Pledge to Sit for the CPA Exam Now; New Multiple Choice Questions

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June 26, 2013

Lesson 135

 

From:   Joe

 

Pledge to Yourself to Sit for the Exam this Testing Window

 

The July testing window will be opening in a few days.   Are you ready?   Each new window offers you the opportunity of getting some parts passed.   I’ve always liked that word “opportunity” because it indicates a potential benefit but not a sure thing.   You have the opportunity to move forward, you have the chance to make something great happen.   But it is up to you.   The opportunity is available but what you do with that opportunity is up to you.

 

For better or worse, it won’t be long until it is the end of August and this opportunity will have passed.   Will you be thrilled by what you have accomplished in those few weeks?  Or, will you be disappointed in yourself because you let the time slip away?   Whether you pass or not, you need to make the most of the opportunity.  I fully realize that there are so very many things in life that can steal your time from you – the Internet alone provides at least 1,000 ways to waste time without adding a single point to your CPA Exam score.   Television is just as bad.

 

Make it your pledge as you start into this new window that you will not get to the end of August disappointed in yourself.   You will not lose this opportunity.

 

Throw away these lines:

--“I could have done better.”

--“I don’t know how I could have lost so much study time.”

--“I don’t know why I find so many other things to do rather than study.”

--“I kept promising myself that I would get to work but I just never made it happen.”

 

In many ways, I think, success comes NOT from all that you get done but rather by avoiding the negatives.   It is those negatives that drag us down.   What is worse is that we allow that to happen.   We make excuses for ourselves.   “I’m just so disorganized.”   “I’ve always been lazy.”   “I don’t know why I’m not able to sit and study.”  Excuses that give you permission to fail.

 

Those are just reasons you are giving yourself not to try very hard.   Most people (not all but most, for sure) who “try very hard” do well on the CPA Exam.   I don’t care what review course you are using or how much you paid for it.   Most review programs where you “try very hard” have good results.

 

So, the key is:   try very hard.   No matter what anyone tells you, those three words are really the key:   try very hard.    Unfortunately, you cannot give yourself 1,000 excuses not to do the work and still take advantage of the opportunity.   You cannot always put it off until tomorrow.   You have to have the intestinal fortitude to sit down and do the work today (now).

 

I cannot make you any promises but if you will just “try very hard,” you have a wonderful chance for success.   Okay, you might not make 99 or 100 but if you put in the effort, you have a great chance to pass.   That’s the only real goal.

 

But, if you don’t “try very hard” your chances of success fall dramatically.

 

So, the only thing you should be focused on as you move into the July-August window is that you will “try very hard” so that when you get to the end of August, you will have no regrets.

 

Focus on avoiding setting up excuses for yourself.   Just sit down and start answering those questions.

 

Try very hard.

 

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If you are a college student or recent graduate reading this newsletter, consider the AccountingHomeworkApps to help you during this semester/quarter.  These phone apps help practice for quizzes and tests in the following college course topics (although maybe not the exact course name):  Financial Accounting, Accounting Information Systems, Business Law, Management Accounting, Auditing, Tax.  Love writing?  Let us know if you'd be interested in contributing to our AccountingHomeworkApps Blog.   A great resume builder!

 

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Are you willing to do the work necessary to achieve your goal of passing the CPA Exam? 

 

A new movie is coming out called Before Midnight.   This movie is a continuation of two earlier movies:   Before Sunrise and Before Sunset.   I really liked the first two movies so I am looking forward to seeing the third movie.   To get ready for this new movie, I recently went back and watched the first two again so I could easily remember everything that happened.

 

There was a line in Before Sunset that I must have missed when I watched it years ago but it really caught my attention this time.   I was so impressed by it that I stopped the video so that I could write it down.

 

These movies are about a man and woman who fall in love.   In Before Sunset, the woman talks about people where their love eventually fails:  “They enjoy the goal but not the process. But the reality of it is that the true work of improving things is in the little achievements of the day.”

 

Okay, she was talking about being in love and staying in love but she could have been talking about passing the CPA Exam.   Over the past 34 years, I have had thousands of people tell me “I am so excited about the possibility of passing the CPA Exam.   That has long been my goal.”

 

Then a couple of weeks will pass and I will ask them how their studies are going and they will say “I am so excited about the possibility of passing the CPA Exam.   That has long been my goal.”   But when I press them about their actual studying, they will confess that they have not yet even started to study.

 

They are in love with the goal of passing the CPA Exam but not the process.   That is simply not enough.   Wanting something, by itself, is never enough.   You have to do enough work, answer enough questions, so that you make a little improvement each day.   If you can successfully make a little improvement every day, you will be amazed by how quickly you will be able to pass the CPA Exam.

 

But you have to take that second step.  Yes, you really do have to have a goal that is meaningful to you.   However, you have to take that second step and get into the process.   You have to be excited enough about the goal that you are willing to do the work.   A goal without work is not a goal but a fantasy.   A goal where there is not enough energy to work questions is just hollow – it is not real.

 

Do you want to pass the CPA Exam?     If the answer to this first question is not a shouted “You bet I do!!!” then you probably should wait.   Unless you want it pretty badly, you are setting yourself up for failure.   It is hard to pass without a serious desire.

 

Are you willing to do the work necessary to achieve your goal of passing the CPA Exam?    That is probably the most important single question that I can ask you.   Are you willing to do the work?    It is not easy but it certainly is not impossible.   People just like you pass the CPA Exam all the time.   And, it is not luck.   They have a goal and they are able to translate that into a desire to do the process also.   That process is answering questions and reading answers and taking short notes about the ones you missed so that you can review and get better.   That’s the process – you should love it because that is the process that leads to success on the CPA Exam.

 

New Practice Questions

 

As always, let’s do a little practice.   Let’s see if we can add some points to your CPA Exam score.

 

FAR

 

FASB has created a fair value hierarchy to help companies know how to determine fair value when that is required for reporting purposes.   In this hierarchy, one level uses a quoted market price found in an active market.   What level is that?

 

A.   Level 1

B.   Level 3

C.   Level A10

D.   Level A 1A

 

Auditing

 

The James and Wade CPA firm have audited the financial statement of Riley, Inc. for a number of years.   Riley has consistently produced high qualify financial statements with no material misstatements.   Although Riley has always been privately owned, it will have an initial public offering of shares on a stock market 4 months after the end of the current year.   How does the knowledge of this initial public offering impact the work of the CPA firm?

