Friday, July 8, 2011
New Points to Pass Unlimited FAR Question Bank
Try us FIRST before you spend your hard-earned money.
July 8, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU (for FREE)
157 Weeks of Operation and 25,375,351 Page Views (an average of over 160,000 page views per week for three solid years)
Lesson 99
From: Joe
(1) – We crossed over 25 million page views recently. Because the average person typically looks at about 22 pages on our site with each visit, that means that www.CPAreviewforFREE.com has been used over one million times in three years by future CPAs gaining the knowledge they need to pass. Can you imagine, 1,000,000 visits by accountants adding points to their score for free? I find that both wonderful and amazing. People from around the world get to work with the same database so that they can all pass the exam and get on with their careers (and not have to pay an arm and a leg).
(2) – For those of you taking FAR in July and August, we are introducing our newest product: Points to Pass. It is set up so that you can practice each topic in FAR literally an infinite number of times. We all know that practice is the way to pass—this is the ultimate tool for practicing.
Are you missing too questions in a particular topic such as inventory, consolidations, or leases? Points to Pass doesn’t provide you with just 10 or 20 additional questions but an UNLIMITED SUPPLY OF QUESTIONS FOR EACH TOPIC IN FAR. You can keep working questions in every topic until you have them completely under control.
For example, we have 23 questions currently about inventory in our database. Let’s say you are struggling with that topic and want to keep practicing after you finish those 23. Well, if you have Points to Pass, you can get more and more and more Inventory questions for as long as you want.
Here’s how it works. We have taken each of the FAR topics and designated about half of those questions as especially important. We have then created a computer program that will change one or more of the essential variables in each of those questions so that you can work them again but with different numbers. So, the 23 inventory questions can become 50 or 100 or 1,000. Just keep working until you are comfortable with that topic and then move to the next one and do it again.
To start practicing with Points to Pass, log into your account at www.CPAreviewforFREE.com and click on Manage Your Purchases>New Subscriptions and select Points to Pass for a 1 month package for only $29.99 or 3 months for only $89.97.
If you have a question about Points to Pass, send an email to info@cpareviewforfree.com
(3) – Always love to hear from you folks who are taking (or have taken) the CPA Exam!!!
FROM BR: “I passed!!! I passed 3 parts (BEC, AUD, and REG) using only your software, simulations, and subscription notes.... Thank you so much for providing this site; it has been a life saver!!!! Thank you so much.”
FROM SD: “I just wanted to say ‘THANK YOU’ for your dedication and hard work in providing a truly free CPA review service. There were many days that my mind was exhausted from studying and I would want to ‘rest’ it but I would get an email from you and it would perk me up to try your practice questions. Sometimes our brains need a ‘re-boot’ and your emails always did the trick for me. I passed my first CPA exam on October 8, 2010 & my final part on May 23, 2011 and all on the first try. I truly believe in your ‘get a point every day’ theory and feel like it helped me push through some very tough material.”
FROM KM: “Just wanted to thank you for the pointers you gave me. I got the Reg part with an 80 after going through your subscription material. Unfortunately my Auditing had expired, but am very confident of getting it back on July 10 when I retake it.”
FROM VT: “I just got my REG score back today. I passed with a 75. That was my first attempt at REG so I am happy that I passed.... Thank you for your website. I used your website as 50% of my study material and the other is a book I bought at Borders. I am attempting to pass without having to spend a lot of money. We will see how that goes by the end of September.”
FROM RJ: “After receiving scores of 60, 60, 72 and then 65 I found out yesterday that I received a score of 88 on the Audit and Attestation part of the CPA exam! I stared at the computer screen for about a minute before the score actually registered in my mind and realized that I passed!!! It's really great to see what a passing score looks like! … Now it's on to adding points in BEC! Every time I sit down to study I remember what you always say ‘add points,’ ‘add points,’ ‘add points.’
FROM TM: “I have cleared all 4 papers at first attempt. I used your free material as well as bought BEC and Reg subscriptions. They were very useful. Thanks for your help.”
FROM CD: “I'm loving the essential material on CPAReviewForFree. I'm telling everyone I know who is studying for the exam to use that instead of the other guys. Thanks.”
(4) – And, now for the legal stuff. You received this email because you have signed up for it. We love having you. We love hearing from you (see above). We love being helpful. I’ve been writing these email lessons for well over a decade and I’m sure I can go on for another decade or two, maybe even another millennium. However, you absolutely do have the legal right to unsubscribe whenever you wish. So, on any email lesson, if you scroll to the bottom, you’ll find a link that is labeled “Unsubscribe.” If you need to go, we understand. But, we do hope you’ll tell anyone and everyone about www.CPAreviewforFREE.com and its attempt to create world harmony through the universal passing of the CPA Exam.
(5) – I really like to spend each Fourth of July in Yorktown, Williamsburg, and Jamestown, Virginia because so much of our country’s history took place in those 10-15 miles. You can see where the British surrendered at the end of the Revolution. You can see where Thomas Jefferson went to school. You can see where the early settlers risked their lives to start the Jamestown Colony. Yeah, it is my favorite place to spend Independence Day.
Driving home on the 4th, I was listening to some music on the radio and a group sang a song that just seemed to fit the mood of that trip: “No one remembers what you didn’t do.” Those people at Yorktown, Williamsburg, and Jamestown are remembered because of what they managed to accomplish.
Okay, passing the CPA Exam is not on the same planet as winning the Revolutionary War or founding a colony in a new world. I do realize that. But the things that count in this life are the things that you accomplish. It is not easy, I fully understand. I passed the CPA Exam myself – I know how hard it is to do all that work. However, nothing was ever accomplished by not trying. Nothing good comes from giving up. Life is about doing.
I am a firm believer that everyone can pass the CPA Exam. Yes, you have to put in the time. You have to work enough questions. You have to read enough answers. You have to take enough notes. It is not easy. That’s what makes it worth doing.
No one is ever going to remember what you don’t do.
Life is meant to be lived by doing. Do the work and pass that exam.
You’ll always be so glad you put in that work.
(6) – I posted part of the following message on our Facebook page yesterday – here’s the entire message.
Many, many people reading these lessons will be taking one or more parts of the CPA Exam during the roughly 8 weeks that remain until the end of August. Sometime in the next 8 weeks, an awful lot of you will walk into a testing center somewhere in this world and take a section of the CPA Exam. Whether you pass or fail that exam depends very much on how well you use these last days and weeks. The points you add at the end are the most important because that is the stuff you’ll remember the best.
It is easy to get tired and discouraged and find reasons not to study, especially here in the summer when the weather can be so beautiful. We are all human; it is very easy to find reasons NOT to do the work.
It is a much bigger challenge to find reasons each day TO study. Why should YOU study today? Make it a habit every day to find one good reason for you to do what has to be done:
I want to add a point today. I want to do the work to add a point today. Why is that?
I don't ever want to ever take this exam again.
I want my parents, my spouse, my friends, my kids to be proud of me.
I want to show my boss what I know.
I want my resume to say "CPA."
I want to get that promotion.
I know I can do it so I might as well get it done.
I want to feel good about myself.
I want that “I did it” feeling when I see those scores.
In these last 8 weeks, it is very easy to get into a "I dread study" routine. Occasionally, I hear from people who tell me: "I'm going to study today but I am going to hate every second of it." Trust me, that makes it 10 times more difficult to put in the time. It is just hard to be efficient at preparation when you only have negative reasons to study.
Don't approach your studies as a negative - that's one of the primary problems with our school system; learning is too often viewed as a negative by the students. Find a good positive reason to study today:
I want to show my spouse (or my girl friend or boy friend) that I can make 75.
I want to prove to my teacher in college that I was smarter than he thought.
I want to get a new job and this will help my search.
I'll get a raise or a bonus when I pass.
I want to watch television again or go to the movies.
I want to be able to play with my kids more next fall.
I want to prove to the world that I can do it.
If you look, there are many many good reasons to study today.
Come at this exam in an aggressive, positive manner. It should not be a torture to be dreaded but a challenge to be conquered. Study is not a punishment; study - just like exercise - will make you better and, thus, better able to conquer the challenge you face.
(7) – Ah, time for a bit of practice – take out a pencil and piece of paper and see how many of these you can get correct.
FAR
A nongovernmental not-for-profit organization (Charity A) receives a gift of $50,000 that must be conveyed to another, separate not-for-profit organization. Which of the following statements is true?
A – Charity A will record contribution revenue of $50,000 in all cases.
B – Charity A will record contribution revenue of $50,000 but it must be labeled as temporarily restricted.
C – Charity A will record contribution revenue of $50,000 but only if it has variance powers to change the beneficiary.
D – Charity A cannot record contribution revenue but must record a liability of $50,000 to the other charity.
Answer is C
Normally, when a not-for-profit organization receives a gift that must be conveyed to another charity, it is merely serving to convey the money and records it as a liability (answer D). However, if the initial charity is giving variance powers so that it does have the ability to change beneficiary, then it has genuine control over the money. Under that situation, Charity A records the gift as contribution revenue and not as a liability.
Auditing & Attestation
A CPA is performing an independent audit of the Longston Corporation. The CPA is currently doing a test of the controls surrounding the recording of accounts receivable. Shirley Jones is the internal auditor for Longston and has offered to help in performing these tests of controls. Which of the following is true?
A – The CPA cannot allow the internal auditor to provide any direct assistance in the tests of controls.
B – The CPA should not have let the internal auditor know what testing was being considered.
C – The CPA can allow the internal auditor to provide direct assistance in the tests of these controls.
D – The CPA can allow the company accountant to be of direct assistance but not the internal auditor.
Answer is C.
The CPA may receive assistance from the internal auditor in providing tests of controls (and also substantive testing procedures) with proper oversight. The CPA will probably be interested in making sure the internal auditor is properly competent by verifying her education, certification, and work experience and by examining her previous work for this client. The CPA will also need to ensure that her work is properly reviewed. However, if all of that seems appropriate, the CPA can get direct assistance from the internal auditor in doing tests of controls.
Regulation
Ligano serves as an agent for Boswell. Boswell has only given Ligano the authority to carry out 4 specific actions on his behalf. However, Ligano carries out an action in Boswell’s name that is not one of those four. The agent (Ligano) lacked authority to legally bind the principal (Boswell). Boswell decides to affirm the act and do the specified work despite Ligano’s lack of authority. What action has Boswell taken?
A – Reimbursement by judgment
B – Ratification
C – Reference by priority
D – Reference by remainder
Answer is B
Whenever an agent (such as an employee) takes an action without proper authority, once informed, the principal must either ratify it (agree to be bound to the agreement) or repudiate it (inform the other party that the principal will not be bound by the agreement because the agent did not have proper authority).
BEC
The Swinton Company wants to open a new retail outlet in Manchester. Swinton officials go to the local bank and borrow $500,000 to start operations and agree to pay an annual interest rate of 8 percent. As part of the agreement, Swinton must maintain a cash balance in the local bank of $40,000. What is the effective cost to Swinton of borrowing this money for one year? (rounded)
A – 8.2 percent
B – 8.5 percent
C – 8.7 percent
D – 8.9 percent
Answer is C
Swinton only gets $460,000 from the bank to use because $40,000 must stay with the bank. The annual cost of the loan is an interest charge of $40,000 ($500,000 times 8 percent). If Swinton pays $40,000 per year to get $460,000, the annual cost of the loan is $40,000/$460,000 or 8.7 percent.
You’ve got roughly 8 weeks left in the July-August window. Let’s make the very best of that time to add points and get 75 and pass.
Joe Hoyle
Co-Founder and President
CPA Review for FREE
www.CPAreviewforFREE.com
July 8, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU (for FREE)
157 Weeks of Operation and 25,375,351 Page Views (an average of over 160,000 page views per week for three solid years)
Lesson 99
From: Joe
(1) – We crossed over 25 million page views recently. Because the average person typically looks at about 22 pages on our site with each visit, that means that www.CPAreviewforFREE.com has been used over one million times in three years by future CPAs gaining the knowledge they need to pass. Can you imagine, 1,000,000 visits by accountants adding points to their score for free? I find that both wonderful and amazing. People from around the world get to work with the same database so that they can all pass the exam and get on with their careers (and not have to pay an arm and a leg).
(2) – For those of you taking FAR in July and August, we are introducing our newest product: Points to Pass. It is set up so that you can practice each topic in FAR literally an infinite number of times. We all know that practice is the way to pass—this is the ultimate tool for practicing.
Are you missing too questions in a particular topic such as inventory, consolidations, or leases? Points to Pass doesn’t provide you with just 10 or 20 additional questions but an UNLIMITED SUPPLY OF QUESTIONS FOR EACH TOPIC IN FAR. You can keep working questions in every topic until you have them completely under control.
For example, we have 23 questions currently about inventory in our database. Let’s say you are struggling with that topic and want to keep practicing after you finish those 23. Well, if you have Points to Pass, you can get more and more and more Inventory questions for as long as you want.
Here’s how it works. We have taken each of the FAR topics and designated about half of those questions as especially important. We have then created a computer program that will change one or more of the essential variables in each of those questions so that you can work them again but with different numbers. So, the 23 inventory questions can become 50 or 100 or 1,000. Just keep working until you are comfortable with that topic and then move to the next one and do it again.
To start practicing with Points to Pass, log into your account at www.CPAreviewforFREE.com and click on Manage Your Purchases>New Subscriptions and select Points to Pass for a 1 month package for only $29.99 or 3 months for only $89.97.
If you have a question about Points to Pass, send an email to info@cpareviewforfree.com
(3) – Always love to hear from you folks who are taking (or have taken) the CPA Exam!!!
FROM BR: “I passed!!! I passed 3 parts (BEC, AUD, and REG) using only your software, simulations, and subscription notes.... Thank you so much for providing this site; it has been a life saver!!!! Thank you so much.”
