Try us FIRST before you spend your hard-earned money.
February 27, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
138 Weeks of Operation and 21,650,464 Page Views (without a penny spent on marketing)
Lesson 89
From: Joe
(I was going to send this message out several hours ago but my Internet connection went down completely. At such times, I am always reminded of how much we rely on technology.)
(1) – I gave an intermediate accounting test last week. I thought it was a pretty good test—the questions were hard without being impossible. However, there was one devious trick: The students had to read each question rather carefully. Okay, the test was in English and I used relatively small words but you had to actually read what it said rather than scan it quickly and guess at what was being asked.
It was the first test of the semester and the students were very tense and, unfortunately, some of them didn’t really read the questions. It wasn’t that they didn’t know the material; it was that they literally did not read the questions closely enough. Can you believe that? How could you ever try to answer a question without reading it carefully? It was an important test in their major and they didn’t focus on the question. Well, believe it or not, that happens way too often. Students are in such a hurry to start creating answers that they don’t pay sufficient attention to the question. They do not show the patience necessary to read the entire question before they start forming an answer.
Decades ago, candidates could buy back their CPA Exam answers so they could actually see what they had missed and try to do better the next time (the CPA Exam has obviously changed a lot over the decades). I would occasionally sit down with a candidate who had failed and we would go over the questions they missed very carefully. I cannot tell you how often the candidate would look up horror stricken during these sessions and cry out “I knew that question – how could I possibly have chosen the wrong answer? I must have read the question incorrectly.” There we go again, missing questions based on a poor reading.
I have a theory. If are sloppy when we practice, then, when we get to the real game, we will play sloppy. As the old saying goes, “you play like you practice.” In other words, when you practice, if you get used to scanning through questions quickly without focusing on what is being asked, you’ll be likely to do that on the real exam. In my classes, students often excuse themselves for dumb answers by lamenting “oh, I read the question wrong.” And, I will respond “don’t do that! You are picking up bad habits.”
As you work problem after problem to get yourself ready for the CPA Exam, work on focusing on the question to make sure you know
--what is being asked
--the facts that you have available
Then, in most cases, the problem is no more than putting those pieces together in the proper order.
If you miss a question during practice because you didn’t know what to do, that’s okay because you can then work on the topic and learn it. However, if you miss a question due to careless reading, you’ve wasted your time. You’ve not learned a single thing. That is probably the very worse outcome: a mistake by bad reading. Nothing at all happens that can be positive about that.
As you practice, read those questions ever so carefully. Learn to focus during your work sessions and you’ll be more likely to focus in the real exam. Don’t pick up bad habits. That focus will help you to stop giving away points on the CPA Exam through carelessness.
(2) – If you are ready to unsubscribe to these email lessons that I send out every week or two, you can easily scroll to the bottom of this lesson (or any other lesson) and you’ll find the world famous “Unsubscribe” button. Click on that and we will have parted. It will seem sad without you but you do have the right to unsubscribe whenever you so choose.
(3) – My good buddy Professor C. J. Skender at UNC sent me the following great quote. I had asked him what words had inspired him in his life.
“In Rocky IV, Rocky is talking with his son before leaving for Russia to fight Ivan Drago. ‘Going in one more round when you don't think you can, that's what makes all the difference in your life.’"
In studying to pass the CPA Exam (and in so many other things in life), we work until we get tired. Studying day after day can just wear a person totally out. Whether you succeed often depends on what you do AFTER you reach the point of being sick and tired of it all. Anyone can study well when they are fresh and just getting started. That doesn’t prove much. You start really making a difference when you get to the point where you want to quit. Then, what do you do? How tough are you?
A vast majority of people get tired and ready to quit and then they respond by quitting. It certainly takes nothing to put down the pencil and go watch television or go take a nap. That’s easy. That doesn’t make you stronger or more able to take on strong challenges.
It is a whole lot more difficult when you get tired to then push yourself to keep working for another 15-30 minutes. It takes something deep down inside of yourself to push on when you have reached the point when you start to think “Quit.”
Anyone can work well up to the point where you think “I’m ready to stop.” It is the real winners in life who can then push on for another 15-30 minutes even after they are dogged tired and ready to quit for the day.
As Rocky says, “Going in one more round when you don't think you can, that's what makes all the difference in your life."
(4) – Let’s do some practice. Remember to read the questions carefully to make sure you know the facts that are given and the actual question being asked. Don’t miss a single question because of poor reading.
FAR (we worked this problem today in my Intermediate Accounting II class).
On January 1, Year One, Ace Company completes construction work on a warehouse at a cost of $2 million and sells it to a bank for $2.3 million. Ace immediately leases it back for its entire 20 year life for lease payments that have a present value of $2.3 million. The straight-line method is to be used and the warehouse is expected to have no residual value at the end of that 20 years. What amount of depreciation expense is recognized by Ace for Year One?
A. Zero
B. $15,000
C. $100,000
D. $115,000
Answer is C
Initially, in this question, it looks like the depreciation should be the capitalized lease cost of $2.3 million allocated over 20 years at a rate of $115,000 per year. However, in a sale-leaseback arrangement where the asset is leased back for most of its life, any gain on the sale ($300,000 in this case) is not recognized but rather deferred. Then, that deferred gain is reduced over the life of the lease or, here, at the rate of $15,000 per year ($300,000 deferred gain divided over 20 years). The reduction of the deferred gain is not recognized as an actual gain but rather as a reduction of depreciation expense. Therefore, Ace will report depreciation expense of $100,000 ($115,000 less $15,000).
Regulation
My daughter made a ceramic soup bowl at her church. It was red and shaped like a heart. It had a value of $20. Right before the Super Bowl, it was auctioned off by the church and I paid $35 to buy it. What amount of itemized deduction can I claim on my individual income taxes?
A. Zero
B. $15
C. $20
D. $35
Answer is B
If you pay an amount to a qualified charity to acquire an item, then anything you pay over the fair value of the property is viewed as a donation to the organization. Because I paid $15 more than fair value, I can take that as a charitable contribution on my itemized deductions.
BEC
Internal controls are extremely important to the appropriate governance of any organization. In the United States, what group produced the framework for internal controls that is the most commonly used by organizations?
A. FASB
B. PCAOB
C. COSO
D. IASB
Answer is C
The internal control framework that is most commonly used in the United States is “Internal Control—Integrated Framework” produced by COSO. In this, COSO separates internal control into five components: control environment, risk assessment process, control activities, information and communication, and monitoring. COSO is the Committee of Sponsoring Organizations of the Treadway Commission.
Auditing and Attestation
The International Ethics Standards Board for Accountants (IAESB) operates within the International Federation of Accountants (IFAC). It produces ethical standards to be used by accountants around the world. Which of these statements reflects the rules created by the IAESB in connection with the acceptance of contingent fees?
A. The professional accountant should never accept a contingent fee.
B. The professional accountant should only accept contingent fees for audit engagements.
C. The professional accountant should make sure that necessary safeguards are in effect in connection with contingent fees.
D. The professional accountant should only accept contingent fees for tax engagements.
Answer is C.
Because this set of rules must be flexible enough to be applied around the world (where widely differing rules have long been accepted practice), these standards tend to be more general in nature. Note that A, B, and D are all very specific rules. In contrast, C is a general guideline. It does not indicate what is allowed or not allowed. Instead, it requires the company to set up proper safeguards.
Auditing and Attestation (bonus question because we really want you to pass)
In which paragraph of a standard unqualified audit report is the following sentence found: “An audit includes examining all evidence that supports the amounts and disclosures in the financial statements.”
A. First (introductory) paragraph
B. Second (scope) paragraph
C. Third (opinion) paragraph
D. None of the above
Answer is D
The auditor almost never examines all of the evidence for any reported amount or disclosure. Instead, as is explained in the scope paragraph, the auditor looks at evidence on a test basis. A test basis means that items are studied in samples and is sufficient to be able to provide the reasonable assurance which is given by a CPA in an unqualified opinion.
Joe Hoyle
Co-Founder
CPA Review for FREE
Sunday, February 27, 2011
Sunday, February 6, 2011
To Win the Game: Start Early and Play Hard
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
135 Weeks of Operation and 21,006,849 Page Views (without a penny spent on marketing)
Lesson 88
From: Joe
(1) – We went over a 21 million (I still can’t imagine the size of this number) page views in our history last week. That’s an average of 155,606 page views per week for over 2 ½ years. Or, to put it another way, that represents 10,000 candidates answering 15.56 questions EVERY WEEK for 135 weeks.
Wow -- No wonder the pass rates have gone up on the CPA Exam from 33 percent to about 50 percent. That’s a lot of questions answered. That’s an awful lot of points added.
(2) – Please remember that we now have our subscription services available for FAR, BEC, and Regulation. We have hundreds of content slides online (for each of these three sections) along with task-based simulations and written communication questions. All of this is available for a mere $15 per month per section. $.50 per day for great materials.
Here’s a tiny sample of the study guide that we include for the FAR portion of the exam just to give you an idea of how this is set up.
PORTION OF THE STUDY GUIDE FOR FAR
When working questions, you should never guess. Although that is important when taking the actual examination, guessing can be misleading during your preparation (getting a question right by luck might fool you into thinking you actually know the topic). Read each answer carefully, especially if you did not select the correct choice. Your goal is always to be adding points. Your only objective is to get to 75 points on the CPA Exam. You do that by adding points when you study.
Keep a notebook with you whenever you are answering questions. If you miss a question, read the answer and try to take a short note (preferably 10 words or less) that will help you get it (or a similar question) correct the next time you see it. Periodically, you will review those notes to keep that “helpful” material fresh in your mind.
**
One important question for your preparation is whether you should work the free questions first or go through the subscription content material first. Here are two possible approaches. You may want to practice both for a few days to see which seems to work best for you.
*Study Plan One--If You Are Not Already Comfortable With a Topic (such as Accounts Receivable or Leases) Follow These Steps:
--Step 1 – Read the content material first. It is not designed to provide you with an answer for all questions but rather to help you establish a basic level of understanding that will enable you to pass.
--Step 2 - Work the corresponding question area in the free questions. As suggested, take short notes on any of those that you miss.
--Step 3 - If you get 70-80 percent of the free questions correct, move on to the next topic. You probably know enough to pass that topic.
--Step 4 - If you do not get 70-80 percent of the questions correct, read the content material again and then also read all of your 10-word notes for that topic.
--Step 5 - Go through all of the questions again and try to get 10 percent more of the answers correct this time. For example, if you got 20 out of 40 on the first attempt, shoot for 24 the second time.
--Step 6 - Move on to the next topic.
*Study Plan Two--If You Are Already Comfortable With a Topic (such as Accounts Receivable or Leases) Follow These Steps:
--Step 1 – Work the free questions on the topic first. As always, take short (10 word) notes on those questions that you miss.
--Step 2 – If you get 70-80 percent of the free questions correct, move on to the next topic. You probably know enough to pass.
--Step 3 - If you do not get 70-80 percent of the free questions correct, read the related content material (the subscription material) carefully and read all of your 10-word notes for that topic.
--Step 4 - Go through all of the questions again and try to get 10 percent more of the answers correct. If you got 20 out of 40 on the first attempt, shoot for 24 this time.
--Step 5 - Move on to the next topic.
*Study Sessions
The length of the following study sessions can vary from 30 minutes to 3 hours. Study sessions can be combined or they can be broken down into two or more sessions. You need to adjust the program so that it allows you to study when and where you can.
*Study Session One
--Subscription Content Area: Accounts Receivable
--Free Questions: Accounts Receivable
*Study Session Two
--Subscription Content Area: Inventory and Present Value
--Free Questions: Inventory
*Study Session Three
--Subscription Content Area: Notes and Bonds Payable
--Free Questions: Notes and Bonds Payable
*Study Session Four
--Subscription Content Area: Land, Buildings, and Equipment and Intangible Assets
--Free Questions: Land, Buildings, and Equipment and Intangible Assets
*Study Session Five
--Reread all of your 10 word notes for the topics in sessions one through four
--Free Questions: Rework every fourth question in the topics in sessions one through four
Okay, the study guide goes on to outline all of the study sessions but you get the idea of how the program is constructed.
(3) – Here, in the United States, they will be playing the Super Bowl on Sunday. Two teams (the Packers and the Steelers) will be seeking to win the championship of pro football. All of the other teams have lost and gone home.
I’d bet that if you asked the players on these two final teams how they got this far, you’d get a response something like this: “It all goes back to getting properly prepared last summer. When practice first started, we realized that we had a chance to win it all so we dedicated ourselves to doing the work necessary to make it happen. It was hot and the work was both tedious and difficult but we wanted to win so we kept at it day after day. If you want to win, you do the work and you do it right and you do it right from the beginning.”
No one gets good at the last minute.
No one suddenly decides at the end to be a winner.
Success always goes back to the very beginning and whether the person is willing to do the work that it takes to achieve success.
--A lot of players say they want to win but then they cut back on their practice time or simply slack off and don’t try very hard.
--A lot of players say they want to win but then look around for some good luck to carry them forward without the need for real work.
The teams that most often win are the ones who do things (from Day One) in the right way. They do the exercises; they lift the weights; they learn the plays; they practice getting things right over and over. They make the personal sacrifices that it takes to do well. It is not exciting; it is not fun. But, it gets the job done.
If you really want to pass the CPA Exam (if it is more than just lip service), you need to do your study in the right way starting today. You have to be willing to do all of the boring stuff: sitting and working questions, carefully reading answers, reviewing your notes, going over complicated materials time and time again. You have to be willing and able to make sacrifices: turn off the television, drink less beer, go out less often, become more efficient in your daily life.
Success does NOT happen randomly.
Success does NOT happen by accident.
You need to plan for success and you need to do things in the right way.
I do realize that we now live in a society that demands instant gratification. People want positive feedback immediately. People want things to be perfect right now. Well, I’m sorry but the CPA Exam is different. You have to study 60-100 hours per part; you have to go take the exam; and, then, you have to wait weeks for the results. That’s a prime reason why the studying is so difficult: the gratification of (hopefully) passing the CPA Exam only comes weeks or maybe months after you begin to do the hard work. People just don’t do well with a “work very hard now and hopefully you’ll get a positive score in a couple of months” routine.
So, a lot of candidates just won’t make it. They’ll get excited and they’ll get started but without that instant gratification, they fade out. They get tired; they slow down; they quit. When it comes to the CPA Exam, a lot of people start strong but a great many of them give up before they even make it to the CPA Exam.
When it comes to the Super Bowl and to the CPA Exam, you need to realize that success comes from getting started early and then doing the work that is needed in an appropriate manner. As I always say, it is not about being smart; it is not about your level of education. The only thing that really matters is setting up a legitimate plan and then making the sacrifices necessary to follow that plan to success.
Go get it!!! You can do it!!!
(4) – We are always delighted to hear from our customers.
From AC: “I've been meaning to email you, but have been so busy lately. Just wanted to let you know that using only a few books purchased online and your site, I was able to pass the CPA exam last October! I passed REG, FAR, and BEC on my first try and AUD on the second. CPAreviewforFREE helped me for all four sections, but especially for the government and nonprofit portion of FAR. I was also able to sell my books back and ended up only spending $20 in total to study for the exam! Thanks for the website and emails - you guys are the best!”
From SS: “I'm one of many who owe you a big Thank you and hugs. I finished and passed all of my exams in December 2010 and I couldn't have done it without your encouragement, support, motivation, and your website. I've been encouraging my friends to take CPA exams and use your website which was crucial for my experience. I thank you for your kindness and caring approach to CPA candidates all around the world. I will try my hardest to spread your words and motivate people around me.”
We always appreciate your willingness to help us spread the word about www.CPAreviewforFREE.com.
(5) – In case you no longer want to receive these email lessons every 7-10 days, you are certainly able to unsubscribe. Just scroll to the bottom of this lesson or any other lesson and you will find an “unsubscribe” button which allows you to remove your name from our mailing list.
We are always delighted to have you with us but we don’t want to fill up your email box unnecessarily.
(6) – Okay time to get in some practice. Let’s see if we can ask you a couple of questions that will provide you with the opportunity of adding a couple of points to your score. Every point gets you closer to that magic 75 number.
**FAR
As of December 31, Year One, the Ranstok Corporation has three debts that come due in July of Year Two. The company will issue its Year One financial statements on February 22, Year Two. Debt One is for $1 million and the companies agree on January 19, Year Two that land costing $800,000 will be conveyed to the creditor to satisfy the debt. Debt Two is for $2 million and the bank agrees on January 31, Year Two to refinance the debt for an additional two years. Debt Three is for $4 million and the bank gives Ranstok a noncancellable agreement on February 8, Year Two, stating that it will refinance the debt for an additional year on the date that it comes due. According to US GAAP, what current liability should Ranstok report on its December 31, Year One, balance sheet?
A – Zero
B - $1 million
C - $2 million
D - $4 million
Answer is A
In each case, the debtor will not use any of its December 31, Year One, current assets to satisfy the liability. Hence, they must all be reported as noncurrent. The first debt will be paid this year but will be paid with land and not with a current asset. Debt Two has been refinanced before the financial statements are issued and, therefore, the company is sure that its own current assets will not be used. Debt Three has not yet been refinanced but there is a noncancellable agreement to refinance that is signed before the financial statements are issued which assures that the company will not have to use its current assets when the debt comes due. Therefore, there are no current liabilities to be reported.
**BEC
The Thornston Company is preparing a balanced scorecard and is currently looking at this process from the perspective of the company’s customers. A strategic objective has been established that is critical to the company’s success. A performance measure (such as the customer retention rate) has also been selected. What component of a balanced scorecard is most likely to come next?