 

A.   It has no impact on the work of the CPA firm because of the historic quality of the work.

B.   It increases the risk of a possible material misstatement.

C.   It lowers risk because of the legal liability that Riley is taking on with the initial public offering.

D.   It depends on what percentage of the company is being traded in the initial public offering.

 

Regulation

 

An entity files a form 1023 with the Internal Revenue Service.   What is the purpose of this form?

 

A.   It reports gains and losses by a company from the sale of its own stock.

B.   It is an application for tax-exempt status.

C.   It is a form used by not-for-profit entities to report the salaries received by its officers and directors.

D.  It is required whenever a corporation issues a stock dividend where the owners have the option of receiving cash instead of stock.

 

 

BEC

 

A company produces 10,000 widgets for $90,000 and sells them for $110,000.    Fixed cost is $20,000.   The company plans to drop the price of a widget by $1 with the hopes that it will sell 40 percent more units.   How will that decision impact net income?

 

A.   Net income will go up by $2,000

B.   Net income will go up by $10,000

C.   Net income will go up by $12,000

D.  Net income will go up by $14,000

 

ANSWERS:

 

 

 

FAR

 

Answer is A

 

The fair value hierarchy has three levels:   1, 2, and 3.   Using 1 is the most desirable because it is the most accurate portrayal of fair value.   It is described as using a quoted market price from an active market.   Level 2 is a bit less desirable and suggests using other observable information such as a quoted price for a similar property in an active or inactive market.   Level 3 is the least desirable because it requires the use of assumptions (rather than observations) such as guess at what a market participant might do in arriving at a price for a property.   In reporting fair value, a company is supposed to use the highest level possible for each account balance.

 

Auditing

 

Answer is B

 

Any time that a company plans to issue shares of its own stock, it hopes to receive as much money from investors as possible.   Investors will bid up the opening price of the initial public offering if Riley, Inc. looks especially profitable.   Therefore, whenever an audit client is making plans to issue shares to the public, the independent auditor should be aware that the risk of a material misstatement is higher because it could be used to benefit the company and its original owners.

 

 

Regulation

 

Answer is B

 

The form 1023 is labeled as the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.  Section 501(c)(3) is the most common tax-exempt status.

 

 

BEC

 

Answer is A

 

Currently, net income is $110,000 less $90,000 or $20,000.   Widgets are sold for $110,000/10,000 units are $11 each.  Because fixed cost is $20,000, the variable cost must be the other $70,000 or $7 per unit ($70,000/10,000 units).   If the price is lowered from $11 to $10, the number of units sold will go up by 40 percent from 10,000 to 14,000.   Total sales will be 14,000 times $10 sales price or $140,000.   Fixed cost is still $20,000 and variable costs are $7 each times 14,000 units or $98,000.   Total costs are now $118,000 ($20,000 plus $98,000).   The new profit will be $140,000 sales less $118,000 cost for a profit of $22,000.   That is $2,000 more than the current net income.

 

 

You’ve got roughly 9 weeks 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

 

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How to Stay Fresh While Taking the CPA Exam; New Practice MCQs

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May 14, 2013

Lesson 133

 

From:   Joe

 

THANKS FOR YOUR HELP PAYING US FORWARD

 

We just got our results for last week and we had 10,029 visitors to our website who spent an average time of over 21 minutes.   That is an average visit for the entire week of 21 minutes, not 21 seconds like on most websites but 21 minutes.   To put that in another way, those visitors looked at 212,502 pages in that one week.   That means that someone looked at a page onCPAreviewforFREE every 2.8 seconds for 24 hours per day for the entire 7 days.

 

Why do so many people look at so many of our pages?   That’s easy – people just like you get the word out to their friends.   All those other (expensive) review programs advertise like crazy.   We spend nothing on advertising.   Nothing.   Instead, we depend on you to pass along emails like this one to people who are preparing to take the CPA Exam.  

So, every time we see a number like 212,502, we always say a word of thanks to YOU for helping to spread the word.

 

 

FACEBOOK AND TWITTER FOR MOTIVATION  BETWEEN NEWSLETTERS

 

We send these email lessons out every 10-14 days to everyone who registers for free at CPAreviewforFREE.  However, we want to try to provide more encouragement quicker.   So, recently, we have been sending out 2-3 messages per day on Facebook (CPAreviewforFREE) and twitter (CPAreview4FREE).   It is amazing how much you can say in just 140 characters.   We realize that people who are challenging something as tough as the CPA Exam can use a touch of encouragement on a regular basis and that is what we are trying to provide.

 

Check us out.

 

Or, again, pass the word along.

 

 

HOW TO STAY FRESH WHILE TAKING THE EXAM

 

I gave a couple of final exams last week for Intermediate Accounting II (deferred taxes, bonds, leases, etc.).   As I am sure you know, that material is very complex.   Therefore, although the students normally get three hours, I gave them four hours.   One of the things that I always warn my students about is “thinking tired” during any exam.   They are not digging ditches or building pyramids but it is easy to start convincing yourself that you are tired as you mentally work through a long test.   When you start “thinking tired,” you begin to get careless.   You lose your concentration.   You start making silly errors.   That can be the difference in passing and failing.

 

I realize that a four hour test is a long test but when it comes to your mental state, you are only as tired as you tell yourself you are.   I want my students to be as fresh during the last hour on that exam as they are during the first.   I suggest that they stand up and stretch every 45 minutes or so just to relax and get the energy moving again.  

 

However, my most common admonition is that they never start mentally whining about how tired they feel.  More...  

 

DEFINITIVE INFORMATION ON THE CPA EXAM FROM THE AICPA

 

I am a big believer when you face a serious challenge that you need to learn as much about the enemy as you can.   When I took the CPA Exam many decades ago, I spent the first couple of weeks reading as much about the Exam as I could find.   I felt like I could better prepare myself for the battle if I understood what the CPA Exam was all about.

 

Now, of course, there is an entire website devoted to the CPA Exam.   Before you get too much further into your preparation, take a break and make sure you understand what you are facing.

 

Go to www.cpa-exam.org

 

Next, click on “For candidates” and read the “Candidate Bulletin.”   Skip what does not apply to you but read carefully everything that does apply to you.

 

Next, click on “Exam content” and read the “CSOs/SSOs Effective January 1, 2013”

 

After that, just wander through the website and see what you can learn.   Much of it will not impact you but some of it can be very important.   Know the enemy – it makes the enemy easier to defeat.  A reminder, our material is up to date to prepare you for the CPA exam.

