain that checks are being prepared for actual individuals who work for the company. That is also the case for following up on checks that are not claimed at the appropriate time. The approval by the supervisor is correct here because the supervisor is the person most likely to know how many hours the employee actually did work. That person is in a position to verify that the number of hours listed is correct.
Have a great week. Remember 30 questions per day is a great pace as you get started working to pass the CPA Exam.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.cpareviewforfree.com
100 Weeks of Operation and 12,388,928 Page Views (without a penny spent on marketing)
Lesson 72
From: Joe
(1) – Nice note that came in a day or so ago from DA: “I'm glad you mentioned that the questions on your site can be worked on smart phones. I just discovered it myself recently as I was preparing for Audit. That is HUGE!! I can practice anywhere I can get service! No excuses!”
And one from HA: “Thank you! I passed AUDIT 82! I love this feeling of sending an e-mail to let you know how much I appreciate you. I am so fortunate to have come across your free website. I want all the CPA candidates in the world to know about this wonderful web site and want them to experience how I feel. I feel great! Joe, your questions and explanations are the best to put things together to provide me with the whole picture; your explanation helps me to understand the concept which I am then able to apply. So, you set me free from suffering from the vast amount of memorization and being overwhelmed. Thank you. I passed REG and BEC last time by studying your website. Unfortunately, I failed FARE 71 this time. But, I know I can pass FARE my next attempt as long as I practice your questions! Thanks for motivating me and .. helping me " NOT TO GIVE UP." Finally, I feel I am close to accomplishing my goal... it has been about 15 years. Again, thanks very very much.”
I love getting emails like these. This second person came in after struggling in the past and used our website and passed three and needs only four more points to pass that last exam. This is just great!!!
And, you can be the next – get to work and get those points and go do it!!
(2) – Okay, let’s assume you come to me and say “I want to pass the first part of the exam in 5-6 weeks from right now. I want to try my very best to pass this first part without spending a penny. I have a job and a family but I’m willing to put in 1-3 hours each evening. If I fail, I may do something different next time but, first, I want to try to do it quick and dirty and free. What would you recommend? I want to pass the first part in 5-6 weeks, I can spend 1-3 hours per day, and I want to keep my money for my spouse and kids. I don’t need to make 99 or even 76; I just want to make 75.”
Fair question – in fact, I’m surprised that I don’t get asked this question more: the quick and dirty and free approach to passing.
--Pick the part of the exam that you like best.
--Start by trying to work 30 questions each day at www.CPAreviewforFREE.com. If it turns out that you don’t have time for 30, pick some other daily goal that is reasonable for you: 25 or 20, for example.
--When studying, never guess at the answer. Read the question carefully. If you think you can get the answer, go for it.
--Read through the answer carefully. If you got the question right, move on. Don’t dwell on success. If you missed the question, write down 10 words or less that should give you a better chance to get the answer correct the next time. That’s how you add points and “adding points” is the name of the game.
--Get a supportive friend or your spouse or even a parent to play the role of your parental advisor. Lots of friends want to help—give one of the them a chance to do that. Every night when you get finished studying, email this “parental advisor” with the number of questions you did during that day. “Did 32 today” for example– keep it short. There is something about having to report your progress to a parental figure that will make you work harder.
--Ask your parental advisor to respond to every one of these emails but with just a few words. If you managed to hit your daily goal, the person should write back some congratulations. “Wonderful, I knew you could do it.” “That’s the way to make 75.” “Not easy but you made it.” “I’m very proud of you.”
--If you were not able to hit your daily goal, ask the parent to give you some support/encouragement. “you are making progress; you’ll get there,” “don’t get down, we all know you can do it,” “look for those open moments during the day when you can get a question done,” “try to work just a little harder tomorrow.” That kind of encouragement can be ever so helpful.
