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www.CPAreviewforFREE.com
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Lesson 91
From: Joe
(a) – Sitting here on Saturday evening working to help everyone pass the CPA Exam. I wonder if the folks who run those big courses are working right now to help their candidates pass. It is 8:33 p.m., March 26 -- if you are an officer for a big CPA review course and you are working for your candidates TONIGHT, drop me an email at Jhoyle@cpareviewforfree.com and let me know. I’m curious (maybe “skeptical” is a better term) to know which review courses really put in the work for you guys.
(1) – We have a lot of readers who live and work in Japan. We here at www.CPAreviewforFREE.com want to express our deepest sympathies for all that your country has been through in recent days as a result of the recent earthquake. From what I can see on television, the devastation seems unbelievable. Every person in Japan is certainly in our thoughts.
(2) – I’ve received a lot of really nice emails in the last few days from CPA Exam candidates. Wish I could include a copy of every one that I receive but here are a couple.
From LQ: “Just found out I passed REG which means I completed all four parts!! Joe, many thanks to you and your team for such wonderful questions. I used the subscriptions also for practicing simulations. These helped me add a few points to my score for sure. I'm very excited and can't thank CPAreviewforFREE enough!"
From KC: "Thanks to CPA Review for free I passed all four sections my first time around. (Within a six month time frame.) Your site is an amazing resource and motivational tool. I bought one other study book per section for reference (except REG - I used your paid information) and spent under $140 on all my exam materials. I would suggest to anyone to try to pass one section with this site before spending hundreds of dollars on study materials. Thank you!!!!"
From RA: “I would like to thank you for this great website. I used it to prepare my CPA exam and today I got the result for the last part (REG). I have passed all the four parts thanks to the information that I learned from your website. This achievement is very important to me given I graduated more than twenty years ago and lot of the material was completely new for me.”
From CK: “I just got my score for REG - my final part - and I passed! I want to thank you for your help. Your words of wisdom really kept me going. Your words of encouragement kept me going. I have a wife and 7 children at home. I used to sit here at 11:30 PM and study. That's after a day's full of work and helping at home. I locked myself in a room and studied (not at home). I can tell you that I felt miserable. And then your emails arrived. It was like fresh cold water on a hot day. You wrote points like don't give up, keep going, focus on getting more points every day, etc. That gave me the push to continue studying. You made all the difference. It was the difference between sluggishly going thru the materials, and between enthusiastically going forward. I thank you very much. God should repay you for your help.”
From HK: “So, it’s been a really long journey, but I just found out today that I finally passed my last section. FAR no less. FAR was the section I struggled with most and I am just so grateful that I passed. This was also this first implementation of the new 2011 exam. Anyway, the passing of these exams could not have been done without your website, FOR SURE. You have all my gratitude, and my thanks. So Thank you, thank you, thank you... The questions on cpareviewforfree.com gave me the points needed to pass.”
All of these people saved their money and used www.CPAreviewforFREE.com and have achieved success on the CPA Exam. In these difficult times, there is no good reason to throw your money away. Give us a shot and see how you do. Pick a part that you like and use www.CPAreviewforFREE.com and go for it.
(3) – I know we have a lot of college students who use our materials and read these email lessons. In case you are interested (or in case you think one of your teachers would be interested), I do write a blog about teaching in college. I want to encourage better teaching because I think that will lead to better learning—something that is important for our country and our world. In case you are interested, the blog can be found at:
www.joehoyle-teaching.blogspot.com/
My most recent posting provides my thoughts on “The Top Five Mistakes that College Teachers Make.”
(4) – If, by chance, you are ready to unsubscribe from these lessons, please scroll to the end of this email lesson and click on the appropriate link.
(5) - As the spring gets here, more and more accountants begin to think about passing the CPA Exam. How do you manage to do the work that is needed for success? As I have said often in these email lessons over the years, your biggest enemy is procrastination. There just seems to be a thousand reasons in life pushing you to put off studying. It is such a difficult task to break through the wall of procrastination in order to do the necessary work that you need for success.
My wife takes “Good Housekeeping” magazine. I almost never even open the magazine. However, this morning, for no good reason, I picked up the new copy (April 2011) sitting on a table and found a fascinating article by Gretchin Rubin about how to beat our human tendency to procrastinate. I was immediately very interested. I like articles like this. She put forth a number of recommendations that should help you to stop putting off the study you really need to be doing. Here are a couple that she mentioned that were my favorites.
---“Do it first thing in the morning.” If you don’t like to do something (and studying isn’t always the most fun you can have), get it over with as quickly as you can. The longer you put it off during the day, the more likely it is that you will never get around to doing the work. As the day moves along, you get tired and your schedule gets full. Suddenly, it is bedtime and you haven’t studied for one minute. You have lost the entire day. Get up early and get some study time in before anything else happens. Then, no matter what takes place for the rest of the day, you’ll have added points to your score. You’ll never have a lost day. That’s a good motto for success: never lose a day.