FROM SD: “I just wanted to say ‘THANK YOU’ for your dedication and hard work in providing a truly free CPA review service. There were many days that my mind was exhausted from studying and I would want to ‘rest’ it but I would get an email from you and it would perk me up to try your practice questions. Sometimes our brains need a ‘re-boot’ and your emails always did the trick for me. I passed my first CPA exam on October 8, 2010 & my final part on May 23, 2011 and all on the first try. I truly believe in your ‘get a point every day’ theory and feel like it helped me push through some very tough material.”
FROM KM: “Just wanted to thank you for the pointers you gave me. I got the Reg part with an 80 after going through your subscription material. Unfortunately my Auditing had expired, but am very confident of getting it back on July 10 when I retake it.”
FROM VT: “I just got my REG score back today. I passed with a 75. That was my first attempt at REG so I am happy that I passed.... Thank you for your website. I used your website as 50% of my study material and the other is a book I bought at Borders. I am attempting to pass without having to spend a lot of money. We will see how that goes by the end of September.”
FROM RJ: “After receiving scores of 60, 60, 72 and then 65 I found out yesterday that I received a score of 88 on the Audit and Attestation part of the CPA exam! I stared at the computer screen for about a minute before the score actually registered in my mind and realized that I passed!!! It's really great to see what a passing score looks like! … Now it's on to adding points in BEC! Every time I sit down to study I remember what you always say ‘add points,’ ‘add points,’ ‘add points.’
FROM TM: “I have cleared all 4 papers at first attempt. I used your free material as well as bought BEC and Reg subscriptions. They were very useful. Thanks for your help.”
FROM CD: “I'm loving the essential material on CPAReviewForFree. I'm telling everyone I know who is studying for the exam to use that instead of the other guys. Thanks.”
(4) – And, now for the legal stuff. You received this email because you have signed up for it. We love having you. We love hearing from you (see above). We love being helpful. I’ve been writing these email lessons for well over a decade and I’m sure I can go on for another decade or two, maybe even another millennium. However, you absolutely do have the legal right to unsubscribe whenever you wish. So, on any email lesson, if you scroll to the bottom, you’ll find a link that is labeled “Unsubscribe.” If you need to go, we understand. But, we do hope you’ll tell anyone and everyone about www.CPAreviewforFREE.com and its attempt to create world harmony through the universal passing of the CPA Exam.
(5) – I really like to spend each Fourth of July in Yorktown, Williamsburg, and Jamestown, Virginia because so much of our country’s history took place in those 10-15 miles. You can see where the British surrendered at the end of the Revolution. You can see where Thomas Jefferson went to school. You can see where the early settlers risked their lives to start the Jamestown Colony. Yeah, it is my favorite place to spend Independence Day.
Driving home on the 4th, I was listening to some music on the radio and a group sang a song that just seemed to fit the mood of that trip: “No one remembers what you didn’t do.” Those people at Yorktown, Williamsburg, and Jamestown are remembered because of what they managed to accomplish.
Okay, passing the CPA Exam is not on the same planet as winning the Revolutionary War or founding a colony in a new world. I do realize that. But the things that count in this life are the things that you accomplish. It is not easy, I fully understand. I passed the CPA Exam myself – I know how hard it is to do all that work. However, nothing was ever accomplished by not trying. Nothing good comes from giving up. Life is about doing.
I am a firm believer that everyone can pass the CPA Exam. Yes, you have to put in the time. You have to work enough questions. You have to read enough answers. You have to take enough notes. It is not easy. That’s what makes it worth doing.
No one is ever going to remember what you don’t do.
Life is meant to be lived by doing. Do the work and pass that exam.
You’ll always be so glad you put in that work.
(6) – I posted part of the following message on our Facebook page yesterday – here’s the entire message.
Many, many people reading these lessons will be taking one or more parts of the CPA Exam during the roughly 8 weeks that remain until the end of August. Sometime in the next 8 weeks, an awful lot of you will walk into a testing center somewhere in this world and take a section of the CPA Exam. Whether you pass or fail that exam depends very much on how well you use these last days and weeks. The points you add at the end are the most important because that is the stuff you’ll remember the best.
It is easy to get tired and discouraged and find reasons not to study, especially here in the summer when the weather can be so beautiful. We are all human; it is very easy to find reasons NOT to do the work.
It is a much bigger challenge to find reasons each day TO study. Why should YOU study today? Make it a habit every day to find one good reason for you to do what has to be done:
I want to add a point today. I want to do the work to add a point today. Why is that?
I don't ever want to ever take this exam again.
I want my parents, my spouse, my friends, my kids to be proud of me.
I want to show my boss what I know.
I want my resume to say "CPA."
I want to get that promotion.
I know I can do it so I might as well get it done.
I want to feel good about myself.
I want that “I did it” feeling when I see those scores.
In these last 8 weeks, it is very easy to get into a "I dread study" routine. Occasionally, I hear from people who tell me: "I'm going to study today but I am going to hate every second of it." Trust me, that makes it 10 times more difficult to put in the time. It is just hard to be efficient at preparation when you only have negative reasons to study.
Don't approach your studies as a negative - that's one of the primary problems with our school system; learning is too often viewed as a negative by the students. Find a good positive reason to study today:
I want to show my spouse (or my girl friend or boy friend) that I can make 75.
I want to prove to my teacher in college that I was smarter than he thought.
I want to get a new job and this will help my search.
I'll get a raise or a bonus when I pass.
I want to watch television again or go to the movies.
I want to be able to play with my kids more next fall.
I want to prove to the world that I can do it.
If you look, there are many many good reasons to study today.
Come at this exam in an aggressive, positive manner. It should not be a torture to be dreaded but a challenge to be conquered. Study is not a punishment; study - just like exercise - will make you better and, thus, better able to conquer the challenge you face.
(7) – Ah, time for a bit of practice – take out a pencil and piece of paper and see how many of these you can get correct.
FAR
A nongovernmental not-for-profit organization (Charity A) receives a gift of $50,000 that must be conveyed to another, separate not-for-profit organization. Which of the following statements is true?
A – Charity A will record contribution revenue of $50,000 in all cases.
B – Charity A will record contribution revenue of $50,000 but it must be labeled as temporarily restricted.
C – Charity A will record contribution revenue of $50,000 but only if it has variance powers to change the beneficiary.
D – Charity A cannot record contribution revenue but must record a liability of $50,000 to the other charity.
Answer is C
Normally, when a not-for-profit organization receives a gift that must be conveyed to another charity, it is merely serving to convey the money and records it as a liability (answer D). However, if the initial charity is giving variance powers so that it does have the ability to change beneficiary, then it has genuine control over the money. Under that situation, Charity A records the gift as contribution revenue and not as a liability.
Auditing & Attestation
A CPA is performing an independent audit of the Longston Corporation. The CPA is currently doing a test of the controls surrounding the recording of accounts receivable. Shirley Jones is the internal auditor for Longston and has offered to help in performing these tests of controls. Which of the following is true?
A – The CPA cannot allow the internal auditor to provide any direct assistance in the tests of controls.
B – The CPA should not have let the internal auditor know what testing was being considered.
C – The CPA can allow the internal auditor to provide direct assistance in the tests of these controls.
D – The CPA can allow the company accountant to be of direct assistance but not the internal auditor.
Answer is C.
The CPA may receive assistance from the internal auditor in providing tests of controls (and also substantive testing procedures) with proper oversight. The CPA will probably be interested in making sure the internal auditor is properly competent by verifying her education, certification, and work experience and by examining her previous work for this client. The CPA will also need to ensure that her work is properly reviewed. However, if all of that seems appropriate, the CPA can get direct assistance from the internal auditor in doing tests of controls.
Regulation
Ligano serves as an agent for Boswell. Boswell has only given Ligano the authority to carry out 4 specific actions on his behalf. However, Ligano carries out an action in Boswell’s name that is not one of those four. The agent (Ligano) lacked authority to legally bind the principal (Boswell). Boswell decides to affirm the act and do the specified work despite Ligano’s lack of authority. What action has Boswell taken?
A – Reimbursement by judgment
B – Ratification
C – Reference by priority
D – Reference by remainder
Answer is B
Whenever an agent (such as an employee) takes an action without proper authority, once informed, the principal must either ratify it (agree to be bound to the agreement) or repudiate it (inform the other party that the principal will not be bound by the agreement because the agent did not have proper authority).
BEC
The Swinton Company wants to open a new retail outlet in Manchester. Swinton officials go to the local bank and borrow $500,000 to start operations and agree to pay an annual interest rate of 8 percent. As part of the agreement, Swinton must maintain a cash balance in the local bank of $40,000. What is the effective cost to Swinton of borrowing this money for one year? (rounded)
A – 8.2 percent
B – 8.5 percent
C – 8.7 percent
D – 8.9 percent
Answer is C
Swinton only gets $460,000 from the bank to use because $40,000 must stay with the bank. The annual cost of the loan is an interest charge of $40,000 ($500,000 times 8 percent). If Swinton pays $40,000 per year to get $460,000, the annual cost of the loan is $40,000/$460,000 or 8.7 percent.
You’ve got roughly 8 weeks left in the July-August window. Let’s make the very best of that time to add points and get 75 and pass.
Joe Hoyle
Co-Founder and President
CPA Review for FREE
www.CPAreviewforFREE.com
Tuesday, June 14, 2011
New Practice Questions Added--Success Requires Courage
Try us FIRST before you spend your hard-earned money.
June 14, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
154 Weeks of Operation and 24,755,208 Page Views (an average of over 160,000 page views per week for approximately three solid years)
Lesson 98
From: Joe
(1) – Do you ever wonder whether all those other review programs ever pay any attention to CPA Review for FREE (www.CPAreviewforFREE.com)? If you ask them, they will tell you that they pay no attention to us at all.
Well, here’s some information you might find interesting.
---We are able to trace where the traffic to our website comes from. Last month, we had 269 visits from one of the major review courses—IN ONE MONTH! We don’t know what they were looking for but they sure were interested in our website.
---Another major review course now boasts on its website “Experience the best in CPA Exam Review for FREE. Just enter….” I even wrote that review program to suggest that they needed to hire someone who could come up with some new ideas of their own. At the very least, they could have made it sound different.
---Another CPA review website just recently started bragging that they are going to start giving away a “FREE study planner.” Oh my goodness, where did that idea come from, I wonder? What a coincidence.
Okay, here is my point – these other review programs are asking for thousands of your dollars. They have one goal: your money in their pockets And, yet, they can’t even come up with their own ideas.
--We are the innovative ones.
--We are the ones who have the ideas.
--We are the ones who care about you enough to do this week in and week out.
--All those other review programs have is just fancy marketing.
--Don’t be fooled.
--When’s the last time they had a creative educational idea that they didn’t get from us?
So, shouldn’t you go directly to the source?
Shouldn’t you trust the people who actually come up with the ideas and not the ones who follow 8 steps behind?
--Our 2,200 questions and answers are free – always have been, always will be.
--Our subscription service has hundreds of pages of content about each topic you need to know.
--Our subscription service has examples of ten task-based simulations per part and numerous written communication questions for BEC.
--Our subscription service provides a study guide to show you how to combine our free questions and our subscription service.
--Our subscription service cost $15 per month per part. Yeah – 50 cents per day.
What do we ask? Give us $15 and try one part for one month. At the end of that month, give us another $15 or give the other guys $2,500. That is a very reasonable approach. Worst case scenario – you lose $15. Best case scenario – you save thousands.
Why not go with the people who have all the real ideas and not the ones who obviously don’t?
(2) – In my last email, I talked all about our latest (and potentially greatest) addition to CPA Review: Points to Pass. Questions that you can work over and over until you can get them right every time. We have had a lot of questions about how soon that will be available. We plan to roll out the FAR version in the next week or two. Stay tuned.
(3) – If you are a college student, I want you to know that we will have an exhibit table at the Beta Alpha Psi convention in Denver this August. If you are a member of BAP and will be there, please stop by the booth and say hello. We have the niftiest gifts to hand out. I stole five of them for myself.
(4) – We posted the following note on our Facebook page a couple of days ago. This is exactly what we want to hear from each of you. This is what victory sounds like. This is what success feels like. This is what we want for you.
“I just wanted you to know that I used CPAreviewforfree.com and have just been issued my CPA license from the North Carolina Board of Accountancy. Thanks for all you have done to help me and so many others prepare for this exam. RB, CPA”
Our wants are simple – we want to see you get four grades of 75 so you can move on with your life and your career (with your money still in your pocket).
(5) – They played a great basketball game on Sunday night. It was a game that went back and forth. One team got ahead and then the other team caught up and got ahead. It proved to be the final game of the season because Dallas won and took the championship.
Those guys had been practicing and playing for at least 9-10 months day in and day out.
--Do you think they ever got tired along the way?
--Do you think they ever got discouraged?
--Do you think they ever wanted to slack off?
--Do you think they ever wanted to give up?
Of course they did – it is a long season that requires an incredible amount of work—day after day, week after week. But, they won the championship because they stuck with it. Even in the dark days, they kept pushing themselves on.
Giving up is easy. Slacking off is easy.
You know how it starts. One day you quit studying early and promise yourself to make up the time tomorrow. But, tomorrow, you study a bit less. Studying less feels good and you start to make excuses. When you don’t want to do something, any excuse will work. You start to give yourself permission to lose.
Sticking with it takes courage. Sticking with it takes heart.
If you ask the Dallas players today how success feels, I guarantee they will tell you it feels absolutely wonderful. They had a dream of being the champions and now they have the trophy. They will always know what being the champion feels like.
Your dream is to pass the CPA Exam.
Your dream is to get your scores and see 75 or more on all four parts.
Your dream is to be able to tell your friends and family that you have passed a very difficult test.