--If you’ll follow this regiment, you can work all of the questions in a section of www.CPAreviewforFREE.com TWICE in roughly five weeks. There’s obviously no guarantee but if you work all the questions twice in a fairly short period of time and take a few notes to help you add points, I think you’ve got a wonderful chance to make 75 and get on to the next part WITHOUT SPENDING ANY MONEY.
(3) – I send out these emails about every 7 to 10 days to nearly 13,500 accountants around the world. Please feel free to stay on the list just as long as you want. I’ve been writing these emails, off and on now, for about a dozen years – I’m pretty sure I can go for another dozen. However, if you are ever ready to unsubscribe, scroll to the bottom of the page and click on the appropriate link.
(4) – Went to a movie a few days ago about one of my favorite artist: Vincent van Gogh. Absolutely beautiful work – unbelievable, what a wonderful talent. However, one of the things that I found the most interesting was that van Gogh painted around 900 paintings but only managed to sell one. Of course, these same paintings now sell for tens of millions but when he was alive and working, 899 out of 900 (.999) of his work no one wanted to buy. What a horrible batting average.
Think how discouraging that must have been. He did all that work and no one thought the results were worth buying. What would you have done?
In such cases, most people would have given up and assumed they were wasting their time. Fortunately, van Gogh did not give up and our world is richer for his persistence.
When you are studying for the CPA Exam, you’ll often hit patches were you will miss a lot of questions (although I’m not sure any of us will ever miss .999 of the questions we work). As you probably already know, it is really easy to get discouraged and decide that you are wasting your time. It is always easy to push yourself forward when you are getting positive results. If you get question after question right, everyone enjoys doing the work—keeping going is easy. There is no challenge to that.
However, the real test of what we are made of is when we miss a question and then miss another question and then another. It is so easy to get discouraged quickly—that is just human nature. It takes a really tough person to hang in there. That is one of the reasons that I stress so often that the goal is not to focus on where you are at right now but to concentrate on adding points. If you try three questions and get them all correct, you are probably not adding any points. If you try three questions and miss them all, you have a wonderful opportunity to add some points, to get better, to get closer to passing.
I know how hard it is, though, to keep a positive attitude when everything seems negative. That alone may be the single biggest reason why 50 percent of the people fail each of the four parts of the CPA Exam. It is hard to keep pushing when the results are not positive.
So, when you get up in the morning, you have to start out with a push. Start with the right attitude.
--I’m going to add some points today.
--I’m going to work 30 questions today and read those answers carefully.
--I’m going to learn from my mistakes and not get discouraged.
--I’m going to find spare moments when I can work a question or two.
--I can pass and I am going to pass.
In life and the CPA Exam, success is all about attitude. Go for it – you can do it!!!
(5) – Speaking of doing some questions, let’s practice a bit – here’s where you can add a point or two right now.
FAR
The Hammerstein Company produces a balance sheet. Within stockholders’ equity is a rather large figure reported as accumulated other comprehensive income. Which of the following could NOT have led to this recognition?
A. Hammerstein has a subsidiary in Japan which uses the yen as its functional currency.
B. Hammerstein has invested in a bond that was issued at a discount from its face value and is reported as a trading security.
C. Hammerstein bought shares of another company several years ago that are being reported as available for sale.
D. Hammerstein has a defined benefit pension plan where the projected benefit obligation was just increased as a result of an amendment in the plan contract.
Answer is B
Accumulated other comprehensive income is used to recognize specific income effects that are reported but not included within net income. Three of the most common sources of this reporting are foreign currency translation of the statements of a subsidiary in another country, the gains and losses in the value of investments reported as available for sale, and changes in the projected benefit obligation of a defined benefit plan because of contractual adjustments (known as a prior service cost). However, the reporting of an investment classified as a trading security only affects net income and does not impact other comprehensive income.
Regulation
Milano Corporation buys land for $34,000 from John and Susan Orteland. The president of Milano hands them a check for the appropriate amount. Which of the following is true about a check?