A. Key initiatives to be taken are identified.
B. Quality enhancement keys are listed.
C. Baseline performance is to be determined.
D. A strategy map needs to be drawn.
Answer is C
Once a company has identified a performance measure such as the customer retention rate, the current level of performance for that measure needs to be determined. That is known as the baseline performance. After that, within the framework of the balanced scorecard, target levels should be set and strategic initiatives identified in order to move from the baseline performance to these targets.
**Regulation
The MIT Car Repair Company repairs a car for Mr. Jones. The cost was $900 but the total charge for the services is $1,400. The company fears that cash payment will not be made by Mr. Jones and retains possession of the car until payment is received. What type of lien is illustrated here?
A. Automotive lien
B. Artisan’s lien
C. McCormack’s lien
D. Jersey lien
Answer is B
An artisan’s lien occurs when one party improves personal property for another and then retains possession of that property until payment is made. Without this type of lien, the party doing the work might have trouble forcing payment to be made.
**Auditing
The Harvard Corporation buys and sells investments during the year and maintains physical control over all stock certificates. The auditor comes in and finds the serial numbers listed on the purchase orders for these investments and then compares those to the actual serial numbers listed on the stock certificates held by the company. What is the auditor worried about when doing such testing?
A. That the stock certificates are counterfeit.
B. That the stock values have been permanently impaired and need to be written down in value.
C. That the stocks were sold by company employees and then replaced.
D. That the initial cost of the stocks was miscalculated.
Answer is C
If stock certificates are held by a company, one concern is that an employee is able to “borrow” the certificate, sell the stock, make use of the money for a period of time, and then buy a replacement certificate so that the absence is not noticed. In effect, the money received from the sale serves as an interest free loan for the employee. Therefore, if the serial numbers on the certificates do not match with the numbers indicated for the original purchase, the auditor knows that it is likely that the stocks were stolen and then replaced as a way of covering up the crime.
Enjoy watching the Super Bowl but remember that YOUR SUPER BOWL is the CPA Exam. And, just like the Packers and the Steelers, you become a winner based on the amount of work that you do right now.
Joe Hoyle
President and Co-Founder
CPAreviewforFREE
135 Weeks of Operation and 21,006,849 Page Views (without a penny spent on marketing)
Lesson 88
From: Joe
(1) – We went over a 21 million (I still can’t imagine the size of this number) page views in our history last week. That’s an average of 155,606 page views per week for over 2 ½ years. Or, to put it another way, that represents 10,000 candidates answering 15.56 questions EVERY WEEK for 135 weeks.
Wow -- No wonder the pass rates have gone up on the CPA Exam from 33 percent to about 50 percent. That’s a lot of questions answered. That’s an awful lot of points added.
(2) – Please remember that we now have our subscription services available for FAR, BEC, and Regulation. We have hundreds of content slides online (for each of these three sections) along with task-based simulations and written communication questions. All of this is available for a mere $15 per month per section. $.50 per day for great materials.
Here’s a tiny sample of the study guide that we include for the FAR portion of the exam just to give you an idea of how this is set up.
PORTION OF THE STUDY GUIDE FOR FAR
When working questions, you should never guess. Although that is important when taking the actual examination, guessing can be misleading during your preparation (getting a question right by luck might fool you into thinking you actually know the topic). Read each answer carefully, especially if you did not select the correct choice. Your goal is always to be adding points. Your only objective is to get to 75 points on the CPA Exam. You do that by adding points when you study.
Keep a notebook with you whenever you are answering questions. If you miss a question, read the answer and try to take a short note (preferably 10 words or less) that will help you get it (or a similar question) correct the next time you see it. Periodically, you will review those notes to keep that “helpful” material fresh in your mind.
**
One important question for your preparation is whether you should work the free questions first or go through the subscription content material first. Here are two possible approaches. You may want to practice both for a few days to see which seems to work best for you.
*Study Plan One--If You Are Not Already Comfortable With a Topic (such as Accounts Receivable or Leases) Follow These Steps:
--Step 1 – Read the content material first. It is not designed to provide you with an answer for all questions but rather to help you establish a basic level of understanding that will enable you to pass.
--Step 2 - Work the corresponding question area in the free questions. As suggested, take short notes on any of those that you miss.
--Step 3 - If you get 70-80 percent of the free questions correct, move on to the next topic. You probably know enough to pass that topic.
--Step 4 - If you do not get 70-80 percent of the questions correct, read the content material again and then also read all of your 10-word notes for that topic.
--Step 5 - Go through all of the questions again and try to get 10 percent more of the answers correct this time. For example, if you got 20 out of 40 on the first attempt, shoot for 24 the second time.
--Step 6 - Move on to the next topic.
*Study Plan Two--If You Are Already Comfortable With a Topic (such as Accounts Receivable or Leases) Follow These Steps:
--Step 1 – Work the free questions on the topic first. As always, take short (10 word) notes on those questions that you miss.
--Step 2 – If you get 70-80 percent of the free questions correct, move on to the next topic. You probably know enough to pass.
--Step 3 - If you do not get 70-80 percent of the free questions correct, read the related content material (the subscription material) carefully and read all of your 10-word notes for that topic.
--Step 4 - Go through all of the questions again and try to get 10 percent more of the answers correct. If you got 20 out of 40 on the first attempt, shoot for 24 this time.
--Step 5 - Move on to the next topic.
*Study Sessions
The length of the following study sessions can vary from 30 minutes to 3 hours. Study sessions can be combined or they can be broken down into two or more sessions. You need to adjust the program so that it allows you to study when and where you can.
*Study Session One
--Subscription Content Area: Accounts Receivable
--Free Questions: Accounts Receivable
*Study Session Two
--Subscription Content Area: Inventory and Present Value
--Free Questions: Inventory
*Study Session Three
--Subscription Content Area: Notes and Bonds Payable
--Free Questions: Notes and Bonds Payable
*Study Session Four
--Subscription Content Area: Land, Buildings, and Equipment and Intangible Assets
--Free Questions: Land, Buildings, and Equipment and Intangible Assets
*Study Session Five
--Reread all of your 10 word notes for the topics in sessions one through four
--Free Questions: Rework every fourth question in the topics in sessions one through four
Okay, the study guide goes on to outline all of the study sessions but you get the idea of how the program is constructed.
(3) – Here, in the United States, they will be playing the Super Bowl on Sunday. Two teams (the Packers and the Steelers) will be seeking to win the championship of pro football. All of the other teams have lost and gone home.
I’d bet that if you asked the players on these two final teams how they got this far, you’d get a response something like this: “It all goes back to getting properly prepared last summer. When practice first started, we realized that we had a chance to win it all so we dedicated ourselves to doing the work necessary to make it happen. It was hot and the work was both tedious and difficult but we wanted to win so we kept at it day after day. If you want to win, you do the work and you do it right and you do it right from the beginning.”
No one gets good at the last minute.
No one suddenly decides at the end to be a winner.
Success always goes back to the very beginning and whether the person is willing to do the work that it takes to achieve success.
--A lot of players say they want to win but then they cut back on their practice time or simply slack off and don’t try very hard.
--A lot of players say they want to win but then look around for some good luck to carry them forward without the need for real work.
The teams that most often win are the ones who do things (from Day One) in the right way. They do the exercises; they lift the weights; they learn the plays; they practice getting things right over and over. They make the personal sacrifices that it takes to do well. It is not exciting; it is not fun. But, it gets the job done.
If you really want to pass the CPA Exam (if it is more than just lip service), you need to do your study in the right way starting today. You have to be willing to do all of the boring stuff: sitting and working questions, carefully reading answers, reviewing your notes, going over complicated materials time and time again. You have to be willing and able to make sacrifices: turn off the television, drink less beer, go out less often, become more efficient in your daily life.
Success does NOT happen randomly.
Success does NOT happen by accident.
You need to plan for success and you need to do things in the right way.
I do realize that we now live in a society that demands instant gratification. People want positive feedback immediately. People want things to be perfect right now. Well, I’m sorry but the CPA Exam is different. You have to study 60-100 hours per part; you have to go take the exam; and, then, you have to wait weeks for the results. That’s a prime reason why the studying is so difficult: the gratification of (hopefully) passing the CPA Exam only comes weeks or maybe months after you begin to do the hard work. People just don’t do well with a “work very hard now and hopefully you’ll get a positive score in a couple of months” routine.
So, a lot of candidates just won’t make it. They’ll get excited and they’ll get started but without that instant gratification, they fade out. They get tired; they slow down; they quit. When it comes to the CPA Exam, a lot of people start strong but a great many of them give up before they even make it to the CPA Exam.
When it comes to the Super Bowl and to the CPA Exam, you need to realize that success comes from getting started early and then doing the work that is needed in an appropriate manner. As I always say, it is not about being smart; it is not about your level of education. The only thing that really matters is setting up a legitimate plan and then making the sacrifices necessary to follow that plan to success.
Go get it!!! You can do it!!!
(4) – We are always delighted to hear from our customers.
From AC: “I've been meaning to email you, but have been so busy lately. Just wanted to let you know that using only a few books purchased online and your site, I was able to pass the CPA exam last October! I passed REG, FAR, and BEC on my first try and AUD on the second. CPAreviewforFREE helped me for all four sections, but especially for the government and nonprofit portion of FAR. I was also able to sell my books back and ended up only spending $20 in total to study for the exam! Thanks for the website and emails - you guys are the best!”
From SS: “I'm one of many who owe you a big Thank you and hugs. I finished and passed all of my exams in December 2010 and I couldn't have done it without your encouragement, support, motivation, and your website. I've been encouraging my friends to take CPA exams and use your website which was crucial for my experience. I thank you for your kindness and caring approach to CPA candidates all around the world. I will try my hardest to spread your words and motivate people around me.”
We always appreciate your willingness to help us spread the word about www.CPAreviewforFREE.com.
(5) – In case you no longer want to receive these email lessons every 7-10 days, you are certainly able to unsubscribe. Just scroll to the bottom of this lesson or any other lesson and you will find an “unsubscribe” button which allows you to remove your name from our mailing list.
We are always delighted to have you with us but we don’t want to fill up your email box unnecessarily.
(6) – Okay time to get in some practice. Let’s see if we can ask you a couple of questions that will provide you with the opportunity of adding a couple of points to your score. Every point gets you closer to that magic 75 number.
**FAR
As of December 31, Year One, the Ranstok Corporation has three debts that come due in July of Year Two. The company will issue its Year One financial statements on February 22, Year Two. Debt One is for $1 million and the companies agree on January 19, Year Two that land costing $800,000 will be conveyed to the creditor to satisfy the debt. Debt Two is for $2 million and the bank agrees on January 31, Year Two to refinance the debt for an additional two years. Debt Three is for $4 million and the bank gives Ranstok a noncancellable agreement on February 8, Year Two, stating that it will refinance the debt for an additional year on the date that it comes due. According to US GAAP, what current liability should Ranstok report on its December 31, Year One, balance sheet?
A – Zero
B - $1 million
C - $2 million
D - $4 million
Answer is A
In each case, the debtor will not use any of its December 31, Year One, current assets to satisfy the liability. Hence, they must all be reported as noncurrent. The first debt will be paid this year but will be paid with land and not with a current asset. Debt Two has been refinanced before the financial statements are issued and, therefore, the company is sure that its own current assets will not be used. Debt Three has not yet been refinanced but there is a noncancellable agreement to refinance that is signed before the financial statements are issued which assures that the company will not have to use its current assets when the debt comes due. Therefore, there are no current liabilities to be reported.
**BEC
The Thornston Company is preparing a balanced scorecard and is currently looking at this process from the perspective of the company’s customers. A strategic objective has been established that is critical to the company’s success. A performance measure (such as the customer retention rate) has also been selected. What component of a balanced scorecard is most likely to come next?
A. Key initiatives to be taken are identified.
B. Quality enhancement keys are listed.
C. Baseline performance is to be determined.
D. A strategy map needs to be drawn.
Answer is C
Once a company has identified a performance measure such as the customer retention rate, the current level of performance for that measure needs to be determined. That is known as the baseline performance. After that, within the framework of the balanced scorecard, target levels should be set and strategic initiatives identified in order to move from the baseline performance to these targets.
**Regulation
The MIT Car Repair Company repairs a car for Mr. Jones. The cost was $900 but the total charge for the services is $1,400. The company fears that cash payment will not be made by Mr. Jones and retains possession of the car until payment is received. What type of lien is illustrated here?
A. Automotive lien
B. Artisan’s lien
C. McCormack’s lien
D. Jersey lien
Answer is B
An artisan’s lien occurs when one party improves personal property for another and then retains possession of that property until payment is made. Without this type of lien, the party doing the work might have trouble forcing payment to be made.
**Auditing
The Harvard Corporation buys and sells investments during the year and maintains physical control over all stock certificates. The auditor comes in and finds the serial numbers listed on the purchase orders for these investments and then compares those to the actual serial numbers listed on the stock certificates held by the company. What is the auditor worried about when doing such testing?
A. That the stock certificates are counterfeit.
B. That the stock values have been permanently impaired and need to be written down in value.
C. That the stocks were sold by company employees and then replaced.
D. That the initial cost of the stocks was miscalculated.
Answer is C
If stock certificates are held by a company, one concern is that an employee is able to “borrow” the certificate, sell the stock, make use of the money for a period of time, and then buy a replacement certificate so that the absence is not noticed. In effect, the money received from the sale serves as an interest free loan for the employee. Therefore, if the serial numbers on the certificates do not match with the numbers indicated for the original purchase, the auditor knows that it is likely that the stocks were stolen and then replaced as a way of covering up the crime.
Enjoy watching the Super Bowl but remember that YOUR SUPER BOWL is the CPA Exam. And, just like the Packers and the Steelers, you become a winner based on the amount of work that you do right now.
Joe Hoyle
President and Co-Founder
CPAreviewforFREE
Friday, January 21, 2011
Great Dreams Create a Great Future
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
133 Weeks of Operation and 20,636,151 Page Views (without a penny spent on marketing)
Lesson 87
From: Joe
(1) – Our big news for today is that our subscription service for BEC is now up and running. It joins our subscription services for FAR and Regulation that have become so popular over the last few months. Of course, our 2,100 free questions and answers are still available (you can even download those for a small fee).
For the BEC subscription service, we have over 650 slides with the content information you need to get the 75 points that will get you a passing score on that part of the exam. We include a study guide to direct you in how to combine the subscription service with our free questions. And, within this package, we have over 25 brand new examples of the Written Communication questions that now make up 15 percent of your grade in BEC.
Each subscription service is just $15 per month (a whopping 50 cents per day). Other review programs are $2,500. We are 50 cents per day.
If you are interested in subscribing for BEC, FAR, or Regulation (Auditing should be up soon), go to www.CPAreviewforFREE.com and click on “Stores” in the upper right corner. You will see information about our “Essential Information” that will guide you through signing up for the subscription service.
(2) – Here’s a nice note that I got a few days ago from CJ: “You may have forgotten me. I am the lady that used to ask you questions on your textbook and your CPAreviewforFREE site. You were always patient with me even when I was talking nonsense. I took FAR and Audit at the end of last year. Today I saw my results. I scored 87 in FAR and 91 in audit. Your site was very helpful. Most importantly the personal touch you give is priceless.”
We are always delighted to be able to help people pass the CPA Exam.
--For many, it is a personal goal – something they do just because they want to prove to themselves that they can pass.
--For others, it is a career necessity; they are in public accounting and they absolutely have to get a CPA license to stay in this business.
--For even others, it is a way to make their resume look stronger so they can receive the jobs and promotions they are looking for as they build their careers.
I don’t care why you want to pass the CPA Exam. All of those are great reasons. But, if you really do want to pass the CPA Exam, the key is to put in the time and do the work. We give you stuff for free or for 50 cents per day; someone else charges you $2,500 because they are trying to get rich. However, in truth, the cost is not the important thing – the important thing is your willingness to sit down most nights, turn off the television, the Internet, and your cell phone and put in 60-90 minutes of real work. Kill the distractions—do the work.
People will promise you tricks and short-cuts and special secrets. There are no tricks, short-cuts, or special secrets. You need to know the material. You need to put in the time. If you do that, you have a wonderful chance to pass the CPA Exam. Nothing in life is guaranteed, of course, but if you do the work, then, as they say in basketball games, you’ve put yourself into a position to win.
And, there is no better time to get started than right now. How much study time can you put in by this time tomorrow? That’s all I’m interested in. I don’t want to hear about studying in the future. I don’t much care about promises of work to be done some time next spring or summer. If you really want to pass, I want to hear about how much time you are able to study right now—or at least in the next 24 hours.
(3) – How hard is the CPA Exam? That’s a good question for anyone to ask who is working to pass that exam. One way to judge the difficult is by looking at the pass rates. People from all over the world take the CPA Exam—some study hard and some don’t study that hard, some have a great education and some not quite so good. The pass rates for 2010 were recently announced: Auditing – 47.80 percent, BEC – 47.29 percent, Regulation – 50.56 percent, and FAR – 47.81 percent.
So, roughly 50 percent of the candidates pass each part they take. What that means is that you don’t have to be perfect. You don’t have to make 100. You don’t even have to be at the top of your class. What that means is that you just have to be in the top half of all the people who take the CPA Exam.
Okay, that is still not easy. However, that is achievable; that is a very reasonable goal. It is a goal that you can make. If you use good quality materials and you put in 60-100 hours per part, you’ve got a great chance to get in the upper half of the candidates. If you do that, you are probably going to pass. I think it is important to keep that in mind because that makes this goal of yours reasonable and that makes studying easier. It is something that you can do – hit the top half.