And, like a basketball championship, it is not easy. It is real work. They don’t give you points for smiling. They give you points because you are able to answer questions. And, you become able to do that through long hours of practice where you sit and answer questions and read answers and take notes.
They work in a hot gym for hours and hours. You sit in front of a computer screen and work question after question.
No, success is never easy. Success requires courage and heart.
Everyone wants success but not everyone is willing to do the work that it takes.
Dallas did it.
So can you.
(6) – To unsubscribe from these weekly email lessons, just scroll to the bottom of this screen or any other email lesson and click on “Unsubscribe.” We hope you’ll stay. We like talking with you. We appreciate it when you tell others about us (well, don’t tell those other review courses since they seem to like our ideas too much). We are glad to have you get these emails lessons.
Please stay just as long as you wish.
(7) – Let’s do some practice. More importantly, let’s add some points. My goal is always the same – after you read each of these questions and answers can you get them right the NEXT TIME you see them. If so, you are adding points and that’s the real secret to success on the CPA Exam.
Okay, here’s what I decided to do this week. I wanted to give you a feel for the information available in our subscription service. So, for each part of the exam, I went into our subscription service and picked a general topic (like inventory or contract law). Then, I randomly scrolled down through that topic and stopped. Wherever I landed, I took that material and used it to write the following questions for you. If you are using our subscription service, the answers to each question are readily available
FAR
The Lutz Company is using IFRS to prepare its annual financial statements. Under IFRS, revaluation of fixed assets is permitted but it must be done for an entire class of assets. One class of the company’s fixed assets has gone up in value. Another class of fixed assets has gone down in value. What is the impact of revaluation under IFRS?
A. Decrease in value reduces net income; increase in value increases accumulated other comprehensive income.
B. Decrease in value reduces net income; increase in value increases net income.
C. Decrease in value reduces accumulated other comprehensive income; increase in value increases accumulated other comprehensive income.
D. Decrease in value reduces accumulated other comprehensive income; increase in value increases net income.
Answer is A
Probably because of the conservatism that is inherent in much of financial accounting, if a class of assets goes down in value, IFRS reflects that revaluation as a reduction in net income. However, if a class of assets goes up in value, IFRS reflects that revaluation as an increase in accumulated other comprehensive income (within stockholders’ equity on the balance sheet) rather than in net income.
Auditing and Attestation
In auditing, what is meant by the term “inherent risk?”
A. It is the chance that a reporting entity will go bankrupt regardless of its current financial position.
B. It is the chance that a material misstatement will exist in a financial statement assertion, assuming no re¬lated internal controls are in place.
C. It is the chance that an independent auditor will make a mistake purely because of being a human being.
D. It is the chance that an independent auditor will see a material misstatement but not recognize that it a material misstatement.
Answer is B.
When an audit is started, the independent auditor needs to assess the inherent risk which is the chance that a material misstatement exists in one of the financial statement assertions. Companies with great accounting systems, well-trained employees and transactions that do not contain a lot of risk may have virtually no inherent risk. Material misstatements probably will not occur. Other companies with poorly designed accounting systems or untrained employees or very risky transactions may have an incredible amount of inherent risk. As you can imagine, the work that the independent auditor does to reduce audit risk to an acceptably low level is impacted significantly by the assessed level of inherent risk.
BEC
The Jones Corporation is publicly-held and subject to the rules of the SEC. In the current period, to reduce its registration costs, the company issued unregistered bonds directly to a specific number of accredited investors. This practice is common. What is it called?
A. Undisclosed sale
B. Private placement
C. Accredited sale
D. Approved sale
Answer is B
The SEC has certain rules that permit the private placement of securities. These rules allow the sale of securities with only a limited amount of registration and disclosure information which will save the company money. Such an issuance is referred to as a private placement.
Regulation
The Lambert Company bought a piece of equipment this year on October 9. The company’s tax return is filed on a calendar year basis. MACRS (the Modified Accelerated Cost Recovery ) is used to determine depreciation for income tax purposes. Which of the following is true as to the amount of depreciation that can be recognized in this initial year?
A. Lambert can take no depreciation
B. Lambert should take a full year of depreciation.
C. Lambert can take depreciation for 3/12 of the year.
D. Lambert can take depreciation for 1/2 of the year.
Answer is D.
According to the rules of MACRS, personal property is treated as placed in service or disposed of at the midpoint of the taxable year, resulting in a half-year of depreciation for the year in which the property is placed in service or disposed of by the company.
Hey, it is a beautiful day here in Richmond. I hope it is beautiful wherever you are today.
Work hard
Add points
We really do want you to pass and get on with your lives.
Do me a favor – give someone a hug today and tell them that you are cheering for them. It might make all the difference in the world to that person.
Joe Hoyle
Co-Founder and President
CPA Review for FREE
www.CPAreviewforFREE.com
June 14, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
154 Weeks of Operation and 24,755,208 Page Views (an average of over 160,000 page views per week for approximately three solid years)
Lesson 98
From: Joe
(1) – Do you ever wonder whether all those other review programs ever pay any attention to CPA Review for FREE (www.CPAreviewforFREE.com)? If you ask them, they will tell you that they pay no attention to us at all.
Well, here’s some information you might find interesting.
---We are able to trace where the traffic to our website comes from. Last month, we had 269 visits from one of the major review courses—IN ONE MONTH! We don’t know what they were looking for but they sure were interested in our website.
---Another major review course now boasts on its website “Experience the best in CPA Exam Review for FREE. Just enter….” I even wrote that review program to suggest that they needed to hire someone who could come up with some new ideas of their own. At the very least, they could have made it sound different.
---Another CPA review website just recently started bragging that they are going to start giving away a “FREE study planner.” Oh my goodness, where did that idea come from, I wonder? What a coincidence.
Okay, here is my point – these other review programs are asking for thousands of your dollars. They have one goal: your money in their pockets And, yet, they can’t even come up with their own ideas.
--We are the innovative ones.
--We are the ones who have the ideas.
--We are the ones who care about you enough to do this week in and week out.
--All those other review programs have is just fancy marketing.
--Don’t be fooled.
--When’s the last time they had a creative educational idea that they didn’t get from us?
So, shouldn’t you go directly to the source?
Shouldn’t you trust the people who actually come up with the ideas and not the ones who follow 8 steps behind?
--Our 2,200 questions and answers are free – always have been, always will be.
--Our subscription service has hundreds of pages of content about each topic you need to know.
--Our subscription service has examples of ten task-based simulations per part and numerous written communication questions for BEC.
--Our subscription service provides a study guide to show you how to combine our free questions and our subscription service.
--Our subscription service cost $15 per month per part. Yeah – 50 cents per day.
What do we ask? Give us $15 and try one part for one month. At the end of that month, give us another $15 or give the other guys $2,500. That is a very reasonable approach. Worst case scenario – you lose $15. Best case scenario – you save thousands.
Why not go with the people who have all the real ideas and not the ones who obviously don’t?
(2) – In my last email, I talked all about our latest (and potentially greatest) addition to CPA Review: Points to Pass. Questions that you can work over and over until you can get them right every time. We have had a lot of questions about how soon that will be available. We plan to roll out the FAR version in the next week or two. Stay tuned.
(3) – If you are a college student, I want you to know that we will have an exhibit table at the Beta Alpha Psi convention in Denver this August. If you are a member of BAP and will be there, please stop by the booth and say hello. We have the niftiest gifts to hand out. I stole five of them for myself.
(4) – We posted the following note on our Facebook page a couple of days ago. This is exactly what we want to hear from each of you. This is what victory sounds like. This is what success feels like. This is what we want for you.
“I just wanted you to know that I used CPAreviewforfree.com and have just been issued my CPA license from the North Carolina Board of Accountancy. Thanks for all you have done to help me and so many others prepare for this exam. RB, CPA”
Our wants are simple – we want to see you get four grades of 75 so you can move on with your life and your career (with your money still in your pocket).
(5) – They played a great basketball game on Sunday night. It was a game that went back and forth. One team got ahead and then the other team caught up and got ahead. It proved to be the final game of the season because Dallas won and took the championship.
Those guys had been practicing and playing for at least 9-10 months day in and day out.
--Do you think they ever got tired along the way?
--Do you think they ever got discouraged?
--Do you think they ever wanted to slack off?
--Do you think they ever wanted to give up?
Of course they did – it is a long season that requires an incredible amount of work—day after day, week after week. But, they won the championship because they stuck with it. Even in the dark days, they kept pushing themselves on.
Giving up is easy. Slacking off is easy.
You know how it starts. One day you quit studying early and promise yourself to make up the time tomorrow. But, tomorrow, you study a bit less. Studying less feels good and you start to make excuses. When you don’t want to do something, any excuse will work. You start to give yourself permission to lose.
Sticking with it takes courage. Sticking with it takes heart.
If you ask the Dallas players today how success feels, I guarantee they will tell you it feels absolutely wonderful. They had a dream of being the champions and now they have the trophy. They will always know what being the champion feels like.
Your dream is to pass the CPA Exam.
Your dream is to get your scores and see 75 or more on all four parts.
Your dream is to be able to tell your friends and family that you have passed a very difficult test.
And, like a basketball championship, it is not easy. It is real work. They don’t give you points for smiling. They give you points because you are able to answer questions. And, you become able to do that through long hours of practice where you sit and answer questions and read answers and take notes.
They work in a hot gym for hours and hours. You sit in front of a computer screen and work question after question.
No, success is never easy. Success requires courage and heart.
Everyone wants success but not everyone is willing to do the work that it takes.
Dallas did it.
So can you.
(6) – To unsubscribe from these weekly email lessons, just scroll to the bottom of this screen or any other email lesson and click on “Unsubscribe.” We hope you’ll stay. We like talking with you. We appreciate it when you tell others about us (well, don’t tell those other review courses since they seem to like our ideas too much). We are glad to have you get these emails lessons.
Please stay just as long as you wish.
(7) – Let’s do some practice. More importantly, let’s add some points. My goal is always the same – after you read each of these questions and answers can you get them right the NEXT TIME you see them. If so, you are adding points and that’s the real secret to success on the CPA Exam.
Okay, here’s what I decided to do this week. I wanted to give you a feel for the information available in our subscription service. So, for each part of the exam, I went into our subscription service and picked a general topic (like inventory or contract law). Then, I randomly scrolled down through that topic and stopped. Wherever I landed, I took that material and used it to write the following questions for you. If you are using our subscription service, the answers to each question are readily available
FAR
The Lutz Company is using IFRS to prepare its annual financial statements. Under IFRS, revaluation of fixed assets is permitted but it must be done for an entire class of assets. One class of the company’s fixed assets has gone up in value. Another class of fixed assets has gone down in value. What is the impact of revaluation under IFRS?
A. Decrease in value reduces net income; increase in value increases accumulated other comprehensive income.
B. Decrease in value reduces net income; increase in value increases net income.
C. Decrease in value reduces accumulated other comprehensive income; increase in value increases accumulated other comprehensive income.
D. Decrease in value reduces accumulated other comprehensive income; increase in value increases net income.
Answer is A
Probably because of the conservatism that is inherent in much of financial accounting, if a class of assets goes down in value, IFRS reflects that revaluation as a reduction in net income. However, if a class of assets goes up in value, IFRS reflects that revaluation as an increase in accumulated other comprehensive income (within stockholders’ equity on the balance sheet) rather than in net income.
Auditing and Attestation
In auditing, what is meant by the term “inherent risk?”
A. It is the chance that a reporting entity will go bankrupt regardless of its current financial position.
B. It is the chance that a material misstatement will exist in a financial statement assertion, assuming no re¬lated internal controls are in place.
C. It is the chance that an independent auditor will make a mistake purely because of being a human being.
D. It is the chance that an independent auditor will see a material misstatement but not recognize that it a material misstatement.
Answer is B.
When an audit is started, the independent auditor needs to assess the inherent risk which is the chance that a material misstatement exists in one of the financial statement assertions. Companies with great accounting systems, well-trained employees and transactions that do not contain a lot of risk may have virtually no inherent risk. Material misstatements probably will not occur. Other companies with poorly designed accounting systems or untrained employees or very risky transactions may have an incredible amount of inherent risk. As you can imagine, the work that the independent auditor does to reduce audit risk to an acceptably low level is impacted significantly by the assessed level of inherent risk.
BEC
The Jones Corporation is publicly-held and subject to the rules of the SEC. In the current period, to reduce its registration costs, the company issued unregistered bonds directly to a specific number of accredited investors. This practice is common. What is it called?
A. Undisclosed sale
B. Private placement
C. Accredited sale
D. Approved sale
Answer is B
The SEC has certain rules that permit the private placement of securities. These rules allow the sale of securities with only a limited amount of registration and disclosure information which will save the company money. Such an issuance is referred to as a private placement.
Regulation
The Lambert Company bought a piece of equipment this year on October 9. The company’s tax return is filed on a calendar year basis. MACRS (the Modified Accelerated Cost Recovery ) is used to determine depreciation for income tax purposes. Which of the following is true as to the amount of depreciation that can be recognized in this initial year?
A. Lambert can take no depreciation
B. Lambert should take a full year of depreciation.
C. Lambert can take depreciation for 3/12 of the year.
D. Lambert can take depreciation for 1/2 of the year.
Answer is D.
According to the rules of MACRS, personal property is treated as placed in service or disposed of at the midpoint of the taxable year, resulting in a half-year of depreciation for the year in which the property is placed in service or disposed of by the company.
Hey, it is a beautiful day here in Richmond. I hope it is beautiful wherever you are today.
Work hard
Add points
We really do want you to pass and get on with your lives.
Do me a favor – give someone a hug today and tell them that you are cheering for them. It might make all the difference in the world to that person.
Joe Hoyle
Co-Founder and President
CPA Review for FREE
www.CPAreviewforFREE.com
Tuesday, June 7, 2011
Go Forth Boldly and Challenge the CPA Exam
Try us FIRST before you spend your hard-earned money.