A – A check is a promise to pay a certain amount.
B – A check is a written order for the payment of money.
C – A check is the equivalent of an IOU.
D – A check indicates that payment will be made upon the completion of specified actions.
Answer is B
A check is an order to a bank to make cash payment of the amount specified. The Ortelands can take the check they have received and go to the bank on which it is written and receive the $34,000 (assuming that amount of money is held in the appropriate account).
BEC
Company officials for Lastinaff, Inc. are thinking about buying a machine for $300,000 that has a ten-year life and no salvage value. Ignoring any tax effects, they expect this machine to generate net income for the company of $50,000 per year. In deciding whether to make this investment, what is the best estimation of the payback period?
A – 3.75 years
B – 4.50 years
C – 5.00 years
D – 6.00 years
Answer is A
The payback period is the time that it takes a company to generate cash inflows equal to its investment. The quicker the payback period is the better the investment is. If cash is generated evenly over time, the payback period is the cost of the asset divided by the annual cash inflow. Here, the company makes a profit of $50,000 each year. However, depreciation expense is a noncash expense that is subtracted to arrive at this net income. Assuming straight-line depreciation (by far the most common method used in the business community), annual depreciation is $30,000 ($300,000/10 years). Cash revenues and expenses minus noncash revenues and expenses give net income. If the noncash depreciation is $30,000 and net income is $50,000, then the cash revenues and expenses net to $80,000 per year from the machine. The payback period is $300,000 divided by $80,000 or 3.75 years.
Auditing
Jane Simpson works for Shadowline Corporation and is paid $30 per hour. She typically works 28 hours per week but always reports that she works 32 hours per week so that she can receive additional wages from the company. Which of the following internal control activities is most likely to prevent this type of theft?
A – The company’s payroll program is tested each month with test data to ensure that it operates properly.
B – A separate paymaster delivers the checks each pay period to Jane Simpson after verifying her identity.
C – The supervisor for Jane Simpson must review her time sheet each period and indicate approval.
D – Any paychecks that are printed but not picked up must be turned over to an independent group for subsequent handling.
Answer is C
Each of these four is an internal control activity frequently found in a company’s payroll system. However, they are each designed to prevent or discover frauds of a specific type. Here, the problem is extra hours claimed by an employee so that unearned money can be received. Test data is used to verify that the payroll program is working as intended. The paymaster hands out checks to make certain that checks are being prepared for actual individuals who work for the company. That is also the case for following up on checks that are not claimed at the appropriate time. The approval by the supervisor is correct here because the supervisor is the person most likely to know how many hours the employee actually did work. That person is in a position to verify that the number of hours listed is correct.
Have a great week. Remember 30 questions per day is a great pace as you get started working to pass the CPA Exam.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.cpareviewforfree.com
Thursday, May 27, 2010
2,100 FREE CPA Review Questions and Answers Available for YOU
99 Weeks of Operation and 12,124,462 Page Views (without a penny spent on marketing)
Lesson 71
From: Joe
(a) – We officially went over 12,000,000 page views last week!!! Hard to believe we’ve been able to do this without advertising but you guys have made it happen. Thanks a million (well 12 million)!!!
And, last week, yet again, our traffic set a new all time high. The average (“average” not “highest”) candidate came to our site 2.39 times during the week and looked at a total of 62.5 pages of information.
That’s a lot of points added and every single one of those points was added for F*R*E*E. Free, Free, Free. Don’t you know that the folks who run those other courses charging $2,800 really hate the word “FREE.”
(1) – Here in the United States, Monday is Memorial Day—a national day that commemorates the men and women who have been willing to die for their country while in the military service. We here at www.CPAreviewforFREE.com want to salute all of the folks (and their families) who serve and sacrifice so that we can stay free. If you know someone in the military or, perhaps, a family who has had a love one die in the military, please pass along a kind, grateful word.