---“Become a regular.” If you are constantly looking for time to study, you may never be able to find any. It is always a game of hide and seek with time. Thus, set aside one period of time, (even if it is only 20 minutes) to study every single day. During that time, study every day no matter what else happens. Having a defined time when you always study just helps make that a normal part of your life. When it becomes a normal part of your life, you won’t even consider putting it off.
---“Find ways to make the task more pleasant.” Yeah, studying can be a drag occasionally. In fact, as you study, it will seem more and more painful as time passes. Pretty soon, it can become almost impossible to keep going. Build in a reward mechanism. For example, promise yourself a small piece of chocolate or 4-5 jelly beans after each 15 minutes that you study. That gives you a good reason to study. Then, it is no longer about an exam that you might not be taking for months; you are working for a piece of candy that you’ll get in 15 minutes. Instant reward. Or, play music while you study. The words to songs may distract you but upbeat instrumental music can just make you feel better about the whole study process. When I am at work, I have a whole list of instrumental music that I listen to for energy.
---“Protect yourself from interruption.” If you start and stop studying ever 5 minutes, you’ll never get anything accomplished. Turn off your cell phone. Unplug your computer. Hang a sign on your door “Go away and leave me alone – I’m working to pass the CPA Exam.” If you find yourself praying for an interruption as you study, you are not going to be able to focus on the materials you need to learn. Once you start studying, you want to stay at study. So, think of every possible way that you could be interrupted and, before you start, try to rid yourself of those potential distractions.
--“Take a baby step.” You are never going to pass the CPA Exam in one day. Won’t happen. Success on the CPA Exam is the culmination of a long string of small improvements. So, every time that you sit down to study, remind yourself that you don’t have to hit a homerun. All you have to do is have an efficient study session so that you can add a point or two. Somehow, having a reasonable goal just makes the entire study process easier. It is terribly important that you get away from thinking of the CPA Exam as overwhelmingly difficult or even impossible. Who could possibly want to do a lot of work if they believe the goal cannot be achieved? Your goal today (and every day) is to make a baby step forward as you get closer and closer to passing the CPA Exam.
Okay, there were several more ideas in the article but this gives you some thoughts. You face procrastination every day; you need a plan to get over the wall that it creates to keep you from studying.
(6) – My younger daughter (Lara) hopes to become a pastry chef. So, last Sunday, we drove to Norfolk, Virginia to see “the Cake Boss” who is – I now know – a gentleman named Buddy Valastro who runs a family bakery in New Jersey. More importantly, I suppose, he has become famous on cable television as he tells viewers how to make great cakes and, also, how to deal with this family.
Here is a person who has taken a normal job and used it to become famous. There were 700 people in that room who hung on every word he had to say for nearly four hours.
Personally, I found three things he had to say to be especially interesting.
--First, he told the audience that he was a truly lucky guy but that he had also worked incredibly hard. He talked about getting up at 4 in the morning to go to the bakery. He talked about dropping out of high school to help in the bakery when his father got sick and died. The point that I took away: virtually all success (even on cable television) goes back to hard work. Few people succeed at anything whether it is making cakes or passing the CPA Exam without hard work. If you spend your time looking for shortcuts, you may simply not be cut out for success.
--Second, when he was given the chance to succeed in television, his wife told him that she was sure he would succeed because he was the most determined person in the world. The point that I took away: there are a lot of things in this world that will come between you and your goals. It is easy to let them throw you off the track. If you are going to succeed, you must learn to fight through adversity. If you don’t want success enough to fight through the problems, you really don’t want it. Be determined or don’t get started.
--Third, he had a problem with one of the demonstrations and he had to improvise. He turned to the audience and said that this is just what you have to do—take what you have and make the most of it. People are always looking for one more CPA review product. They are always looking for one more book or one more CD. It is usually not the review materials that are the problem. It is what you do with them that counts. Make the most of what you have been given.
Yeah, it was an interesting day. But I was surprised by how much the Cake Boss said that applied to any challenge, even the CPA Exam, and not just to the making of cakes. I am convinced that people who are successful tend to follow the same pattern, no matter what the field.
---Work incredibly hard,
---Be completed determined, and
---Make the best of what you have.
(7) – Practice time. Let’s add some points.
FAR
The City of Singler has a capital projects fund. The highest-level of decision-making authority for the city transfers $9 million from the general fund to this capital projects fund with the stipulation that the money must be used to construct Highway 66 out of town. In the balance sheet for this fund, the cash is shown as an asset. How is the fund balance reported?
A. Fund balance—restricted
B. Fund balance—committed
C. Fund balance—assigned
D. Fund balance—unassigned
Answer is B
Assets that have been designated for a particular purpose—not by an outside party but rather internally by the highest-level of decision-making authority—is reported as a “fund-balance committed.” The term “restricted” is used if the designation of purpose is made by an outside party. The term “assigned” is used if the decision about the asset’s use is made within the government but not by the highest-level of decision-making authority. The term “unassigned” is appropriate for assets where no stipulation of the future use has been made.
Auditing & Attestation
Jane Eyre works as a staff auditor for the CPA firm of East & West. She is currently working on the audit engagement of the Hitckcock Corporation. Her daughter is employed by Hitchcock. Her daughter is 27 years old and not a dependent of Jane Eyre. The firm is trying to determine whether Jane Eyre must be removed from the audit team because of a lack of independence. In applying these rules, which designation is applied to the daughter?