June 7, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
153 Weeks of Operation and 24,621,047 Page Views
Lesson 97
From: Joe
(1) – We just added a few additional Tips to our “Tips for Success” column on our website (www.CPAreviewforFREE.com). Go to the homepage and you’ll see “CPA Exam Resources” in the lower left. “Tips for Success” should be the fourth article on that list.
(2) – I am truly excited that, in two weeks, we will be adding a brand new product to our list. We are always thinking of ways to help you pass. Okay, for now, it is only for FAR. It addresses the concern that every candidate must face:
--You work a question.
--You miss the question.
--You read the answer carefully.
--You think you understand the answer so you want to work another question again to see if you can get it correct this time. (Have you really learned it?) However, you already know the answer to that question so it really doesn’t prove anything to do the same question again.
What you really want is another question in the same category that you can keep working as many times as you want as long as you want--unlimited questions! Yea, that would be a big help.
Welcome to: POINTS TO PASS
If you subscribe to this program, the software will generate a stream of new questions so that you can try again (and again and again) until you are sure you have mastered the material. The best way to practice is to practice and Points to Pass allows you to do that for as long as you want.
Points to Pass will generate an entirely new question.
If you really understand the concept, you will get the correct answer. If not, you can read the answer carefully and try again with a newly generated question until you are comfortable with this computation.
I just think this is the absolute greatest way ever to prepare for the CPA Exam. And we will have FAR available on a subscription basis in about two weeks – stay tuned.
(3) – I was in Norfolk, Virginia a few weeks back on a Sunday morning. I walked into an old-timey bookstore, the kind you used to see before they started getting to be the size of large barns. The first thing I noticed was a little sign that asked the question “what would you set out to do in life if you had no fear of failure?”
Interesting question – one that I have thought a lot about since that morning. We are all ruled (at least somewhat) by fear. There are lots of things that we really want to do except we are afraid to try. We are timid. We all hold back because we worry about what might happen if we do not succeed. Instead of focusing on what we might be able to accomplish, we try to stay totally safe. Failure gets built up in our minds until it is this huge ogre that is going to hurt us with an ax.
Come on, really?
I’ve known lots of people who became so obsessed with the possibility of failure that they would not even take the exam. They were never able to walk in and take it for fear of failure.
What will really happen if you fail the CPA Exam?
--You’ll feel bad for a day or two.
--You’ll wonder how you could have gotten a few more questions correct.
--You’ll fuss that you got too many weird questions.
--You’ll wish you had been a bit more careful and managed your time better.
And then you’ll move on and start thinking about getting back into your preparation. You’ll start adding points again and working to do things slightly better. Life is full of trial and error – you’ll start working on doing better the next time so you will pass.
So, put all thoughts of failure out of your mind. Such thoughts are never helpful and, in truth, those thoughts will just seem a lot scarier than necessary. The fear of failure will hold you back and make you cautious. Thinking about failure doesn’t do you any good and it will probably make you play scared.
I don’t like playing scared. That’s not what life is all about. Instead of thinking about failure, I want you to have Power Thoughts.
--I am going to learn this stuff.
--If other people can do this, so can I.
--It just takes time and I’m going to give it the time that it needs.
--If I add a point or two every day, I’ll be able to pass in no time.
--I will make the time today to get in the study that I need.
--I can make this happen.
--I can work one more question and read one more answer.
You need Power Thoughts. You need Power Thoughts every day to keep up your spirits. You don’t need to play scared. I recently heard a person mention a favorite saying of mine: “Why not go out on a limb? Isn't that where the fruit is?”
Go after the exam, don’t let it come after you.
Go after those hours of study.
Go after the knowledge you need.
Go after those points and don’t quit going for them until you have 75.
Go boldly after the CPA Exam. Nothing is accomplished by being afraid.
(4) – We love having 20,000 subscribers – we hope you’ll go out and get us some more subscribers. Explain to people what they are missing.
However, if you ever decide that you want to unsubscribe, just scroll to the bottom of this email and click on “unsubscribe.” You can do that if and when you are ready to stop receiving these email messages.
(5) – One of my former students came by my office this afternoon to talk about the CPA Exam. She graduated a few weeks ago and is studying hard so she can knock out some/all of the exam over the summer. She asked specifically about the three written communication questions included in BEC.
The best thing you can do for the written communications questions is to go to www.cpa-exam.org and click on Tutorial and Sample Tests. Then, select the Sample Tests for downloading. They will give you five multiple-choice questions. After you submit those answers, they give you two examples of written communications questions. That shows you the kinds of questions that you are going to see.
It is very important to understand that they include the following information (I may have missed a word or two but this is the basic idea).
“REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for infor¬mation that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organi¬zation, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation.”
In other words, write something that is clear and understandable and addresses the question in a professional manner. Make it look like it was written by a CPA.
I gave my student the following example: you might be told that a client runs a manufacturing operation and wants you to suggest a method for reporting a by-product that is created as a result of this process. That seemed like a reasonable question that a CPA might encounter in practice and would fall under the BEC topics.
My student then asked the obvious question. “What if I don’t know a specific method for handling a by-product? Do I just leave the answer blank and get a zero?”
Absolutely not!!! The answer is graded twice. First, it is read to determine whether it is “on topic” – in other words is the written answer about the accounting for by-products? If it is not, if you have written about deferred taxes or contract law, you get a zero regardless of how well written the answer is. The answer has to address the question.
If your answer is “on topic,” then the question goes through a second grading where points are given for your use of the English language as described above. Notice, that the second grading is about the use of the language and not about whether the answer is right or wrong. The rest of the BEC exam tests your knowledge of content. That is not the purpose of the written communication questions. So, you do have to be “on content,” you do have to write about the subject in question. After that, though, the points are given based on proper use of English and not on how well you did getting the answer perfectly correct.
(6) – Remember a free study guide is available to show you how to combine our free questions and answers with our content subscription service ($15 per month per part) if you’ll identify the part that you are going to study next in an email to Jhoyle@cpareviewforfree.com. It is not fair to ask you to spend money without showing you how the program works.
(7) – Review – let’s add some points. Let’s do some practice.
FAR – Just to show you how a program like Points to Pass works, I went to our free question and answer data base and selected a question and answer. Then, I made some changes so that you can try the topic again.
You can find the following question in our database of questions:
(a) - The James Company starts Year One with accounts receivable of $370,000 and an allowance for doubtful accounts of $22,200 (a credit balance). During the year, credit sales of $1.9 million were made and cash of $1.2 million was collected. Accounts with a total balance of $50,000 were written off during the period as uncollectible. Company officials believe that 6 percent of ending accounts receivables will eventually prove to be uncollectible. What should James Company report as its bad debt expense for this year?
A - $61,200
B - $68,400
C - $89,000
D - $92,000
The answer is C.
In applying the percentage of receivables approach to bad debts, the allowance for doubtful accounts is the balance being estimated. The ending receivable balance is $370,000 plus $1.9 million less $1.2 million less $50,000 or $1,020,000. Because 6 percent is the estimated amount of uncollectible accounts, the company needs to report an allowance for doubtful accounts of $61,200 ($1,020,000 x 6 percent). Bad debt expense is the amount of adjustment that is needed so that the year-end allowance reports this $61,200. Prior to the adjustment, the allowance has a debit balance of $27,800 (the original $22,200 credit reduced by $50,000 in accounts written off). The company must turn the $27,800 debit balance into the proper $61,200 credit balance. To do so, an expense of $89,000 is recognized.
**
Let’s assume you missed the above question, you read the answer carefully and now you want to try again. You tell Points to Pass to show you a second question on this topic and here is what you get.
(b) The Robertson Company starts Year One with accounts receivable of $510,000 and an allowance for doubtful accounts of $41,000 (a credit balance). During the year, credit sales of $2.3 million were made and cash of $1.9 million was collected. Accounts with a total balance of $60,000 were written off during the period as uncollectible. Company officials believe that 5 percent of ending accounts receivables will eventually prove to be uncollectible. What should Robertson Company report as its bad debt expense for this year?
A - $42,500
B - $61,500
C - $64,500
D - $69,500
The answer is B.
In applying the percentage of receivables approach to bad debts, the allowance for doubtful accounts is the balance being estimated. The ending receivable balance is $510,000 plus $2.3 million less $1.9 million less $60,000 or $850,000. Because 5 percent is the estimated amount of uncollectible accounts, the company needs to report an allowance for doubtful accounts of $42,500 ($850,000 x 5 percent). Bad debt expense is the amount of adjustment that is needed so that the year-end allowance reports this $42,500. Prior to the adjustment, the allowance has a debit balance of $19,000 (the original $41,000 credit reduced by $60,000 in accounts written off). The company must turn the $19,000 debit balance into the proper $42,500 credit balance. To do so, an expense of $61,500 is recognized.
AND, you can keep requesting questions under Points to Pass until you know exactly how to work this question. Every time I see this I just know how much it will help YOU to pass the FAR portion of the CPA Exam.
Auditing and Attestation
The treasurer of a company has stolen $10,000 in cash from the company. At the end of the year, he is afraid that he will be caught so he transfers $10,000 from one company bank account to another. He records the deposit on December 31 of the first year so that $10,000 cash is added. He does not record the withdrawal from the other account until January 1 of the second year. As a result, for one day, the company looks like it has $10,000 more than it really does. What is this deception called?
A. Kiting
B. Lapping
C. Simultaneous Origination
D. Zero Line Fraud
Answer is A
When money is moved from one account to another but the deposit and the withdrawal are recorded in different time periods to inflate the amount of cash being reported, the term “kiting” is used to identify that fraud.
BEC
A company spends $100,000 to produce 20,000 pounds of product A. However, in that process, 3,000 pounds of product Z are produced. It is viewed as a by-product because it can only be sold for $5 per pound after spending $3 per pound to process it enough to be sold. The company chooses to record this by-product at its net realizable value. What is the cost of a pound of product A?
A. $4.25 per pound
B. $4.50 per pound
C. $4.70 per pound
D. $5.00 per pound
Answer is C
The net realizable value of the by-product is the $5.00 sales price less the $3.00 to be spent on processing or $2.00 per pound. For 3,000 pounds, that is a net realizable value of $6,000. The by-product is recorded at its net realizable value so $6,000 is moved from the $100,000 cost into a by-product inventory account. That leaves $94,000 assigned just to product A. There are 20,000 pounds of product A so the cost is $4.70 per pound.
Regulation
Mr. and Mrs. Stremble were married at the age of 30 and lived together until the current year when Mrs. Stremble died at the age of 70. Mr. Stremble received $100,000 in cash from a life insurance policy. They had paid, as a couple, a total of $40,000 in premiums over the years on this policy. What amount of income must he include in his current tax return as a result of receiving the $100,000 payment?
A. Zero
B. $60,000
C. $80,000
D. $100,000
Answer is A.
Life insurance premiums paid by the couple were never deductible but the proceeds, when received at the time of death, are not taxable. Money from a life insurance policy is not viewed as “income” and, therefore, is not taxed as taxable income.
Have a great week. It has been a beautiful day here in Richmond. Enjoy each day but make sure to make time to do your studies and add some points. Don’t be afraid – go forward boldly.
Joe Hoyle
President
CPA review for FREE
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June 7, 2011
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Lesson 97
From: Joe
(1) – We just added a few additional Tips to our “Tips for Success” column on our website (www.CPAreviewforFREE.com). Go to the homepage and you’ll see “CPA Exam Resources” in the lower left. “Tips for Success” should be the fourth article on that list.
(2) – I am truly excited that, in two weeks, we will be adding a brand new product to our list. We are always thinking of ways to help you pass. Okay, for now, it is only for FAR. It addresses the concern that every candidate must face:
--You work a question.
--You miss the question.
--You read the answer carefully.
--You think you understand the answer so you want to work another question again to see if you can get it correct this time. (Have you really learned it?) However, you already know the answer to that question so it really doesn’t prove anything to do the same question again.
What you really want is another question in the same category that you can keep working as many times as you want as long as you want--unlimited questions! Yea, that would be a big help.
Welcome to: POINTS TO PASS
If you subscribe to this program, the software will generate a stream of new questions so that you can try again (and again and again) until you are sure you have mastered the material. The best way to practice is to practice and Points to Pass allows you to do that for as long as you want.
Points to Pass will generate an entirely new question.
If you really understand the concept, you will get the correct answer. If not, you can read the answer carefully and try again with a newly generated question until you are comfortable with this computation.
I just think this is the absolute greatest way ever to prepare for the CPA Exam. And we will have FAR available on a subscription basis in about two weeks – stay tuned.
(3) – I was in Norfolk, Virginia a few weeks back on a Sunday morning. I walked into an old-timey bookstore, the kind you used to see before they started getting to be the size of large barns. The first thing I noticed was a little sign that asked the question “what would you set out to do in life if you had no fear of failure?”
Interesting question – one that I have thought a lot about since that morning. We are all ruled (at least somewhat) by fear. There are lots of things that we really want to do except we are afraid to try. We are timid. We all hold back because we worry about what might happen if we do not succeed. Instead of focusing on what we might be able to accomplish, we try to stay totally safe. Failure gets built up in our minds until it is this huge ogre that is going to hurt us with an ax.
Come on, really?
I’ve known lots of people who became so obsessed with the possibility of failure that they would not even take the exam. They were never able to walk in and take it for fear of failure.
What will really happen if you fail the CPA Exam?
--You’ll feel bad for a day or two.
--You’ll wonder how you could have gotten a few more questions correct.
--You’ll fuss that you got too many weird questions.
--You’ll wish you had been a bit more careful and managed your time better.
And then you’ll move on and start thinking about getting back into your preparation. You’ll start adding points again and working to do things slightly better. Life is full of trial and error – you’ll start working on doing better the next time so you will pass.