(2) – One of the most common questions that I get concerning www.CPAreviewforFREE.com is “I’m ready to give it a try. I’d like to keep my money in my pocket. What do I have to lose???? How should I get started?”
Good question. Here’s what I would do:
--Go to www.CPAreviewforFREE.com
--Click on “resources” at the top of the screen.
--You should see a section called “Articles”
--Click on “Using CPAreviewforFREE to prepare for success on the CPA Exam”
--Read every word of that essay carefully.
--Click on “Register” and get started.
--Pick a topic
--Start answering questions – when you study, never guess at an answer
--If you get the question right, read the answer quickly and then move on
--If you do not get the question right, read the answer carefully. This is by far the most important part of the entire process. Try to pick up at least one factor that would help you to get this question right if you were to see it again in 2-3 weeks. Preparation is all about improving your ability to get questions right. That is your only goal. Add points. Add points. Add points.
--When you read an answer for a question you missed, try to write down something to help you get the question right the next time. Limit what you write to 10 words or less per question. Don’t write an essay—just a memory kicker (“this will help me remember how to do this next time.”)
--Remember—college classes are designed to teach understand. Our goal is to help you get questions right and add points until you make 75 and pass!!!!
(3) – One of my partners sent along this message. I always want to keep the partners happy since they do all of the real work. “Please mention in your next newsletter that our site is "pf" (phone friendly) meaning that candidates can work our multiple choice questions on their smart phones (iPhone, Blackberry, Droid,etc). They can study on the go (but, of course, not behind the wheel of a car).” We want you to pass the CPA exam – not die trying.
(4) – I have become very fond of a little number game called KenKen. It is a lot like Suduko except that you have to do some simple mathematical computations that you fit together to form a box. I like to do KenKen when I take sauna baths. Doing those puzzles helps distract my mind from the fierce heat and allows me to stay in the sauna for a longer period of time.
Tuesday I got into the sauna and started working one of the KenKen puzzles. About half-way through I got stuck so I tried to quickly start over and managed to get stuck again at the same place. I started to rush through checking my numbers but I also started noticing how hot I was getting. I really wanted to finish that puzzle before I had to get out of the sauna so I started pushing myself to work faster. I kept saying “think, think –you can do this. You’re being dumb.”
I finally just gave up before I melted. I threw the puzzle on the floor and stomped off to take my shower.
Later, I came back all cooled down. I picked up the puzzle and looked at it and knew my mistake immediately. It did not take me two seconds to see that I had reversed two numbers and I then finished the puzzle successfully in just a few minutes.
Why was my problem so hard to work at first and then so easy to work later?
I often tell my students to picture their brains as a big muscle somewhat like the ones in your arm. If I give you a baseball and tell you to throw it and you keep your arm muscle loose, you can throw it for a pretty good distance. But, if you tense up your arm, it becomes more and more difficult to throw the ball. In fact, if you tense up those muscles enough, you cannot even move your arm.
The brain is the same way. If you tense it up, it becomes less and less able to function until, with enough tension, it won’t move at all. It just shuts down. But, if you can loosen it up, it works like the natural marvel it is. Your goal should always be to have a brain that is focused but loose. Focused so you don’t get distracted but loose so it is able to move around and do the thinking necessary. No brain thinks better than a focused but loose brain.
When I was trying to work the KenKen puzzle, I started to get upset and tense because I was hot and in a hurry. The more I rushed, the more tense my brain became. Eventually, there was no chance in the world that I could complete the puzzle. My brain just was not going to work because of the tension I was exerting. However, when I moved on to something else and came back, my brain was back to a loose but focused state. I had the right frame of mind to get it done and, sure enough, I did. The problem was actually easy.
I always tell my students “if your jaw is clenched, your brain is probably too tense. If your jaw is loose, your brain probably is also.”
