Nuts and Bolts for Passing the CPA Exam

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February 19, 2014

Lesson 147

From:   Joe

Welcome!

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Nuts and Bolts of Preparing for the CPA Exam

The question that I get most often (and I get a lot of questions) is:   “I want to pass the CPA Exam in a reasonable period of time and I don’t want to spend any money.   I am out of work and really don’t have money to spend on fancy courses.   I am not shooting for 100.   All I want is to get 75 points on each of the four exams and pass and then get on with my life.   I realize that the pass rate is about 50 percent on each part but I am willing to work hard.   If that is my goal, how would you recommend that I prepare for the CPA Exam?”

I think that is a very reasonable goal and one that CPAreviewforFREE can help you accomplish.   I have long held that too many people who really need to pass the exam (so they can get a job and start a career) never even take the exam because of the high cost of review materials.  I think that is terribly sad.   I think that is bad for the country and bad for the profession.   Professions should not just be open to the wealthy.  

So, here are my steps to success on the CPA Exam without spending money (or spending almost no money).   Please feel free to pass this along to anyone you know who might be looking to take the CPA Exam (especially those folks who are short of cash).

a.   Make sure that you qualify to take the CPA Exam in the state of your choice.   Go toThisWayToCPA for a list of the states and a brief overview of the requirements to sit in that state.  If you click on the state name, more specific information is given as well as state board contact information. This site is great for U.S. or international candidates.

b.   Start learning about the CPA Exam itself.   The enemy here is big.   You want to understand the process as completely as you can.   Go to the AICPA's website and you’ll find a massive amount of information.   You don’t have to look at it all but try to get as comfortable with the process as you can.  

On the opening page, you’ll see the following links that you should follow and read: 

For the rest of the items...See c through u here

I’ve probably left out a few things but this is not a bad path at all to get the exam done without spending thousands of dollars.   A few companies have tried to convince everyone on the planet that thousands must be spent to pass the CPA Exam.   No, if you have the self-discipline to do the work, you have a great chance of passing the exam while leaving all of that money in your own pocket so that you can buy things you really want.

Practice Questions

Okay, enough about the exam, let’s do some practice and add some points.   Here are four questions – four potential points.   Let’s make good use of them.

FAR

On January 1, Year One, Wherton Corporation buys an oil well in the Gulf of Mexico for $20 million.   It is expected to pump out 1 million barrels of oil over five years and then be dismantled.   Legally, Wherton is required to remove all signs of the oil well when the oil has been removed.   The fair value of that obligation as measured in Year One is $3 million.   Wherton pumped out 300,000 barrels of oil in Year One and sold them for $83 per barrel.    What was the reported gross profit for that year?  

a.   $8,400,000

b.   $12,800,000

c.   $15,200,000

d.   $18,000,000

Regulation

Jack and Diane are both 28 years old and have income this year of $50,000.   During this tax year, they paid $2,300 in interest on qualified student loans.   How does that impact their federal income tax return?

a.   There is no deduction because of the income.

b.   There is a $2,300 deduction to arrive at adjusted gross income.

c.   There is a $2,300 itemized deduction for interest expense.

d.   There is a $2,300 itemized deduction as a miscellaneous deduction.

Auditing

An auditor with the CPA firm of Winston and Churchill is working to understand a client’s inventory procurement system.  In hopes of assessing the control risk present in this system, the auditor is reviewing a flowchart created by company employees.   One symbol has a diamond shape.   What does that symbol represent?

a.   A document within the system

b.   A decision made within the system

c.   A process carried out within the system

d.   The input of information within the system

BEC

At the beginning of the current year, $1 would buy .8 Euros.   At the end of the current year, $1 would buy only .6 Euros.   Which of the following is most likely to be true?

a.   US exports to Europe should decrease

b.   US citizens are more likely to become tourists in Europe

c.   European citizens are less likely to become tourists in the US

d.   European exports to the US should decrease

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ANSWERS

FAR

Answer is D

The fair value of the cleanup operation that is legally required is capitalized to the cost of the oil well making the total $23 million.    Because 1 million barrels of oil are expected, depletion is $23 per barrel.   The oil is sold for $83 per barrel for a gross profit of $60 per barrel.   The company pumped out and sold 300,000 barrels for a total gross profit of $18 million.   Because the remains of the oil well must be removed, there is apparently no residual value.  