So, every day, think about all of those people preparing for the CPA exam and ask yourself (quite honestly): “Am I working harder today than half of those people?” If the answer is “Yes!!!”, then you are certainly on the road to getting that passing score.
(4) – As I always say, do be aware that you have the right to unsubscribe from these emails at any time that you wish. We love having you with us but you can leave if you need. Just scroll to the bottom of this email (or any email) and click on “unsubscribe.” We’ll miss you.
(5) – This morning, I was visiting a friend of mine here at the University who teaches Organizational Behavior. He had a piece of paper on his desk and there was the following quote on it from Victor Hugo:
“There is nothing like a dream to create the future.”
Good stuff. As you get 2011 under way, what are your dreams that are going to create your future? Do you have great dreams or do you just wait around to see what is going to happen to you? It is hard to have the future that you really want if you don’t have dreams of that future.
Of course, I hope that one of your strongest dreams for this coming year is to pass the CPA Exam so that you can get on with building a strong career. It is awfully hard to do the work necessary to succeed unless you have a dream that gnaws at you and pushes you forward. Dreams create ambition and ambition pushes you to get up and do the work. You really need to want success, you really need to crave 75 if you are going to put out the effort that is necessary to succeed.
When you go to bed at night, do you envision the thrill of getting that final 75 so that you can go to your friends and family and say: “I’m finished!!!! I have done it!!!! It was not easy but I’ve made it!!! I have passed the CPA exam.”
It is hard to be great without great dreams!!!
(6) – I always end these email lessons with some practice – usually, I give you four multiple-choice questions, one from each area of the CPA Exam along with my answers.
Today, though, in honor of our new BEC subscription service being available, I thought I would give you an example of what I think the new Written Communications questions are going to look like in BEC. This is my guess about the type of writing that you might see.
Think about your approach to the answer.
---Read the question very carefully and see how it is set up. What are they asking you to address.
---Jot down some notes that you want to cover in your answer.
---Go back and number those notes in the order that you want to cover them. That provides a quick outline to guide your writing.
---Look to see if you have left anything out or have not addressed the question appropriately.
---Write up your answer. Make sure all sentences are complete, no words are misspelled, and that all words are used properly. As I have said before, keep the sentences short and make sure one sentence links to the next.
---Read your answer out loud (or to yourself) and listen to how it sounds. Are there places that sound wrong or awkward? Does one sentence flow into the next so that the writing is smooth? Have you actually addressed the question that was asked? When it is read will it be understood?
---Find someone who knows how to write well and ask them to read your answer and point out any places that are hard to understand.
---Make sure it looks like a professional letter or memo. If you were to get that memo from a professional accountant, would you be impressed or shocked?
I believe this is a great system for learning how to write a strong professional answer for the written communication questions (three per exam) on the BEC portion of the CPA Exam.
Written Communication
The San Francisco Corporation is highly automated with the many transactions from its subsidiaries around the world being processed immediately through the company’s computer system. Company officials have become concerned about the possibility of a disaster such as an earthquake knocking out this computer system. A disaster recovery corporation was invited to visit the company and put forth a proposal. This outside vendor talked about creating either a hot site for the company or a cold site as part of an overall disaster recovery plan. Jane Addams, president of the San Francisco Corporation, is not certain that she fully understands those two terms. She has asked you to prepare a memo explaining both of the two terms to her. Please type your answer in the space provided below.
REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for infor¬mation that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organi¬zation, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation.
To: Jane Addams, President of the San Francisco Corporation
Re: Disaster Recovery Plan
Type Answer Here
************
Quite obviously, there are hundreds of different ways to set up this response to show that you can make proper use of the English language. Here is one possible structure for an answer.
To: Jane Addams, President of the San Francisco Corporation
Re: Disaster Recovery Plan
If the computer system for the San Francisco Corporation were ever shut down because of an emergency, the company should have an alternative system in place to allow operations around the world to continue to function in a timely manner. One possibility is to have an outside vendor, such as a disaster recovery firm, maintain a designated hot site. A hot site is a facility owned by the vendor that is a fully equipped data center. Every piece of hardware and software that the company needs is already in place. Near-complete backups of all essential user data are maintained. In case of an emergency that halts the company’s computer system, the San Francisco Corporation could move in trained personnel in a matter of hours and be operating with only a minimum amount of downtime. However, such a facility can be very expensive to maintain.
As an alternative, a cold site can be established by the vendor. Space is rented but no actual hardware or software is in place. Instead, a detailed plan is maintained to outline how the necessary components could be obtained in the least amount of time in case of emergency. The cost is considerably less than that of a hot site because no equipment or software is physically maintained. Unfortunately, if an actual emergency takes place, the company would require a greater amount of time before operations could be resumed in a normal fashion.
In making the decision between a hot site and a cold site, company management must evaluate the cost of having the computer system shut down for a period of time. The risk of such a catastrophe must also be weighed. Both solutions will work but one costs more to maintain while the other costs more if there is ever a disaster involving the company’s computer system.
Work hard – I’ll try to be back with another email lesson next week. Until then, show me how many hours you can put in to add those points that you need.
Joe Hoyle
President and Co-Founder
CPAreviewforFREE
133 Weeks of Operation and 20,636,151 Page Views (without a penny spent on marketing)
Lesson 87
From: Joe
(1) – Our big news for today is that our subscription service for BEC is now up and running. It joins our subscription services for FAR and Regulation that have become so popular over the last few months. Of course, our 2,100 free questions and answers are still available (you can even download those for a small fee).
For the BEC subscription service, we have over 650 slides with the content information you need to get the 75 points that will get you a passing score on that part of the exam. We include a study guide to direct you in how to combine the subscription service with our free questions. And, within this package, we have over 25 brand new examples of the Written Communication questions that now make up 15 percent of your grade in BEC.
Each subscription service is just $15 per month (a whopping 50 cents per day). Other review programs are $2,500. We are 50 cents per day.
If you are interested in subscribing for BEC, FAR, or Regulation (Auditing should be up soon), go to www.CPAreviewforFREE.com and click on “Stores” in the upper right corner. You will see information about our “Essential Information” that will guide you through signing up for the subscription service.
(2) – Here’s a nice note that I got a few days ago from CJ: “You may have forgotten me. I am the lady that used to ask you questions on your textbook and your CPAreviewforFREE site. You were always patient with me even when I was talking nonsense. I took FAR and Audit at the end of last year. Today I saw my results. I scored 87 in FAR and 91 in audit. Your site was very helpful. Most importantly the personal touch you give is priceless.”
We are always delighted to be able to help people pass the CPA Exam.
--For many, it is a personal goal – something they do just because they want to prove to themselves that they can pass.
--For others, it is a career necessity; they are in public accounting and they absolutely have to get a CPA license to stay in this business.
--For even others, it is a way to make their resume look stronger so they can receive the jobs and promotions they are looking for as they build their careers.
I don’t care why you want to pass the CPA Exam. All of those are great reasons. But, if you really do want to pass the CPA Exam, the key is to put in the time and do the work. We give you stuff for free or for 50 cents per day; someone else charges you $2,500 because they are trying to get rich. However, in truth, the cost is not the important thing – the important thing is your willingness to sit down most nights, turn off the television, the Internet, and your cell phone and put in 60-90 minutes of real work. Kill the distractions—do the work.
People will promise you tricks and short-cuts and special secrets. There are no tricks, short-cuts, or special secrets. You need to know the material. You need to put in the time. If you do that, you have a wonderful chance to pass the CPA Exam. Nothing in life is guaranteed, of course, but if you do the work, then, as they say in basketball games, you’ve put yourself into a position to win.
And, there is no better time to get started than right now. How much study time can you put in by this time tomorrow? That’s all I’m interested in. I don’t want to hear about studying in the future. I don’t much care about promises of work to be done some time next spring or summer. If you really want to pass, I want to hear about how much time you are able to study right now—or at least in the next 24 hours.
(3) – How hard is the CPA Exam? That’s a good question for anyone to ask who is working to pass that exam. One way to judge the difficult is by looking at the pass rates. People from all over the world take the CPA Exam—some study hard and some don’t study that hard, some have a great education and some not quite so good. The pass rates for 2010 were recently announced: Auditing – 47.80 percent, BEC – 47.29 percent, Regulation – 50.56 percent, and FAR – 47.81 percent.
So, roughly 50 percent of the candidates pass each part they take. What that means is that you don’t have to be perfect. You don’t have to make 100. You don’t even have to be at the top of your class. What that means is that you just have to be in the top half of all the people who take the CPA Exam.
Okay, that is still not easy. However, that is achievable; that is a very reasonable goal. It is a goal that you can make. If you use good quality materials and you put in 60-100 hours per part, you’ve got a great chance to get in the upper half of the candidates. If you do that, you are probably going to pass. I think it is important to keep that in mind because that makes this goal of yours reasonable and that makes studying easier. It is something that you can do – hit the top half.
So, every day, think about all of those people preparing for the CPA exam and ask yourself (quite honestly): “Am I working harder today than half of those people?” If the answer is “Yes!!!”, then you are certainly on the road to getting that passing score.
(4) – As I always say, do be aware that you have the right to unsubscribe from these emails at any time that you wish. We love having you with us but you can leave if you need. Just scroll to the bottom of this email (or any email) and click on “unsubscribe.” We’ll miss you.
(5) – This morning, I was visiting a friend of mine here at the University who teaches Organizational Behavior. He had a piece of paper on his desk and there was the following quote on it from Victor Hugo:
“There is nothing like a dream to create the future.”
Good stuff. As you get 2011 under way, what are your dreams that are going to create your future? Do you have great dreams or do you just wait around to see what is going to happen to you? It is hard to have the future that you really want if you don’t have dreams of that future.
Of course, I hope that one of your strongest dreams for this coming year is to pass the CPA Exam so that you can get on with building a strong career. It is awfully hard to do the work necessary to succeed unless you have a dream that gnaws at you and pushes you forward. Dreams create ambition and ambition pushes you to get up and do the work. You really need to want success, you really need to crave 75 if you are going to put out the effort that is necessary to succeed.
When you go to bed at night, do you envision the thrill of getting that final 75 so that you can go to your friends and family and say: “I’m finished!!!! I have done it!!!! It was not easy but I’ve made it!!! I have passed the CPA exam.”
It is hard to be great without great dreams!!!
(6) – I always end these email lessons with some practice – usually, I give you four multiple-choice questions, one from each area of the CPA Exam along with my answers.
Today, though, in honor of our new BEC subscription service being available, I thought I would give you an example of what I think the new Written Communications questions are going to look like in BEC. This is my guess about the type of writing that you might see.
Think about your approach to the answer.
---Read the question very carefully and see how it is set up. What are they asking you to address.
---Jot down some notes that you want to cover in your answer.
---Go back and number those notes in the order that you want to cover them. That provides a quick outline to guide your writing.
---Look to see if you have left anything out or have not addressed the question appropriately.
---Write up your answer. Make sure all sentences are complete, no words are misspelled, and that all words are used properly. As I have said before, keep the sentences short and make sure one sentence links to the next.
---Read your answer out loud (or to yourself) and listen to how it sounds. Are there places that sound wrong or awkward? Does one sentence flow into the next so that the writing is smooth? Have you actually addressed the question that was asked? When it is read will it be understood?
---Find someone who knows how to write well and ask them to read your answer and point out any places that are hard to understand.
---Make sure it looks like a professional letter or memo. If you were to get that memo from a professional accountant, would you be impressed or shocked?
I believe this is a great system for learning how to write a strong professional answer for the written communication questions (three per exam) on the BEC portion of the CPA Exam.
Written Communication
The San Francisco Corporation is highly automated with the many transactions from its subsidiaries around the world being processed immediately through the company’s computer system. Company officials have become concerned about the possibility of a disaster such as an earthquake knocking out this computer system. A disaster recovery corporation was invited to visit the company and put forth a proposal. This outside vendor talked about creating either a hot site for the company or a cold site as part of an overall disaster recovery plan. Jane Addams, president of the San Francisco Corporation, is not certain that she fully understands those two terms. She has asked you to prepare a memo explaining both of the two terms to her. Please type your answer in the space provided below.
REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for infor¬mation that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organi¬zation, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation.
To: Jane Addams, President of the San Francisco Corporation
Re: Disaster Recovery Plan
Type Answer Here
************
Quite obviously, there are hundreds of different ways to set up this response to show that you can make proper use of the English language. Here is one possible structure for an answer.
To: Jane Addams, President of the San Francisco Corporation
Re: Disaster Recovery Plan
If the computer system for the San Francisco Corporation were ever shut down because of an emergency, the company should have an alternative system in place to allow operations around the world to continue to function in a timely manner. One possibility is to have an outside vendor, such as a disaster recovery firm, maintain a designated hot site. A hot site is a facility owned by the vendor that is a fully equipped data center. Every piece of hardware and software that the company needs is already in place. Near-complete backups of all essential user data are maintained. In case of an emergency that halts the company’s computer system, the San Francisco Corporation could move in trained personnel in a matter of hours and be operating with only a minimum amount of downtime. However, such a facility can be very expensive to maintain.
As an alternative, a cold site can be established by the vendor. Space is rented but no actual hardware or software is in place. Instead, a detailed plan is maintained to outline how the necessary components could be obtained in the least amount of time in case of emergency. The cost is considerably less than that of a hot site because no equipment or software is physically maintained. Unfortunately, if an actual emergency takes place, the company would require a greater amount of time before operations could be resumed in a normal fashion.
In making the decision between a hot site and a cold site, company management must evaluate the cost of having the computer system shut down for a period of time. The risk of such a catastrophe must also be weighed. Both solutions will work but one costs more to maintain while the other costs more if there is ever a disaster involving the company’s computer system.
Work hard – I’ll try to be back with another email lesson next week. Until then, show me how many hours you can put in to add those points that you need.
Joe Hoyle
President and Co-Founder
CPAreviewforFREE
Wednesday, December 22, 2010
3 Word Motto--MAKE IT HAPPEN!
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
129 Weeks of Operation and 20,011,437 Page Views (without a penny spent on marketing)
Lesson 86
From: Joe
(1) – Happy Holidays to each and every one of you from all of us here at CPAreviewforFREE. I hope 2010 has been great for you and that 2011 will be even better. You only live once – make it a life of joy with a willingness to help others.
One of our proudest accomplishments here at www.CPAreviewforFREE.com is that we have visitors to our site from all over the world. Last week alone, visitors from 97 different countries used our site to add points to their CPA Exam scores. Isn’t that neat! I know the world is just full of bad news where people cannot seem to get along but, at CPAreviewforFREE, we want to do our part to help all people, all the way around the globe.
Last week, as always, a majority of our traffic came from the US but the next biggest locations outside of the US were Canada, United Arab Emirates, India, Japan, and Philippines. We love being able to touch so many people in so many places.
Welcome to all of you wherever you may live!!!!!
**
And, we just passed two milestones this week: 20 million page views since we first started and 12 million page views in 2010 alone. I only have one thing to say: WOW!!!
(2) – As I mentioned in my last email, we are working feverishly to adapt our site to the January 2011 CPA Exam. If you want to see what is going to be on the new exam, go to www.cpa-exam.org and click on “CSOs/SSOs effective January 1, 2011.”
In the last few days, we have
--added Business Structures (Corporations, Partnerships, and LLCs) to our Regulation subscription service.
--added International Financial Reporting Standards (IFRS) to our FAR subscription service.
--added SEC material and accounting for trusts to our FAR subscription service.
--updated our subscription study guide for FAR and Regulation (remember, each subscription service is only $15 per month).
--got ready to expand the number of task-based simulations that are available in our subscription service.
--started finishing up the subscription services for BEC and Auditing.
(3) – As always, I am delighted to get emails from so many of you. Thanks for writing.
From WBS: “I wanted to say a HUGE thanks for all of your support. I used your materials to pass both FAR and REG, and I am now DONE with the exam! Initially, I was using CPA Review for Free as a supplement to the "expensive review course". As I became familiar with your format, it did not take long before your materials became my primary source of study. I graduated with my accounting degree in 1999, so, needless to say, I felt like I was way behind the power curve in preparing for the exam. Your materials provided a great pathway for an old guy like me to gain the confidence I needed to pass the exam. You are providing a great service, and I wanted to be sure to let you know of my deep gratitude for your tireless efforts to help us all succeed. I am referring as many people as possible to your website.”
From NI: “After 6 years of trying to pass the CPA exam, I am so happy to let you know that I have completed the exam. It seems like yesterday when I wrote my goal out for 2010. My main professional goal was to pass the CPA exam by the end of 2010. I promised to study 1 1/2 hours every day except Sundays and do as much of your multiple choice questions as I could. Thank you so much for all your encouraging emails and believing in me. You are such a great teacher, motivator and a fabulous person. Thank you for always picking me up and letting me know that I could always make it better the next day. I praise God for your gifts and please keep being the light that you are. Nothing beats hard work, a positive attitude while studying and your encouraging emails. Thank you, Thanks you and Thank you. This has been the best Christmas Gift for me and my family.”
From NJ: “Hi Joe! I don't know if you may remember me but I emailed you once regarding a question on equivalent units in BEC. I just wanted to say that I just saw my score and passed BEC on my first attempt! All the practice questions you offered on your website were incontrovertibly the best practice aides!! Thank you so much for continually pushing so many of us with your cheerful emails I absolutely love reading them! Happy holidays and onto the next stage now!”