Whether you are studying tonight or taking the CPA Exam tomorrow, don’t let a tense brain block your chance of making 75 and passing. Keep the jaw loose and if you find yourself too tense over a question, move on to the next one. Getting upset and panicky is not helpful; it is about the worst thing you can do. Loose and focused – that’s the key to brain success.
(5) – Here is a nice note that I received last week from ES. Always makes me smile to hear from folks: “I just wanted to let you know how much I love your emails. I've passed both BEC and AUD on my first attempt thanks to your study tips/questions and XX review. I'm currently studying for REG and am completely overwhelmed by XX review. However, I started working through your questions from the website and from some of your old emails, and I'm finding that I feel much more confident after working your questions. There is just so much detail involved with REG that it is difficult to remember every little piece of information. I kept doing XX questions and kept getting them wrong because I would forget one small thing. But with your questions, I am getting them correct and understanding your explanations as well. So thank you for helping me add points and keep my sanity while studying!”
And, here’s an email I got on the same day from FT: “Thank you for a free website and all the motivating e-mails. I passed BEC and REG using cpareviewforree.com. All personal websites are blocked at my workplace except for yours. I make sure I go through 50 questions per day. I am now struggling with audit and thank you for all those free questions. Too bad there are going to be too many CPAs and not enough jobs for them. I am not giving up though! Thank you Thank you. God sends angels in different forms.”
Well, I’m not sure if we qualify as “angels” but I do appreciate the thought!!!
(6) – As always (we are legally required to make this mention but I hope you understand that the offer is real), do know that you can very easily stop getting these email lessons by scrolling to the bottom of this lesson and clicking on the appropriate button. We want to help. We are delighted to be of assistance. But, the moment you are ready to move on, please feel free to unsubscribe.
(7) – Let’s do some practice. Let’s add some points. You CAN do it!! I know you can.
Here we go.
Financial Accounting and Reporting
The Artichoke Company expects to make $200,000 in net income this year and pay income taxes at a 30 percent rate. In the first quarter of the year, the company makes income of $40,000 and the previous estimations remain the same. In the second quarter, the company makes another $60,000 in income but now believes the effective tax rate for this tax year is probably going to be 32 percent instead of 30 percent. How much income tax expense should the company recognize in the second quarter of the year?
A. $16,000
B. $18,000
C. $19,200
D. $20,000
Answer is D
In the first quarter of the year, the company has income so far of $40,000 and expects a tax rate of 30 percent so an expense of $12,000 is recognized. By the end of the second quarter, the company has earned total income of $100,000 ($40,000 + $60,000) but the expected tax rate is now assumed to be 32 percent or a total of $32,000. In reporting the second quarter, the company has to raise its expense from $12,000 to $32,000. Thus, the expense must be increased by $20,000 for that second period.
BEC
A company has a large building in Detroit. The company can sell the building for $1.7 million or refurbish the building for $220,000 and then rent it for ten years at $370,000 per year. Company officials consider the possibilities and choose to refurbish the building for rental purposes. What is the $1.7 million?
A. A fixed cost
B. A variable cost
C. A sunk cost
D. An opportunity cost
Answer is D
In making decisions about the use of assets, benefits that are passed up are referred to as opportunity costs. In other words, the $1.7 million was an opportunity for the company and the decision was made not to take advantage of that possibility. A sunk cost is a real cost incurred in the past that cannot now be changed. A fixed cost is one that will not increase as production levels increase (within a relevant range). A variable cost is one that will increase as production levels increase.
Regulation
The firm of Assini and Grim CPAs is doing the current year tax return for Mr. and Mrs. Clarence Alexander. The return was done in the previous year by John Roberts CPA. Assini and Grim discover that a $30,000 itemized deduction was incorrectly taken by the taxpayers in the previous year. What should the new CPAs do about this mistake?