A. Close relative
B. Distant relative
C. Member of immediate family
D. General member of family
Answer is A
The AICPA defines a close relative as a parent, sibling, or nondependent child. A dependent child would be considered a member of the staff auditor’s immediate family.
BEC
A company has cost of goods sold for the past year of $900,000 and average inventory for the period of $100,000. The cost of goods sold is divided by average inventory to arrive at 9. What does the 9 represent?
A. Inventory density
B. Cost availability
C. Inventory turnover
D. Cost performance analysis
Answer is C
Cost of goods sold divided by the average amount of inventory for the same period gives the inventory turnover (also known as inventory turnover ratio) which reflects how many times during the year that the reporting company sells an amount equal to its average inventory. It is used to measure the speed at which a company is able to sell its inventory.
Regulation
What is a gift causa mortis?
A. A gift of real property
B. A conditional gift in contemplation of death
C. A gift that will only occur after a specified event (a cause) has taken place
D. A gift that is transferred as part of a will.
Answer is B.
A gift causa mortis is a conditional gift made in contemplation of death. It is automatically revoked if the donor does not die of the impending illness or crisis. Such gifts can only be made when the donor is in a terminable condition.
Spring is coming and the air feels good. It is a great time to sit down and start studying to pass the CPA Exam. Why not make it a goal that you will pass several parts (if not all) of the CPA Exam by the end of the summer. Put in the time and effort and YOU CAN DO IT!!!
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
Monday, March 28, 2011
Friday, March 25, 2011
Exam Grades Released
Congrats to all of you who passed the CPA exam as well as those that passed the next part!
To those who didn't pass, here is Joe's "secret sauce" to help you pass the exam:
(1) – Pick the part of the exam that you like the most. It’s always easier to get started with a part you like.
(2) – Schedule to take that exam in roughly 40 days, let’s say the end of January.
(3)—Go to www.CPAreviewforFREE.com and read all the information under “resources.”
(4)—Start answering at least 15 questions per day.
(5)—Never guess. On the exam, you need to guess. In studying, never guess.
(6)—If you get a question correct, move on. Don’t sit and congratulate yourself.
(7)—If you miss a question, find the step you missed (see above) and figure out what you missed in that step. Write down 10 words or less to help you get the question/step right the next time you see it.
(8)—Never forget that you only need to get 75 points to pass. You are not seeking perfection.
(9)—When you get to the final 7-10 days, start going methodically back through your 10 word notes. You want to make sure you can get as many questions right as possible.
(10)—During the exam, watch your time very closely. You want to finish with about 10 seconds left. Don’t waste time but don’t get too rushed.
(11)—If you don’t know a question, eliminate as many answers as possible and take a guess. Don’t let a tough question get you rattled.
To those who didn't pass, here is Joe's "secret sauce" to help you pass the exam:
(1) – Pick the part of the exam that you like the most. It’s always easier to get started with a part you like.
(2) – Schedule to take that exam in roughly 40 days, let’s say the end of January.
(3)—Go to www.CPAreviewforFREE.com and read all the information under “resources.”
(4)—Start answering at least 15 questions per day.
(5)—Never guess. On the exam, you need to guess. In studying, never guess.
(6)—If you get a question correct, move on. Don’t sit and congratulate yourself.
(7)—If you miss a question, find the step you missed (see above) and figure out what you missed in that step. Write down 10 words or less to help you get the question/step right the next time you see it.
(8)—Never forget that you only need to get 75 points to pass. You are not seeking perfection.
(9)—When you get to the final 7-10 days, start going methodically back through your 10 word notes. You want to make sure you can get as many questions right as possible.
(10)—During the exam, watch your time very closely. You want to finish with about 10 seconds left. Don’t waste time but don’t get too rushed.
(11)—If you don’t know a question, eliminate as many answers as possible and take a guess. Don’t let a tough question get you rattled.
Tuesday, March 15, 2011
Help for Japan's Victims
Our hearts and prayers go out to the victims and their families of the Japan earthquake and tsunami. It humbles us to see dreams interrupted to deal with tasks at hand that take immediate precedent. Our thoughts also go out to the brave men and women working with the damaged nuclear reactors.
Google has set up an info page which includes an easy way to donate to The Japanese Red Cross Society
For family members, the Japanese Red Cross Society has also provided the following link: Family link web site has been opened in cooperation with ICRC:
http://www.familylinks.icrc.org/eng/familylinks-japan
Thank you! Lynn
Google has set up an info page which includes an easy way to donate to The Japanese Red Cross Society
For family members, the Japanese Red Cross Society has also provided the following link: Family link web site has been opened in cooperation with ICRC:
http://www.familylinks.icrc.org/eng/familylinks-japan
Thank you! Lynn
Sunday, March 13, 2011
Characteristics for Success of the CPA Exam
Try us FIRST before you spend your hard-earned money.
March 9, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
140 Weeks of Operation and 21,985,330 Page Views (without a penny spent on marketing)
Lesson 90
From: Joe
(1) – I want to start with the same information that I sent out last week about the CPA Exam going international. I know that, for a lot of our readers, this is exciting news.