So, put all thoughts of failure out of your mind. Such thoughts are never helpful and, in truth, those thoughts will just seem a lot scarier than necessary. The fear of failure will hold you back and make you cautious. Thinking about failure doesn’t do you any good and it will probably make you play scared.
I don’t like playing scared. That’s not what life is all about. Instead of thinking about failure, I want you to have Power Thoughts.
--I am going to learn this stuff.
--If other people can do this, so can I.
--It just takes time and I’m going to give it the time that it needs.
--If I add a point or two every day, I’ll be able to pass in no time.
--I will make the time today to get in the study that I need.
--I can make this happen.
--I can work one more question and read one more answer.
You need Power Thoughts. You need Power Thoughts every day to keep up your spirits. You don’t need to play scared. I recently heard a person mention a favorite saying of mine: “Why not go out on a limb? Isn't that where the fruit is?”
Go after the exam, don’t let it come after you.
Go after those hours of study.
Go after the knowledge you need.
Go after those points and don’t quit going for them until you have 75.
Go boldly after the CPA Exam. Nothing is accomplished by being afraid.
(4) – We love having 20,000 subscribers – we hope you’ll go out and get us some more subscribers. Explain to people what they are missing.
However, if you ever decide that you want to unsubscribe, just scroll to the bottom of this email and click on “unsubscribe.” You can do that if and when you are ready to stop receiving these email messages.
(5) – One of my former students came by my office this afternoon to talk about the CPA Exam. She graduated a few weeks ago and is studying hard so she can knock out some/all of the exam over the summer. She asked specifically about the three written communication questions included in BEC.
The best thing you can do for the written communications questions is to go to www.cpa-exam.org and click on Tutorial and Sample Tests. Then, select the Sample Tests for downloading. They will give you five multiple-choice questions. After you submit those answers, they give you two examples of written communications questions. That shows you the kinds of questions that you are going to see.
It is very important to understand that they include the following information (I may have missed a word or two but this is the basic idea).
“REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for infor¬mation that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organi¬zation, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation.”
In other words, write something that is clear and understandable and addresses the question in a professional manner. Make it look like it was written by a CPA.
I gave my student the following example: you might be told that a client runs a manufacturing operation and wants you to suggest a method for reporting a by-product that is created as a result of this process. That seemed like a reasonable question that a CPA might encounter in practice and would fall under the BEC topics.
My student then asked the obvious question. “What if I don’t know a specific method for handling a by-product? Do I just leave the answer blank and get a zero?”
Absolutely not!!! The answer is graded twice. First, it is read to determine whether it is “on topic” – in other words is the written answer about the accounting for by-products? If it is not, if you have written about deferred taxes or contract law, you get a zero regardless of how well written the answer is. The answer has to address the question.
If your answer is “on topic,” then the question goes through a second grading where points are given for your use of the English language as described above. Notice, that the second grading is about the use of the language and not about whether the answer is right or wrong. The rest of the BEC exam tests your knowledge of content. That is not the purpose of the written communication questions. So, you do have to be “on content,” you do have to write about the subject in question. After that, though, the points are given based on proper use of English and not on how well you did getting the answer perfectly correct.
(6) – Remember a free study guide is available to show you how to combine our free questions and answers with our content subscription service ($15 per month per part) if you’ll identify the part that you are going to study next in an email to Jhoyle@cpareviewforfree.com. It is not fair to ask you to spend money without showing you how the program works.
(7) – Review – let’s add some points. Let’s do some practice.
FAR – Just to show you how a program like Points to Pass works, I went to our free question and answer data base and selected a question and answer. Then, I made some changes so that you can try the topic again.
You can find the following question in our database of questions:
(a) - The James Company starts Year One with accounts receivable of $370,000 and an allowance for doubtful accounts of $22,200 (a credit balance). During the year, credit sales of $1.9 million were made and cash of $1.2 million was collected. Accounts with a total balance of $50,000 were written off during the period as uncollectible. Company officials believe that 6 percent of ending accounts receivables will eventually prove to be uncollectible. What should James Company report as its bad debt expense for this year?
A - $61,200
B - $68,400
C - $89,000
D - $92,000
The answer is C.
In applying the percentage of receivables approach to bad debts, the allowance for doubtful accounts is the balance being estimated. The ending receivable balance is $370,000 plus $1.9 million less $1.2 million less $50,000 or $1,020,000. Because 6 percent is the estimated amount of uncollectible accounts, the company needs to report an allowance for doubtful accounts of $61,200 ($1,020,000 x 6 percent). Bad debt expense is the amount of adjustment that is needed so that the year-end allowance reports this $61,200. Prior to the adjustment, the allowance has a debit balance of $27,800 (the original $22,200 credit reduced by $50,000 in accounts written off). The company must turn the $27,800 debit balance into the proper $61,200 credit balance. To do so, an expense of $89,000 is recognized.
**
Let’s assume you missed the above question, you read the answer carefully and now you want to try again. You tell Points to Pass to show you a second question on this topic and here is what you get.
(b) The Robertson Company starts Year One with accounts receivable of $510,000 and an allowance for doubtful accounts of $41,000 (a credit balance). During the year, credit sales of $2.3 million were made and cash of $1.9 million was collected. Accounts with a total balance of $60,000 were written off during the period as uncollectible. Company officials believe that 5 percent of ending accounts receivables will eventually prove to be uncollectible. What should Robertson Company report as its bad debt expense for this year?
A - $42,500
B - $61,500
C - $64,500
D - $69,500
The answer is B.
In applying the percentage of receivables approach to bad debts, the allowance for doubtful accounts is the balance being estimated. The ending receivable balance is $510,000 plus $2.3 million less $1.9 million less $60,000 or $850,000. Because 5 percent is the estimated amount of uncollectible accounts, the company needs to report an allowance for doubtful accounts of $42,500 ($850,000 x 5 percent). Bad debt expense is the amount of adjustment that is needed so that the year-end allowance reports this $42,500. Prior to the adjustment, the allowance has a debit balance of $19,000 (the original $41,000 credit reduced by $60,000 in accounts written off). The company must turn the $19,000 debit balance into the proper $42,500 credit balance. To do so, an expense of $61,500 is recognized.
AND, you can keep requesting questions under Points to Pass until you know exactly how to work this question. Every time I see this I just know how much it will help YOU to pass the FAR portion of the CPA Exam.
Auditing and Attestation
The treasurer of a company has stolen $10,000 in cash from the company. At the end of the year, he is afraid that he will be caught so he transfers $10,000 from one company bank account to another. He records the deposit on December 31 of the first year so that $10,000 cash is added. He does not record the withdrawal from the other account until January 1 of the second year. As a result, for one day, the company looks like it has $10,000 more than it really does. What is this deception called?
A. Kiting
B. Lapping
C. Simultaneous Origination
D. Zero Line Fraud
Answer is A
When money is moved from one account to another but the deposit and the withdrawal are recorded in different time periods to inflate the amount of cash being reported, the term “kiting” is used to identify that fraud.
BEC
A company spends $100,000 to produce 20,000 pounds of product A. However, in that process, 3,000 pounds of product Z are produced. It is viewed as a by-product because it can only be sold for $5 per pound after spending $3 per pound to process it enough to be sold. The company chooses to record this by-product at its net realizable value. What is the cost of a pound of product A?
A. $4.25 per pound
B. $4.50 per pound
C. $4.70 per pound
D. $5.00 per pound
Answer is C
The net realizable value of the by-product is the $5.00 sales price less the $3.00 to be spent on processing or $2.00 per pound. For 3,000 pounds, that is a net realizable value of $6,000. The by-product is recorded at its net realizable value so $6,000 is moved from the $100,000 cost into a by-product inventory account. That leaves $94,000 assigned just to product A. There are 20,000 pounds of product A so the cost is $4.70 per pound.
Regulation
Mr. and Mrs. Stremble were married at the age of 30 and lived together until the current year when Mrs. Stremble died at the age of 70. Mr. Stremble received $100,000 in cash from a life insurance policy. They had paid, as a couple, a total of $40,000 in premiums over the years on this policy. What amount of income must he include in his current tax return as a result of receiving the $100,000 payment?
A. Zero
B. $60,000
C. $80,000
D. $100,000
Answer is A.
Life insurance premiums paid by the couple were never deductible but the proceeds, when received at the time of death, are not taxable. Money from a life insurance policy is not viewed as “income” and, therefore, is not taxed as taxable income.
Have a great week. It has been a beautiful day here in Richmond. Enjoy each day but make sure to make time to do your studies and add some points. Don’t be afraid – go forward boldly.
Joe Hoyle
President
CPA review for FREE
www.CPAreviewforFREE.com
Tuesday, May 31, 2011
Words for Success--Do the Work and Pass the CPA Exam
Try us FIRST before you spend your hard-earned money.
May 31, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
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Lesson 96
From: Joe
(1) – We have distributed an amazing number of FREE study guides to the folks who have identified their next exam in an email to Jhoyle@cpareviewforfree.com. These study guides explain how to combine our 2,200 free questions and answers with our subscription service to create a comprehensive CPA Exam review program for $15 per month per part (50 cents per day – try to beat that on eBay).
However, the question we always get is: “Can you explain how your subscription service actually works?” Seems like a reasonable question. So, at the end of this email, I’ll give you a demonstration of one very small part of our subscription service. I hope that proves helpful in understanding how our program will get you through this exam for a whole lot less than $2,500.
(2) – We’ve added something new to the home page of our website (www.CPAreviewforFREE.com). Under our CPA Exam Resources section, we already have three important articles:
--Using CPA Review for FREE to Prepare for the CPA Exam.
--Applying for the CPA Exam
--Structure of the CPA Exam
We believe all of these would be helpful to every candidate.
We have now added a fourth article: “Tips for Success.” Over the years, we have distributed scores of tips for success on our Facebook page. Over the last few days, I have gathered my top 60 or so of these tips. Because we have so many, I posted the first ten this week and I’ll post another batch every week or two until they are all posted.
Go to www.CPAreviewforFREE.com. Go to “CPA Exam Resources” on the home page. Click on “Tips for Success.” I probably wouldn’t sit down and read this material all at once like you might a novel. Most people don’t need 60 tips for success at one time. Instead, every day or two, if you feel the need for some encouragement or a boost of energy, go to the website and read a couple.
We hope they help. As always, we are trying our best to do everything we can possibly do to assist you in getting the 75 points you need to pass the CPA Exam. Hope our Tips for Success makes the journey a bit easier.
(3) – I attended a lovely wedding here in Richmond this past Sunday. It was held in a beautiful church that was constructed in 1848. Because of the US Civil War, there are few buildings standing in Richmond that are so old.
During the ceremony, the pastor talked directly to the young couple. He told them there are certain words that they should say to each other so often, during their lives together, that they wear those words out. “Wear these words out” was kind of the theme of his remarks. To the bride and groom, he suggested the words: “I am sorry” and “I’m so very grateful.” Probably good advice for any newlyweds (or anyone else, for that matter).
I liked that idea of “wearing words out.” So, I started thinking: If I were talking to my CPA Exam candidates, what words would I suggest that they “wear out” over the course of their study.
Here’s my suggestion for words that you might want to wear out over the next few weeks or months as you prepare to pass the CPA Exam.
"I'm tired but I can still study a bit longer.” Too many people obsess over being tired and let it control what they can accomplish. At the first hint of tired, they give up and quit. Successful people get to the point where they are tired and then they keep going. That is one true mark of people who succeed in this life.
“I missed this problem but now I see how it works.” Passing the CPA Exam is all about making progress. If you get a question correct, you really learn nothing. If you miss a question and move on, you really learn nothing. But the most important moment is when you miss a question, read the answer carefully, and figure out how to work it right the next time. Now, that’s success.
“I’m not trying to be perfect; I just want to answer enough questions to pass.” It is very easy to get stuck trying to learn it all. I’ve known way too many people who gave up before they ever took the exam because they couldn’t achieve perfection. Don’t worry about trying to answer every question correctly. Once again, as above, the only important goal is making progress.
“The CPA Exam is a mile wide and an inch deep.” The CPA Exam that you take will try to cover a little bit about everything in the world of accounting, auditing, tax, and the like. As you study, it is much more important to cover all the topics a little bit than to cover any topic in too much depth and detail.
“When I get to the exam, I’m going to watch my time closely.” I’m convinced that, once you have put in your 60-100 hours of preparation for each part, the biggest problem is time management during the exam. If you rush too fast, you’ll make careless mistakes. If you work too slowly, you won’t finish. It is very important, as I said in my previous lesson (Lesson 95 that can be found in the Blog Archives in the right hand navigation), that you get used to working at an appropriate “exam speed.”
Okay, I could probably come up with 25 other sets of words to wear out as you prepare for the CPA Exam but these five form a pretty good foundation. I’m not sure that I wouldn’t write them down and tape them to your wall and read through them each and every day.
Wear those words out.
(4) – Personal note to all 20,000 of our subscribers (yeah, this means YOU). We love having you. We really hope we provide a benefit. I never go anywhere (like a wedding) that I don’t think about things to tell you that might help you pass the CPA Exam.
However, if you ever decide that you are ready to unsubscribe, it is easy to do. Scroll to the bottom of any one of these email lessons. You’ll find a link to unsubscribe. Click on that and follow the directions. You have every right to manage your emails. If you are ready to unsubscribe, go for it.
(5) – Yesterday, while I was dressing for the wedding, I watched the last 10 laps of the Indianapolis 500. If you follow car racing at all, you already know what happened. A young rookie was leading the race going into the last lap. He had a good sized lead and was going to win fairly easily. The announcers were already talking about him being the champion. There was really nothing in his way of winning. As he took the very last turn (he could see the finish line), his car slid into the wall. He wasn’t hurt but he lost the race. He let it get away. He had driven by that wall 199 previous times that day with no problem but on that last time, for no apparent reason, he crashed.