Regulation

Answer is B

Here, both the amount of interest and the amount of income are below threshold levels so the interest paid on those qualified student loans is deducted as a deduction to arrive at Jack and Diane’s adjusted gross income.

Auditing

Answer is B

On a flowchart, a diamond represents a decision that must be made.  Normally, the operations process out of one point of the diamond if the answer to the decision is Yes and out of another point on the diamond if the answer is No.  

BEC

Answer is D

The dollar can buy a certain amount of Euros at first and then later the dollar can buy a smaller amount of Euros.   The dollar is losing value and the Euro is gaining value.   People holding dollars have less comparative wealth and people holding Euros have more comparative wealth because of the relative change in currency values.   Answer a is wrong because Europeans are likely to buy more now from the US rather than less.   Answer b is wrong because US citizens are more likely to stay home now because they have less value to spend.   Answer c is wrong because Europeans have more comparative wealth now and are more likely to travel rather than stay at home.   The answer is D because US citizens have less comparative wealth now and, therefore, are inclined to spend less.

Joe Hoyle

President

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December 31, 2013

Lesson 145

 

From:   Joe Hoyle

 

New Year’s Eve – Time to Make a Resolution that YOU Will Be More Successful in 2014!!!  

 

You can do it and CPAreviewforFREE.com is here to help.

 

Less than two weeks ago, my new book (Don’t Just Dream about Success:   Stack the Odds in Your Favor) was released on Amazon in both the Kindle and the paperback versions.   The book is available for less than $9.00.

Proceeds from the sale of this Success book will enable CPA Review for FREE to continue to offer our 2,400+ free questions and answers to CPA Exam candidates and college accounting students around the world.  Our website receives 500,000 hits per year and you (yes, YOU) can provide the financial assistance needed to keep making these questions available.  Buy a book.  With the discount, it is practically free.   YOUR SUPPORT CAN MAKE THE DIFFERENCE.   Buy a book, read it, become more successful.  Now, there is a genuine win-win situation.  

 

And, if you like my Success book, please leave a positive reader review on the Amazon site.   That is a great marketing help for us.  (Also, do us a favor and forward this message along to anyone who might enjoy a book on achieving success.)

 

If you are a follower on our Facebook page, you know that I have been posting daily quotes from Don’t Just Dream about Success:   Stack the Odds in Your Favor.    Here are a few of my favorites.  Although the book is 142 pages of advice, stories, and assignments, these quotes will give you a good idea of the message that I want to convey.   I believe everyone benefits from receiving positive feedback on how to achieve success more of the time.   That was the reason that I wrote this book.   It is for YOU.

 

Motivational quotes on our Facebook page from:   Don’t Just Dream about Success:   Stack the Odds in Your Favor.

 

“Success should become like breathing, something we do every moment as a natural part of life.”  

 

“We should all latch on to dreams that push us toward greatness.   You (yes, YOU) can do that.   The ability to make a mark on this world is only limited by your ability to dream.”

 

“I am convinced that people can take specific steps to improve their chances for success whenever they encounter the opportunities that life provides.   Success is not random.  It is not the product of luck.   Successful people have learned how to succeed.   That can be you.   That should be you.   With thought and work, you can achieve success a much higher percentage of the time.  Start today to nudge the odds upward.   Do that and evolve into a winner as you begin to succeed more often.”

 

“Time is the most important weapon you have in your quest to succeed.  Time is more valuable than talent, brains, and strength.   Time is like gold:  You should hoard and make careful use of it.”   