From GH: “I have just registered on your cpa review for free website. What a great way to keep being a "good samaritan". I enjoyed your "last lecture" on YouTube - it was the best hour I've spent in a long time. Also, I have your text book on advanced accounting (9e). I never made the connection until tonight. I am a 50 year old studying for the CPA. I am in my own transition. God Bless you for your inspiration.”
From RK: “Good morning Joe! I just received my advisory score for REG and I passed with an 86%! Thank you so much for all your help! The study tips, the free questions, the encouragement - all that you do has been wonderful. Thank you, thank you! I have now passed all 4 parts. It's a great Christmas present!”
(4) – One day recently, Good Morning America, which is a television show on one of the major networks, challenged its viewers to come up with three words that conveyed a message about themselves. I thought that was a fascinating exercise – what three words would you use to describe your feelings/personality?
I stopped and did some reflection – what three words best describe Joe Hoyle?
It is not a bad exercise – can you boil down who you are to just three words, three words that really capture the very essence of being you.
For me, it was “Make It Happen.” I must admit that I love that phrase and what it conveys.
--To an extent, it reminds me that what we accomplish, what we become in life, is up to us. We are not pawns in the hands of fate but we are capable of creating our own destiny. Going back to my favorite lines from Shakespeare: “The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings.”
--Being willing to work hard is more important than money or talent or smarts or family connections or anything else. Yeah, there is always some limit to what you can accomplish purely by yourself. But there is not much of a limit. If you truly know what you want, you have the ability to make it happen.
What three words would you use to describe yourself?
“Gave Up, Quit”
“Needed A Nap”
“Everyone’s Against Me”
“Television’s More Important”
“Never Had Time”
“Will Work Tomorrow”
“Everything Distracts Me”
Some of these are funny but the truth is that we all know people who seem to have such mottos.
What was YOUR 3-word motto for 2010?
More importantly
What is going to be YOUR 3 word motto for 2011?
There is not much we can still do about 2010 but there are a million things you can accomplish in 2011.
Make It Happen!!!
PS – I challenged our friends on our Facebook page to give me their three word motto for 2011 – I’d love to hear yours if you are on Facebook.
(5) – We have to say the following legally: You can always unsubscribe from these email lessons that I write and mail out about every 7-14 days. Just scroll to the bottom of this email (or any email from us) and click on the link and you’ll immediately be removed. Cross my heart.
Now, we don’t have to say the following legally: We are delighted to have you with us. Please feel free to stay on as long as you like. Don’t hesitate to tell your friends and neighbors. Mention us to strangers you meet on the street. Leave anonymous notes in people’s mailboxes to tell them to subscribe. Since we spend nothing for advertising, we are like Blanche DuBois in A Street Car Named Desire in that we “always depend on the kindness of strangers.” Thanks for helping us spread the word.
(6) – We always get a lot of nice compliments around here about being Good Samaritans but you can be one too. Don’t leave that work up to us. Over this holiday season, make it a special point to be a Good Samaritan at least one time. Think how much better the world would be if we all did that just one time in the new few weeks.
A few days ago, my wife and elder daughter went through the drive-in at the local Arby’s to get a couple of sandwiches for their lunch. When they pulled up to the window to pay, they were informed that the person in the previous car (who had now driven away) had paid for their meal as a Christmas gesture. It was a neat gift from one anonymous person to another. Yeah, it cost a few bucks but it really made my wife smile. It was the essence of a pure gift with nothing expected in return. And, my wife will never know who the person was. Just some stranger who wanted to make her day better.
You don’t have to buy someone’s lunch but such gestures are what makes us all proud to be human beings. Don’t leave it to someone else – YOU do it.
(7) – In studying for the CPA Exam, it is always easy to get discouraged. There are many study days when you just miss an awful lot of questions. It is easy to feel lost and hopeless. Sometimes it feels like you are so far behind that you are never going to catch up.
Okay, I don’t follow either of these teams but I do know that the Eagles played the Giants in NFL football on Sunday. With 7 minutes and 30 seconds left in the game, the Giants were ahead by 31 to 10. I do know that in pro football being 21 points behind with 7 ½ minutes to play means that you might as well give up and start heading to the locker room. You just cannot score 21 points with that little time left. The game is lost so give up and quit and don’t get hurt.
Apparently, someone forgot to tell the Eagles because they managed to score four touchdowns in the last 7 ½ minutes and actually won the game by seven points. They scored 28 points in the final 7 ½ minutes. When all looked lost, they came back and won.
They could have folded their tents but they didn’t do that. All of a sudden things started turning their way and they began to make good things happen.
Too often, in studying for the CPA Exam, people get into a “I can’t possibly win this so I’m going to give up” mentality. They keep studying but the energy has drained completely out of them. They simply start expecting to lose.
When you expect to lose, it takes the edge off your work. No one ever puts out a 100 percent effort when they expect to get beaten.
I’m here to pass along yet another three word message – NEVER GIVE UP. There are times when things look bleak but no one gets anywhere in life by giving up. Some of the most exciting victories come when you get strong at the end and pull out a win that looked like a certain loss.
I know some of you have struggled with the CPA Exam in the past. But that was in the past. That was 2010. Forget about it. The exam you are going to see is the 2011 CPA Exam. There is no reason why you cannot pass the CPA Exam in 2011.
Keep Adding Points (yes, another 3 word message – they are everywhere).
As long as you keep adding points, you are going to get to 75 and you are going to pass that CPA Exam. Make it happen in 2011. Make this the year where you kick your career into high gear by passing the CPA Exam.
And, let us at www.CPAreviewforFREE.com help you in that quest.
(8) – Time to practice!!! Here are four questions – you should have one goal: when I see these questions again, I’ll be able to get them right.
FAR
Which of the following is filed with the SEC as an annual report to provide a comprehensive picture of a company’s performance, including aud¬ited financial statements?
A – Form 8-K
B – Form 10-K
C – Form 10-Q
D – Form S-1
Answer is B
The Form 8-K is filed with the SEC to provide information about material events that affect the company, such as mergers and acquisitions, changes in directors or CEO, other major changes in operations or status, changes in auditors, etc. The Form 10-K is the annual report filed with the SEC and includes sections such as a description of the business, risk factors, properties, legal proceedings, and submission of matters to a vote of security holders. The Form 10-Q is the quarterly report filed with the SEC. The Form S-1 is the common form filed in connection with the registration of new securities.
BEC
Wikipedia describes which of the following as “that element of a project that keeps it on-track, on-time and within budget?”
A – Project control
B – Project proposal management
C – Projection completion entitlement
D – Projection completion assurance (or PCA)
Answer is A
In the performance of a project, the ongoing comparison that measures actual progress to planned progress to serve as a control feature for every aspect of the job is known as project control.
Auditing and Attestation.
A CPA is auditing the financial statements of Yolandin Corporation. The CPA is concerned as to whether the accounts receivable being reported represent all of the amounts owed to the entity at the balance sheet date. Which of the following is the CPA most likely to perform to provide evidence about this concern?
A – Trace a sample of the balances reported as of the balance sheet date back to their source documentation.
B – Examine the list of receivables at the end of the year for especially large balances.
C – Examine the sales reported for the first few days of the subsequent period to ensure that each was recorded in the correct period.
D – Trace a sample of cash collections received prior to the end of the year to be sure that the proper balances were reduced.
Answer is C
The CPA is worried that some accounts receivable have been omitted at the balance sheet date so that the reported balance does not represent all of the amounts that are owed to the company. Answer A is a test of balances that have already been reported. Answer B is a test of balances that are reported. Answer D is a test to make sure balances have been properly removed. The only test that looks at the possible omission of accounts receivable is answer C. Sales reported shortly after the end of the year and recorded at that time might have actually taken place prior to the end of the year and were omitted from the reporting for that year. There are several reasons that might have taken place – often it is that the creation of the documents takes a few days to occur and be recorded so the event takes place in one year but is not recorded until the next.
Regulation
James and Madelyn Hogswealth discover an error in a previous year’s federal income tax return. They file an amended return and receive a refund of $1,933 plus an additional $17 as interest for a total amount of $1,950. In the year in which they receive this money, how does it impact their federal income tax return?
A – There is no impact on their current income tax return because the money related to an earlier year.
B - $17 increase in taxable income
C - $1,933 increase in taxable income
D - $1,950 increase in taxable income
Answer is B
Federal income taxes paid or received (as refunds) have no impact on a person’s federal taxable income. However, interest received on such a refund is viewed as taxable income and must be reported.
Stay warm.
Stay safe.
Do good work.
Joe Hoyle
President and Co-Founder
CPAreviewforFREE
129 Weeks of Operation and 20,011,437 Page Views (without a penny spent on marketing)
Lesson 86
From: Joe
(1) – Happy Holidays to each and every one of you from all of us here at CPAreviewforFREE. I hope 2010 has been great for you and that 2011 will be even better. You only live once – make it a life of joy with a willingness to help others.
One of our proudest accomplishments here at www.CPAreviewforFREE.com is that we have visitors to our site from all over the world. Last week alone, visitors from 97 different countries used our site to add points to their CPA Exam scores. Isn’t that neat! I know the world is just full of bad news where people cannot seem to get along but, at CPAreviewforFREE, we want to do our part to help all people, all the way around the globe.
Last week, as always, a majority of our traffic came from the US but the next biggest locations outside of the US were Canada, United Arab Emirates, India, Japan, and Philippines. We love being able to touch so many people in so many places.
Welcome to all of you wherever you may live!!!!!
**
And, we just passed two milestones this week: 20 million page views since we first started and 12 million page views in 2010 alone. I only have one thing to say: WOW!!!
(2) – As I mentioned in my last email, we are working feverishly to adapt our site to the January 2011 CPA Exam. If you want to see what is going to be on the new exam, go to www.cpa-exam.org and click on “CSOs/SSOs effective January 1, 2011.”
In the last few days, we have
--added Business Structures (Corporations, Partnerships, and LLCs) to our Regulation subscription service.
--added International Financial Reporting Standards (IFRS) to our FAR subscription service.
--added SEC material and accounting for trusts to our FAR subscription service.
--updated our subscription study guide for FAR and Regulation (remember, each subscription service is only $15 per month).
--got ready to expand the number of task-based simulations that are available in our subscription service.
--started finishing up the subscription services for BEC and Auditing.
(3) – As always, I am delighted to get emails from so many of you. Thanks for writing.
From WBS: “I wanted to say a HUGE thanks for all of your support. I used your materials to pass both FAR and REG, and I am now DONE with the exam! Initially, I was using CPA Review for Free as a supplement to the "expensive review course". As I became familiar with your format, it did not take long before your materials became my primary source of study. I graduated with my accounting degree in 1999, so, needless to say, I felt like I was way behind the power curve in preparing for the exam. Your materials provided a great pathway for an old guy like me to gain the confidence I needed to pass the exam. You are providing a great service, and I wanted to be sure to let you know of my deep gratitude for your tireless efforts to help us all succeed. I am referring as many people as possible to your website.”
From NI: “After 6 years of trying to pass the CPA exam, I am so happy to let you know that I have completed the exam. It seems like yesterday when I wrote my goal out for 2010. My main professional goal was to pass the CPA exam by the end of 2010. I promised to study 1 1/2 hours every day except Sundays and do as much of your multiple choice questions as I could. Thank you so much for all your encouraging emails and believing in me. You are such a great teacher, motivator and a fabulous person. Thank you for always picking me up and letting me know that I could always make it better the next day. I praise God for your gifts and please keep being the light that you are. Nothing beats hard work, a positive attitude while studying and your encouraging emails. Thank you, Thanks you and Thank you. This has been the best Christmas Gift for me and my family.”
From NJ: “Hi Joe! I don't know if you may remember me but I emailed you once regarding a question on equivalent units in BEC. I just wanted to say that I just saw my score and passed BEC on my first attempt! All the practice questions you offered on your website were incontrovertibly the best practice aides!! Thank you so much for continually pushing so many of us with your cheerful emails I absolutely love reading them! Happy holidays and onto the next stage now!”
From GH: “I have just registered on your cpa review for free website. What a great way to keep being a "good samaritan". I enjoyed your "last lecture" on YouTube - it was the best hour I've spent in a long time. Also, I have your text book on advanced accounting (9e). I never made the connection until tonight. I am a 50 year old studying for the CPA. I am in my own transition. God Bless you for your inspiration.”
From RK: “Good morning Joe! I just received my advisory score for REG and I passed with an 86%! Thank you so much for all your help! The study tips, the free questions, the encouragement - all that you do has been wonderful. Thank you, thank you! I have now passed all 4 parts. It's a great Christmas present!”
(4) – One day recently, Good Morning America, which is a television show on one of the major networks, challenged its viewers to come up with three words that conveyed a message about themselves. I thought that was a fascinating exercise – what three words would you use to describe your feelings/personality?
I stopped and did some reflection – what three words best describe Joe Hoyle?
It is not a bad exercise – can you boil down who you are to just three words, three words that really capture the very essence of being you.
For me, it was “Make It Happen.” I must admit that I love that phrase and what it conveys.
--To an extent, it reminds me that what we accomplish, what we become in life, is up to us. We are not pawns in the hands of fate but we are capable of creating our own destiny. Going back to my favorite lines from Shakespeare: “The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings.”
--Being willing to work hard is more important than money or talent or smarts or family connections or anything else. Yeah, there is always some limit to what you can accomplish purely by yourself. But there is not much of a limit. If you truly know what you want, you have the ability to make it happen.
What three words would you use to describe yourself?
“Gave Up, Quit”
“Needed A Nap”
“Everyone’s Against Me”
“Television’s More Important”
“Never Had Time”
“Will Work Tomorrow”
“Everything Distracts Me”
Some of these are funny but the truth is that we all know people who seem to have such mottos.
What was YOUR 3-word motto for 2010?
More importantly
What is going to be YOUR 3 word motto for 2011?
There is not much we can still do about 2010 but there are a million things you can accomplish in 2011.
Make It Happen!!!
PS – I challenged our friends on our Facebook page to give me their three word motto for 2011 – I’d love to hear yours if you are on Facebook.
(5) – We have to say the following legally: You can always unsubscribe from these email lessons that I write and mail out about every 7-14 days. Just scroll to the bottom of this email (or any email from us) and click on the link and you’ll immediately be removed. Cross my heart.
Now, we don’t have to say the following legally: We are delighted to have you with us. Please feel free to stay on as long as you like. Don’t hesitate to tell your friends and neighbors. Mention us to strangers you meet on the street. Leave anonymous notes in people’s mailboxes to tell them to subscribe. Since we spend nothing for advertising, we are like Blanche DuBois in A Street Car Named Desire in that we “always depend on the kindness of strangers.” Thanks for helping us spread the word.
(6) – We always get a lot of nice compliments around here about being Good Samaritans but you can be one too. Don’t leave that work up to us. Over this holiday season, make it a special point to be a Good Samaritan at least one time. Think how much better the world would be if we all did that just one time in the new few weeks.
A few days ago, my wife and elder daughter went through the drive-in at the local Arby’s to get a couple of sandwiches for their lunch. When they pulled up to the window to pay, they were informed that the person in the previous car (who had now driven away) had paid for their meal as a Christmas gesture. It was a neat gift from one anonymous person to another. Yeah, it cost a few bucks but it really made my wife smile. It was the essence of a pure gift with nothing expected in return. And, my wife will never know who the person was. Just some stranger who wanted to make her day better.
You don’t have to buy someone’s lunch but such gestures are what makes us all proud to be human beings. Don’t leave it to someone else – YOU do it.
(7) – In studying for the CPA Exam, it is always easy to get discouraged. There are many study days when you just miss an awful lot of questions. It is easy to feel lost and hopeless. Sometimes it feels like you are so far behind that you are never going to catch up.
Okay, I don’t follow either of these teams but I do know that the Eagles played the Giants in NFL football on Sunday. With 7 minutes and 30 seconds left in the game, the Giants were ahead by 31 to 10. I do know that in pro football being 21 points behind with 7 ½ minutes to play means that you might as well give up and start heading to the locker room. You just cannot score 21 points with that little time left. The game is lost so give up and quit and don’t get hurt.
Apparently, someone forgot to tell the Eagles because they managed to score four touchdowns in the last 7 ½ minutes and actually won the game by seven points. They scored 28 points in the final 7 ½ minutes. When all looked lost, they came back and won.
They could have folded their tents but they didn’t do that. All of a sudden things started turning their way and they began to make good things happen.
Too often, in studying for the CPA Exam, people get into a “I can’t possibly win this so I’m going to give up” mentality. They keep studying but the energy has drained completely out of them. They simply start expecting to lose.
When you expect to lose, it takes the edge off your work. No one ever puts out a 100 percent effort when they expect to get beaten.
I’m here to pass along yet another three word message – NEVER GIVE UP. There are times when things look bleak but no one gets anywhere in life by giving up. Some of the most exciting victories come when you get strong at the end and pull out a win that looked like a certain loss.
I know some of you have struggled with the CPA Exam in the past. But that was in the past. That was 2010. Forget about it. The exam you are going to see is the 2011 CPA Exam. There is no reason why you cannot pass the CPA Exam in 2011.
Keep Adding Points (yes, another 3 word message – they are everywhere).
As long as you keep adding points, you are going to get to 75 and you are going to pass that CPA Exam. Make it happen in 2011. Make this the year where you kick your career into high gear by passing the CPA Exam.
And, let us at www.CPAreviewforFREE.com help you in that quest.
(8) – Time to practice!!! Here are four questions – you should have one goal: when I see these questions again, I’ll be able to get them right.