Whenever I talk with people about the CPA Exam, I always tell them to take nothing for granted. If you know the topic, make sure you continue to do the work. If you feel good about an area, make sure you continue to do the work. If you have been studying all day and you are going to work a few more problems, make sure you continue to do the work. If you are actually taking the CPA exam and you have been working for nearly 3 or 4 hours, make sure you continue to do the work.
It is easy to lose your focus. It is easy to start day dreaming or just start thinking of something else. It is easy to get distracted. Things are always happening that catch your attention. When you are studying, your mind should be on one thing and one thing only: How do I get this particular question in front of me answered correctly? When you are taking the exam itself, your mind should be on one thing and one thing only: How do I get this one particular question in front of me answered correctly?
My assumption is that most people actually study enough hours to pass the exam. However, during those hours, it is easy to get distracted and wind up accomplishing nothing. You don’t just need 60-100 hours per part; you need 60-100 hours of concentrated study per part. Make sure you continue to do the work.
My assumption is that most people who take the CPA Exam actually have enough knowledge in their heads to pass. However, during the exam itself, it is easy to get distracted and wind up making mistakes. Don’t worry about the lights, the seat, the computer screen, the noise, the heat, the cold, the other people. When you are taking the CPA Exam only one thing matters: How do I get this particular question in front of me answered correctly?
Studying for the CPA Exam is not a game. It is not for play. It deserves your undivided attention. You don’t want to lose the race just because you failed to do something that you had done before and should have been able to do again.
(6) – I want to close today by giving you a full-scale illustration of our Subscription Service. As we’ve said, it costs $15 per month per part. Let’s look at FAR. If you subscribe to the FAR material, what do you get for your $15?
--You get 10 examples of our illustrations of what we believe task-based simulations look like.
--You get a study guide to show how to combine our free questions and our subscription service to create a comprehensive program (this is the study guide you can get for free by sending a note to Jhoyle@cpareviewforfree.com).
--For FAR, you get content information divided into 23 different topic areas – everything from consolidations to earnings per share and inventory to government accounting. Those topic areas contain hundreds of slides presenting the information we believe you need to know to pass that part of the CPA Exam.
What does this content information look like? I decided to select accounts receivable as my illustration because it is one of the shortest topics and won’t use up so much space in your email box.
So, quite literally, here is our content material for Accounts Receivable within the FAR part of the CPA Exam as covered by our subscription service
SLIDE ONE
Accounts Receivables
Accounts receivable is normally reported as a current asset because collection is expected within one year. It reflects amounts owed to a company by its customers.
Accounts receivable should be disclosed in the balance sheet at net realizable value (the cash expected – the total amount owed to the company less the estimated amount of uncollectibles). Receivables from company officers, employees, and affiliate companies should be separately disclosed.
SLIDE TWO
Cash discounts (such as 2/10, n/30) give a discount if the customer pays within a certain period of time. In this example, a 2 percent discount can be taken if payment is made in 10 days but any remaining amount must be paid in total in 30 days.
When a discount is offered, account receivable can be recorded by either the net method or the gross method.
SLIDE THREE
Net method. The seller (and the buyer if that company so chooses) reports the transaction at the net amount (after the discount) which assumes the discount will be taken. A $100 sale is recorded at only $98 if a 2 percent discount is available. If paid in time, cash is debited for $98 and the $98 account receivable is removed. However, the $2 discount might not be taken so that the entire $100 is collected. In that case, the extra $2 collection is recorded as interest.
SLIDE FOUR
Gross method. The seller (and, possibly, buyer) reports these transactions at the gross amount which assumes the discount will not be taken. A $100 sale is recorded at $100. The only problem is that the $2 discount might still be taken so that only $98 is collected. The $2 reduction is recorded as a sales discount by the seller. “Sales discounts” reduce Sales on the income statement.
SLIDE FIVE
Bad Debts. Bad Debt Expense is reported on the income statement and the Allowance for Bad Debts is reported on the balance sheet as a reduction to Accounts Receivable.
The allowance method of recording bad debts is used in US GAAP because it matches the expense with the timing of the revenue. An alternative, the direct method, does not recognize any expense until an account proves uncollectible. This method is not allowed under US GAAP.
SLIDE SIX
The allowance method estimates the amount of uncollectible accounts based on past experience and present industry, company, and economic conditions. Bad debt expense is recognized in the same period as the sale. Because the actual bad accounts have not yet been identified, a contra valuation account (an Allowance for Bad Debts – which might also be called something like an Allowance for Doubtful Accounts) is established for the amount of the receivables estimated to be uncollectible.
SLIDE SEVEN
The adjusting entry to record Bad Debt Expense for the period and establish the proper balance in the Allowance for Bad Debts is made at the end of each period.
Bad Debt Expense estimated amount
Allowance for Bad Debts estimated amount
SLIDE EIGHT
When an account actually proves to be uncollectible (the customer dies, moves away, files for bankruptcy or just refuses to pay), the account is written off. However, the expense has already been recognized in the previous estimation entry and should not be recorded again.
Allowance for Bad Debts uncollectible amount
Accounts Receivable uncollectible amount
If this account is ever collected in the future, the above entry is reversed to reinstate the balance before collection is recorded.
SLIDE NINE
One key element of this reporting is left to be shown. How does the company estimate the amount of its bad debts in the first entry shown previously? There are two methods to determine the annual charge to bad debt.
(1) Percentage of sales method
(2) Percentage of receivable method (or a variation – the aging method)
SLIDE TEN
Regardless of the method being used, at the end of each period, the reporting company will have a bad debt expense account with a balance that is zero because no estimation has yet been recorded for the period.
It will also have an Allowance for Bad Debts but that account will have a remaining balance that can either be a debit or a credit. The Allowance balance is its beginning balance for the period less the amount of accounts written off during the period (but plus any accounts that were written back on the books because of latter collection).
SLIDE ELEVEN
PERCENTAGE OF SALES METHOD
Multiply the appropriate percentage times the sales balance for the period. This is the balance that should be reported for Bad Debt Expense.
Because the Bad Debt Expense account has a zero balance, the amount determined by the computation is added directly to Bad Debt Expense (and also to the Allowance for Bad Debts). If the estimation is for $36,000, then the adjusting entry is for $36,000. Bad Debt Expense will equal the estimation. The Allowance for Bad Debts will be its previous balance as adjusted by this final entry.
SLIDE TWELVE
PERCENTAGE OF RECEIVABLES METHOD
Multiply the appropriate percentage times the accounts receivable balance at the end of the period. This is the balance that should be reported as a credit for the Allowance for Bad Debts.
That contra account already has a balance that may be either a debit or a credit. The adjusting entry records the amount needed to bring this previous account balance to the new estimation. If a $3,000 credit was in the allowance account and the estimation is now $40,000, then the adjusting entry is for $37,000. If a $1,000 debit was in the allowance account and the estimation is now $40,000, then the adjusting entry is for $41,000.
SLIDE THIRTEEN
Pledging of receivables. Pledging is an agreement whereby a company’s accounts receivable are used as collat¬eral for loans. Customers whose accounts have been pledged are not aware of this situation so their payments are still remitted to the original company. The pledged accounts merely serve as security to a lender. The only accounting issue relating to pledging is that of adequate disclosure. The accounts receivable, which remain assets of the borrowing entity, continue to be shown as current assets on its balance sheet but must be identified as having been pledged.
SLIDE FOURTEEN
Factoring of receivables. Factoring is the sale of receivables to a buyer known as a factor. The transfer of receivables “without recourse” means that the factor (the buyer) assumes the risk of loss from any noncollection. Thus, once this type of factoring arrangement is com¬pleted, the seller has no further involvement with the accounts. The receivables are removed from the books of the seller and the difference between the cash received and the car¬rying value of those receivables is recognized as a gain or loss.
SLIDE FIFTEEN
Another possibility is factoring “with recourse” where a monetary amount must be returned to the buyer if a specified amount is not collected from the receivables. In recording the transfer of the receivables, the seller must take into account any anticipated repayment amount. For example, if cash of $100,000 is guaranteed but the seller only anticipates that the buyer will collect $98,000, a $2,000 liability is recorded by the seller at the time of sale. The accounts receivable are removed from the seller’s books and this liability is recognized; the cash received is also recorded and the difference is a gain or loss.
SLIDE SIXTEEN
Several Important Ratios Involving Current Assets
Solvency ratios or amounts—Any ratio or computation that measures an entity's short-term viability by its ability to pay its debts as they come due.
---Acid-test (quick) ratio—It is the sum of the quick assets (cash, receivables, and short-term investments) divided by the total of the current liabilities.
---Current ratio—It is computed by taking the total of all current assets (the quick assets plus inventory, prepayments, and supplies) and dividing it by the total of current liabilities
---Working capital—It is computed by taking the total of the current assets and subtracting the current liabilities
SLIDE SEVENTEEN
Operational efficiency ratios or amounts—A ratio or computation that measures an entity's ability to make good use of its assets
---Receivable turnover—It measures how rapidly cash is collected from credit sales. It is computed by taking the net credit sales for a period divided by the average of the net receivables for the same period.
---Number of days’ sales in receivables—The average length of time receivables are out¬standing, which reflects the efficiency of credit and collection policies. It is the receivable balance divided by average credit sales per day.
SLIDE EIGHTEEN
Now that you have gone through all of these slides for accounts receivable, go back to our free questions and answers and work all of the questions provided under “Accounts Receivable.” This should help you get to the point where you can pass Accounts Receivable. Once you can pass the topics, you can pass FAR.
Take good notes, especially for any questions that you miss. A good note is one that takes 10 words or less and explains anything that you might have missed that would prevent you from getting the question correct.
Have a great week!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
www.CPAreviewforFREE.com
May 31, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
152 Weeks of Operation and 24,487,209 Page Views (without a penny being spent on marketing)
Lesson 96
From: Joe
(1) – We have distributed an amazing number of FREE study guides to the folks who have identified their next exam in an email to Jhoyle@cpareviewforfree.com. These study guides explain how to combine our 2,200 free questions and answers with our subscription service to create a comprehensive CPA Exam review program for $15 per month per part (50 cents per day – try to beat that on eBay).
However, the question we always get is: “Can you explain how your subscription service actually works?” Seems like a reasonable question. So, at the end of this email, I’ll give you a demonstration of one very small part of our subscription service. I hope that proves helpful in understanding how our program will get you through this exam for a whole lot less than $2,500.
(2) – We’ve added something new to the home page of our website (www.CPAreviewforFREE.com). Under our CPA Exam Resources section, we already have three important articles:
--Using CPA Review for FREE to Prepare for the CPA Exam.
--Applying for the CPA Exam
--Structure of the CPA Exam
We believe all of these would be helpful to every candidate.
We have now added a fourth article: “Tips for Success.” Over the years, we have distributed scores of tips for success on our Facebook page. Over the last few days, I have gathered my top 60 or so of these tips. Because we have so many, I posted the first ten this week and I’ll post another batch every week or two until they are all posted.
Go to www.CPAreviewforFREE.com. Go to “CPA Exam Resources” on the home page. Click on “Tips for Success.” I probably wouldn’t sit down and read this material all at once like you might a novel. Most people don’t need 60 tips for success at one time. Instead, every day or two, if you feel the need for some encouragement or a boost of energy, go to the website and read a couple.
We hope they help. As always, we are trying our best to do everything we can possibly do to assist you in getting the 75 points you need to pass the CPA Exam. Hope our Tips for Success makes the journey a bit easier.
(3) – I attended a lovely wedding here in Richmond this past Sunday. It was held in a beautiful church that was constructed in 1848. Because of the US Civil War, there are few buildings standing in Richmond that are so old.
During the ceremony, the pastor talked directly to the young couple. He told them there are certain words that they should say to each other so often, during their lives together, that they wear those words out. “Wear these words out” was kind of the theme of his remarks. To the bride and groom, he suggested the words: “I am sorry” and “I’m so very grateful.” Probably good advice for any newlyweds (or anyone else, for that matter).
I liked that idea of “wearing words out.” So, I started thinking: If I were talking to my CPA Exam candidates, what words would I suggest that they “wear out” over the course of their study.
Here’s my suggestion for words that you might want to wear out over the next few weeks or months as you prepare to pass the CPA Exam.
"I'm tired but I can still study a bit longer.” Too many people obsess over being tired and let it control what they can accomplish. At the first hint of tired, they give up and quit. Successful people get to the point where they are tired and then they keep going. That is one true mark of people who succeed in this life.
“I missed this problem but now I see how it works.” Passing the CPA Exam is all about making progress. If you get a question correct, you really learn nothing. If you miss a question and move on, you really learn nothing. But the most important moment is when you miss a question, read the answer carefully, and figure out how to work it right the next time. Now, that’s success.
“I’m not trying to be perfect; I just want to answer enough questions to pass.” It is very easy to get stuck trying to learn it all. I’ve known way too many people who gave up before they ever took the exam because they couldn’t achieve perfection. Don’t worry about trying to answer every question correctly. Once again, as above, the only important goal is making progress.
“The CPA Exam is a mile wide and an inch deep.” The CPA Exam that you take will try to cover a little bit about everything in the world of accounting, auditing, tax, and the like. As you study, it is much more important to cover all the topics a little bit than to cover any topic in too much depth and detail.
“When I get to the exam, I’m going to watch my time closely.” I’m convinced that, once you have put in your 60-100 hours of preparation for each part, the biggest problem is time management during the exam. If you rush too fast, you’ll make careless mistakes. If you work too slowly, you won’t finish. It is very important, as I said in my previous lesson (Lesson 95 that can be found in the Blog Archives in the right hand navigation), that you get used to working at an appropriate “exam speed.”
Okay, I could probably come up with 25 other sets of words to wear out as you prepare for the CPA Exam but these five form a pretty good foundation. I’m not sure that I wouldn’t write them down and tape them to your wall and read through them each and every day.