 

“The desire for success burning within the heart has to be hot enough to push the person to do the difficult work that is necessary.” 

 

“The distance between success and failure is often smaller than you might imagine.   If your efforts are focused on continuously getting better, success is rarely too far away.”

 

“A lot more goes into a winning performance than mere talent and physical repetition.   Do not be naïve.  Nothing is ever that simple.   Players must be mentally ready to succeed if they hope to hit the winning shot.   Although hours of practice on the court are essential, the mind also has to be properly trained.”  

 

“You have to be a successful person every day if you are going to be a successful person any day.”

  

You CAN Pass the CPA Exam--Keep It Simple

 

One quote that I discuss in my new Success book (but that comes from another person) was said by the legendary football coach Vince Lombardi.   In that particular chapter of the Success book, I write about the fact that we often try to make things in life too complicated and that attitude holds us back.   Keeping things as simple as possible is usually the best strategy.  

 

Coach Lombardi said:  “Some people try to find things in this game that don't exist but football is only two things—blocking and tackling.”

 

So, in today’s lesson, as you look forward to a brand new year, I want you to think about success on the CPA Exam (or whatever you seek to accomplish during 2014) and try to narrow that success down to just two words.   Let’s keep things truly simple.   I want passing the CPA Exam to become a simpler task for you.   I want success to become simpler.   I think that focusing the whole process on just two words might help you to get more comfortable with the preparation that you need to do if you are going to succeed.

 

What would your two words be if I asked you to describe “Success on the CPA Exam” in just two words?

 

I have spent a lot of time thinking about this question and here are some of the words that I considered.  They are all extremely important but I didn’t think they were the MOST important.  More...

 

Practice, Practice, Practice

 

Okay, let’s do some practice problems and start adding points to your CPA exam score as you move into 2014.

 

FAR

 

A company buys an available for sale security as an investment at the beginning of Year One.   It goes up in value by $9,000 in Year One and by another $7,000 in Year Two.   On the last day of Year Two, the company sells this investment for $16,000 more than its original cost.   The company then reports net income of $80,000 in Year One and $90,000 in Year Two.   What amount should the company report as its comprehensive income in each of these two years?

 

a.   $80,000 in Year One and $106,000 in Year Two

b.   $89,000 in Year One and $81,000 in Year Two

c.   $89,000 in Year One and $97,000 in Year Two

d.   $80,000 in Year One and $99,000 in Year Two

 

 

Auditing

 

Under certain circumstances an independent auditor must communicate information directly to those who are charged with the ultimate governance of the reporting entity (often the board of directors).   The auditor can communicate any information that is deemed important but certain matters are required to be discussed with those in charge of governance.   Which of the following is most likely to be communicated in this manner?

 

a.  An event occurring after the end of the year provided important audit evidence about a reported balance.

b.  The auditor had to assess control risk in determining the amount of substantive testing that was required.

c.   Management consulted with another public accounting firm about the financial reporting of a large transaction near the end of the year.

d.  The accounting department of the reporting organization has not experienced significant turnover in a number of years.

 

 

Regulation

 

An independent CPA serving as a tax return preparer for the Unicorn Company recklessly disclosed information about the company that was discovered while preparing the tax return.   Which of the following is true?

 

a.   Although considered a bad practice, no penalty can be assessed for such behavior.

b.   A monetary penalty can be assessed against the tax return preparer.

c.   A penalty can only be assessed if the disclosed information was financial in nature.

d.   A penalty can only be assessed if the disclosed information specifically included the names of individuals who had not agreed to be so named.

 

 

BEC

 

Which of the following is an example of collusive pricing?

 

a.   Company A decides to take a loss in order to gain market share by pricing its output significantly below that of Company B, its major competitor.

b.   Company A prices its products higher than that of Company B, its major competitor, but hopes to continue selling at normal levels by an increase in its marketing budget.

c.  Company A forms a secret agreement with Company B, its major competitor, to keep prices higher than they would be in a purely competitive environment.

d.  Company A simply waits for Company B, its major competitor, to set a price and it automatically sets the price at a 5 percent discount from that amount.