Starting in 2011, the Uniform CPA Examination will be offered during the month of August in Japan, Bahrain, Kuwait, Lebanon and the United Arab Emirates. The international exam, which will be offered in English, is the same as the U.S. exam administered by the AICPA, NASBA, and Prometric in the United States. Future testing months during which the exam will be administered in Japan and the Middle East will be November 2011 and February, May 2012. Licensure requirements for international candidates are the same as for U.S. CPA candidates. Along with passing the Uniform CPA Examination, international candidates must meet educational and experience requirements as mandated by U.S. state boards of accountancy. In the United States, state boards have the governmental legal authority to award the U.S. CPA license. Registration for the international exam will begin on May 1, and applications may be made through certain U.S. state boards of accountancy offering eligibility for
international candidates. A list of participating state boards and information about fees will be posted on the NASBA website in April at www.nasba.org. Testing in the new international locations will be open to citizens and long-term residents of the countries in which the exam is being administered. In the Middle East, citizens of Egypt, Jordan, Oman, Qatar and Saudi Arabia may take the exam in one of the Middle East locations. U.S. citizens living abroad are eligible to test at any location.
(2) – Okay, we’ve got thousands of people who use www.CPAreviewforFREE.com for our free questions and answers each and every week.
--Most of them are preparing for the CPA Exam. Many of those folks have become disenchanted with the mediocre review programs that charge them thousands and are poorly put together.
--Others simply decided (as our motto suggests) to try us for free first before investing even a penny in a review program.
--Some use us along with other books and programs; some use our free questions along with our subscription service ($15 per month per part); and some folks use our questions all by themselves to pass.
--We also assist college students who are desperately trying to get an A in Intermediate Accounting, Advanced Accounting, Auditing, Business Law, Income Taxes, or the like. They use our questions as a way to practice and review.
--Other folks just use our questions to keep themselves in touch with a wide variety of accounting questions. I’m always fascinated by how many people write in to say “I passed the exam years ago but I still enjoy working 5-10 of your question each day to stay sharp.”
How you make use of www.CPAreviewforFREE.com is up to you. The 2,200 questions and answers are there for YOU. We are happy to make them available. When we first started, we would get a lot of questions like “what’s the catch?” There is no catch. By now, nearly three years in, most people have come to understand that. We are happy to be of help to you.
We do need to make enough money to support our site so when you pay to download the questions and answers or when you use our subscription service ($15 per month per part), you are really helping to keep us in business so that we can continue to help others. THANKS!!! We very much appreciate your support.
So, if you have never looked at our questions and answers, go online and start working. One hour per day working with our questions and answers and you have a great chance of passing the entire CPA Exam in 2011 FOR FREE.
We don’t want to see the high cost (and low quality) of other CPA review programs keep you out of the Accounting profession. I have long argued that the cost of CPA review is entirely unfair. The Accounting profession should be open to everyone, not just those people who can afford expensive review programs.
I was reminded of this last week when I got a wonderful email from an accountant in Iran who thanked me for what we were doing. Do you think those big review programs get many grateful emails from Iran? We are not out to save the world but we are glad to be of help to everyone who wants to be able to enter the Accounting profession—no matter where you live and no matter how much money you have.
And, of course, we are grateful for your support.
(3) – How Good Do You Have To Be? I am convinced that everyone is always a bit insecure about most important things. That is just human nature. So, when you start to consider taking the CPA Exam, there is always the sinking feeling that you are just not smart enough to be able to pass. Well, I’m here to tell you that is pure NONSENSE!!!! Yes, the CPA Exam is tough and requires work but anyone who is willing to put in the time and stays persistent should be able to pass the CPA Exam in a reasonable period of time. No matter how many doubts you may have-YOU CAN DO IT!!!
Assume that you bring in 100 candidates who are thinking about taking the CPA Exam. Do you have to be the smartest person in the room to pass? Of course not. Do you have to be one of the best prepared candidates in that room to succeed? No way. In school, we tend to focus on the very top students—that upper 10 percent that seem to know all the answers. Passing the CPA Exam isn’t like school. In most cases, the top 50 percent of the people (roughly) are going to pass each part while many of the rest are going to come close. And, in that bottom half are an awful lot of people who never got around to studying at all. Or, they studied a few hours, got distracted, and never got back to it.
In other words, most people who try do pretty well. That’s just the statistics. That’s the secret that those big review courses don’t want you to know.
So, yes, you do have to study and certainly you can fail. But you don’t have to be a genius to pass. You don’t have to be an A plus student to succeed. That’s all just a myth. You just have to get in the upper 50 percent. That bar is not set terribly high.
How do you get into the upper 50 percent? You study. You study. You study. It is not magic. You study. I always suggest that if you just want to pass (make 75) you should spend 60-100 hours per part. That is one hour per day for between 8 months to a bit over a year. That is not easy but it certainly is not impossible. If you get up a bit early, you can have that done every day before breakfast.
How do you spend 60-100 hours of studying per part?
It doesn’t take smarts.