A. File an amended return for the previous year.
B. Talk with the taxpayers and urge them to file an amended return.
C. Contact John Roberts CPA and explain the problem and suggest that he take remedial action.
D. Contact the IRS so that they can contact the taxpayers about the problem.
Answer is B
The return is that of the taxpayers so the CPA firm cannot contact any outside party (the previous CPA or the IRS) and cannot file an amended return without the consent of the taxpayer. Thus, the CPA should discuss the issue with the taxpayer and provide clear advice as the appropriate action that should be taken to rectify the problem.
Auditing and Attestation
The CPA firm of Abercrombie & Fitch discovers that the president of its biggest client committed several illegal acts in the name of the company last year. He authorized the payment of bribes to officials of a competing company. The board of directors was informed of this activity but chose to take no action because the amounts were judged to be immaterial in comparison to the reported balances taken as a whole. Which of the following is the most likely decision by the CPA firm?
A. Contact the appropriate government officials to disclose the actions of the president.
B. Provide disclosure of the information in the audit report but do not change the audit opinion being rendered.
C. Provide disclosure of the information in the audit report and do change the audit report to a qualified audit opinion.
D. Consider quitting the engagement.
Answer is D
The board of directors is supposed to set the ethical standards for a company. If no action is taken in this situation when an illegal act has been performed in the name of the company, the CPA firm should consider whether it wants to be associated with an organization which appears to have ethically challenged leadership at both the board of director level as well as the presidential level. The firm might decide not to quit but they need to consider that possibility.
Have a great Memorial Day. Take a few moments out to remember those who have served and died.
99 Weeks of Operation and 12,124,462 Page Views (without a penny spent on marketing)
Lesson 71
From: Joe
(a) – We officially went over 12,000,000 page views last week!!! Hard to believe we’ve been able to do this without advertising but you guys have made it happen. Thanks a million (well 12 million)!!!
And, last week, yet again, our traffic set a new all time high. The average (“average” not “highest”) candidate came to our site 2.39 times during the week and looked at a total of 62.5 pages of information.
That’s a lot of points added and every single one of those points was added for F*R*E*E. Free, Free, Free. Don’t you know that the folks who run those other courses charging $2,800 really hate the word “FREE.”
(1) – Here in the United States, Monday is Memorial Day—a national day that commemorates the men and women who have been willing to die for their country while in the military service. We here at www.CPAreviewforFREE.com want to salute all of the folks (and their families) who serve and sacrifice so that we can stay free. If you know someone in the military or, perhaps, a family who has had a love one die in the military, please pass along a kind, grateful word.
(2) – One of the most common questions that I get concerning www.CPAreviewforFREE.com is “I’m ready to give it a try. I’d like to keep my money in my pocket. What do I have to lose???? How should I get started?”
Good question. Here’s what I would do:
--Go to www.CPAreviewforFREE.com
--Click on “resources” at the top of the screen.
--You should see a section called “Articles”
--Click on “Using CPAreviewforFREE to prepare for success on the CPA Exam”
--Read every word of that essay carefully.
--Click on “Register” and get started.
--Pick a topic
--Start answering questions – when you study, never guess at an answer
--If you get the question right, read the answer quickly and then move on
--If you do not get the question right, read the answer carefully. This is by far the most important part of the entire process. Try to pick up at least one factor that would help you to get this question right if you were to see it again in 2-3 weeks. Preparation is all about improving your ability to get questions right. That is your only goal. Add points. Add points. Add points.
--When you read an answer for a question you missed, try to write down something to help you get the question right the next time. Limit what you write to 10 words or less per question. Don’t write an essay—just a memory kicker (“this will help me remember how to do this next time.”)
--Remember—college classes are designed to teach understand. Our goal is to help you get questions right and add points until you make 75 and pass!!!!
(3) – One of my partners sent along this message. I always want to keep the partners happy since they do all of the real work. “Please mention in your next newsletter that our site is "pf" (phone friendly) meaning that candidates can work our multiple choice questions on their smart phones (iPhone, Blackberry, Droid,etc). They can study on the go (but, of course, not behind the wheel of a car).” We want you to pass the CPA exam – not die trying.