 

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Did you know we have iPhone/iPad apps as well as Android apps?  

 

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PRACTICE NEW MCQs

 

Let’s do some practice and add some points to your score.  We're trying something different.  We added the answer letter and explanation to the end of the questions so you don't see the answers right off the bat.  Let us know if you like this.   

 

FAR

 

 The city of LeHuston sends out its Year Two property tax levies in Year One.   Although the money cannot be legally used by the city until Year Two, cash of $30,000 is collected prior to the end of Year One.   Cash is debited for $30,000 at that time.   How is the credit recorded in preparing the government-wide financial statements for Year One?

a.     As a revenue of $30,000 on the statement of activities

b.     As a liability of $30,000 on the statement of net assets

c.     As a deferred inflow of resources of $30,000 on the statement of net position

d.    As an increase in the fund balance-restricted on the balance sheet

 

 

Auditing

 

 The audit firm of Jennifer and Lawrence is gathering evidence about the possibility of material misstatements in a client company’s accounts receivable.   The company has 10,000 accounts receivable that the CPAs have split into two groups:   one for balances under $500 and another for balances of $500 or more.   The CPAs tested 5 percent of the first group and 20 percent of the second.   Which of the following statements is true?

a.   The audit firm cannot split accounts receivable in this way because the balance must be examined as a whole.

b.   The audit firm has stratified the population in hopes of reducing the necessary sample size.

c.    The audit firm can split the group as it pleases but the same number of items must be selected from each group.

d.   The audit firm can split the group as it pleases but must sample at least 30 percent of the total number of items.

 

 

Regulation

 

The Mendenhall Corporation is a domestic US company and owns shares in three different companies.   Each investment paid a $20,000 dividend to Mendenhall during the current tax year (for a total of $60,000).    Mendenhall owned 9 percent of the first company which was not a domestic US corporation.   Mendenhall owned 18 percent of the second company which was a domestic US corporation.   Mendenhall owned 27 percent of the third company which was also a domestic US corporation.   By how much did these dividends cause Mendenhall’s taxable income to go up?

a.   $60,000

b.   $30,000

c.   $16,000

d.   $12,000

 

 

BEC

 

A company is attempting to project the amount of cash that it will need to purchase an adequate amount of inventory for the current physical year.   The company expects to make sales of $300,000 with the merchandise costing $180,000.    The company wants to increase its level of inventory during the year by $25,000.   In addition, the company would like to decrease the level of accounts payable by $10,000.   What cash will have to be spent to achieve these objectives?

a.    $145,000

b.   $165,000

c.   $195,000

d.   $215,000

 

Have a great week – check out our Facebook page and/or out Twitter feed.

 

 

Answers to the questions above:

 

 

FAR--Answer is C

 

Historically, this early payment amount was reported as a liability.   However, services do not have to be rendered to earn the money and no repayment will occur.   So, the credit does not really meet the normal definition of a liability.   In a relatively new standard, GASB has created a statement of net position (instead of a statement of net assets) where a few balances (such as this) are reported as deferred inflows of resources in a category separate from the government’s liabilities.   

Joe Hoyle

 

Auditing--Answer is B

 

One of the problems in doing statistical sampling is that sample size is affected by the variability of the items in the population.  Thus, a lot of variability may necessitate a very large sample size (requiring a large amount of cost and effort).   That problem can be alleviated somewhat by dividing a population into several smaller populations based on dollar amounts – a process known as stratification.   The variability of each of these smaller populations is reduced so that the overall sampling size can be smaller saving time and cost.

 

Regulation--Answer is B.  

 

All of the dividends are included as revenue but then, for the two investments in domestic US corporations, a dividend received deduction is allowed.   For the second company, that deduction is $14,000 or 70 percent because ownership was under 20 percent.   For the third company, that deduction is $16,000 or 80 percent because ownership was 20 percent or more.   The revenue was $60,000 less $14,000 and $16,000 for an increase in taxable income of $30,000.

 

Answer is D

 

The company expects to sell $180,000 worth of inventory but still wants to increase inventory levels by $25,000.   That is only possible if the company buys $205,000 in inventory this period.   The company also wants to reduce the level of its accounts payable by $10,000.    Reducing a liability requires an additional payment, in this situation an additional payment of $10,000.   Therefore, to achieve these goals the company must anticipate spending a total of $215,000 in purchasing inventory.

 

Now go get some additional points!

 

Joe Hoyle, Co-Founder

CPA Review for FREE

 

www.CPAreviewforFREE.com

 

Q2 Scores for the CPA Exam

The AICPA announced that the scores for days 1-20 of Q2 have been released.  Have you received your scores yet?  If so, let us know how you did.

Congrats to those who put in the time and work to pass one part at a time!

Remember, if you didn't pass, you can "talk" it over with others on our forum.  Also, be sure that you register for our free newsletter where Joe provides encouragement, motivation and some new questions to study.

Check out our CPA Exam Tips to get started now on passing the exam.  You can still do it in 2013, but don't procrastinate.  Start NOW!