What characteristics does it take? What helps people become winners on the exam?
--Desire
--Ambition
--Determination
--Self-control
--Patience
--Planning
--Being Methodical
--Persistency
--Being Driven
Yeah, when it comes to the CPA Exam, I would take any one of those characteristics over smarts. Anyone can have smarts and waste them away. But if you give me a person with the above characteristics, I’ll show you a real winner.
You can do it.
(4) – Need to unsubscribe? Well, we hate for you to leave us but you have the right to unsubscribe. Just scroll to the bottom of this email and you’ll find an unsubscribe button. Use it and we shall part. However, before you do so, why not forward this lesson to a friend who might be thinking of taking the CPA Exam and tell them they should go to www.CPAreviewforFREE.com and register and check the box for additional materials and those additional materials ONLY include these email lessons. And, before you leave, let me say one final time “Thanks so much for being with us.”
(5) – Time to practice. Notice that this first question is very similar to the first question in our previous lesson but with some small changes. Often in accounting, understanding the importance of small changes can make all the difference in the world.
FAR
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. It has a useful life of 30 years. Ace immediately leases it back for two years. What amount of gain is recognized by Ace during Year One?
A. Zero
B. $10,000
C. $150,000
D. $300,000
Answer is D
In a sale-leaseback arrangement, any gain on the sale is normally deferred and then written off as a reduction to the depreciation expense recognized in connection with the leased asset. However, if the leaseback is for a period of 10 percent or less of the life of the asset, the entire gain is recognized immediately. Here, the leaseback is for only two out of 30 years so that the gain is not deferred but recognized entirely at the time of sale.
Regulation (I went to our subscription service and picked this information at random).
A calendar-year corporation was organized and incurred organizational expenditures of $6,000. Assume the corporation begins business on April 1, Year One, and wants to maximize its deduction for organizational expenditures in that year. What amount can be deducted in Year One?
A. Zero
B. $300
C. $5,000
D. $5,050
Answer is D
Because the company has elected to maximize its deductions in Year One, they can deduct the first $5,000 immediately. The remaining $1,000 is amortized to expense over 180 months or $1,000 x 9/180 = $50. Although it does not apply here, if the organization expenditures are over $50,000, the company begins to lose the right to the initial $5,000 deduction so that more is subject to amortization.
Auditing and Attestation.
A publicly-held corporation is in the process of changing its president. Which of the following forms should be filed with the SEC to disclose this event?
A. Form 10-K
B. Form S-1
C. Form S-3
D. Form 8-K
Answer is D
According to the SEC’s website, “Form 8-K is the ‘current report’ companies must file with the SEC to announce major events that shareholders should know about.”
BEC
Numerous companies produce widgets. However, the only company that buys widgets on the market is the Ace Corporation which uses the widgets in its uniquely designed aircraft. In economics, how is this market described?
A. As a floating market
B. As a monopsony
C. As a category 2 market
D. As a market dominated by the Wilson effect
Answer is B
Candidates are likely to know of a monopoly—a situation where there is only one seller so that unfair pricing advantage can be taken over customers. A monopsony is the opposite situation where there are many sellers but only a single buyer. This buyer can often demand unreasonably low prices because the sellers have no other alternative sales for their goods.
Hope the sun is shining where you are today. Start using www.CPAreviewforFREE.com to add those points that you need in order to pass the CPA Exam. Let’s get it done in 2011.
Joe Hoyle
President and Co-Founder
CPAreviewforFREE
www.CPAreviewforFREE.com
March 9, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
140 Weeks of Operation and 21,985,330 Page Views (without a penny spent on marketing)
Lesson 90
From: Joe
(1) – I want to start with the same information that I sent out last week about the CPA Exam going international. I know that, for a lot of our readers, this is exciting news.
Starting in 2011, the Uniform CPA Examination will be offered during the month of August in Japan, Bahrain, Kuwait, Lebanon and the United Arab Emirates. The international exam, which will be offered in English, is the same as the U.S. exam administered by the AICPA, NASBA, and Prometric in the United States. Future testing months during which the exam will be administered in Japan and the Middle East will be November 2011 and February, May 2012. Licensure requirements for international candidates are the same as for U.S. CPA candidates. Along with passing the Uniform CPA Examination, international candidates must meet educational and experience requirements as mandated by U.S. state boards of accountancy. In the United States, state boards have the governmental legal authority to award the U.S. CPA license. Registration for the international exam will begin on May 1, and applications may be made through certain U.S. state boards of accountancy offering eligibility for
international candidates. A list of participating state boards and information about fees will be posted on the NASBA website in April at www.nasba.org. Testing in the new international locations will be open to citizens and long-term residents of the countries in which the exam is being administered. In the Middle East, citizens of Egypt, Jordan, Oman, Qatar and Saudi Arabia may take the exam in one of the Middle East locations. U.S. citizens living abroad are eligible to test at any location.
(2) – Okay, we’ve got thousands of people who use www.CPAreviewforFREE.com for our free questions and answers each and every week.
--Most of them are preparing for the CPA Exam. Many of those folks have become disenchanted with the mediocre review programs that charge them thousands and are poorly put together.