FAR
Which of the following is filed with the SEC as an annual report to provide a comprehensive picture of a company’s performance, including aud¬ited financial statements?
A – Form 8-K
B – Form 10-K
C – Form 10-Q
D – Form S-1
Answer is B
The Form 8-K is filed with the SEC to provide information about material events that affect the company, such as mergers and acquisitions, changes in directors or CEO, other major changes in operations or status, changes in auditors, etc. The Form 10-K is the annual report filed with the SEC and includes sections such as a description of the business, risk factors, properties, legal proceedings, and submission of matters to a vote of security holders. The Form 10-Q is the quarterly report filed with the SEC. The Form S-1 is the common form filed in connection with the registration of new securities.
BEC
Wikipedia describes which of the following as “that element of a project that keeps it on-track, on-time and within budget?”
A – Project control
B – Project proposal management
C – Projection completion entitlement
D – Projection completion assurance (or PCA)
Answer is A
In the performance of a project, the ongoing comparison that measures actual progress to planned progress to serve as a control feature for every aspect of the job is known as project control.
Auditing and Attestation.
A CPA is auditing the financial statements of Yolandin Corporation. The CPA is concerned as to whether the accounts receivable being reported represent all of the amounts owed to the entity at the balance sheet date. Which of the following is the CPA most likely to perform to provide evidence about this concern?
A – Trace a sample of the balances reported as of the balance sheet date back to their source documentation.
B – Examine the list of receivables at the end of the year for especially large balances.
C – Examine the sales reported for the first few days of the subsequent period to ensure that each was recorded in the correct period.
D – Trace a sample of cash collections received prior to the end of the year to be sure that the proper balances were reduced.
Answer is C
The CPA is worried that some accounts receivable have been omitted at the balance sheet date so that the reported balance does not represent all of the amounts that are owed to the company. Answer A is a test of balances that have already been reported. Answer B is a test of balances that are reported. Answer D is a test to make sure balances have been properly removed. The only test that looks at the possible omission of accounts receivable is answer C. Sales reported shortly after the end of the year and recorded at that time might have actually taken place prior to the end of the year and were omitted from the reporting for that year. There are several reasons that might have taken place – often it is that the creation of the documents takes a few days to occur and be recorded so the event takes place in one year but is not recorded until the next.
Regulation
James and Madelyn Hogswealth discover an error in a previous year’s federal income tax return. They file an amended return and receive a refund of $1,933 plus an additional $17 as interest for a total amount of $1,950. In the year in which they receive this money, how does it impact their federal income tax return?
A – There is no impact on their current income tax return because the money related to an earlier year.
B - $17 increase in taxable income
C - $1,933 increase in taxable income
D - $1,950 increase in taxable income
Answer is B
Federal income taxes paid or received (as refunds) have no impact on a person’s federal taxable income. However, interest received on such a refund is viewed as taxable income and must be reported.
Stay warm.
Stay safe.
Do good work.
Joe Hoyle
President and Co-Founder
CPAreviewforFREE
Monday, December 6, 2010
Set a Goal and Make it Happen
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
126 Weeks of Operation and 19,645,481 Page Views (without a penny spent on marketing)
Lesson 85
From: Joe
(a) – We should go over 20 million page views in the next few days – WOW!!!!
(1) – The 2010 CPA Exam is officially over and we are going to use the next few weeks to switch everything on our site over to the 2011 CPA Exam. Here are some of the changes we want you to notice.
--We have added a bunch of IFRS multiple-choice questions for FAR in our free question and answer database. Probably the 2011 change that has been the most talked about is the addition of some IFRS questions in FAR. We have tried to pick out the questions that we believe are most likely to be used to test IFRS. You can do those questions (right now) at www.CPAreviewforFREE.com.
--As I type, we are in the process of moving our free Business Structure questions and answers from BEC to REG. The examiners decided that those subject areas (corporations and partnerships) were better suited under Regulation.
--We have added a whole bunch of free Corporate Governance questions and answers to our BEC database. The examiners moved Business Structure to REG and replaced it in BEC with Corporate Governance. Those questions and answers are now ready to go.
--In our subscription services for FAR and REG, we have removed all of the old-style simulations and replaced them with brand new task-based simulation questions and answers. We will soon have 10 or so task-based simulations in each of the subscription areas. On the CPA Exam, instead of having two very long simulations that include both research and written communications, each part of the CPA Exam (except BEC) will have 6-7 shorter task-based simulations. Research will still be tested here but the written communications questions will all move to BEC.
--In our subscription services for FAR and REG, we have updated our study programs to incorporate the changes that are being made.
Okay, that is the progress at the moment. We have more to do and I’ll give you that information in my next email less.
Our goal is quite simple: we want to do whatever is necessary to be the biggest CPA Exam Review program in the country by the end of 2011.
(2) – That is our goal for 2011. What is your goal for 2011? Where do you want to be one year from today? As I sometimes tell my students, you don’t need a map if you don’t know where you want to go. Life doesn’t happen as you want it by chance. What would you like to accomplish over the next year?
Hopefully, one of your goals is to get the CPA Exam passed, done, and out of your life.
--Whether you went to a big school or a tiny one, that is a reasonable goal. It just takes work.
--Whether you made a 4.0 in college or just barely passed, that is still a reasonable goal. It just takes work.
--Whether you were the smartest student in your class or the one who just squeaked by, that is still a reasonable goal. It just takes work.
Success doesn’t come by accident.
How soon do you want to pass the CPA Exam? What is reasonable?
Which part do you want to pass next?
How much time is it going to take?
What study materials will you use (hopefully, www.CPAreviewforFREE.com)?
The country (and I suppose the world) seem to be in a rut right now. It needs more people like you to get up and start accomplishing something. The world doesn’t get stronger by having its best and brightest people sit around and whine about our problems. It gets stronger by doing. Figure out what you want to do over the next 365 days and get on with the journey. If you know where you want to go, you can make it happen.
(3) – As always, we love the mail we get.
From KS: Just received my final CPA exam grade--passed FAR with a score of 91. I used your pay content almost exclusively for preparation. I had the XXXX review series, but it was overkill, and the book was way too thick to possibly get through (since I am also working full-time, am married and have two children). So thanks! Your review materials are spot on and prepared me well. I will keep spreading the word about your site!
From JK: I just wanted to say thank you for all of the information on your site! I found out this week that I passed FAR with an 83 after studying with the subscription review slides and free questions on your site. It is such a great resource and I have been using the site instead of doing a review program. Many people at work are surprised when I say I'm not going to a review class, but I really believe that your site is helpful in passing the test. Thank you again.
From Z: Just wanted to let you know that I passed FAR!! Got my scores in today. I made exactly what was needed to pass, a 75. I wanted to take a moment of your time to thank you for your encouraging emails and suggestions. I applied several of your techniques. I actually wrote out on a piece of paper that “every question I do gets me closer to a 75” and that has helped a lot. It truly worked out!
From NW: Before I unsubscribe, I want to thank you for your site – it helped me pass the CPA exam! Every time when I had trouble figuring out a concept, I checked out your site and learned the concept from a different perspective. I LOVED your thorough explanations, much better than the XXXX. I also enjoyed your encouraging periodic newsletters/e-mails. Those fun and positive messages kept me on track! Thank you SO very much!
From OP: Just a word to say thanks so much for your help in passing the CPA exam. I received notice that I passed the 4th part this week, but now I must retake REG in Jan 2011 because the 18 months time limit passed and I lost credit for REG that I initially took and passed in 01/09. Anyway, I am very thankful for all your timeless efforts to help old guys like myself to achieve their desires to excel. I am 58 now and began this endeavor around August 2008. After passing this last "hurdle" and fulfilling my experience requirement, I will launch my "new" career as a CPA!
Now--Picture your email right here – that’s what I want – to hear from YOU about how you used www.CPAreviewforFREE.com and passed that exam!!
(4) – My semester has just ended and I am in the middle of final exams. Last week one of the students came to me because she was disappointed with her grade. She had worked very hard throughout the semester but her test grades were not as good as she hoped they would be. She wanted some advice on how she could do better on the final exam.
I eventually wrote her a note with some advice. I thought that advice might be helpful to you even though you are not taking a final exam in “Introduction to Financial Accounting.”
To my student:
On a test, there are typically one (or more) out of several possible reasons for missing a question.
The first is that you don't read the question very well and don't even know what is being asked or the information that is available. You never get a good handle on the question. In the helter skelter of a test, students often start to "guess" at what the question wants before they have finished the first sentence. They are so pumped up that they want to get on with the job of answering the question before they even read the question. They'll often come back and say "I don't know how I could possibly have missed that. I knew that material and still got the question wrong."
And the most likely answer is that they never really understood what the question was asking. So, after you read the question, repeat it back to yourself. What am I supposed to determine? And, then ask yourself what information is needed to answer that question. Once you know the question, you should start thinking about the information you must obtain to address that question.
The second reason for mistakes is that accounting tests are often quantitative tests where you have a bunch of numbers or other information presented in a very random fashion. Those numbers and that other information must be processed in a particular order. You must provide order for the chaos. Somehow, students often never get the numbers and information ordered correctly. The information remains confused in the person’s head and the person can just not get things lined up to arrive at an answer. So, as you are studying, think about how the information is put together to arrive at a proper answer. Answers tend to be built: do this and then do this and then do this and you have the correct answer.
Students will say “I know I need this and this and this but I don’t see how they all go together—how do I put them together?” That is not a question you should be asking yourself during the test; that is a question you need to answer prior to the test.
The third reason for missing goes back to the learning process. The best way to learn something is to miss it and then have to figure out what went wrong. You need to work as many practice problems as you can and every time you miss one you need to get obsessed with figuring out what went wrong. There is absolutely no reason to practice if you are not going to learn from your mistakes. Too many students say “shucks” when they miss a question and then find a spot within the question that they missed and move on. To say “oh, it is six at that point rather than seven” doesn’t mean you know how to work the question. So, always ask yourself “if this question were asked again but the numbers were changed slightly and rearranged a bit, could I get it right the next time?” In many ways, that is the ultimate preparation question. Until your answer to that question is “absolutely yes,” you cannot move on -- you must still learn how to answer that question.
It takes patience and it takes perseverance but you must read the question carefully, you must understand how the information fits together, and you must learn from your mistakes. If you do that, there is no reason that you can’t knock the top out of that exam.
(5) – If you want to unsubscribe from these email lessons, it is easy. Just scroll to the bottom of this email lesson (or any email lesson) and click on the Unsubcribe link. We are delighted to have you with us. Please stay as long as you wish. Please forward these lessons to your friends, family, strangers, enemies, and creatures from other planets. But, when you are ready to go, you are certainly able to unsubscribe.
(6) – Let’s add some points. Here are four good questions – the chance to add four points to YOUR CPA Exam score.
FAR
A company borrows money on a long-term note payable. In the current year, the company pays the required $23,000 in interest expense. On a statement of cash flows, how is that payment reflected according to IFRS?
A. As an operating activity
B. As a financing activity
C. As either an operating activity or a financing activity
D. As either a financing activity or an investing activity
Answer is C
Under US GAAP, cash paid for interest expense is always reported as an operating activity. IFRS takes a different approach. Cash paid for interest expense can be reported as an operating activity on a statement of cash flows but company management can also show it as a financing activity (since it is directly related to a liability).
BEC
Which of the following is a requirement established by the New York Stock Exchange for the companies that are officially listed on that exchange?
A. A code of conduct must be adopted by the governing board and made public.
B. The company must have both common stock and preferred stock so that investors can have an available option.
C. The company must maintain a reasonable equity position as measured by its debt-to-equity ratio.
D. The company must have a history of paying out a minimum of five percent of its earnings in the form of cash dividends.
Answer is A
To help ensure that companies operate with some level of moral guidance, a code of conduct must be adopted. To help outsiders evaluate the company’s commitment to ethical principles that code of conduct must be made public. Most companies do not have a preferred stock and there are certainly no rules requiring its availability. Investors should judge the financial position and operations of the company for themselves by looking at benchmarks such as the debt-to-equity ratio and the dividend payout. The NYSE has no such requirements about preferred stock, the debt-to-equity ratio, or the dividend payout.
Auditing and Attestation
A CPA firm is planning to do an audit of a reporting entity located in a foreign country and the firm is required to follow the rules established by international auditing standards. What authoritative body establishes those standards?
A. The Public Oversight Board of Europe and Asia
B. The Auditing Development Board of the United Nations
C. The Auditing Standards Group of the World Bank
D. The International Federation of Accountants
Answer is D
The International Federation of Accountants (IFAC) produces international auditing standards. According to its website, “As the global organization for the accountancy profession, IFAC is committed to protecting the public interest by developing high-quality international standards, promoting strong ethical values, encouraging quality practice, and supporting the development of all sectors of the profession around the world.”
Regulation
The Jones Partnership has been in operation for a number of years and is run by Bill Jones and Phil Jones. Tom Smith has also put money into the business but is a silent 20 percent partner. He does not do any work in connection with the business and no one knows that he is a silent partner other that Bill and Phil Jones. Which of the following is true?
A. Tom Smith can only lose the amount of money that he has invested in the partnership.
B. Tom Smith can only be held for responsible for 20 percent of the liabilities of the partnership.
C. Tom Smith can only be held liable by individuals or companies that should have known that he was a partner.
D. Tom Smith has unlimited liability for the debts of the partnership despite serving as a silent partner.
Answer is D
The designation of Smith as a silent partner has no impact on his liability for the debts of a partnership. In a general partnership, all partners have this unlimited risk.
Have a great week – make wonderful things happen!!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
www.CPAreviewforFREE.com
126 Weeks of Operation and 19,645,481 Page Views (without a penny spent on marketing)
Lesson 85
From: Joe
(a) – We should go over 20 million page views in the next few days – WOW!!!!
(1) – The 2010 CPA Exam is officially over and we are going to use the next few weeks to switch everything on our site over to the 2011 CPA Exam. Here are some of the changes we want you to notice.
--We have added a bunch of IFRS multiple-choice questions for FAR in our free question and answer database. Probably the 2011 change that has been the most talked about is the addition of some IFRS questions in FAR. We have tried to pick out the questions that we believe are most likely to be used to test IFRS. You can do those questions (right now) at www.CPAreviewforFREE.com.
--As I type, we are in the process of moving our free Business Structure questions and answers from BEC to REG. The examiners decided that those subject areas (corporations and partnerships) were better suited under Regulation.
--We have added a whole bunch of free Corporate Governance questions and answers to our BEC database. The examiners moved Business Structure to REG and replaced it in BEC with Corporate Governance. Those questions and answers are now ready to go.
--In our subscription services for FAR and REG, we have removed all of the old-style simulations and replaced them with brand new task-based simulation questions and answers. We will soon have 10 or so task-based simulations in each of the subscription areas. On the CPA Exam, instead of having two very long simulations that include both research and written communications, each part of the CPA Exam (except BEC) will have 6-7 shorter task-based simulations. Research will still be tested here but the written communications questions will all move to BEC.
--In our subscription services for FAR and REG, we have updated our study programs to incorporate the changes that are being made.
Okay, that is the progress at the moment. We have more to do and I’ll give you that information in my next email less.
Our goal is quite simple: we want to do whatever is necessary to be the biggest CPA Exam Review program in the country by the end of 2011.
(2) – That is our goal for 2011. What is your goal for 2011? Where do you want to be one year from today? As I sometimes tell my students, you don’t need a map if you don’t know where you want to go. Life doesn’t happen as you want it by chance. What would you like to accomplish over the next year?
Hopefully, one of your goals is to get the CPA Exam passed, done, and out of your life.
--Whether you went to a big school or a tiny one, that is a reasonable goal. It just takes work.
--Whether you made a 4.0 in college or just barely passed, that is still a reasonable goal. It just takes work.
--Whether you were the smartest student in your class or the one who just squeaked by, that is still a reasonable goal. It just takes work.
Success doesn’t come by accident.
How soon do you want to pass the CPA Exam? What is reasonable?
Which part do you want to pass next?
How much time is it going to take?
What study materials will you use (hopefully, www.CPAreviewforFREE.com)?
The country (and I suppose the world) seem to be in a rut right now. It needs more people like you to get up and start accomplishing something. The world doesn’t get stronger by having its best and brightest people sit around and whine about our problems. It gets stronger by doing. Figure out what you want to do over the next 365 days and get on with the journey. If you know where you want to go, you can make it happen.
(3) – As always, we love the mail we get.
From KS: Just received my final CPA exam grade--passed FAR with a score of 91. I used your pay content almost exclusively for preparation. I had the XXXX review series, but it was overkill, and the book was way too thick to possibly get through (since I am also working full-time, am married and have two children). So thanks! Your review materials are spot on and prepared me well. I will keep spreading the word about your site!
From JK: I just wanted to say thank you for all of the information on your site! I found out this week that I passed FAR with an 83 after studying with the subscription review slides and free questions on your site. It is such a great resource and I have been using the site instead of doing a review program. Many people at work are surprised when I say I'm not going to a review class, but I really believe that your site is helpful in passing the test. Thank you again.
From Z: Just wanted to let you know that I passed FAR!! Got my scores in today. I made exactly what was needed to pass, a 75. I wanted to take a moment of your time to thank you for your encouraging emails and suggestions. I applied several of your techniques. I actually wrote out on a piece of paper that “every question I do gets me closer to a 75” and that has helped a lot. It truly worked out!