 

 

Have a great start to your 2014.   You can be successful this year.   Make it happen!!!

 

Answers

 

FAR

 

Answer is B

 

Because the investment is classified as an available for sale security, no gain or loss is recognized in computing net income in Year One but the entire $16,000 is included in Year Two when the investment is sold.   In reality, the investment did not go up by $16,000 in Year Two but rather by $9,000 in Year One and by $7,000 in Year Two.   To arrive at comprehensive income, the zero net income effect in Year One is increased to $9,000 which increases the reported income from $80,000 to $89,000.   To get to comprehensive income, the $16,000 net income increase in year Two is reduced to $7,000 which decreases reported income by $9,000 from $90,000 to $81,000.

 

 

Auditing

 

Answer is C

 

An independent auditor is most likely to talk with the people in charge of governance when something occurs which might indicate the possible existence of a material misstatement.   Answers a, b, and d are all common events that take place often in audits or within audit clients.   Nothing out of the ordinary is apparent in these answers.   However, whenever the entity’s management talks with another public accounting firm (other than its own), the question arises as to whether the management is looking to manipulate the reporting for its own benefit.   Such consultation is not forbidden and may well not be a problem.   But, the people in charge of governance need to be aware that this has happened and, perhaps, talk with management about the need for such consultation.

 

Regulation

 

Answer is B

 

Knowingly or recklessly disclosing or using any tax return information other than to prepare or assist in preparing a tax return can lead to the assessment of a monetary penalty.

 

BEC

 

Answer is C

 

Collusive pricing occurs when companies within an industry form a secret pact to increase all profits by setting prices at an artificially high amount.   In effect, competition is eliminated so that customers are negatively impacted.

 

 

Joe Hoyle

President

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Professor Joe Hoyle's New Book Released--Don't Just Dream About Success: Stack the Odds in Your Favor

Try us FIRST before you spend your hard-earned money.

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December 19,

2013

Lesson 144

From:   Joe

Joe's New Book on Sale Now

My newest book is on sale on Amazon...just in time for the holidays.  

        Don’t Just Dream About Success:  Stack the Odds in Your Favor

Read the first portion of the book for FREE.   To buy the book, the introductory cost is only $8.99.   The Kindle version is available now.   The print version should be ready in a day or so.  Stay tuned!

Proceeds from the sale of this book will go to support work at CPA Review for FREE.   

Would You Do Us Two Favors? 

First, we have no marketing budget.   If this book is going to be successful, we need help in spreading the word.  

Please forward this email to anyone and everyone you think would benefit from this book.. 

I would greatly appreciate that.   If we don’t get that type of support, nothing else we can do is ever going to work.  You can make a real difference.

Second, one of the most important things in marketing a book these days is “Amazon reader reviews.”  

Please write a review on the book.

Everyone who buys on Amazon reads those and they make a huge difference as to whether someone buys or moves to the next book.   If you read the book and like it, please leave a review.   If you’ve never done this before, it is easy.  You’ll need to sign up and pick out a reviewer name (I’m not going to tell you my weird reviewer name—most people pick something unique).   And, then, write all about what you liked (or didn’t like).  Obviously the more reviews written, the better.

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Buy one of our test preparation products and NEVER spend another dime until you pass without any hoops to jump through or red tape to deal with. We want loyal customers for life that will refer friends and colleagues and pursue more credentials with us. We value your business and truly want you to pass.

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Proceeds of the Book to Support CPAreviewforFREE

Proceeds from the sale of Don’t Just Dream About Success:  Stack the Odds in Your Favor  will be used to support CPA Review for FREE.   Since 2008, we have provided 2,400 free questions and answers for candidates taking the CPA exam who could not afford the outrageous cost of review materials (often up to $3,000).   We believe the accounting profession should be open to all—not just those rich enough to buy good preparatory materials.   Over the years, we have averaged 400,000 visits to the site with the average person staying on the site for over 20 minutes.  That is a huge amount of added points on a very difficult exam.