Wear those words out.
(4) – Personal note to all 20,000 of our subscribers (yeah, this means YOU). We love having you. We really hope we provide a benefit. I never go anywhere (like a wedding) that I don’t think about things to tell you that might help you pass the CPA Exam.
However, if you ever decide that you are ready to unsubscribe, it is easy to do. Scroll to the bottom of any one of these email lessons. You’ll find a link to unsubscribe. Click on that and follow the directions. You have every right to manage your emails. If you are ready to unsubscribe, go for it.
(5) – Yesterday, while I was dressing for the wedding, I watched the last 10 laps of the Indianapolis 500. If you follow car racing at all, you already know what happened. A young rookie was leading the race going into the last lap. He had a good sized lead and was going to win fairly easily. The announcers were already talking about him being the champion. There was really nothing in his way of winning. As he took the very last turn (he could see the finish line), his car slid into the wall. He wasn’t hurt but he lost the race. He let it get away. He had driven by that wall 199 previous times that day with no problem but on that last time, for no apparent reason, he crashed.
Whenever I talk with people about the CPA Exam, I always tell them to take nothing for granted. If you know the topic, make sure you continue to do the work. If you feel good about an area, make sure you continue to do the work. If you have been studying all day and you are going to work a few more problems, make sure you continue to do the work. If you are actually taking the CPA exam and you have been working for nearly 3 or 4 hours, make sure you continue to do the work.
It is easy to lose your focus. It is easy to start day dreaming or just start thinking of something else. It is easy to get distracted. Things are always happening that catch your attention. When you are studying, your mind should be on one thing and one thing only: How do I get this particular question in front of me answered correctly? When you are taking the exam itself, your mind should be on one thing and one thing only: How do I get this one particular question in front of me answered correctly?
My assumption is that most people actually study enough hours to pass the exam. However, during those hours, it is easy to get distracted and wind up accomplishing nothing. You don’t just need 60-100 hours per part; you need 60-100 hours of concentrated study per part. Make sure you continue to do the work.
My assumption is that most people who take the CPA Exam actually have enough knowledge in their heads to pass. However, during the exam itself, it is easy to get distracted and wind up making mistakes. Don’t worry about the lights, the seat, the computer screen, the noise, the heat, the cold, the other people. When you are taking the CPA Exam only one thing matters: How do I get this particular question in front of me answered correctly?
Studying for the CPA Exam is not a game. It is not for play. It deserves your undivided attention. You don’t want to lose the race just because you failed to do something that you had done before and should have been able to do again.
(6) – I want to close today by giving you a full-scale illustration of our Subscription Service. As we’ve said, it costs $15 per month per part. Let’s look at FAR. If you subscribe to the FAR material, what do you get for your $15?
--You get 10 examples of our illustrations of what we believe task-based simulations look like.
--You get a study guide to show how to combine our free questions and our subscription service to create a comprehensive program (this is the study guide you can get for free by sending a note to Jhoyle@cpareviewforfree.com).
--For FAR, you get content information divided into 23 different topic areas – everything from consolidations to earnings per share and inventory to government accounting. Those topic areas contain hundreds of slides presenting the information we believe you need to know to pass that part of the CPA Exam.
What does this content information look like? I decided to select accounts receivable as my illustration because it is one of the shortest topics and won’t use up so much space in your email box.
So, quite literally, here is our content material for Accounts Receivable within the FAR part of the CPA Exam as covered by our subscription service
SLIDE ONE
Accounts Receivables
Accounts receivable is normally reported as a current asset because collection is expected within one year. It reflects amounts owed to a company by its customers.
Accounts receivable should be disclosed in the balance sheet at net realizable value (the cash expected – the total amount owed to the company less the estimated amount of uncollectibles). Receivables from company officers, employees, and affiliate companies should be separately disclosed.
SLIDE TWO
Cash discounts (such as 2/10, n/30) give a discount if the customer pays within a certain period of time. In this example, a 2 percent discount can be taken if payment is made in 10 days but any remaining amount must be paid in total in 30 days.
When a discount is offered, account receivable can be recorded by either the net method or the gross method.
SLIDE THREE
Net method. The seller (and the buyer if that company so chooses) reports the transaction at the net amount (after the discount) which assumes the discount will be taken. A $100 sale is recorded at only $98 if a 2 percent discount is available. If paid in time, cash is debited for $98 and the $98 account receivable is removed. However, the $2 discount might not be taken so that the entire $100 is collected. In that case, the extra $2 collection is recorded as interest.
SLIDE FOUR
Gross method. The seller (and, possibly, buyer) reports these transactions at the gross amount which assumes the discount will not be taken. A $100 sale is recorded at $100. The only problem is that the $2 discount might still be taken so that only $98 is collected. The $2 reduction is recorded as a sales discount by the seller. “Sales discounts” reduce Sales on the income statement.
SLIDE FIVE
Bad Debts. Bad Debt Expense is reported on the income statement and the Allowance for Bad Debts is reported on the balance sheet as a reduction to Accounts Receivable.
The allowance method of recording bad debts is used in US GAAP because it matches the expense with the timing of the revenue. An alternative, the direct method, does not recognize any expense until an account proves uncollectible. This method is not allowed under US GAAP.
SLIDE SIX
The allowance method estimates the amount of uncollectible accounts based on past experience and present industry, company, and economic conditions. Bad debt expense is recognized in the same period as the sale. Because the actual bad accounts have not yet been identified, a contra valuation account (an Allowance for Bad Debts – which might also be called something like an Allowance for Doubtful Accounts) is established for the amount of the receivables estimated to be uncollectible.
SLIDE SEVEN
The adjusting entry to record Bad Debt Expense for the period and establish the proper balance in the Allowance for Bad Debts is made at the end of each period.
Bad Debt Expense estimated amount
Allowance for Bad Debts estimated amount
SLIDE EIGHT
When an account actually proves to be uncollectible (the customer dies, moves away, files for bankruptcy or just refuses to pay), the account is written off. However, the expense has already been recognized in the previous estimation entry and should not be recorded again.
Allowance for Bad Debts uncollectible amount
Accounts Receivable uncollectible amount
If this account is ever collected in the future, the above entry is reversed to reinstate the balance before collection is recorded.
SLIDE NINE
One key element of this reporting is left to be shown. How does the company estimate the amount of its bad debts in the first entry shown previously? There are two methods to determine the annual charge to bad debt.
(1) Percentage of sales method
(2) Percentage of receivable method (or a variation – the aging method)
SLIDE TEN
Regardless of the method being used, at the end of each period, the reporting company will have a bad debt expense account with a balance that is zero because no estimation has yet been recorded for the period.
It will also have an Allowance for Bad Debts but that account will have a remaining balance that can either be a debit or a credit. The Allowance balance is its beginning balance for the period less the amount of accounts written off during the period (but plus any accounts that were written back on the books because of latter collection).
SLIDE ELEVEN
PERCENTAGE OF SALES METHOD
Multiply the appropriate percentage times the sales balance for the period. This is the balance that should be reported for Bad Debt Expense.
Because the Bad Debt Expense account has a zero balance, the amount determined by the computation is added directly to Bad Debt Expense (and also to the Allowance for Bad Debts). If the estimation is for $36,000, then the adjusting entry is for $36,000. Bad Debt Expense will equal the estimation. The Allowance for Bad Debts will be its previous balance as adjusted by this final entry.
SLIDE TWELVE
PERCENTAGE OF RECEIVABLES METHOD
Multiply the appropriate percentage times the accounts receivable balance at the end of the period. This is the balance that should be reported as a credit for the Allowance for Bad Debts.
That contra account already has a balance that may be either a debit or a credit. The adjusting entry records the amount needed to bring this previous account balance to the new estimation. If a $3,000 credit was in the allowance account and the estimation is now $40,000, then the adjusting entry is for $37,000. If a $1,000 debit was in the allowance account and the estimation is now $40,000, then the adjusting entry is for $41,000.
SLIDE THIRTEEN
Pledging of receivables. Pledging is an agreement whereby a company’s accounts receivable are used as collat¬eral for loans. Customers whose accounts have been pledged are not aware of this situation so their payments are still remitted to the original company. The pledged accounts merely serve as security to a lender. The only accounting issue relating to pledging is that of adequate disclosure. The accounts receivable, which remain assets of the borrowing entity, continue to be shown as current assets on its balance sheet but must be identified as having been pledged.
SLIDE FOURTEEN
Factoring of receivables. Factoring is the sale of receivables to a buyer known as a factor. The transfer of receivables “without recourse” means that the factor (the buyer) assumes the risk of loss from any noncollection. Thus, once this type of factoring arrangement is com¬pleted, the seller has no further involvement with the accounts. The receivables are removed from the books of the seller and the difference between the cash received and the car¬rying value of those receivables is recognized as a gain or loss.
SLIDE FIFTEEN
Another possibility is factoring “with recourse” where a monetary amount must be returned to the buyer if a specified amount is not collected from the receivables. In recording the transfer of the receivables, the seller must take into account any anticipated repayment amount. For example, if cash of $100,000 is guaranteed but the seller only anticipates that the buyer will collect $98,000, a $2,000 liability is recorded by the seller at the time of sale. The accounts receivable are removed from the seller’s books and this liability is recognized; the cash received is also recorded and the difference is a gain or loss.
SLIDE SIXTEEN
Several Important Ratios Involving Current Assets
Solvency ratios or amounts—Any ratio or computation that measures an entity's short-term viability by its ability to pay its debts as they come due.
---Acid-test (quick) ratio—It is the sum of the quick assets (cash, receivables, and short-term investments) divided by the total of the current liabilities.
---Current ratio—It is computed by taking the total of all current assets (the quick assets plus inventory, prepayments, and supplies) and dividing it by the total of current liabilities
---Working capital—It is computed by taking the total of the current assets and subtracting the current liabilities
SLIDE SEVENTEEN
Operational efficiency ratios or amounts—A ratio or computation that measures an entity's ability to make good use of its assets
---Receivable turnover—It measures how rapidly cash is collected from credit sales. It is computed by taking the net credit sales for a period divided by the average of the net receivables for the same period.
---Number of days’ sales in receivables—The average length of time receivables are out¬standing, which reflects the efficiency of credit and collection policies. It is the receivable balance divided by average credit sales per day.
SLIDE EIGHTEEN
Now that you have gone through all of these slides for accounts receivable, go back to our free questions and answers and work all of the questions provided under “Accounts Receivable.” This should help you get to the point where you can pass Accounts Receivable. Once you can pass the topics, you can pass FAR.
Take good notes, especially for any questions that you miss. A good note is one that takes 10 words or less and explains anything that you might have missed that would prevent you from getting the question correct.
Have a great week!!!
Joe Hoyle
Co-Founder and President
CPA Review for FREE
www.CPAreviewforFREE.com
Friday, May 20, 2011
How many review courses have you used?
So many of the big review courses claim passing candidates as their own and while that may be true, we hear from many that they've used materials from other courses. So how many prep courses have you used?
Friday, May 13, 2011
Auditing Subscription Service Now Available
Try us FIRST before you spend your hard-earned money.
May 12, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
149 Weeks of Operation and 23,661,776 Page Views (without a penny spent on marketing)
Lesson 94
From: Joe
(1) - Our Auditing and Attestation subscription service is now up and running!!! For a mere $15 per month (50 cents per day), you can get
---377 slides of information covering everything you need to know about Auditing and Attestation
---10 task-based simulations covering audit reports, reviews, compilations, internal control, and much more
---a complete 24 step study guide to prepare you to take and pass the Auditing and Attestation section of the CPA Exam.
All for that just 50 cents per day.
We now have a complete CPA Exam review service available for you!!
**Free Questions and Answers**
--Auditing and Attestation
--Financial Accounting & Reporting
--BEC
--Regulation
**Subscription Service (each part for $15/month)**
--Auditing and Attestation
--Financial Accounting & Reporting
--BEC
--Regulation
Trust me - you don’t have to spend $2,500. That is highway robbery. For $15 per month, we can give you thousands of free questions and the content you need to pass AND a study guide to tell you what to do.
Try us first, before you spent thousands. Why not try us for a month and see if you can save thousands?
Okay, I know you want to know more about how the subscription service works. So, send me an email at Jhoyle@cpareviewforfree.com and tell me what part of the exam you plan to take next. I’ll send you the study guide for that part. As we like to say down here in the South, it is not good idea to buy a pig in a poke. We believe in our program and want you to see how our program works. Just send me an email (jhoyle@cpareviewforfree.com and let me know what part you plan to take next and I’ll send you our study guide by return email. You can see how our program is designed.
I’ve been in this business for over 30 years. I designed this program so that you can pass AND pay as close to zero as possible.
--If you are truly wealthy and are dying to spend thousands of dollars, then nothing I can say is going to change your mind. Nothing—that money is burning a hole in your pocket.
--However, if it were me, I’d invest $15 first and try this program for one month. That’s just common sense. At the end of a month, you can give us another $15 or you can give the other guys $2,500 but at least you’ll know what works for you. Come on – accountants should be smart enough to see that trying one month for $15 is a good idea.
**To purchase any of our subscription services:
You must be registered to purchase any of our content. Then, just login to your account at www.CPAreviewforFREE.com and click on “Paid Content” to choose the section and select the package you wish to purchase which is only $15/one month or $30 for three months
(2) – In case you missed it above, send me a note at Jhoyle@cpareviewforfree.com and tell me the part that you are going to take next and I’ll send you our study guide for that part ABSOLUTELY FREE. (Our favorite term around here - “absolutely free.”)
(3) – Recently, I have been posting daily messages on our Facebook page. I just like giving everyone a daily boost of “you can do it – put in the time and energy and make it happen.”)