From NW: Before I unsubscribe, I want to thank you for your site – it helped me pass the CPA exam! Every time when I had trouble figuring out a concept, I checked out your site and learned the concept from a different perspective. I LOVED your thorough explanations, much better than the XXXX. I also enjoyed your encouraging periodic newsletters/e-mails. Those fun and positive messages kept me on track! Thank you SO very much!
From OP: Just a word to say thanks so much for your help in passing the CPA exam. I received notice that I passed the 4th part this week, but now I must retake REG in Jan 2011 because the 18 months time limit passed and I lost credit for REG that I initially took and passed in 01/09. Anyway, I am very thankful for all your timeless efforts to help old guys like myself to achieve their desires to excel. I am 58 now and began this endeavor around August 2008. After passing this last "hurdle" and fulfilling my experience requirement, I will launch my "new" career as a CPA!
Now--Picture your email right here – that’s what I want – to hear from YOU about how you used www.CPAreviewforFREE.com and passed that exam!!
(4) – My semester has just ended and I am in the middle of final exams. Last week one of the students came to me because she was disappointed with her grade. She had worked very hard throughout the semester but her test grades were not as good as she hoped they would be. She wanted some advice on how she could do better on the final exam.
I eventually wrote her a note with some advice. I thought that advice might be helpful to you even though you are not taking a final exam in “Introduction to Financial Accounting.”
To my student:
On a test, there are typically one (or more) out of several possible reasons for missing a question.
The first is that you don't read the question very well and don't even know what is being asked or the information that is available. You never get a good handle on the question. In the helter skelter of a test, students often start to "guess" at what the question wants before they have finished the first sentence. They are so pumped up that they want to get on with the job of answering the question before they even read the question. They'll often come back and say "I don't know how I could possibly have missed that. I knew that material and still got the question wrong."
And the most likely answer is that they never really understood what the question was asking. So, after you read the question, repeat it back to yourself. What am I supposed to determine? And, then ask yourself what information is needed to answer that question. Once you know the question, you should start thinking about the information you must obtain to address that question.
The second reason for mistakes is that accounting tests are often quantitative tests where you have a bunch of numbers or other information presented in a very random fashion. Those numbers and that other information must be processed in a particular order. You must provide order for the chaos. Somehow, students often never get the numbers and information ordered correctly. The information remains confused in the person’s head and the person can just not get things lined up to arrive at an answer. So, as you are studying, think about how the information is put together to arrive at a proper answer. Answers tend to be built: do this and then do this and then do this and you have the correct answer.
Students will say “I know I need this and this and this but I don’t see how they all go together—how do I put them together?” That is not a question you should be asking yourself during the test; that is a question you need to answer prior to the test.
The third reason for missing goes back to the learning process. The best way to learn something is to miss it and then have to figure out what went wrong. You need to work as many practice problems as you can and every time you miss one you need to get obsessed with figuring out what went wrong. There is absolutely no reason to practice if you are not going to learn from your mistakes. Too many students say “shucks” when they miss a question and then find a spot within the question that they missed and move on. To say “oh, it is six at that point rather than seven” doesn’t mean you know how to work the question. So, always ask yourself “if this question were asked again but the numbers were changed slightly and rearranged a bit, could I get it right the next time?” In many ways, that is the ultimate preparation question. Until your answer to that question is “absolutely yes,” you cannot move on -- you must still learn how to answer that question.
It takes patience and it takes perseverance but you must read the question carefully, you must understand how the information fits together, and you must learn from your mistakes. If you do that, there is no reason that you can’t knock the top out of that exam.
(5) – If you want to unsubscribe from these email lessons, it is easy. Just scroll to the bottom of this email lesson (or any email lesson) and click on the Unsubcribe link. We are delighted to have you with us. Please stay as long as you wish. Please forward these lessons to your friends, family, strangers, enemies, and creatures from other planets. But, when you are ready to go, you are certainly able to unsubscribe.
(6) – Let’s add some points. Here are four good questions – the chance to add four points to YOUR CPA Exam score.
FAR
A company borrows money on a long-term note payable. In the current year, the company pays the required $23,000 in interest expense. On a statement of cash flows, how is that payment reflected according to IFRS?
A. As an operating activity
B. As a financing activity
C. As either an operating activity or a financing activity
D. As either a financing activity or an investing activity
Answer is C
Under US GAAP, cash paid for interest expense is always reported as an operating activity. IFRS takes a different approach. Cash paid for interest expense can be reported as an operating activity on a statement of cash flows but company management can also show it as a financing activity (since it is directly related to a liability).
BEC
Which of the following is a requirement established by the New York Stock Exchange for the companies that are officially listed on that exchange?
A. A code of conduct must be adopted by the governing board and made public.
B. The company must have both common stock and preferred stock so that investors can have an available option.
C. The company must maintain a reasonable equity position as measured by its debt-to-equity ratio.
D. The company must have a history of paying out a minimum of five percent of its earnings in the form of cash dividends.
Answer is A
To help ensure that companies operate with some level of moral guidance, a code of conduct must be adopted. To help outsiders evaluate the company’s commitment to ethical principles that code of conduct must be made public. Most companies do not have a preferred stock and there are certainly no rules requiring its availability. Investors should judge the financial position and operations of the company for themselves by looking at benchmarks such as the debt-to-equity ratio and the dividend payout. The NYSE has no such requirements about preferred stock, the debt-to-equity ratio, or the dividend payout.
Auditing and Attestation
A CPA firm is planning to do an audit of a reporting entity located in a foreign country and the firm is required to follow the rules established by international auditing standards. What authoritative body establishes those standards?
A. The Public Oversight Board of Europe and Asia
B. The Auditing Development Board of the United Nations
C. The Auditing Standards Group of the World Bank
D. The International Federation of Accountants
Answer is D
The International Federation of Accountants (IFAC) produces international auditing standards. According to its website, “As the global organization for the accountancy profession, IFAC is committed to protecting the public interest by developing high-quality international standards, promoting strong ethical values, encouraging quality practice, and supporting the development of all sectors of the profession around the world.”
Regulation
The Jones Partnership has been in operation for a number of years and is run by Bill Jones and Phil Jones. Tom Smith has also put money into the business but is a silent 20 percent partner. He does not do any work in connection with the business and no one knows that he is a silent partner other that Bill and Phil Jones. Which of the following is true?
A. Tom Smith can only lose the amount of money that he has invested in the partnership.
B. Tom Smith can only be held for responsible for 20 percent of the liabilities of the partnership.
C. Tom Smith can only be held liable by individuals or companies that should have known that he was a partner.
D. Tom Smith has unlimited liability for the debts of the partnership despite serving as a silent partner.
Answer is D
The designation of Smith as a silent partner has no impact on his liability for the debts of a partnership. In a general partnership, all partners have this unlimited risk.
Have a great week – make wonderful things happen!!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
www.CPAreviewforFREE.com
Thursday, November 25, 2010
Keep Moving Forward
Try us FIRST before you spend your hard-earned money.
November 23, 2010
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
125 Weeks of Operation and 19,287,496 Page Views (without a penny spent on marketing)
Lesson 84
From: Joe
(a) – Have a great and joyous and wonderful Thanksgiving day on Thursday. Please do take time out of your busy and hectic day to reflect on all those many things that you have in your heart to be thankful for. I’m convinced that life goes better if your focus on what you are grateful for rather than stew on those things that tick you off. Too many people I know spend too much valuable time stewing.
(b) – And, here is one thing that we have to be thankful for – last week was our busiest week in our history!!! And, as always, it was done without advertising. Just think, if we had any money and could advertise like the big courses, we could really grow.
Just to put our growth into perspective, we measure a lot of things around here in page views. A page view is basically one person reading one question and one answer. So, it is a unit of measure that we can all understand. In our first week of existence, we had 1,920 page views and I was ecstatic. I thought that was unbelievable.
Last week, we had an average of 1,920 page views every 45 minutes round the clock, 24 hours per day for all 7 days of the week. That is close to a one-half million page views in that one week. (Or, as another way to look at it, we averaged 42.85 page views PER MINUTE for an entire week).
The average person stayed on our site for nearly 30 minutes and did 31.27 page views. That was THE AVERAGE PERSON.
So, don’t let the big courses kid you. We believe that 2011 will be the year where we become the most popular CPA Review program in the world. We have great plans that we will be rolling out during the next month. Stay tuned.
(c) – We get gazillions of emails and we always like to share a few with you. Speaking of those big, expensive courses, here is one that I got yesterday.
From EC: “I have to share some great news about your website. I just got my score from the BEC exam that I took on October 15. After four times of miserably failing the BEC section and after spending hundreds of dollars in mediocre CPA review materials such as XXXXXX, XXXXX XXXXXXXX, XXXX, and XXXXXX, I decided to give it a shot using your program. I did not have to spend more money I only needed to invest my time for the fifth time. I felt very comfortable during my last BEC exam but I did not want to have my hopes up since another failure would have devastated my self-esteem. I was pleasantly surprised when I saw I had passed BEC with 79. I was able to raise seven points with your program. The best I had done in the past was a 72, twice. Thank you very much for your commitment to help people like me who almost lost hope on passing BEC. I am now studying to sit for Audit on November 30, 2010, again since my credit expired last June due to the constant failure of not
passing BEC. I am now religiously studying the questions of your program. I will keep you posted as soon as I get my results. If I pass it, I will finally become a CPA and my name will be added to the CPA registry of the AICPA.” (You folks at home get points if you can figure out the four programs marked with the XXXs.)
Notes like this are what keep us working on CPAreviewforFREE.com
(1) – I love the note from EC above because the exam kept pushing him back but he wouldn’t let it get the best of him. He kept working and pushing forward and, at the end of the day, he got 79 points and he passed his nemesis – BEC.
Last Friday, in the Wall Street Journal, there was a quote from the movie Rocky Balboa:
“It ain’t how hard you hit, it’s how hard you can get hit and keep moving forward.”
Whether it is life or the CPA Exam, there are all kinds of barriers in our paths. All sorts of things that want to prevent us from succeeding. Yeah, it is easy to hit a barrier and quit and go home. The people I’m most proud of are those folks like EC who come close but fail several times and are willing to keep moving forward and doing it again until they make it happen!
If you are very smart and a great student and pass the CPA Exam pretty easily, that’s great for you. I really am pleased. But the exam didn’t truly put you to a serious test. The people I cheer for the most are those that work like dogs just to be average students. And, no matter how hard the CPA Exam pushes those folks back, they just keep moving forward and eventually they pass. And, that is truly wonderful. The CPA Exam has been a real test of their character and that character has proven to be rock solid. Now that is an accomplishment worth cheering about.
I liked the quote from the Rocky Balboa movie so well that I went to Google and found the whole quote. This quote is for all those people where the CPA Exam is truly a serious test of your intestinal fortitude. Don’t give up – don’t ever give up.
Rocky: “Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and I don't care how tough you are it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done. Now, if you know what you're worth, now go out and get what you're worth. But you gotta be willing to take the hits, and not pointing fingers saying you ain't where you wanna be because of him, or her, or anybody. Cowards do that and that ain't you. You're better than that!”
If that doesn’t get you up off the couch to go do some problems on CPAreviewforFREE, you better have someone check your pulse.
(2) – Speaking of dynamic characters, we went on a short two-day vacation about ten days. We were staying in a bed and breakfast and we were staying in the “Theodore Roosevelt Room.” If you have ever read much about President Roosevelt, he may well have been one of the most dynamic figures in history. He once was scheduled to give an important speech in a hotel. He was shot in the chest right before he was to give the speech. He refused to go to the hospital until after he gave the speech. The speech lasted for nearly two hours. He almost passed out several times during the speech but he refused to let the gunman get the best of him.
In this Theodore Roosevelt Room, they had the following quote from TR framed at the top of the stairs:
“We shall make mistakes, and if we let these mistakes frighten us from our work, we shall show ourselves weaklings.”
Yes, you are going to miss questions.
Yes, you are going to get discouraged.
Yes, it is possible that you might fail some of the CPA Exam.
Yes, you simply cannot be perfect.
But you cannot let those mistakes frighten you into giving up or not putting in your best effort.
It is easy to live your life in fear but no one ever gets better by being afraid of mistakes.
What is holding you back from doing your very best on the CPA Exam? Is it simply that you are frightened by the possibility of not being perfect? Are you afraid that you will work hard and fail? We all fail at times. We all come up short at times.
And, yes, many people really do give up and quit. Don’t let that be you. When you win, you need to be gracious. When you lose, you need to be pugnacious.
I often tell the story about Vince Lombardi (the legendary coach) in his first pro football playoff game way back when he first started coaching. Apparently, his team lost the game right at the very end when they couldn’t score a touchdown that they really should have scored. As he walked off the field, he told someone something like “my teams will never lose another playoff game.” And, they didn’t.
Now, they did lose some regular season games but when things counted most at the end of the season, a Vince Lombardi team never lost another playoff game.
Think about it, what if that mistake in the first playoff game had made Coach Lombardi tentative or afraid of losing. No one would still remember Lombardi these days. However, hee wasn’t a person to be frightened by failure and, consequently, he is remembered as one of the greatest coaches of all time.
We make mistakes – how we do in life, in large part, depends on how we react to those mistakes. In my book, you need to be pugnacious.
(3) – As always, please know that you are allowed to unsubscribe from these lessons. We have a good number of people all the time who pass the exam and do unsubscribe. Super. To unsubscribe, go to the bottom of this email lesson and click on the unsubscribe button.
Want to help – just forward this email lesson to someone who is thinking about taking the CPA Exam. That would be such a help to us. Simply say “this guy helps to run www.CPAreviewforFREE.com and this email lessons will help you know how to pass. And, they are free.” It’s hard to beat free.
(4) – In just the time it took me to write this email lesson, I got the following two emails:
From MA: “I just wanted to make sure that you know that your free questions and paid content WORK!!! The only thing I supplemented this website with for FAR was an audiobook that I downloaded to listen to in the car and at work, and found out this morning that I got a 77 on FAR (Massachusetts). Thank you Joe!!!”
From JH: “You and your team are wonderful! I am happy to announce that I have officially passed all 4 parts, but I wasn't able to do it until I found your site. Thanks a million for all you are doing for us! I have passed your information along to those I know who are taking the exam. Keep up the good work and thanks again!”
(5) – Let’s do a bit of practice. Let’s add some points. Let’s learn some material. Let’s keep moving forward.
FAR
Near the end of the Year One, a company buys two derivatives that will come due in the next year. One of these derivatives was properly designed as a cash flow hedge. The other derivative was properly designed as a fair value hedge. By the end of the year, the fair value of both of these derivatives had increased. Where will these gains be reported?
A. In net income for both hedges
B. In accumulated other comprehensive income for both hedges
C. In net income for the fair value hedge and in accumulated other comprehensive income for the cash flow hedge.
D In net income for the cash flow hedge and in accumulated other comprehensive income for the fair value hedge.
Answer is C
The fair value hedge is bought to offset a possible loss from an asset or liability that is recorded at fair value. Since the account being hedged is recorded at fair value, its gain or loss will go into net income. Thus, the offsetting gain or loss on the hedge is also put into net income. A cash flow hedge is bought to ensure that an appropriate amount of cash is received or paid. There is not a reported gain or loss to be eliminated. Therefore, any gain or loss on a cash flow hedge is temporarily put into accumulated other comprehensive income (in stockholders’ equity) until it is terminated. In this case, the gain will go from accumulated other comprehensive income to net income in Year Two when the derivative comes due.
BEC
A company needs to obtain $2 million to build a new warehouse and is trying to decide whether to issue debt or issue equity to get the money. Which of the following statements is true about that decision?
A – Financial leverage is an advantage of issuing equity.
B – The tax effects are a disadvantage of debt.
C – The potential impact on future borrowing is a disadvantage of debt.
D – The possibility of bankruptcy is a disadvantage of equity.
Answer is C
If a company borrows money, it will cause a higher debt to equity ratio. As a company’s debt to equity ratio goes up, the ability to borrow money becomes more difficult and interest rates tend to escalate. Financial leverage (using other people’s money to make money for the owners) is a primary advantage of debt. Interest on debt is tax deductible while dividends paid on equity is not so that the advantage goes to the debt. Debt (and its periodic interest) must be paid or a company can be pushed into bankruptcy. No such requirement exists in connection with equity.
Auditing & Attestation
An independent auditor is concerned about her responsibility for uncovering illegal acts that have been committed by an audit client. Which of the following statements is not true?
A - A company records false sales in its financial statements in order to obtain a bank loan. Defalcation has occurred.
B - One reason that an auditor might not be expected to discover all client illegal acts is that some of these acts may involve nonfinancial problems.
C - One reason that an auditor might not be expected to discover all client illegal acts is that some of these acts may be well hidden from the auditors.
D – A reporting company is guilty of polluting the local river and will be subjected to a heavy monetary fine if caught. This is an example of an indirect illegal act.
Answer is A
The manipulation of information to make a company look different than it actually is should be referred to as “fraudulent financial reporting.” Defalcation is theft. An auditor is not expected to uncover all illegal acts for several reasons. For example, some problems (such as pollution) simply do not refer directly to financial reporting. In addition, the audit client will often make a concerted effort to hide illegal acts so that the auditor is unaware. Finally, a direct illegal act has already had an impact on the financial statements. An indirect illegal act will only impact the financial statements if the company is ever caught and punished.
Regulation
Mr. and Mrs. Wallace T. Briarwood have asked you to prepare their federal income taxes. They have listed the following charitable contributions. Which of these four may they include in determining their itemized deductions for this year?