--Others simply decided (as our motto suggests) to try us for free first before investing even a penny in a review program.
--Some use us along with other books and programs; some use our free questions along with our subscription service ($15 per month per part); and some folks use our questions all by themselves to pass.
--We also assist college students who are desperately trying to get an A in Intermediate Accounting, Advanced Accounting, Auditing, Business Law, Income Taxes, or the like. They use our questions as a way to practice and review.
--Other folks just use our questions to keep themselves in touch with a wide variety of accounting questions. I’m always fascinated by how many people write in to say “I passed the exam years ago but I still enjoy working 5-10 of your question each day to stay sharp.”
How you make use of www.CPAreviewforFREE.com is up to you. The 2,200 questions and answers are there for YOU. We are happy to make them available. When we first started, we would get a lot of questions like “what’s the catch?” There is no catch. By now, nearly three years in, most people have come to understand that. We are happy to be of help to you.
We do need to make enough money to support our site so when you pay to download the questions and answers or when you use our subscription service ($15 per month per part), you are really helping to keep us in business so that we can continue to help others. THANKS!!! We very much appreciate your support.
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I was reminded of this last week when I got a wonderful email from an accountant in Iran who thanked me for what we were doing. Do you think those big review programs get many grateful emails from Iran? We are not out to save the world but we are glad to be of help to everyone who wants to be able to enter the Accounting profession—no matter where you live and no matter how much money you have.
And, of course, we are grateful for your support.
(3) – How Good Do You Have To Be? I am convinced that everyone is always a bit insecure about most important things. That is just human nature. So, when you start to consider taking the CPA Exam, there is always the sinking feeling that you are just not smart enough to be able to pass. Well, I’m here to tell you that is pure NONSENSE!!!! Yes, the CPA Exam is tough and requires work but anyone who is willing to put in the time and stays persistent should be able to pass the CPA Exam in a reasonable period of time. No matter how many doubts you may have-YOU CAN DO IT!!!
Assume that you bring in 100 candidates who are thinking about taking the CPA Exam. Do you have to be the smartest person in the room to pass? Of course not. Do you have to be one of the best prepared candidates in that room to succeed? No way. In school, we tend to focus on the very top students—that upper 10 percent that seem to know all the answers. Passing the CPA Exam isn’t like school. In most cases, the top 50 percent of the people (roughly) are going to pass each part while many of the rest are going to come close. And, in that bottom half are an awful lot of people who never got around to studying at all. Or, they studied a few hours, got distracted, and never got back to it.
In other words, most people who try do pretty well. That’s just the statistics. That’s the secret that those big review courses don’t want you to know.
So, yes, you do have to study and certainly you can fail. But you don’t have to be a genius to pass. You don’t have to be an A plus student to succeed. That’s all just a myth. You just have to get in the upper 50 percent. That bar is not set terribly high.
How do you get into the upper 50 percent? You study. You study. You study. It is not magic. You study. I always suggest that if you just want to pass (make 75) you should spend 60-100 hours per part. That is one hour per day for between 8 months to a bit over a year. That is not easy but it certainly is not impossible. If you get up a bit early, you can have that done every day before breakfast.
How do you spend 60-100 hours of studying per part?
It doesn’t take smarts.
What characteristics does it take? What helps people become winners on the exam?
--Desire
--Ambition
--Determination
--Self-control
--Patience
--Planning
--Being Methodical
--Persistency
--Being Driven
Yeah, when it comes to the CPA Exam, I would take any one of those characteristics over smarts. Anyone can have smarts and waste them away. But if you give me a person with the above characteristics, I’ll show you a real winner.
You can do it.
(4) – Need to unsubscribe? Well, we hate for you to leave us but you have the right to unsubscribe. Just scroll to the bottom of this email and you’ll find an unsubscribe button. Use it and we shall part. However, before you do so, why not forward this lesson to a friend who might be thinking of taking the CPA Exam and tell them they should go to www.CPAreviewforFREE.com and register and check the box for additional materials and those additional materials ONLY include these email lessons. And, before you leave, let me say one final time “Thanks so much for being with us.”
(5) – Time to practice. Notice that this first question is very similar to the first question in our previous lesson but with some small changes. Often in accounting, understanding the importance of small changes can make all the difference in the world.
FAR
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. It has a useful life of 30 years. Ace immediately leases it back for two years. What amount of gain is recognized by Ace during Year One?
A. Zero
B. $10,000
C. $150,000
D. $300,000
Answer is D
In a sale-leaseback arrangement, any gain on the sale is normally deferred and then written off as a reduction to the depreciation expense recognized in connection with the leased asset. However, if the leaseback is for a period of 10 percent or less of the life of the asset, the entire gain is recognized immediately. Here, the leaseback is for only two out of 30 years so that the gain is not deferred but recognized entirely at the time of sale.
Regulation (I went to our subscription service and picked this information at random).
A calendar-year corporation was organized and incurred organizational expenditures of $6,000. Assume the corporation begins business on April 1, Year One, and wants to maximize its deduction for organizational expenditures in that year. What amount can be deducted in Year One?