Sales of this book will help us continue to provide you quality, well written material and questions.  A student successful in passing the CPA exam commented that we shoul have a fundraiser similar to Wikipedia's to help raise money for our service.  By buying this book, you are essentially donating money for the site AND you receive a book that can change your life in return.

I hope you will consider buying a copy both for

(1) the benefit of reading an interesting book about success and

(2) as support of a worthy cause.   Everyone can be successful.   Everyone should be successful.   I truly believe that.   It is not a course of study taught in college, but there are many ways to truly stack the odds of success in your favor.

A Parting Note from the Amazon Abstract

"Success is not the province of a chosen few. Success is available to every person willing to plan, think, and work.

Award-winning college professor Joe Hoyle has spent 43 years in the classroom seeking to guide and motivate thousands of students to succeed. He shares those same practical ideas here as he introduces innovative concepts such as Level-3 goals, the Derek Jeter Rule, Joe’s Theorem for Success, and the Ebenezer Scrooge Question.

As Joe states in the final chapter, “Success should become like breathing, something we do every moment as a natural part of life.” Written in a readable conversational style that is part storytelling and part autobiography, the book begins with the amazing tale of a student who sets out to be the youngest person in the world to climb the “7 Sisters,” the highest peak on each of the seven continents. Fourteen chapters later, Professor Hoyle ends with the four words most essential to us as we seek to stack the odds of success in our favor. In-between, he describes numerous techniques such as the use of mental visualization and the choice of a personality model that readers can use to create an overall success philosophy that will help them achieve those goals that matter most to them."

Thanks!!!

Happy Holidays!!!