How to Stay Focused While Preparing for the CPA Exam

Try us FIRST before you spend your hard-earned money.   CPA Review for FREE   Over 2,400 FREE CPA Review Questions and Answers Available to YOU (for FREE)   May 7, 2013 Lesson 132   From:   Joe   PAY US FORWARD   I have been a bit slow sending out these email lessons during the spring because I have been tied up teaching some complicated courses at the university.   However, I gave my last final exam of the semester yesterday.   Now, I plan to be much more consistent over the summer and fall with these periodic email lessons – hopefully, you will be receiving a new lesson every 10-14 days from now on.   So, if you are preparing to take the CPA Exam soon, make sure to watch out for our emails.  We want to help you (yes, you) get the points you need to knock out that exam just as quickly as possible.   And, if you know someone (perhaps a graduating college student) who is gearing up to take the CPA Exam, suggest they go towww.CPAreviewforFREE.com and register so they can get these lessons.   They are absolutely free.   We just want to help you add those essential points to your grades and get you that much closer to 75.   WORK ON STAYING FOCUSED--HERE'S HOW   I wanted to give you a quick update.  Back on February 27, I talked about how hard it was for me to exercise.   Perhaps like you studying for the CPA Exam, I can exercise for a few days but then I will get distracted and fall behind and quit.   In that lesson, I talked about the need to have enough discipline to keep doing the necessary work day after day even after it gets boring.   At that time, I mentioned that I had started working out on a recumbent cross trainer (a type of exercise machine that works both the legs and arms).   What I had found very interesting was that this particular machine would count my steps.   So, after every workout session, I would write down my number of steps and go home and record them in a computer file.  There was something about keeping a count and watching the number get higher that really appealed to me.   Every day that I exercised on that machine, I will see that number of steps move higher.   Back then, I was trying to go to the gym about 5 times each week.  When I was writing that lesson, 33 days had passed and my grand total of steps was all the way up to 35,150.   For me, that was a real accomplishment.   I had not gotten bored and quit.   I had found a routine that seemed to work for me.   So, how am I doing?   Well, a total of 97 days have now passed and I am still shooting to work out 5 days per week and my grand total of steps is up to 116,900.   I am on track to hit my goal of 1 million steps in 2 ½ years – that will be the summer of 2015.   I cannot explain it but keeping track of the steps just works for me and I’m thrilled by that.   I have never successfully exercised in my entire life but now, every day, I say to myself – you can actually do this; every step you take adds more steps to your total.   You can move that total up.   My legs are stronger.   My heart is stronger.   My arms are stronger.   And what is the secret?  More...   WE ARE HERE FOR A REASON; THERE IS SERIOUS WORK TO BE DONE   I was reading a book recently and the author was talking about leading a conference on writing.   For some reason, he did not take his role very seriously and walked in on the first day and started wasting time.    He was amazed because the participants immediately let him know that they had not come to play and have a good time.   He said something in the book like “No one said anything directly to me but the message was clear:   We are here for a reason; there is serious work to be done.”   There is serious work to be done.   That’s a mantra that I like.     If you are going to take the CPA Exam and pass it in a reasonable period of time, you have to approach each day of your preparation with some quote like that:   “There is serious work to be done.”   The CPA Exam is not trivial.   Passing takes a lot of serious work.   In life, there are always distractions calling to you.   Those distractions want to keep you from your serious work. --I am hungry. --I need a sharper pencil. --I am cold; I need a sweater. --I need a cola. --My shoes hurt my feet. --I might have an email so I better check --I wonder who has posted something funny on Facebook. --I wonder if the dog needs food.    I could list a thousand of these.   Sometimes you sound like a two year old fighting to stay out of bed at night.   But, if you really want to pass the CPA Exam, there is serious work to be done.   If you don’t start out with that type of serious attitude, the distractions will pull you in 10 different directions and never let your alone.   There is serious work to be done.   If that is not your attitude, then you might ask yourself whether you really have much of a desire to pass the CPA Exam.    We all build up excuses – my kids, my spouse, my friends, my parents, my teachers – they are all in the way.   We all have issues.   I can send you a list of mine if you wish.   But, in the end, there is serious work to be done.   You have to figure out how to go over, around, under, or through those excuses.    And it is up to you to do it.   No one can study for you.   People can do all kinds of things for you but no one can put information into your head.   You have to do that.   And, that only starts when you realize that there is serious work to be done.   NOW A WORD FROM AHA! AccountingHomeworkApps   We launched a subsidiary company that created Accounting Homework Apps for college students.  The homework apps are like nothing else on the market.  They provide hundreds of multiple choice questions in six common college course topics:  Financial Accounting, Management Accounting, Audit, Tax, Accounting Information Systems and Business Law.  The app tracks the percent of questions correct, the time it takes to work the questions, the number of questions you want to work and more.     Now you can study on your iPhone/iPad and Android smartphone without using precious data.  As finals hit college students, let them know about the apps.     PRACTICE QUESTIONS--ADD SOME POINTS!   For practice today, I am going to do something different.   Yesterday afternoon I gave a test and part of it was on accounting for private not-for-profit organizations.   NFP accounting makes up 10 percent (on average) of the FAR exam.   So, I thought I would give you some of the questions that I asked my students yesterday.   A lot of the accounting for these private not-for-profit organizations revolves around handling of donations.     Good luck (I hope you pass the course).     For all of the following questions, assume that Charity A and Charity B are alike in every way except as described.   Assume that each of these questions is independent from all other questions.   (1) – Charity A and Charity B both suffer significant damage from a hail storm.   Each hires a person to provide essential repairs.   Each of these workers donates the labor to the charity.   Charity A looks at the repair work and deems it to require a specialized skill.   Charity B looks at the repair work and decides that it did not require a specialized skill.   After that, which of the following statements is true?  Circle the correct answer. A.   Charity A will report more unrestricted net assets than Charity B. B.   Charity A will report the same amount of unrestricted net assets as Charity B. C.   Charity A will report less unrestricted net assets than Charity B.       Answer is B   If donated services require a specialized skill that would have been purchased except for the donation, the expense is recorded at fair value as well as contribution revenue.   That is what Charity A did.   Those two accounts cancel each other out so that the total of unrestricted net assets is not affected.   If the work does not require a specialized skill (and if a nonfinancial asset is not enhanced), no recording is normally made.   That is what Charity B did.   No entry means that unrestricted net assets are not affected.   There is no net effect on unrestricted net assets for either charity.     (2) – Each charity receives a large investment in the common stock shares of a publicly-traded company.   Each investment must be held forever.   Charity A can spend the resulting income as it sees fit.   Charity B must spend the resulting income to supplement salaries.   Both charities receive the same amount of income this year.   Both charities immediately spend the entire amount of income to supplement salaries.  After that, which of the following statements is true?  Circle the correct answer. A.   Charity A will report more unrestricted net assets than Charity B. B.   Charity A will report the same amount of unrestricted net assets as Charity B. C.   Charity A will report less unrestricted net assets than Charity B.       Answer is B   The income is unrestricted for Charity A.   When it is earned, contribution revenue is increased within the unrestricted net assets.   When the money is then spent, salary expense is recognized which reduces unrestricted net assets.   The two cancel out.   Charity A has no change in its unrestricted net assets.    The income is restricted for Charity B.   When earned, the temporarily restricted net asset balance is increased.   However, when the money is spent in the appropriate fashion, the temporarily restricted net asset balance is reduced and the unrestricted net assets category is increased (because the restriction has been fulfilled).   Also, the salary expense is recorded within the unrestricted net assets.  For Charity B, the unrestricted net asset total goes up and then is reduced so, once again, there is no change in unrestricted net assets.   Neither Charity A nor Charity B report any change in unrestricted net assets.     (3) – On 1/1/1, each charity combines with another similar charity.   In both cases, this similar charity has assets with a book value of $700,000 but which are worth $780,000.   This similar charity had no liabilities.   Both Charity A and Charity B paid $800,000 to make this acquisition.   Charity A is acquiring a charity that gets its money through exchange transactions (it sells cookies).   Charity B is acquiring a charity that gets its money through donations.    After that, which of the following statements is true for consolidated statements?  Circle the correct answer. A.   Charity A will report more unrestricted net assets than Charity B. B.   Charity A will report the same amount of unrestricted net assets as Charity B. C.   Charity A will report less unrestricted net assets than Charity B.       Answer is A   The problem here is with the handling of the $20,000 that was paid in excess of the fair value of the similar charity’s assets.   The charity acquired by Charity A generates revenue so the $20,000 is viewed as goodwill.   The charity acquired by Charity B gets its funds from donation.   Goodwill is really the amount paid in an acquisition on the anticipation of additional revenues (from a source that cannot otherwise be identified as an intangible asset).    This second charity does not have revenues.   Therefore, the excess is not recorded by Charity B as goodwill but as a reduction in net assets.   Charity A does not have that reduction and will have more unrestricted net assets.     (4) – On 1/1/1, a rich person tells Charity A that she will give $300,000 in cash on January 31, Year Three if the charity has been able to push its program service expenses to 80 percent or more of the charity’s total for expenses.   If received, this donation must be spent on salaries for hourly workers.   The reported figure on December 31, Year One is 75 percent and on December 31, Year Two is 82 percent.   The money is donated early in Year Three and then properly spent several weeks later.    Circle the correct answer. A.   During Year One, Charity A increases its unrestricted net assets. B.   At the end of Year Two, Charity A increases its unrestricted net assets. C.   During Year Three, unrestricted net assets are both increased and decreased. D.   During Year Three, temporarily restricted net assets are both increased and decreased.     Answer is C   Initially, this gift is conditional because it will only be given if the charity is able to accomplish a certain objective.   Conditional pledges are not recorded by not-for-profit organizations.   However, at the end of Year 2, the objective is reached and the gift becomes unconditional so it is recorded.   At that time, in Year Two, the asset “pledge receivable” is increased along with contribution revenue (which increases the temporarily restricted net assets).   The temporarily restricted category is used because the money has to be spent in a particular fashion.   In Year Three, when the money is properly spent, the temporarily restricted net asset category is reduced and the total of unrestricted net assets is increased (the restriction has been fulfilled).   The salary expense also reduced unrestricted net assets at that time.   The total of temporarily restricted net assets is increased in Year Two and decreased in Year Three.   The total of unrestricted net assets is increased and decreased in Year Three.     (5) – Assume Charity A is a not-for-profit hospital.   On 1/1/1, Charity A does an appendectomy on one of its patients.   The cost is $76,000 but the normal charge is $100,000.   Charity A realized from the beginning that collection would be impossible and made no attempt to collect.   What amount should be disclosed by Charity A?   Circle the correct answer.  A.   Zero B.   $76,000 C.   $100,000       Answer is B   Not-for-profit health care entities often do charity service where work is performed but the charity does not anticipate receiving any money, often because the person is poor and uninsured.   Such charity work is not recorded at all since there was no expectation of collection.   However, to indicate the financial impact of this decision, the cost of that work must be disclosed.      Have a great week.   I’ll be back soon with a new lesson.   Let’s get this CPA Exam finished off in 2013.     Joe Hoyle   Co-Founder CPA Review for FREE