A. Zero
B. $300
C. $5,000
D. $5,050
Answer is D
Because the company has elected to maximize its deductions in Year One, they can deduct the first $5,000 immediately. The remaining $1,000 is amortized to expense over 180 months or $1,000 x 9/180 = $50. Although it does not apply here, if the organization expenditures are over $50,000, the company begins to lose the right to the initial $5,000 deduction so that more is subject to amortization.
Auditing and Attestation.
A publicly-held corporation is in the process of changing its president. Which of the following forms should be filed with the SEC to disclose this event?
A. Form 10-K
B. Form S-1
C. Form S-3
D. Form 8-K
Answer is D
According to the SEC’s website, “Form 8-K is the ‘current report’ companies must file with the SEC to announce major events that shareholders should know about.”
BEC
Numerous companies produce widgets. However, the only company that buys widgets on the market is the Ace Corporation which uses the widgets in its uniquely designed aircraft. In economics, how is this market described?
A. As a floating market
B. As a monopsony
C. As a category 2 market
D. As a market dominated by the Wilson effect
Answer is B
Candidates are likely to know of a monopoly—a situation where there is only one seller so that unfair pricing advantage can be taken over customers. A monopsony is the opposite situation where there are many sellers but only a single buyer. This buyer can often demand unreasonably low prices because the sellers have no other alternative sales for their goods.
Hope the sun is shining where you are today. Start using www.CPAreviewforFREE.com to add those points that you need in order to pass the CPA Exam. Let’s get it done in 2011.
Joe Hoyle
President and Co-Founder
CPAreviewforFREE
www.CPAreviewforFREE.com
Wednesday, March 2, 2011
CPA Exam Goes International in August
Try us FIRST before you spend your hard-earned money.
March 1, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
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From: Joe
(1) - I normally only use our emails to provide you with email lessons.
However, the AICPA sent out the following press release today. I know that an awful lot of our readers will be extremely interested in this information. Therefore, I wanted to get it to you sooner rather than later. So, I’m sending it out rather than waiting until I could write an entire email lesson.
The actual press release can be found at:
http://m1e.net/c?90368637-bSPoKLag.815A%406226349-qgsX7oOYmqgYc
The American Institute of Certified Public Accountants, National Association of State Boards of Accountancy, and Prometric announced the international administration of the Uniform CPA Examination will be offered during the month of August in Japan, Bahrain, Kuwait, Lebanon and the United Arab Emirates. Registration begins in May.
The U.S. CPA exam is being offered internationally for the first time as a service to foreign nationals in response to rapidly escalating international demand for U.S. CPA licensure. In 2010, more than 10,000 international candidates traveled to the U.S. to take the U.S. CPA exam, a 22 percent increase from 2009. Nearly one-third of international candidates came from Japan.
“We are very pleased to be able to offer this program in Japan and several countries in the Middle East,” said Craig Mills, AICPA vice president for examinations and continuing professional education. “We believe the international administrations will provide additional opportunities for individuals who want to become U.S. CPAs. As we gain experience in international administrations, we are looking forward to expanding the program to other countries where there is interest.”
The international exam, which will be offered in English, is the same as the U.S. exam administered by the AICPA, NASBA, and Prometric in the United States. Future testing months during which the exam will be administered in Japan and the Middle East will be November 2011 and February, May 2012. Licensure requirements for international candidates are the same as for U.S. CPA candidates. Along with passing the Uniform CPA Examination, international candidates must meet educational and experience requirements as mandated by U.S. state boards of accountancy.
NASBA Executive Vice President & COO Ken L. Bishop said: "It makes excellent sense to extend the benefits of the U.S. state-based CPA examination and licensure processes to an international audience. We’re looking forward to implementing international CPA Examination administrations so that we may bring the examination to candidates who would like an opportunity to qualify as U.S. CPAs."
In the United States, state boards have the governmental legal authority to award the U.S. CPA license. Registration for the international exam will begin on May 1, and applications may be made through certain U.S. state boards of accountancy offering eligibility for international candidates. A list of participating state boards and information about fees will be posted on the NASBA website in April at www.nasba.org.
“Ensuring safe, secure delivery of the CPA exam has always been a priority for us,” said Bill Murtagh, senior vice president of client services and sales at Prometric. “Carrying our commitment to security to other key locations around the world will simply be an extension of the diligence we provide in the U.S. to support the integrity of this high-stakes exam.”
Testing in the new international locations will be open to citizens and long-term residents of the countries in which the exam is being administered. In the Middle East, citizens of Egypt, Jordan, Oman, Qatar and Saudi Arabia may take the exam in one of the Middle East locations. U.S. citizens living abroad are eligible to test at any location.
“The exam, regardless of where it’s administered, provides opportunities for personal growth and contributes to economic prosperity,” Mills said. “We continue to plan for an August administration in the Middle East and are hopeful that the local conditions will allow us to provide this service to the citizens of the region.”
Initially the exam will be offered internationally during a one month testing window per calendar-year quarter. An international testing FAQ sheet is available at the AICPA Uniform CPA Examination website – www.aicpa.org/cpa-exam.
(2) – I cannot send out one of these emails without a message. That’s just not my style.