(4) – I have become very fond of a little number game called KenKen. It is a lot like Suduko except that you have to do some simple mathematical computations that you fit together to form a box. I like to do KenKen when I take sauna baths. Doing those puzzles helps distract my mind from the fierce heat and allows me to stay in the sauna for a longer period of time.
Tuesday I got into the sauna and started working one of the KenKen puzzles. About half-way through I got stuck so I tried to quickly start over and managed to get stuck again at the same place. I started to rush through checking my numbers but I also started noticing how hot I was getting. I really wanted to finish that puzzle before I had to get out of the sauna so I started pushing myself to work faster. I kept saying “think, think –you can do this. You’re being dumb.”
I finally just gave up before I melted. I threw the puzzle on the floor and stomped off to take my shower.
Later, I came back all cooled down. I picked up the puzzle and looked at it and knew my mistake immediately. It did not take me two seconds to see that I had reversed two numbers and I then finished the puzzle successfully in just a few minutes.
Why was my problem so hard to work at first and then so easy to work later?
I often tell my students to picture their brains as a big muscle somewhat like the ones in your arm. If I give you a baseball and tell you to throw it and you keep your arm muscle loose, you can throw it for a pretty good distance. But, if you tense up your arm, it becomes more and more difficult to throw the ball. In fact, if you tense up those muscles enough, you cannot even move your arm.
The brain is the same way. If you tense it up, it becomes less and less able to function until, with enough tension, it won’t move at all. It just shuts down. But, if you can loosen it up, it works like the natural marvel it is. Your goal should always be to have a brain that is focused but loose. Focused so you don’t get distracted but loose so it is able to move around and do the thinking necessary. No brain thinks better than a focused but loose brain.
When I was trying to work the KenKen puzzle, I started to get upset and tense because I was hot and in a hurry. The more I rushed, the more tense my brain became. Eventually, there was no chance in the world that I could complete the puzzle. My brain just was not going to work because of the tension I was exerting. However, when I moved on to something else and came back, my brain was back to a loose but focused state. I had the right frame of mind to get it done and, sure enough, I did. The problem was actually easy.
I always tell my students “if your jaw is clenched, your brain is probably too tense. If your jaw is loose, your brain probably is also.”
Whether you are studying tonight or taking the CPA Exam tomorrow, don’t let a tense brain block your chance of making 75 and passing. Keep the jaw loose and if you find yourself too tense over a question, move on to the next one. Getting upset and panicky is not helpful; it is about the worst thing you can do. Loose and focused – that’s the key to brain success.
(5) – Here is a nice note that I received last week from ES. Always makes me smile to hear from folks: “I just wanted to let you know how much I love your emails. I've passed both BEC and AUD on my first attempt thanks to your study tips/questions and XX review. I'm currently studying for REG and am completely overwhelmed by XX review. However, I started working through your questions from the website and from some of your old emails, and I'm finding that I feel much more confident after working your questions. There is just so much detail involved with REG that it is difficult to remember every little piece of information. I kept doing XX questions and kept getting them wrong because I would forget one small thing. But with your questions, I am getting them correct and understanding your explanations as well. So thank you for helping me add points and keep my sanity while studying!”
And, here’s an email I got on the same day from FT: “Thank you for a free website and all the motivating e-mails. I passed BEC and REG using cpareviewforree.com. All personal websites are blocked at my workplace except for yours. I make sure I go through 50 questions per day. I am now struggling with audit and thank you for all those free questions. Too bad there are going to be too many CPAs and not enough jobs for them. I am not giving up though! Thank you Thank you. God sends angels in different forms.”
Well, I’m not sure if we qualify as “angels” but I do appreciate the thought!!!