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April, 2013
 

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IF THEY CAN DO IT, SO CAN YOU!

 

It is spring and life is good and we always love to hear from candidates who have been using AND passing with CPAreviewforFREE.

 

From MR:

I'd like to thank cpareviewforfree for the great and affordable CPA review materials. I have just passed the CPA exam with flying colors by using your free MCQs and the Essentials. Below are my results.
FAR - 86
AUD - 91
BEC - 80
REG - 79
Thank you cpareviewforfree. More power to you and may you be able to help more CPA candidates!

 

From OV:

I received my score for REG today and I passed (82). Once again, thank you CPAReviewForFree! I've passed two sections at the first attempt because of you guys.

 

NEW TESTING WINDOW, NEW ENERGY TO PASS 

 

The month of April starts the second testing window of 2013.   What is your goal for this testing window (which will conclude on the last day of May)?   By that point in time, what do you want to have accomplished?   Having a specific goal firmly in your mind is a big help in passing the CPA Exam.

 

If you live in the US, you probably know that college teams are playing a lot of basketball these days in what is known as March Madness.   What can we learn from those folks who compete in March Madness on their way to selecting a national champion?   I have two things that I want to point out.

 

1.  First, you don’t become a championship basketball team by accident.   In life, we often blame things on luck.   That is nonsense.   Back in October, these players and these coaches set a goal for themselves. Perhaps it was more like a dream at that time.   They wanted to be one of the teams that got into March Madness and then did well in the tournament and went all the way to the championship.   I’ll bet those players and those coaches have worked on reaching that goal virtually every day since that time.   They have put in hours and hours of preparation.   They have risked failure.   They have made sacrifices.    They have practiced when they were probably sick of practice.   They have worked long hours and then worked some more.  No one doubts this.   In fact, we expect such an effort of people who want to be great.

 

You don’t achieve great things by preparing in a mediocre fashion.

 

While they have been practicing, what have we been doing?   We sit on our couches and watch those teams play and we yell at the television:   “Why don’t you play harder?”   I wonder what it would feel like if one of those players turned to us and said “Hey, why don’t you study harder for the CPA Exam?”    Wouldn’t that be appropriate?   We want the players on our favorite team to work extra hard and succeed to make us feel good.   We want someone else to do the real work so we can share in the success.

 

In truth, how important are those basketball games to our daily lives?   What is important is what we do in our own lives.   Do we want to succeed?   Do we know why we want to pass the CPA Exam?   Are we willing to put in the work that is necessary while knowing that we still risk failure?

 

Do we prefer to sit on the couch and watch or do we do the hard work and succeed?   That’s a very basic question in life. 

 

Many teams with talented players do not win.   Talent alone is never enough.   Those teams either don’t practice enough or they never quite develop the teamwork that is necessary.   There are no guarantees when you compete.   I cannot guarantee that you will pass the CPA Exam no matter how hard you prepare.   I can guarantee, though, that you will fail every time if you don’t prepare.   Life is like that.   You have to be able to deal with the uncertainty.   You do the work for one reason:   to stack the odds in your favor.  