People who pass the exam don’t need encouragement. For them, it is over and part of the past. It is the people who fail and then have to push themselves to try again that need encouragement. So, I’ll leave you with the words of one of my heroes (Vince Lombardi): "The greatest accomplishment," he said, "is not in never falling, but in rising again after you fall."
Or, as I might say: “if you get knocked down, use that as motivation to push yourself even harder the next time. Anyone can take a beating and then quit. Quitting is the easiest thing in the world. It is truly a unique individual who gets stronger from the experience. And, then, the eventual victory is even sweeter.”
(3) – And, as always, remember that you can unsubscribe from these lessons by clicking the button at the bottom of this email.
Joe Hoyle
Co-Founder
CPA Review for FREE
March 1, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,100 FREE CPA Review Questions and Answers Available for YOU
139 Weeks of Operation and 21,875,544 Page Views (without a penny spent on marketing)
From: Joe
(1) - I normally only use our emails to provide you with email lessons.
However, the AICPA sent out the following press release today. I know that an awful lot of our readers will be extremely interested in this information. Therefore, I wanted to get it to you sooner rather than later. So, I’m sending it out rather than waiting until I could write an entire email lesson.
The actual press release can be found at:
http://m1e.net/c?90368637-bSPoKLag.815A%406226349-qgsX7oOYmqgYc
The American Institute of Certified Public Accountants, National Association of State Boards of Accountancy, and Prometric announced the international administration of the Uniform CPA Examination will be offered during the month of August in Japan, Bahrain, Kuwait, Lebanon and the United Arab Emirates. Registration begins in May.
The U.S. CPA exam is being offered internationally for the first time as a service to foreign nationals in response to rapidly escalating international demand for U.S. CPA licensure. In 2010, more than 10,000 international candidates traveled to the U.S. to take the U.S. CPA exam, a 22 percent increase from 2009. Nearly one-third of international candidates came from Japan.
“We are very pleased to be able to offer this program in Japan and several countries in the Middle East,” said Craig Mills, AICPA vice president for examinations and continuing professional education. “We believe the international administrations will provide additional opportunities for individuals who want to become U.S. CPAs. As we gain experience in international administrations, we are looking forward to expanding the program to other countries where there is interest.”
The international exam, which will be offered in English, is the same as the U.S. exam administered by the AICPA, NASBA, and Prometric in the United States. Future testing months during which the exam will be administered in Japan and the Middle East will be November 2011 and February, May 2012. Licensure requirements for international candidates are the same as for U.S. CPA candidates. Along with passing the Uniform CPA Examination, international candidates must meet educational and experience requirements as mandated by U.S. state boards of accountancy.
NASBA Executive Vice President & COO Ken L. Bishop said: "It makes excellent sense to extend the benefits of the U.S. state-based CPA examination and licensure processes to an international audience. We’re looking forward to implementing international CPA Examination administrations so that we may bring the examination to candidates who would like an opportunity to qualify as U.S. CPAs."
In the United States, state boards have the governmental legal authority to award the U.S. CPA license. Registration for the international exam will begin on May 1, and applications may be made through certain U.S. state boards of accountancy offering eligibility for international candidates. A list of participating state boards and information about fees will be posted on the NASBA website in April at www.nasba.org.
“Ensuring safe, secure delivery of the CPA exam has always been a priority for us,” said Bill Murtagh, senior vice president of client services and sales at Prometric. “Carrying our commitment to security to other key locations around the world will simply be an extension of the diligence we provide in the U.S. to support the integrity of this high-stakes exam.”
Testing in the new international locations will be open to citizens and long-term residents of the countries in which the exam is being administered. In the Middle East, citizens of Egypt, Jordan, Oman, Qatar and Saudi Arabia may take the exam in one of the Middle East locations. U.S. citizens living abroad are eligible to test at any location.
“The exam, regardless of where it’s administered, provides opportunities for personal growth and contributes to economic prosperity,” Mills said. “We continue to plan for an August administration in the Middle East and are hopeful that the local conditions will allow us to provide this service to the citizens of the region.”
Initially the exam will be offered internationally during a one month testing window per calendar-year quarter. An international testing FAQ sheet is available at the AICPA Uniform CPA Examination website – www.aicpa.org/cpa-exam.
(2) – I cannot send out one of these emails without a message. That’s just not my style.
People who pass the exam don’t need encouragement. For them, it is over and part of the past. It is the people who fail and then have to push themselves to try again that need encouragement. So, I’ll leave you with the words of one of my heroes (Vince Lombardi): "The greatest accomplishment," he said, "is not in never falling, but in rising again after you fall."
Or, as I might say: “if you get knocked down, use that as motivation to push yourself even harder the next time. Anyone can take a beating and then quit. Quitting is the easiest thing in the world. It is truly a unique individual who gets stronger from the experience. And, then, the eventual victory is even sweeter.”
(3) – And, as always, remember that you can unsubscribe from these lessons by clicking the button at the bottom of this email.
Joe Hoyle
Co-Founder
CPA Review for FREE
Sunday, February 27, 2011
Read Those Questions Carefully
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
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 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.
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