A - Services donated to charity having a fair value of $2,000
B - Dues paid to the American Legion of $180
C - Out-of-pocket costs associated with donated services of $300
D - Donated cash to a political party of $500
Answer is C
Donated services to a qualified charitable organization are not tax deductible but related out-of-pocket expenses are. Dues to a fraternal organization such as the American Legion is not deductible and neither are political contributions.
We have a lot of new subscribers for our email lessons this week. If you are interested in the history of CPAreviewforFREE.com, here is a link to a story about us.
thecollegianur.com/2010/11/04/accounting-professor-creates-affordable-cpa-review-website/15405/
And, if you are interesting in watching one of my videos about education (skip the introductions – you guys know who I am already) here is the URL:
www.youtube.com/watch?v=LjwHxVbZq1o
HAPPY THANKSGIVING FROM ALL OF US HERE AT WWW.CPAREVIEWFORFREE.COM -- WE LOVE YOU GUYS!!!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
November 23, 2010
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
125 Weeks of Operation and 19,287,496 Page Views (without a penny spent on marketing)
Lesson 84
From: Joe
(a) – Have a great and joyous and wonderful Thanksgiving day on Thursday. Please do take time out of your busy and hectic day to reflect on all those many things that you have in your heart to be thankful for. I’m convinced that life goes better if your focus on what you are grateful for rather than stew on those things that tick you off. Too many people I know spend too much valuable time stewing.
(b) – And, here is one thing that we have to be thankful for – last week was our busiest week in our history!!! And, as always, it was done without advertising. Just think, if we had any money and could advertise like the big courses, we could really grow.
Just to put our growth into perspective, we measure a lot of things around here in page views. A page view is basically one person reading one question and one answer. So, it is a unit of measure that we can all understand. In our first week of existence, we had 1,920 page views and I was ecstatic. I thought that was unbelievable.
Last week, we had an average of 1,920 page views every 45 minutes round the clock, 24 hours per day for all 7 days of the week. That is close to a one-half million page views in that one week. (Or, as another way to look at it, we averaged 42.85 page views PER MINUTE for an entire week).
The average person stayed on our site for nearly 30 minutes and did 31.27 page views. That was THE AVERAGE PERSON.
So, don’t let the big courses kid you. We believe that 2011 will be the year where we become the most popular CPA Review program in the world. We have great plans that we will be rolling out during the next month. Stay tuned.
(c) – We get gazillions of emails and we always like to share a few with you. Speaking of those big, expensive courses, here is one that I got yesterday.
From EC: “I have to share some great news about your website. I just got my score from the BEC exam that I took on October 15. After four times of miserably failing the BEC section and after spending hundreds of dollars in mediocre CPA review materials such as XXXXXX, XXXXX XXXXXXXX, XXXX, and XXXXXX, I decided to give it a shot using your program. I did not have to spend more money I only needed to invest my time for the fifth time. I felt very comfortable during my last BEC exam but I did not want to have my hopes up since another failure would have devastated my self-esteem. I was pleasantly surprised when I saw I had passed BEC with 79. I was able to raise seven points with your program. The best I had done in the past was a 72, twice. Thank you very much for your commitment to help people like me who almost lost hope on passing BEC. I am now studying to sit for Audit on November 30, 2010, again since my credit expired last June due to the constant failure of not
passing BEC. I am now religiously studying the questions of your program. I will keep you posted as soon as I get my results. If I pass it, I will finally become a CPA and my name will be added to the CPA registry of the AICPA.” (You folks at home get points if you can figure out the four programs marked with the XXXs.)
Notes like this are what keep us working on CPAreviewforFREE.com
(1) – I love the note from EC above because the exam kept pushing him back but he wouldn’t let it get the best of him. He kept working and pushing forward and, at the end of the day, he got 79 points and he passed his nemesis – BEC.
Last Friday, in the Wall Street Journal, there was a quote from the movie Rocky Balboa:
“It ain’t how hard you hit, it’s how hard you can get hit and keep moving forward.”
Whether it is life or the CPA Exam, there are all kinds of barriers in our paths. All sorts of things that want to prevent us from succeeding. Yeah, it is easy to hit a barrier and quit and go home. The people I’m most proud of are those folks like EC who come close but fail several times and are willing to keep moving forward and doing it again until they make it happen!
If you are very smart and a great student and pass the CPA Exam pretty easily, that’s great for you. I really am pleased. But the exam didn’t truly put you to a serious test. The people I cheer for the most are those that work like dogs just to be average students. And, no matter how hard the CPA Exam pushes those folks back, they just keep moving forward and eventually they pass. And, that is truly wonderful. The CPA Exam has been a real test of their character and that character has proven to be rock solid. Now that is an accomplishment worth cheering about.
I liked the quote from the Rocky Balboa movie so well that I went to Google and found the whole quote. This quote is for all those people where the CPA Exam is truly a serious test of your intestinal fortitude. Don’t give up – don’t ever give up.
Rocky: “Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and I don't care how tough you are it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done. Now, if you know what you're worth, now go out and get what you're worth. But you gotta be willing to take the hits, and not pointing fingers saying you ain't where you wanna be because of him, or her, or anybody. Cowards do that and that ain't you. You're better than that!”
If that doesn’t get you up off the couch to go do some problems on CPAreviewforFREE, you better have someone check your pulse.
(2) – Speaking of dynamic characters, we went on a short two-day vacation about ten days. We were staying in a bed and breakfast and we were staying in the “Theodore Roosevelt Room.” If you have ever read much about President Roosevelt, he may well have been one of the most dynamic figures in history. He once was scheduled to give an important speech in a hotel. He was shot in the chest right before he was to give the speech. He refused to go to the hospital until after he gave the speech. The speech lasted for nearly two hours. He almost passed out several times during the speech but he refused to let the gunman get the best of him.
In this Theodore Roosevelt Room, they had the following quote from TR framed at the top of the stairs:
“We shall make mistakes, and if we let these mistakes frighten us from our work, we shall show ourselves weaklings.”
Yes, you are going to miss questions.
Yes, you are going to get discouraged.
Yes, it is possible that you might fail some of the CPA Exam.
Yes, you simply cannot be perfect.
But you cannot let those mistakes frighten you into giving up or not putting in your best effort.
It is easy to live your life in fear but no one ever gets better by being afraid of mistakes.
What is holding you back from doing your very best on the CPA Exam? Is it simply that you are frightened by the possibility of not being perfect? Are you afraid that you will work hard and fail? We all fail at times. We all come up short at times.
And, yes, many people really do give up and quit. Don’t let that be you. When you win, you need to be gracious. When you lose, you need to be pugnacious.
I often tell the story about Vince Lombardi (the legendary coach) in his first pro football playoff game way back when he first started coaching. Apparently, his team lost the game right at the very end when they couldn’t score a touchdown that they really should have scored. As he walked off the field, he told someone something like “my teams will never lose another playoff game.” And, they didn’t.
Now, they did lose some regular season games but when things counted most at the end of the season, a Vince Lombardi team never lost another playoff game.
Think about it, what if that mistake in the first playoff game had made Coach Lombardi tentative or afraid of losing. No one would still remember Lombardi these days. However, hee wasn’t a person to be frightened by failure and, consequently, he is remembered as one of the greatest coaches of all time.
We make mistakes – how we do in life, in large part, depends on how we react to those mistakes. In my book, you need to be pugnacious.
(3) – As always, please know that you are allowed to unsubscribe from these lessons. We have a good number of people all the time who pass the exam and do unsubscribe. Super. To unsubscribe, go to the bottom of this email lesson and click on the unsubscribe button.
Want to help – just forward this email lesson to someone who is thinking about taking the CPA Exam. That would be such a help to us. Simply say “this guy helps to run www.CPAreviewforFREE.com and this email lessons will help you know how to pass. And, they are free.” It’s hard to beat free.
(4) – In just the time it took me to write this email lesson, I got the following two emails:
From MA: “I just wanted to make sure that you know that your free questions and paid content WORK!!! The only thing I supplemented this website with for FAR was an audiobook that I downloaded to listen to in the car and at work, and found out this morning that I got a 77 on FAR (Massachusetts). Thank you Joe!!!”
From JH: “You and your team are wonderful! I am happy to announce that I have officially passed all 4 parts, but I wasn't able to do it until I found your site. Thanks a million for all you are doing for us! I have passed your information along to those I know who are taking the exam. Keep up the good work and thanks again!”
(5) – Let’s do a bit of practice. Let’s add some points. Let’s learn some material. Let’s keep moving forward.
FAR
Near the end of the Year One, a company buys two derivatives that will come due in the next year. One of these derivatives was properly designed as a cash flow hedge. The other derivative was properly designed as a fair value hedge. By the end of the year, the fair value of both of these derivatives had increased. Where will these gains be reported?
A. In net income for both hedges
B. In accumulated other comprehensive income for both hedges
C. In net income for the fair value hedge and in accumulated other comprehensive income for the cash flow hedge.
D In net income for the cash flow hedge and in accumulated other comprehensive income for the fair value hedge.
Answer is C
The fair value hedge is bought to offset a possible loss from an asset or liability that is recorded at fair value. Since the account being hedged is recorded at fair value, its gain or loss will go into net income. Thus, the offsetting gain or loss on the hedge is also put into net income. A cash flow hedge is bought to ensure that an appropriate amount of cash is received or paid. There is not a reported gain or loss to be eliminated. Therefore, any gain or loss on a cash flow hedge is temporarily put into accumulated other comprehensive income (in stockholders’ equity) until it is terminated. In this case, the gain will go from accumulated other comprehensive income to net income in Year Two when the derivative comes due.
BEC
A company needs to obtain $2 million to build a new warehouse and is trying to decide whether to issue debt or issue equity to get the money. Which of the following statements is true about that decision?
A – Financial leverage is an advantage of issuing equity.
B – The tax effects are a disadvantage of debt.
C – The potential impact on future borrowing is a disadvantage of debt.
D – The possibility of bankruptcy is a disadvantage of equity.
Answer is C
If a company borrows money, it will cause a higher debt to equity ratio. As a company’s debt to equity ratio goes up, the ability to borrow money becomes more difficult and interest rates tend to escalate. Financial leverage (using other people’s money to make money for the owners) is a primary advantage of debt. Interest on debt is tax deductible while dividends paid on equity is not so that the advantage goes to the debt. Debt (and its periodic interest) must be paid or a company can be pushed into bankruptcy. No such requirement exists in connection with equity.
Auditing & Attestation
An independent auditor is concerned about her responsibility for uncovering illegal acts that have been committed by an audit client. Which of the following statements is not true?
A - A company records false sales in its financial statements in order to obtain a bank loan. Defalcation has occurred.
B - One reason that an auditor might not be expected to discover all client illegal acts is that some of these acts may involve nonfinancial problems.
C - One reason that an auditor might not be expected to discover all client illegal acts is that some of these acts may be well hidden from the auditors.
D – A reporting company is guilty of polluting the local river and will be subjected to a heavy monetary fine if caught. This is an example of an indirect illegal act.
Answer is A
The manipulation of information to make a company look different than it actually is should be referred to as “fraudulent financial reporting.” Defalcation is theft. An auditor is not expected to uncover all illegal acts for several reasons. For example, some problems (such as pollution) simply do not refer directly to financial reporting. In addition, the audit client will often make a concerted effort to hide illegal acts so that the auditor is unaware. Finally, a direct illegal act has already had an impact on the financial statements. An indirect illegal act will only impact the financial statements if the company is ever caught and punished.
Regulation
Mr. and Mrs. Wallace T. Briarwood have asked you to prepare their federal income taxes. They have listed the following charitable contributions. Which of these four may they include in determining their itemized deductions for this year?
A - Services donated to charity having a fair value of $2,000
B - Dues paid to the American Legion of $180
C - Out-of-pocket costs associated with donated services of $300
D - Donated cash to a political party of $500
Answer is C
Donated services to a qualified charitable organization are not tax deductible but related out-of-pocket expenses are. Dues to a fraternal organization such as the American Legion is not deductible and neither are political contributions.
We have a lot of new subscribers for our email lessons this week. If you are interested in the history of CPAreviewforFREE.com, here is a link to a story about us.
thecollegianur.com/2010/11/04/accounting-professor-creates-affordable-cpa-review-website/15405/
And, if you are interesting in watching one of my videos about education (skip the introductions – you guys know who I am already) here is the URL:
www.youtube.com/watch?v=LjwHxVbZq1o
HAPPY THANKSGIVING FROM ALL OF US HERE AT WWW.CPAREVIEWFORFREE.COM -- WE LOVE YOU GUYS!!!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
Tuesday, November 9, 2010
Hours Equal Points
November 9, 2010
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
123 Weeks of Operation and 18,488,959 Page Views (without a penny spent on marketing)
Lesson 83
From: Joe
(a) – As we mentioned yesterday on our Facebook page, the school newspaper did a story on www.CPAreviewforFREE.com. If you would like to learn our history and why we first got started in this great adventure, you can read the entire story at the following URL:
www.thecollegianur.com/2010/11/04/accounting-professor-creates-affordable-cpa-review-website/15405/
(b) – It is hard to believe that we have been offering the best possible questions and answers now for 123 weeks and, last week, was our second busiest week in history. We continue to grow as more and more people come to realize that they can pass the CPA Exam without spending thousands of dollars for mediocre materials.
(c) – I have a copy of all of our FAR questions and answers sitting beside of me right here on my desk. I was just reading through several pages and, once again, as I always note, these questions and answers are really well written. Each question and answer is potentially another point on your journey to get 75 and pass.
Remember, you can buy a download of all our questions and answers if that makes your study process easier and more efficient.
And, for FAR and Regulation (and soon for BEC and then Auditing), we have a subscription service that provides hundreds and hundreds of content slides (and, very soon, task-based simulations).
By buying these downloads and/or the subscription service, you add to the materials you can use and you help us pay for this website. And, we do appreciate it.
(1) – When you first get up in the morning, take a 3 by 5 card and write down the number of questions you want to work that day on www.CPAreviewforFREE.com. Pick a number that is challenging but realistic. Put the card in your pocket. Then, each time you work a question during the day, mark off the old number and write in the remaining number of questions to be done. For example, if you hope to do 30 questions today, write down 30. After you do the first question and read the answer, mark out the 30 and write in 29.
This does several things that help you.
--It gives you a goal right now that you can do something about. Making 75 on the CPA exam is a future goal—something you can worry about tomorrow if you wish. You want to avoid procrastination at all costs.
--It provides a sense of accomplishment. Watching those numbers drop off during each day is a clear cut indication that you are making progress. In fact, at the end of every day, tape the card to the wall above your desk. There is something about seeing all those cards that will just feel good. When you feel good about studying, it is easy to study more.
--It helps you focus on today. As you feel that card in your pocket, it will remind you that you have work to do today. One of the hardest things for any person trying to accomplish something is staying in the current moment. Today is the day you’ve got to make good things happen.
Try it – I think you’ll find that you will work more questions and feel better about the whole process.
(2) – A person that I met for about 45 minutes a few weeks ago on our campus sent me a book. I didn’t do anything to deserve a book but I was pleased to get it anyway. Never turn down a good book. The book is titled “Life Is Not A Game of Perfect.”
One of the early stories in this book is about a person who gets a scholarship to play football at a major college. Although he was a great player in high school, when he gets to college, he realizes that he is not the best—in fact, he is far from the best.
I often see this in the students in my college classes. They were great in high school without much effort but in college they are just average. How will that affect them? It is always interesting to see how a person reacts to challenges that they have not faced before. What caught my attention in this book was the reaction of the player on the football team because it is not a reaction that you often see. “I decided,” (he) remembers, “that I might get beat out, but no one would outwork me.”
“No one would outwork me” – how often can you say that, especially when you get into a real challenge? When it comes to the CPA Exam, how many people are outworking you? Often, we have exactly the opposite attitude, “if I can’t do well, why should I try so hard?”
Many of you are preparing for the CPA Exam right now. It is often a struggle. Few people ever face anything like the CPA Exam until they are actually preparing for it. It is often discouraging. Be honest—what is your attitude? How are you responding to this challenge? More importantly, are you letting other people outwork you?
“No one would outwork me” or “If I can’t do well, what should I try so hard?”
How you answer that question tells a lot about who you really are. Your answer depends a lot on how you think about the hard work of studying. If you think that studying is painful and something to be avoided, it is very hard to outwork anyone.
On the other hand, if you think that studying is rewarding because it makes your mind better, then outworking other people is not as hard as it might seem at first.
Everything starts with your attitude. All success comes back eventually to your attitude.
In the case of the CPA Exam, it all comes back to how you look at study time. If it is punishment. If it is tiring. If it is excruciating. Then, you have a real mountain to climb. Putting in the time will be quite difficult.
On the other hand, if you can adopt a different attitude, you’ll find that studying is not nearly as hard. If you view studying as getting a better brain. If you view studying as a game where you see whether you get more wins (correct answers) than losses (incorrect answers). If you view studying as an interesting mental exercise. Then, the ability to put in the necessary hours is just going to be so much easier.
When you compare yourself to all of the people around the world today who are studying for the CPA Exam, where is your attitude?
Is it with the group who says: “No one would outwork me”
Or, are you more aligned with that large body of people who sigh pathetically and doubt themselves by asking: “If I can’t do well, what should I try so hard?”
(3) – We are beginning to gear up for the 2011 CPA Exam. As always, we will continue to send out these email lessons every 1-2 weeks. We are delighted to have you with us. We hope we add points and provide encouragement. However, you do have the right to unsubscribe at any time that you wish. If you should want to unsubscribe, scroll to the bottom of this email lesson (or any email lesson) and click on the appropriate link.