 

The April-May testing window is now open.   It will close at the end of May.   Many of you will be happy with your CPA Exam progress at the end of those two months – not everyone but hopefully most.  Don’t sit on the couch.   Do the work.    Stack the odds in your favor.   Have enough ambition to take the risk and throw yourself at that exam.    The people who are still playing in March Madness did not get to that point by playing it safe and secure.   If you are going to be successful on the CPA Exam, it will not be luck.   Plan out what you want to do each day and make sure you get to that goal.  

 

The second thing is to make a plan to make it happen.  

 

 

CALLING ALL ACCOUNTING COLLEGE PROFS, COLLEGE STUDENTS AND ANYONE WHO KNOWS ACCOUNTING COLLEGE STUDENTS

 

We had an AHA! moment.  Over the years, CPA review courses were telling college profs and accounting students to use their CPA review course materials to prepare for their college tests and quizzes.  We wanted to create a program all your own so we created an app for that!  AccountingHomeworkApps help accounting students practice mcqs for upcoming exams and quizzes anywhere,  any time.  It's not just for students who want to become a CPA.  It's for all accounting majors!  Other than the first download of the app to your Android smartphone or iPhone/iPad, everything is on your device.  No data plans are necessary to study for as long as you'd like.  For $4.99, it's a small price to pay for that "A".  

 

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LET'S PRACTICE SOME QUESTIONS AND START SEEING IF WE CAN ADD POINTS TO GET YOU CLOSER TO SUCCESS

 

FAR – The question comes from yesterday’s Intermediate accounting class here at the University of Richmond.

 

The FGCC Company had an enacted income tax rate of 28 percent.   The company ended Year One with a deferred income tax liability of $40,000, a deferred income tax asset of $50,000 and a valuation allowance of $19,000.    The enacted tax rate was raised at the start of Year Two to 30 percent.   The company ended Year Two with a deferred income tax liability of $70,000, a deferred income tax asset of $40,000, and a valuation allowance of $24,000.   On the company’s Year Two income statement, what is the amount of income tax expense – deferred that is reported?

 

A.  $15,000

B.   $25,000

C.   $35,000

D.   $45,000

 

Answer is D

 

A balance sheet approach is used for deferred taxes.   The balance sheet totals are computed and an adjustment is made to move each previous year total to the newly computed amount.   The balancing number for that entry is the income tax expense-deferred amount to be reported on the income statement.   The expense is not computed directly but only as the amount that moves previous balance sheet accounts to their updated totals.   Here, the liability is increased by a $30,000 credit (from $40,000 to $70,000), the asset is reduced by a $10,000 credit (from $50,000 to $40,000), and the valuation allowance is increased by a $5,000 credit (from $19,000 to $24,000).  The balancing amount is a $45,000 debit which represents the income tax expense-deferred.   Notice here that the enacted tax rates are not used in this calculation because the proper asset and liability balances have already been calculated.

 

 

Auditing

 

The Cosby CPA firm is auditing the financial statements of Hamster, Inc. for the latest year.   Hamster manufactures widgets in its factory located in Gaffney, South Carolina.   The auditors are currently analyzing each of the entries made to the repair expense account.   What is one of the purposes for doing this testing?

A.   The auditors hope to gain evidence that the company’s liabilities are not overstated.

B.   The auditors hope to gain evidence that the company’s net income is not understated.

C.   The auditors hope to gain evidence that the company’s current assets are not overstated.

D.   The auditors hope to gain evidence that the company’s current assets are not understated.

 

 

Answer is B.

 

The auditors are looking for the possibility of material misstatements.   The repair expense account is studied to determine whether any costs that should have been added to an asset account were incorrectly added to this expense account.   If that has taken place, the expense balance will be overstated and, as a result, reported net income will be understated.   If that has occurred, the machinery and equipment balances will also be understated but they are not current assets.

 

 

Regulation

 

Mr. Wilson has placed his house on the market for $319,000.    However, he sends a signed letter to Mr. Dennis offering to sell the property to him for only $300,000.   Mr. Dennis responds with a signed letter agreeing to buy the house for $290,000.   What is the best term for the letter written and sent by Mr. Dennis?

A.   An implied acceptance

B.   A purchase agreement

C.   A counteroffer

D.   A promissory letter

 

 

Answer is C

 

A counteroffer is a return offer made by a party who has rejected an offer.   Mr. Dennis has basically turned down the $300,000 offer made by Mr. Wilson but has then made an offer to buy the house for $290,000.   Because this offer follows the rejection of Mr. Wilson’s offer, it is referred to as a counteroffer.

 

 

BEC

 

An economist is hoping to see a future increase in gross domestic product.   The economist is looking for evidence that might indicate this future change will happen.   Which of the following is most likely to indicate this possibility?

A.   Increase in the hours worked each week by production workers

B.   Increase in the amount of imports

C.   Decrease in the rate of inflation

D.   Decrease in the monetary amounts in circulation.

 

 

Answer is A

 

According to Wikipedia, the “gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time.”   Thus, GDP is a measure of productivity.   The more production workers work the more likely it is that the GDP will increase.

 

Have a great week.   Work hard.   Make a real difference.

 

Joe Hoyle

President, CPAreviewforFREE

 

Practice Test for Governmental Accounting

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Practice Test:

ACCOUNTING FOR STATE AND LOCAL GOVERNMENTS

 

The following is a test that I recently gave to my State and Local Government Accounting class here at the university.   I am delighted to share it (and the answers) with you in exchange for a small donation to Project Hope.  It is important in life that we do not focus solely on ourselves.  We are delighted now to be helping Project Hope and even a small donation from you helps when added to our other generous candidates. We here atCPAreviewforFREE have shared our free questions and answers with hundreds of thousands of candidates over the years.    

 

When I wrote this test, I tried to set it at the level of what I thought my students would see on the CPA Exam.   I chose not to write multiple-choice questions (as they would have seen on the CPA Exam itself) but rather as true-false questions.    The reason was that I wanted to cover a very wide range of topics and it is easier to do that using true-false.  If you know any college accounting students, forward this newsletter to them so they can practice for their next Governmental Accounting quiz or test.

 

If you stop and think about it, a traditional multiple-choice question is merely four true-false questions where one is true and three are false.   So, I never apologize for using true-false questions.  