(6) – As always (we are legally required to make this mention but I hope you understand that the offer is real), do know that you can very easily stop getting these email lessons by scrolling to the bottom of this lesson and clicking on the appropriate button. We want to help. We are delighted to be of assistance. But, the moment you are ready to move on, please feel free to unsubscribe.
(7) – Let’s do some practice. Let’s add some points. You CAN do it!! I know you can.
Here we go.
Financial Accounting and Reporting
The Artichoke Company expects to make $200,000 in net income this year and pay income taxes at a 30 percent rate. In the first quarter of the year, the company makes income of $40,000 and the previous estimations remain the same. In the second quarter, the company makes another $60,000 in income but now believes the effective tax rate for this tax year is probably going to be 32 percent instead of 30 percent. How much income tax expense should the company recognize in the second quarter of the year?
A. $16,000
B. $18,000
C. $19,200
D. $20,000
Answer is D
In the first quarter of the year, the company has income so far of $40,000 and expects a tax rate of 30 percent so an expense of $12,000 is recognized. By the end of the second quarter, the company has earned total income of $100,000 ($40,000 + $60,000) but the expected tax rate is now assumed to be 32 percent or a total of $32,000. In reporting the second quarter, the company has to raise its expense from $12,000 to $32,000. Thus, the expense must be increased by $20,000 for that second period.
BEC
A company has a large building in Detroit. The company can sell the building for $1.7 million or refurbish the building for $220,000 and then rent it for ten years at $370,000 per year. Company officials consider the possibilities and choose to refurbish the building for rental purposes. What is the $1.7 million?
A. A fixed cost
B. A variable cost
C. A sunk cost
D. An opportunity cost
Answer is D
In making decisions about the use of assets, benefits that are passed up are referred to as opportunity costs. In other words, the $1.7 million was an opportunity for the company and the decision was made not to take advantage of that possibility. A sunk cost is a real cost incurred in the past that cannot now be changed. A fixed cost is one that will not increase as production levels increase (within a relevant range). A variable cost is one that will increase as production levels increase.
Regulation
The firm of Assini and Grim CPAs is doing the current year tax return for Mr. and Mrs. Clarence Alexander. The return was done in the previous year by John Roberts CPA. Assini and Grim discover that a $30,000 itemized deduction was incorrectly taken by the taxpayers in the previous year. What should the new CPAs do about this mistake?
A. File an amended return for the previous year.
B. Talk with the taxpayers and urge them to file an amended return.
C. Contact John Roberts CPA and explain the problem and suggest that he take remedial action.
D. Contact the IRS so that they can contact the taxpayers about the problem.
Answer is B
The return is that of the taxpayers so the CPA firm cannot contact any outside party (the previous CPA or the IRS) and cannot file an amended return without the consent of the taxpayer. Thus, the CPA should discuss the issue with the taxpayer and provide clear advice as the appropriate action that should be taken to rectify the problem.
Auditing and Attestation
The CPA firm of Abercrombie & Fitch discovers that the president of its biggest client committed several illegal acts in the name of the company last year. He authorized the payment of bribes to officials of a competing company. The board of directors was informed of this activity but chose to take no action because the amounts were judged to be immaterial in comparison to the reported balances taken as a whole. Which of the following is the most likely decision by the CPA firm?
A. Contact the appropriate government officials to disclose the actions of the president.
B. Provide disclosure of the information in the audit report but do not change the audit opinion being rendered.
C. Provide disclosure of the information in the audit report and do change the audit report to a qualified audit opinion.
D. Consider quitting the engagement.
Answer is D
The board of directors is supposed to set the ethical standards for a company. If no action is taken in this situation when an illegal act has been performed in the name of the company, the CPA firm should consider whether it wants to be associated with an organization which appears to have ethically challenged leadership at both the board of director level as well as the presidential level. The firm might decide not to quit but they need to consider that possibility.
Have a great Memorial Day. Take a few moments out to remember those who have served and died.
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