(4) – I have the great good fortune on Thursday of leading a 3 1/2 hour teaching workshop for 150 brand new teachers in the Virginia Community College System. One of the things I hope to introduce them to is “Joe’s Theorem of Success.” In teaching, as well as in most other things in life such as the CPA Exam, I think this theorem is true:
If it takes X hours to be average at a task
Then it will take 2X hours to be good at that task
And 3X hours to be truly truly excellent
The question is not how to achieve excellence. We are all more than capable of achieving excellence. I am sure of that. The question is whether we want excellence badly enough to put in a sufficient amount of time.
Everyone on this email list can pass the CPA Exam. I’ve worked in this business for 30 years and I’ve never met anyone who couldn’t pass. The only question is whether you want to pass badly enough to put in sufficient time.
As I have said dozens of times in these email lessons - HOURS EQUAL POINTS
I can give you all kinds of helpful advice. In the end, the best thing I can tell you (quite honestly) is that the more time you spend, the better your grade will be.
Don’t procrastinate
Don’t put it off
Put in those hours and learn those questions and answers. In the long run, that is probably the best advice that anyone can give you.
(5) – Speaking of putting in the time, let’s do some practice. If you get these questions correct, then move on. If you miss them, turn that lack of knowledge into real knowledge because that is the only way you really add points on the CPA Exam.
FAR – I opened up my intermediate accounting textbook at random and wrote this question based on what I found on the first page I read.
Pepitone Corporation buys equipment for $900,000 on January 1, Year One. Depreciation for book purposes is $300,000 per year. However, for tax purposes, depreciation was $500,000 in Year One and $200,000 in Year Two and $200,000 in Year Three. The enacted tax rate is 30 percent for Year One and Year Two but 32 percent for Year Three. Which of the following is found on the company’s balance sheet at the end of Year One?
A. Deferred tax asset-current of $30,000 and deferred tax asset-noncurrent of $32,000
B. Deferred tax asset-noncurrent of $62,000
C. Deferred tax liability-current of $30,000 and deferred tax liability-noncurrent of $32,000
D. Deferred tax liability-noncurrent of $62,000
Answer is D
For tax purposes, this company will have $100,000 less depreciation expense in Year Two so taxable income will be $100,000 higher. At a 30 percent tax rate, that is a deferred tax liability of $30,000. For tax purposes, this company also will have $100,000 less depreciation expense in Year Three so taxable income will be $100,000 higher. At a 32 percent tax rate, that is a deferred tax liability of $32,000. The total liability is $62,000. Where that amount is shown on a balance sheet depends on what account caused the difference. Here, it was caused by the equipment that was depreciated. Equipment is a noncurrent account. Hence, all related deferred income tax liabilities or assets will also be reported as noncurrent.
Auditing and Attestation
The Wishton Corporation’s financial statements are audited by the CPA firm of Mansen and Dallas. Wishton has a subsidiary located 1,800 miles from the company’s headquarters. The financial statements of this subsidiary are consolidated with the statements of the parent for external reporting purposes. The subsidiary’s assets and revenues make up approximately 16 percent of the total for the consolidated entity. The subsidiary’s financial statements are audited by a local CPA firm and that audit report has now been forwarded to Mansen and Dallas. In providing the audit report for the consolidated financial statements, Mansen and Dallas has decided to make reference to the work done by the other CPA firm. Which of the following statements is true?
A. The audit report should make reference to the other auditors in the introductory paragraph only.
B. The audit report should make reference to the other auditors in the scope paragraph only.
C. The audit report should make reference to the other auditors in the introductory, scope, and opinion paragraphs only.
D. The audit report should make reference to the other auditors in a separate explanatory paragraph only.
Answer is C
When reference is made to other auditors, the introductory paragraph indicates that the principal auditors did not audit a portion of the consolidated statements and indicates the size of that portion by specifying the amount of assets and revenues audited by the other firm. The scope paragraph is changed to indicate that the principal auditor’s audit and the report of the other auditors provided a reasonable basis for opinion. The opinion paragraph indicates that the opinion being rendered is based on the principal auditor’s audit and the report of the other auditors.
Regulation
Matthews is a 40 percent partner in the WestBrook Partnership. Matthews has a tax basis (capital share) in the partnership of $45,000. Matthews has not loaned the partnership any money but is responsible for her share of the debts. The partnership has $100,000 in assets and $60,000 in liabilities. This year, the partnership reported an ordinary business loss of $120,000. What amount of that loss can Matthews deduct on her individual income tax return this year?
A. $40,000
B. $44,000
C. $45,000
D. $48,000
Answer is D
A partner can deduct the ownership percentage of any partnership ordinary business loss but only up to the person’s “at-risk balance.” The “at-risk balance” is the tax basis in the partnership ($45,000) plus any loans to the partnership (0) plus the owner’s share of the debts of the business (40 percent of $60,000 or $24,000). Here, the “at-risk balance” is a total of $69,000. That is more than this partner’s percentage of the loss. The partner can deduct the entire 40 percent of the $120,000 ordinary business loss (or $48,000).
BEC
The Lynch Company started the current year with 10,000 units in process that were 60 percent complete as to direct labor costs. As to direct labor, these units had a cost at that time of $45,000. During the year, another 50,000 units were started and direct labor cost for the period was $320,000. At the end of the year, the company had 4,000 units still in process which were 20 percent complete as to direct labor. If the company uses a FIFO system, what is the cost of a unit this year as to direct labor costs?
A. $5.63
B. $6.30
C. $6.40
D. $6.43
Answer is B
In a FIFO system, the cost per unit is the cost expended this period divided by the number of equivalent units created during the period. The current cost for direct labor is $320,000. The number of equivalent units starts with the number of units completed. Here, since no units are mentioned as being lost, that number must have been 56,000 (10,000 beginning plus 50,000 started less 4,000 ending working in process). Total direct labor done is 56,000 completed units plus 800 units still in ending working in process (4,000 units that are 20 percent complete) or a total of 56,800 units of work. To get the work done just in this current period (which is used by FIFO), the amount of work in beginning work in process is subtracted. That is 10,000 units times 60 percent completion or 6,000 units done last year. The amount of work done this period is 56,800 total minus 6,000 done last year to arrive at 50,800 units of work done this period. The cost per unit using
FIFO is $320,000/50,800 or $6.30.
GET THAT EXAM OUT OF YOUR WAY!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
123 Weeks of Operation and 18,488,959 Page Views (without a penny spent on marketing)
Lesson 83
From: Joe
(a) – As we mentioned yesterday on our Facebook page, the school newspaper did a story on www.CPAreviewforFREE.com. If you would like to learn our history and why we first got started in this great adventure, you can read the entire story at the following URL:
www.thecollegianur.com/2010/11/04/accounting-professor-creates-affordable-cpa-review-website/15405/
(b) – It is hard to believe that we have been offering the best possible questions and answers now for 123 weeks and, last week, was our second busiest week in history. We continue to grow as more and more people come to realize that they can pass the CPA Exam without spending thousands of dollars for mediocre materials.
(c) – I have a copy of all of our FAR questions and answers sitting beside of me right here on my desk. I was just reading through several pages and, once again, as I always note, these questions and answers are really well written. Each question and answer is potentially another point on your journey to get 75 and pass.
Remember, you can buy a download of all our questions and answers if that makes your study process easier and more efficient.
And, for FAR and Regulation (and soon for BEC and then Auditing), we have a subscription service that provides hundreds and hundreds of content slides (and, very soon, task-based simulations).
By buying these downloads and/or the subscription service, you add to the materials you can use and you help us pay for this website. And, we do appreciate it.
(1) – When you first get up in the morning, take a 3 by 5 card and write down the number of questions you want to work that day on www.CPAreviewforFREE.com. Pick a number that is challenging but realistic. Put the card in your pocket. Then, each time you work a question during the day, mark off the old number and write in the remaining number of questions to be done. For example, if you hope to do 30 questions today, write down 30. After you do the first question and read the answer, mark out the 30 and write in 29.
This does several things that help you.
--It gives you a goal right now that you can do something about. Making 75 on the CPA exam is a future goal—something you can worry about tomorrow if you wish. You want to avoid procrastination at all costs.
--It provides a sense of accomplishment. Watching those numbers drop off during each day is a clear cut indication that you are making progress. In fact, at the end of every day, tape the card to the wall above your desk. There is something about seeing all those cards that will just feel good. When you feel good about studying, it is easy to study more.
--It helps you focus on today. As you feel that card in your pocket, it will remind you that you have work to do today. One of the hardest things for any person trying to accomplish something is staying in the current moment. Today is the day you’ve got to make good things happen.
Try it – I think you’ll find that you will work more questions and feel better about the whole process.
(2) – A person that I met for about 45 minutes a few weeks ago on our campus sent me a book. I didn’t do anything to deserve a book but I was pleased to get it anyway. Never turn down a good book. The book is titled “Life Is Not A Game of Perfect.”
One of the early stories in this book is about a person who gets a scholarship to play football at a major college. Although he was a great player in high school, when he gets to college, he realizes that he is not the best—in fact, he is far from the best.
I often see this in the students in my college classes. They were great in high school without much effort but in college they are just average. How will that affect them? It is always interesting to see how a person reacts to challenges that they have not faced before. What caught my attention in this book was the reaction of the player on the football team because it is not a reaction that you often see. “I decided,” (he) remembers, “that I might get beat out, but no one would outwork me.”
“No one would outwork me” – how often can you say that, especially when you get into a real challenge? When it comes to the CPA Exam, how many people are outworking you? Often, we have exactly the opposite attitude, “if I can’t do well, why should I try so hard?”
Many of you are preparing for the CPA Exam right now. It is often a struggle. Few people ever face anything like the CPA Exam until they are actually preparing for it. It is often discouraging. Be honest—what is your attitude? How are you responding to this challenge? More importantly, are you letting other people outwork you?
“No one would outwork me” or “If I can’t do well, what should I try so hard?”
How you answer that question tells a lot about who you really are. Your answer depends a lot on how you think about the hard work of studying. If you think that studying is painful and something to be avoided, it is very hard to outwork anyone.
On the other hand, if you think that studying is rewarding because it makes your mind better, then outworking other people is not as hard as it might seem at first.
Everything starts with your attitude. All success comes back eventually to your attitude.
In the case of the CPA Exam, it all comes back to how you look at study time. If it is punishment. If it is tiring. If it is excruciating. Then, you have a real mountain to climb. Putting in the time will be quite difficult.
On the other hand, if you can adopt a different attitude, you’ll find that studying is not nearly as hard. If you view studying as getting a better brain. If you view studying as a game where you see whether you get more wins (correct answers) than losses (incorrect answers). If you view studying as an interesting mental exercise. Then, the ability to put in the necessary hours is just going to be so much easier.
When you compare yourself to all of the people around the world today who are studying for the CPA Exam, where is your attitude?
Is it with the group who says: “No one would outwork me”
Or, are you more aligned with that large body of people who sigh pathetically and doubt themselves by asking: “If I can’t do well, what should I try so hard?”
(3) – We are beginning to gear up for the 2011 CPA Exam. As always, we will continue to send out these email lessons every 1-2 weeks. We are delighted to have you with us. We hope we add points and provide encouragement. However, you do have the right to unsubscribe at any time that you wish. If you should want to unsubscribe, scroll to the bottom of this email lesson (or any email lesson) and click on the appropriate link.
(4) – I have the great good fortune on Thursday of leading a 3 1/2 hour teaching workshop for 150 brand new teachers in the Virginia Community College System. One of the things I hope to introduce them to is “Joe’s Theorem of Success.” In teaching, as well as in most other things in life such as the CPA Exam, I think this theorem is true:
If it takes X hours to be average at a task
Then it will take 2X hours to be good at that task
And 3X hours to be truly truly excellent
The question is not how to achieve excellence. We are all more than capable of achieving excellence. I am sure of that. The question is whether we want excellence badly enough to put in a sufficient amount of time.
Everyone on this email list can pass the CPA Exam. I’ve worked in this business for 30 years and I’ve never met anyone who couldn’t pass. The only question is whether you want to pass badly enough to put in sufficient time.
As I have said dozens of times in these email lessons - HOURS EQUAL POINTS
I can give you all kinds of helpful advice. In the end, the best thing I can tell you (quite honestly) is that the more time you spend, the better your grade will be.
Don’t procrastinate
Don’t put it off
Put in those hours and learn those questions and answers. In the long run, that is probably the best advice that anyone can give you.
(5) – Speaking of putting in the time, let’s do some practice. If you get these questions correct, then move on. If you miss them, turn that lack of knowledge into real knowledge because that is the only way you really add points on the CPA Exam.
FAR – I opened up my intermediate accounting textbook at random and wrote this question based on what I found on the first page I read.
Pepitone Corporation buys equipment for $900,000 on January 1, Year One. Depreciation for book purposes is $300,000 per year. However, for tax purposes, depreciation was $500,000 in Year One and $200,000 in Year Two and $200,000 in Year Three. The enacted tax rate is 30 percent for Year One and Year Two but 32 percent for Year Three. Which of the following is found on the company’s balance sheet at the end of Year One?
A. Deferred tax asset-current of $30,000 and deferred tax asset-noncurrent of $32,000
B. Deferred tax asset-noncurrent of $62,000
C. Deferred tax liability-current of $30,000 and deferred tax liability-noncurrent of $32,000
D. Deferred tax liability-noncurrent of $62,000
Answer is D
For tax purposes, this company will have $100,000 less depreciation expense in Year Two so taxable income will be $100,000 higher. At a 30 percent tax rate, that is a deferred tax liability of $30,000. For tax purposes, this company also will have $100,000 less depreciation expense in Year Three so taxable income will be $100,000 higher. At a 32 percent tax rate, that is a deferred tax liability of $32,000. The total liability is $62,000. Where that amount is shown on a balance sheet depends on what account caused the difference. Here, it was caused by the equipment that was depreciated. Equipment is a noncurrent account. Hence, all related deferred income tax liabilities or assets will also be reported as noncurrent.
Auditing and Attestation
The Wishton Corporation’s financial statements are audited by the CPA firm of Mansen and Dallas. Wishton has a subsidiary located 1,800 miles from the company’s headquarters. The financial statements of this subsidiary are consolidated with the statements of the parent for external reporting purposes. The subsidiary’s assets and revenues make up approximately 16 percent of the total for the consolidated entity. The subsidiary’s financial statements are audited by a local CPA firm and that audit report has now been forwarded to Mansen and Dallas. In providing the audit report for the consolidated financial statements, Mansen and Dallas has decided to make reference to the work done by the other CPA firm. Which of the following statements is true?
A. The audit report should make reference to the other auditors in the introductory paragraph only.
B. The audit report should make reference to the other auditors in the scope paragraph only.
C. The audit report should make reference to the other auditors in the introductory, scope, and opinion paragraphs only.
D. The audit report should make reference to the other auditors in a separate explanatory paragraph only.
Answer is C
When reference is made to other auditors, the introductory paragraph indicates that the principal auditors did not audit a portion of the consolidated statements and indicates the size of that portion by specifying the amount of assets and revenues audited by the other firm. The scope paragraph is changed to indicate that the principal auditor’s audit and the report of the other auditors provided a reasonable basis for opinion. The opinion paragraph indicates that the opinion being rendered is based on the principal auditor’s audit and the report of the other auditors.
Regulation
Matthews is a 40 percent partner in the WestBrook Partnership. Matthews has a tax basis (capital share) in the partnership of $45,000. Matthews has not loaned the partnership any money but is responsible for her share of the debts. The partnership has $100,000 in assets and $60,000 in liabilities. This year, the partnership reported an ordinary business loss of $120,000. What amount of that loss can Matthews deduct on her individual income tax return this year?
A. $40,000
B. $44,000
C. $45,000
D. $48,000
Answer is D
A partner can deduct the ownership percentage of any partnership ordinary business loss but only up to the person’s “at-risk balance.” The “at-risk balance” is the tax basis in the partnership ($45,000) plus any loans to the partnership (0) plus the owner’s share of the debts of the business (40 percent of $60,000 or $24,000). Here, the “at-risk balance” is a total of $69,000. That is more than this partner’s percentage of the loss. The partner can deduct the entire 40 percent of the $120,000 ordinary business loss (or $48,000).
BEC
The Lynch Company started the current year with 10,000 units in process that were 60 percent complete as to direct labor costs. As to direct labor, these units had a cost at that time of $45,000. During the year, another 50,000 units were started and direct labor cost for the period was $320,000. At the end of the year, the company had 4,000 units still in process which were 20 percent complete as to direct labor. If the company uses a FIFO system, what is the cost of a unit this year as to direct labor costs?
A. $5.63
B. $6.30
C. $6.40
D. $6.43
Answer is B
In a FIFO system, the cost per unit is the cost expended this period divided by the number of equivalent units created during the period. The current cost for direct labor is $320,000. The number of equivalent units starts with the number of units completed. Here, since no units are mentioned as being lost, that number must have been 56,000 (10,000 beginning plus 50,000 started less 4,000 ending working in process). Total direct labor done is 56,000 completed units plus 800 units still in ending working in process (4,000 units that are 20 percent complete) or a total of 56,800 units of work. To get the work done just in this current period (which is used by FIFO), the amount of work in beginning work in process is subtracted. That is 10,000 units times 60 percent completion or 6,000 units done last year. The amount of work done this period is 56,800 total minus 6,000 done last year to arrive at 50,800 units of work done this period. The cost per unit using
FIFO is $320,000/50,800 or $6.30.
GET THAT EXAM OUT OF YOUR WAY!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
Subscribe to:
Posts (Atom)