 

After you finish studying accounting for state and local governments  or you feel you are ready now, please take the test below just to see how you do.   You will see 38 questions that you have never seen before which is a good way to evaluate your knowledge.   My students took between 40 minutes and 75 minutes to finish this test.   It is my guess (and it really is a guess) that missing 11 or less would be equal to passing this portion of the CPA Exam.  

 

TEST INSTRUCTIONS:  

 

Take the test and then send an email to us with the single word "Answers" in the body and we'll provide the answers to the test.  Read over the questions that you miss.   Pay close attention to those answers.  You certainly do not need to be perfect but you need to work on getting more and more questions correct.

 

BEGIN AND GOOD LUCK:

 

Assume you are the controller for the City of Havisham.   The city has a fiscal year ending December 31, 2013.   IF the city was to produce financial statements right now, the following figures would be included: 

--Governmental Activities:   Assets = $800,000, Liabilities = $300,000, and Change in Net Assets for the period = increase of $100,000

--Business-Type Activities:   Assets = $500,000, Liabilities = $200,000, and Change in Net Assets for the period = increase of $60,000

--Governmental Funds:   Assets = $300,000, Liabilities = $100,000, and Change in Fund Balances = increase of $40,000

--Proprietary Funds:   Assets = $700,000, Liabilities = $300,000, and Change in Net Assets for the period = increase of $70,000

 

Other information:   The city council is viewed as the highest level of decision-making authority for the government.  Where applicable, current financial resources are viewed by the government as available if collected within 75 days of the end of a fiscal year.

 

For each of the following, indicate whether the statement is True or False.   The following questions are all independent of each other.

 

(1) – TRUE or FALSE – In the information provided above, an error has apparently been made that must be corrected because the amount of proprietary fund assets ($700,000) cannot be greater than the amount of business-type activity assets ($500,000).

 

(2) – TRUE or FALSE – A separate governmental fund (such as money held for the construction of Highway 61) is holding assets totaling $32,000.   Based on that information, this fund must be reported as a major fund.

 

(3) – TRUE or FALSE – Investments are given to the city with a value of $5,000,000.    All income earned from these investments must be used to construct a small library in one of the local neighborhoods but the investments must be held forever.   When the investments are received, revenue of $5,000,000 is reported in the Permanent Fund.

 

(4) – TRUE or FALSE – Investments are given to the city with a value of $5,000,000.    All income earned from these investments must be used to construct a small library in one of the local neighborhoods.   If the money is not properly spent, it must be returned.   Near the end of 2013, income of $600,000 is earned.   Construction will not begin until 2015.   Deferred revenue of $600,000 must be reported in a Capital Projects Fund.

 

(5) – TRUE or FALSE – The city starts a bus system to help eliminate traffic congestion.   Passengers are charged a nickel for each trip although that fee will not come close to covering the cost of the bus system or pay for its debts.   Because the fee will not cover the cost of this operation, the bus system is reported as a part of the General Fund rather than as a separate Enterprise Fund.  

 

(6) – TRUE or FALSE – The city council passes its annual budget for all General Fund activities.   Revenues are expected to be $1,000,000 and approved expenditures are $900,000.   These budgetary amounts are recorded through a journal entry at the beginning of the year (an entry that is removed at the end of the year).   In recording this budget, an estimated revenue account is debited for $1,000,000.   

 

(7) – TRUE or FALSE – The city council passes its annual budget for all General Fund activities.   Revenues are expected to be $1,000,000 and approved expenditures are $900,000.   These budgetary amounts are recorded through a journal entry at the beginning of the year (that entry is removed at the end of the year).   In recording this budget, an expenditures account is debited for $900,000.

 

(8) – TRUE or FALSE – In government-wide financial statements, pension trust funds are included within the governmental activities.

 

(9) – TRUE or FALSE – The government bought a three-year insurance policy on January 1, 2013 for its school system.   If the purchases method had been used, the amount of expenditures reported by the city would be larger for that year than if the consumption method had been used.  

 

(10) – TRUE or FALSE – An income tax is classified as derived tax revenue.

 

(11) – TRUE or FALSE – Assume that after the figures on page one of this test were determined, you learned that the city was entitled to $100,000 in income taxes on income earned during 2013.   Starting on January 1, 2014, the city will collect $1,000 per day for the next 98 days (the final balance will prove uncollectible).   As a result, the reported change in net assets for the governmental activities in the government-wide statements for 2013 will go up by $98,000.

 

(12) – TRUE or FALSE – Assume that after the figures on page one of this test were determined, you learned that the city was entitled to $100,000 in income taxes on income earned during 2013.   Starting on January 1, 2014, the city will collect $1,000 per day for the next 98 days (the final balance will prove uncollectible).   As a result, the reported liabilities for the governmental funds in the fund financial statements as of December 31, 2013, will go up by $23,000.  

 

(13) – TRUE or FALSE – The police department ordered some equipment in October 2013 for $43,000.   It was received on December 29, 2013, but at a cost of $44,000.   In the General Fund, the encumbrance account was credited for $44,000 and the expenditure account was debited for $44,000 to indicate the switch from monetary commitment to a liability.

 

(14) – TRUE or FALSE – The police department ordered some equipment in October 2013 for $43,000.   The equipment was not received prior to the end of 2013.   The police chief authorized the department to accept and pay for the equipment when it arrived in 2014.   In reporting fund financial statements at the end of 2013, a fund balance committed amount should be reported on the balance sheet for the governmental funds of $43,000. 

 

(15) – TRUE or FALSE – A cash amount of $32,000 is transferred from the General Fund to a Capital Projects Fund.    On the statement of activities, for the government-wide financial statements, this transaction is shown as both a transfer in and a transfer out.

 

(16) – TRUE or FALSE – A cash amount of $32,000 is transferred from the General Fund to an Internal Service Fund to pay for some work that was done by the print shop for the school system.    On the statement of revenues, expenditures, and other financing sources and uses for the Governmental Funds (in the fund financial statements), this transaction will be reported as an other financing use.

 

(17) – TRUE or FALSE – Assume that after the figures on page one of this test were determined, you learned that the city was entitled to $100,000 in property taxes which were assessed on December 29, 2013, solely to finance government operations in 2014.   Starting on January 1, 2014, the city will collect $1,000 per day for the next 98 days (the final balance will prove uncollectible).   The reported change in net assets for the governmental activities in the government-wide statements reported at the end of 2013 will go up by $98,000.