However, I wrote an entry the other day that I have thought a lot about over the last few days. Here’s what I had to say:
“If you don’t dream enough, work becomes work – pure drudgery. However, if you dream about what you want to accomplish, work becomes a real joy. So, dream about passing the CPA Exam. If you don’t enjoy studying, maybe you are not dreaming enough. From Oliver Wright: ‘I got more thrill out of flying before I had ever been in the air at all – while lying in bed thinking how exciting it would be to fly.’”
I’ve had a terribly busy spring schedule and, in all honesty, work has really started to feel like drudgery to me. I can do it but there’s no real spark there. There’s not been enough excitement. I have just gone through the motions to get it done. I find that a whine and moan a lot. Not enough joy.
So, after I wrote that entry above, I decided that I probably was speaking to me more than to anyone else.
Since then, I have really worked on dreaming about what I want to see happen.
--I dream about having really efficient days where I just seem to work without stopping and everything goes well. I dream about having the energy to get up and get things done.
--I dream about finishing projects and saying to myself “I did it. I made it happen.”
--I dream about doing a good job and that wonderful, wonderful feeling of accomplishment.
--I dream about looking up one day and smiling and saying “it worked out just like I hoped it would.”
I have a request. Stop reading and ask yourself a couple of questions.
--Over the last few weeks would you say that your study for the CPA Exam has been drudgery or a joy?
--Over the last few weeks do you find yourself whining more than you’d like to admit?
--Over the last few weeks have you tried to avoid studying at all costs?
--Over the last few weeks when you have studied have you wanted to quit almost as soon as you started?
If the answer to these questions all tend to be in the “I’m sick to death of studying” mode, then maybe it is time for you to start dreaming. Every morning when you get up, take an extra minute or two and dream:
--Dream that you study and you are perfectly focused and just seem to learn every piece of information that you cover. It is all just very clear.
--Dream that you go to take the CPA Exam and you feel the exaltation as you realize that you know most of the questions. You catch the tricks and understand what they want.
--Most of all, dream about getting your scores and seeing four grades of 75 or above. Dream about how good that is going to feel. Dream about telling your mother, father, husband, wife, son, daughter, boss, coworkers, etc. Dream about that wonderful sense of accomplishment. Dream about yelling out “I DID IT!!!!”
I think you’ll find that having dreams of what you want to do will reenergize your spirits. We are all human. We all get sick of this stuff. It is easy to forget why you got started in the first place. Take five minutes a day – take five minutes every day – and dream about success, victory, and accomplishment. Dream great dreams!!!!
Speaking strictly for me, it really has helped. I feel better about my work and feel better about the whole process of working.
Motivation seeps away pretty quickly if you don’t stop to refill the tanks. Dreaming will help.
(4) – We are delighted to have everyone of you on this email service (and on our Facebook page). Please stay as long as you wish. I’ve been writing these lessons now for about 15 years; I’m pretty sure I can write them for another 15. However, if you ever decide you are ready to unsubscribe, just go to the bottom of this email (or any other email from us) and click on the “unsubscribe” button. Our goal is to help and motivate. Our goal is not to fill up your email box.
(5) – Okay, practice time. Let’s see if we can add some points – ABSOLUTELY FREE!!!
FAR
Living plants and animals are referred to as biological assets for accounting purposes. Assume a company has a large fruit orchard. Under IFRS, how should this asset be reported on a company’s balance sheet?
A. Fair value
B. Fair value less estimated cost to sell
C. Historical cost
D. Historical cost less accumulated depreciaton
Answer is B
Under US GAAP, the orchard would be reported at historical cost less accumulated depreciation like most other long-lived assets. But, under IFRS, biological assets are reported at fair value less the estimated cost that it would take to sell them.
Auditing & Attestation
An auditor must make an assessment of control risk as part of the process to determine how much substantive testing must be done to reduce overall audit risk to an acceptably low level. Which of the following is not one of the five components that make up internal control?
A. Checks and balances
B. Monitoring
C. Control environment
D. Risk assessment.
Answer is A
The five components of internal control are (1) control environment—the organization’s commitment to having a strong internal control, (2) risk assessment—the organization’s ability to anticipate problems and work to prevent them in advance, (3) control activities-the policies and procedures in place to help ensure that the organization’s systems are working as intended by management, (4) information and communication-the organization’s ability to gather significant data and get it to the people who need it in a timely fashion, and (5) monitoring—the assessment of internal control by the organization over time to ensure that internal control properly adapts as changes are needed.
BEC
What is meant by the term “economic profit?”
A. It is just a different way of saying net income.
B. It is the amount of profit being earned in excess of a normal profit.
C. It is equivalent to gross margin.
D. It is the same as return on assets.
Answer is B.
Economic profit is any profit earned in excess of a normal amount of profit. In economics, it is important because it is assumed that additional competition will be drawn to areas where an economic profit can be earned so that, in the long run, it will be eliminated by the added competition. In fact, the term is also referred to as “excess profits” which is more self-explanatory.
Regulation
A company owes a bank $10,000. The company cannot pay. Jones is a surety on the debt for $6,000. Smith is also a co-surety on the same debt for $6,000. The bank releases Jones without reservation of rights against Smith. For what amount is Smith now obligated to the bank in connection with this debt?
A. Zero
B. $3,000
C. $5,000
D. $6,000
Answer is B
Initially, each co-surety is liable in for the amount that each has personally guaranteed. However, when the bank released one co-surety without reservation of rights against the other, the remaining co-surety is also released, but only to the extent that his right of contribution is affected. In other words, Smith has lost the right to step into the bank's shoes against Jones for contribution of $3,000, so is released to that extent.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
May 12, 2011
CPA Review for FREE
www.CPAreviewforFREE.com
Over 2,200 FREE CPA Review Questions and Answers Available for YOU
149 Weeks of Operation and 23,661,776 Page Views (without a penny spent on marketing)
Lesson 94
From: Joe
(1) - Our Auditing and Attestation subscription service is now up and running!!! For a mere $15 per month (50 cents per day), you can get
---377 slides of information covering everything you need to know about Auditing and Attestation
---10 task-based simulations covering audit reports, reviews, compilations, internal control, and much more
---a complete 24 step study guide to prepare you to take and pass the Auditing and Attestation section of the CPA Exam.
All for that just 50 cents per day.
We now have a complete CPA Exam review service available for you!!
**Free Questions and Answers**
--Auditing and Attestation
--Financial Accounting & Reporting
--BEC
--Regulation
**Subscription Service (each part for $15/month)**
--Auditing and Attestation
--Financial Accounting & Reporting
--BEC
--Regulation
Trust me - you don’t have to spend $2,500. That is highway robbery. For $15 per month, we can give you thousands of free questions and the content you need to pass AND a study guide to tell you what to do.
Try us first, before you spent thousands. Why not try us for a month and see if you can save thousands?
Okay, I know you want to know more about how the subscription service works. So, send me an email at Jhoyle@cpareviewforfree.com and tell me what part of the exam you plan to take next. I’ll send you the study guide for that part. As we like to say down here in the South, it is not good idea to buy a pig in a poke. We believe in our program and want you to see how our program works. Just send me an email (jhoyle@cpareviewforfree.com and let me know what part you plan to take next and I’ll send you our study guide by return email. You can see how our program is designed.
I’ve been in this business for over 30 years. I designed this program so that you can pass AND pay as close to zero as possible.
--If you are truly wealthy and are dying to spend thousands of dollars, then nothing I can say is going to change your mind. Nothing—that money is burning a hole in your pocket.
--However, if it were me, I’d invest $15 first and try this program for one month. That’s just common sense. At the end of a month, you can give us another $15 or you can give the other guys $2,500 but at least you’ll know what works for you. Come on – accountants should be smart enough to see that trying one month for $15 is a good idea.
**To purchase any of our subscription services:
You must be registered to purchase any of our content. Then, just login to your account at www.CPAreviewforFREE.com and click on “Paid Content” to choose the section and select the package you wish to purchase which is only $15/one month or $30 for three months
(2) – In case you missed it above, send me a note at Jhoyle@cpareviewforfree.com and tell me the part that you are going to take next and I’ll send you our study guide for that part ABSOLUTELY FREE. (Our favorite term around here - “absolutely free.”)
(3) – Recently, I have been posting daily messages on our Facebook page. I just like giving everyone a daily boost of “you can do it – put in the time and energy and make it happen.”)
However, I wrote an entry the other day that I have thought a lot about over the last few days. Here’s what I had to say:
“If you don’t dream enough, work becomes work – pure drudgery. However, if you dream about what you want to accomplish, work becomes a real joy. So, dream about passing the CPA Exam. If you don’t enjoy studying, maybe you are not dreaming enough. From Oliver Wright: ‘I got more thrill out of flying before I had ever been in the air at all – while lying in bed thinking how exciting it would be to fly.’”
I’ve had a terribly busy spring schedule and, in all honesty, work has really started to feel like drudgery to me. I can do it but there’s no real spark there. There’s not been enough excitement. I have just gone through the motions to get it done. I find that a whine and moan a lot. Not enough joy.
So, after I wrote that entry above, I decided that I probably was speaking to me more than to anyone else.
Since then, I have really worked on dreaming about what I want to see happen.
--I dream about having really efficient days where I just seem to work without stopping and everything goes well. I dream about having the energy to get up and get things done.
--I dream about finishing projects and saying to myself “I did it. I made it happen.”
--I dream about doing a good job and that wonderful, wonderful feeling of accomplishment.
--I dream about looking up one day and smiling and saying “it worked out just like I hoped it would.”
I have a request. Stop reading and ask yourself a couple of questions.
--Over the last few weeks would you say that your study for the CPA Exam has been drudgery or a joy?
--Over the last few weeks do you find yourself whining more than you’d like to admit?
--Over the last few weeks have you tried to avoid studying at all costs?
--Over the last few weeks when you have studied have you wanted to quit almost as soon as you started?
If the answer to these questions all tend to be in the “I’m sick to death of studying” mode, then maybe it is time for you to start dreaming. Every morning when you get up, take an extra minute or two and dream:
--Dream that you study and you are perfectly focused and just seem to learn every piece of information that you cover. It is all just very clear.
--Dream that you go to take the CPA Exam and you feel the exaltation as you realize that you know most of the questions. You catch the tricks and understand what they want.
--Most of all, dream about getting your scores and seeing four grades of 75 or above. Dream about how good that is going to feel. Dream about telling your mother, father, husband, wife, son, daughter, boss, coworkers, etc. Dream about that wonderful sense of accomplishment. Dream about yelling out “I DID IT!!!!”
I think you’ll find that having dreams of what you want to do will reenergize your spirits. We are all human. We all get sick of this stuff. It is easy to forget why you got started in the first place. Take five minutes a day – take five minutes every day – and dream about success, victory, and accomplishment. Dream great dreams!!!!
Speaking strictly for me, it really has helped. I feel better about my work and feel better about the whole process of working.
Motivation seeps away pretty quickly if you don’t stop to refill the tanks. Dreaming will help.
(4) – We are delighted to have everyone of you on this email service (and on our Facebook page). Please stay as long as you wish. I’ve been writing these lessons now for about 15 years; I’m pretty sure I can write them for another 15. However, if you ever decide you are ready to unsubscribe, just go to the bottom of this email (or any other email from us) and click on the “unsubscribe” button. Our goal is to help and motivate. Our goal is not to fill up your email box.
(5) – Okay, practice time. Let’s see if we can add some points – ABSOLUTELY FREE!!!
FAR
Living plants and animals are referred to as biological assets for accounting purposes. Assume a company has a large fruit orchard. Under IFRS, how should this asset be reported on a company’s balance sheet?
A. Fair value
B. Fair value less estimated cost to sell
C. Historical cost
D. Historical cost less accumulated depreciaton
Answer is B
Under US GAAP, the orchard would be reported at historical cost less accumulated depreciation like most other long-lived assets. But, under IFRS, biological assets are reported at fair value less the estimated cost that it would take to sell them.
Auditing & Attestation
An auditor must make an assessment of control risk as part of the process to determine how much substantive testing must be done to reduce overall audit risk to an acceptably low level. Which of the following is not one of the five components that make up internal control?
A. Checks and balances
B. Monitoring
C. Control environment
D. Risk assessment.
Answer is A
The five components of internal control are (1) control environment—the organization’s commitment to having a strong internal control, (2) risk assessment—the organization’s ability to anticipate problems and work to prevent them in advance, (3) control activities-the policies and procedures in place to help ensure that the organization’s systems are working as intended by management, (4) information and communication-the organization’s ability to gather significant data and get it to the people who need it in a timely fashion, and (5) monitoring—the assessment of internal control by the organization over time to ensure that internal control properly adapts as changes are needed.
BEC
What is meant by the term “economic profit?”
A. It is just a different way of saying net income.
B. It is the amount of profit being earned in excess of a normal profit.
C. It is equivalent to gross margin.
D. It is the same as return on assets.
Answer is B.
Economic profit is any profit earned in excess of a normal amount of profit. In economics, it is important because it is assumed that additional competition will be drawn to areas where an economic profit can be earned so that, in the long run, it will be eliminated by the added competition. In fact, the term is also referred to as “excess profits” which is more self-explanatory.
Regulation
A company owes a bank $10,000. The company cannot pay. Jones is a surety on the debt for $6,000. Smith is also a co-surety on the same debt for $6,000. The bank releases Jones without reservation of rights against Smith. For what amount is Smith now obligated to the bank in connection with this debt?
A. Zero
B. $3,000
C. $5,000
D. $6,000
Answer is B
Initially, each co-surety is liable in for the amount that each has personally guaranteed. However, when the bank released one co-surety without reservation of rights against the other, the remaining co-surety is also released, but only to the extent that his right of contribution is affected. In other words, Smith has lost the right to step into the bank's shoes against Jones for contribution of $3,000, so is released to that extent.
Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com
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