 

(18) – TRUE or FALSE – Assume that after the figures on page one of this test were determined, you learned that the city was entitled to $100,000 in property taxes which were assessed on December 29, 2013 solely to finance government operations in 2014.   Starting on January 1, 2014, the city will collect $1,000 per day for the next 98 days (the final balance will prove uncollectible).   The change in fund balances reported for the Governmental Funds at the end of 2013 will go up by $60,000.

 

(19) – TRUE or FALSE – Assume that after the figures on page one of this test were determined, you learned that the city was entitled to $100,000 in property taxes which were assessed on December 29, 2013, solely to finance government operations in 2014.   The government collected $5,000 on December 30, 2013 and the rest in the first four weeks of 2014.   On government-wide financial statements for the governmental activities as of December 31, 2013, the total liability balance will be increased by $5,000.

 

(20) – TRUE or FALSE – Assume that after the figures on page one of this test were determined, you learned that the city was entitled to $100,000 in property taxes which were assessed on December 29, 2013, solely to finance government operations in 2014.   The government collected $5,000 on December 30, 2013 but the rest will not be collected until June of 2014.   On fund financial statements for the Governmental Funds as of December 31, 2013, the total liability balance will be increased by $5,000.

 

 

(21) – TRUE or FALSE – Investments are given to the city with a value of $5,000,000.    All income earned from these investments must be used to construct a small library in one of the local neighborhoods but the investments must be held forever.   In 2013, income of $480,000 was received from these investments.   However, none of this money has yet been spent.   On fund financial statements, the year-end balance sheet for the Governmental Funds must show a “fund balance – restricted” of $5,000,000 and a “fund balance – committed” of $480,000.   

 

(22) – TRUE or FALSE – The city bought some land several years ago for $220,000.   At the very end of 2013, the land is sold for cash of $250,000.   The net asset total in the government-wide financial statements goes up by $220,000 more than the fund balance total for the Governmental Funds.

 

(23) – TRUE or FALSE – The city incurs an expense on December 30, 2013, of $90,000 that will not be paid for 4 months.   On the 2013 financial statements, there is a reconciliation that starts with the total change in fund balances for the Governmental Funds and works down to end with the total change in the net assets for the Governmental Activities.   Because of differences between modified accrual accounting and accrual accounting, this $90,000 must be subtracted as part of this reconciliation.

 

(24) – TRUE or FALSE – On December 30, 2013, the city issues $400,000 in long-term bonds for face value to finance school operations.   On the 2013 financial statements, there is a reconciliation that starts with the total change in fund balances for the Governmental Funds and works down to end with the total change in the net assets for the Governmental Activities.   As a result of the bond issuance, this $400,000 must be subtracted as part of this reconciliation.

 

(25) – TRUE or FALSE – On December 30, 2013, the city spends $900,000 on a sidewalk.   On the 2013 financial statements, there is a reconciliation that starts with the total change in fund balances for the Governmental Funds and works down to end with the total change in net assets for the Governmental Activities.   As a result of this acquisition, this $900,000 must be subtracted as part of this reconciliation.

 

(26) – TRUE or FALSE – A discretely presented component unit is shown in the government-wide financial statements as if it were one of the funds within the government.  

 

(27) – TRUE or FALSE – All of the board of directors for a nature museum are appointed by the city.   This fact alone makes this nature museum a component unit of the city.

 

(28) – TRUE or FALSE – The city appoints none of the governing board of a parks commission.   This fact alone prohibits this parks commission from being a component unit of the city.

 

(29) – TRUE or FALSE – The city has a school system with a separately elected governing board (elected by the public).    This fact alone makes the school system a special purpose government with its own financial reporting to be made.

 

(30) – TRUE or FALSE – The city council officially passes a budget for its General Fund activities.   In studying this budget as it is presented within the CAFR, a citizen will find the following three columns:   the budgetary figures as initially passed, the budgetary figures as amended during the period, and the actual results for the period.  

 

(31) – TRUE or FALSE – The modified approach applies only to infrastructure assets.

 

(32) – TRUE or FALSE – The modified approach has become widely used in state and local government accounting over the last few years.

 

(33) – TRUE or FALSE – The state of Virginia requires the city to buy equipment to monitor its air quality.    The state gives the city $100,000 to help pay for the equipment acquisitions.   This grant is known as a voluntary nonexchange transaction so that revenue is recognized when all eligibility requirements are met.

 

(34) – TRUE or FALSE – The city’s school system charges its students a $10 per person fee each year.   In recording this revenue in the government-wide financial statements on the statement of activities, it should be shown as miscellaneous revenue directly under the general revenues.  

 

(35) – TRUE or FALSE – The city receives a work of art worth $100,000 as a gift and also spends $70,000 in cash to buy a second art work.   Both art works will be exhibited publicly and properly protected and preserved.   The city council passes a resolution that if either item is ever sold the proceeds will be used to buy replacement art works.   Both of the art works are viewed as inexhaustible.   The city has the option to report both of these pieces of art as expenses rather than as assets in the government-wide financial statements.

 

(36) – TRUE or FALSE – A city constructs curbing for a neighborhood in a special assessment project in which the individuals whose property is being benefitted will pay the money for the work.   The city has no legal responsibility at all for this work so it is recorded in an Agency Fund.   The money collected should be reported as program revenues on the statement of activities in the government-wide financial statements.

 

(37) – TRUE or FALSE – Assume that the city issues 30 day tax anticipation notes on December 30, 2013, just to finance the government until new taxes are collected.   These notes are issued at their face value of $500,000.      On the 2013 financial statements, there is a reconciliation that starts with the total change in fund balances for the Governmental Funds and works down to end with the total change in the net assets for the Governmental Activities.   As a result of the bond issuance, this $500,000 must be subtracted as part of this reconciliation.

 

(38) – TRUE or FALSE – On January 1, 2013, assume that the city received a grant for $130,000 with the money to be used to supplement the salaries of the police and fire department workers.   The money will not be received by the city until after the salaries have been paid.   On December 30, 2013, all $130,000 is paid to appropriate workers and the city applies for reimbursement to receive the grant money.    It will be received within the next month.   The $130,000 revenue is recognized in the government-wide financial statements in 2013 but not in the fund financial statements for 2013.

 

For the answers, email us.

 

Joe Hoyle

President, CPAreviewforFREE