Joe Hoyle

President

CPA Review for FREE

Get Out of Your Rut

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)   November 18, 2013 Lesson 142     From:   Joe   IMPORTANT ANNOUNCEMENT   We have been looking for a way to fundCPAreviewforFREE.com so that we can continue to offer candidates 2,400 free questions and answers forever.  We believe that everyone needs access to affordable materials so they can pass the CPA Exam.   The CPA profession should be open to all people, even if you cannot afford expensive review materials.   So, over the last couple of months, I have been writing an entire book on Achieving Success.   I am thrilled with the way it has turned out – even better than I had hoped.   We will publish the book in January or February for under $10 (with proceeds going to supportCPAreviewforFREE).      We will have more information for you very soon but I wanted to get this book on your radar.  It is intended as a guide for anyone who wants to become more successful:   more successful on the CPA Exam, more successful in school, more successful at work, and just more successful in life.   You can never be successful 100 percent of the time but you can certainly increase the odds for success by adopting logical (and reasonable) strategies.   Success does not happen by accident.   That is the purpose of my new book – to help you (yes, YOU) become a more successful person at all of those goals that really do matter to you.      Help us continue to provide 2,400 free questions and answers to CPA Exam candidates whether rich or poor.   And, help yourself (or a friend or loved one) to think more carefully about the path to success.   You can help CPAreviewforFREE by buying a book.   You can also help by telling others.   Don’t be shy – spread the word.   WHAT MAKES SOMEONE SUCCESSFUL?   I was in San Francisco a few days ago on business and had some time to waste.   So, I wandered around the city and played one of my favorite games.   In this game, I assume that I am a rich business owner who has an unlimited number of jobs to fill.   I need one of everything:   bus driver, plumber, dish washer, etc.   As I walk from place to place and go in and out of buildings, I ask myself which people I would hire.   Who catches my attention for doing a particularly good job?   And, just as importantly, what did they do that caught my attention?  I am trying to figure out what makes someone particularly good at a job.   I am obviously interested in success and this is one way that I can better see what leads to success.  Focusing on the essential nature of success helps you become more successful.      Our Partner, Fast Forward Academy, Offers the Most Technologically Advanced Review Course    Fast Forward Academy has the best price in the market, but they also offer a simple 4 pay plan of $225 for 4 months. Full access with the first payment and then 3 easy monthly payments to follow.  FFA is a great option to affordably give you the edge to pass that problem area. 10% coupon code CPAREVIEWFORFREE.   No two people are exactly the same. We identify the areas YOU specifically need to study. Then, we adjust and accommodate your study by shaping our tools and content with laser focus to your exact needs. This is not a one-size-fits-all obsolete industrial model to education, but rather the future... a one-size-fits-YOU custom approach to learning and succeeding..That's Intelligent Learning!     In life, a few people are absolutely terrible at their vocations and a great majority are just average.   Luckily, the remaining folks (a relatively small number) are absolutely excellent.   What makes them so very good?   Why would you hire Mr. A rather than Mr. B?   What can we learn from these people?   For example, while I was in San Francisco, I had to go across town in a taxicab and then back to work in a hurry and the driver was wonderful.   He stayed calm in heavy traffic and was quite friendly and helpful.   I would have hired him for my company.   I liked his attitude.  I liked his efficiency.   If I drove a cab, I would like to be like him.   I went to a deli (a large chain) one afternoon and ordered a sandwich.   Four employees stood in a line making sandwiches.   Three of these people never looked at me even once, never smiled, never seemed to care if I lived or died.   The third person in the line looked up with a kind smile and asked how she could be of help.   She listened to my request and made the sandwich in the way that I had asked.   She was quick and efficient.   I would have hired her for my company.   Her attitude made my day a bit brighter and she did her work with a certain sense of enthusiasm.   If I made sandwiches for a living, I would like to be like her.   There are two ways to do things--More..   Get Out of Your Rut   On the airplane ride back from San Francisco, I was reading the magazine that is in the back of the seat pocket.   It contained an interview with Malcolm Gladwell, a writer whom I really enjoy.   He has a new book out titled David and Goliath talking about how underdogs can overcome the odds and manage to win.  In this interview, Gladwell had one line that really caught my attention:   “Don’t be passive and lose.”     I loved that.   Too many people who get behind (for whatever reason), become discouraged and go down without a fight.   They just give up.   That’s nonsense.  The only way to win if you are up against a difficult opponent (like the CPA Exam) is to put up a strong fight and then fight some more.   If you don’t like how things are going at the moment, reassess your strategy and make changes and go back into the battle.   Don’t be one of those people who just accepts “their fate” and lets failure wash up over them like the tide.   Failure is almost never inevitable.   Make changes.  For instance...   Points to Pass™ for Financial Accounting & Reporting, one of four sections needed to pass the CPA exam, benefits users by working hundreds of new questions by question or by topic.  A user can try the same question again (and again and again with different numbers) until sure they have mastered the concept.  The best way to succeed is to practice, andPoints to Pass™ allows candidates to do that for as long as they feel is necessary.     Time for a little practice     Every time you figure out a new question, you have potentially added another point to your CPA Exam score.   So, always be looking for new questions, especially for questions that you might struggle with.   That’s where points can be added.   FAR   Little Company has 1,000,000 shares outstanding.   Big Company pays $40 per share to acquire 800,000 of these shares.   That price was considered reasonable for all of the outstanding shares of the company.   Little had two assets:  equipment with a net book value of $10 million and a fair value of $16 million and buildings with a net book value of $17 million and a fair value of $21 million.   Little had no liabilities.   On consolidated financial statements immediately after the acquisition, what is reported on the balance sheet as the noncontrolling interest?   A.   -0- B.   $3 million C.   $5 million D.   $8 million     Auditing   CPAs for Englewood and Cliffs are auditing the financial statements of Veronica, Inc.   The auditors are currently assessing the level of control risk.   They have decided to test the operating efficiency of several specific controls in the accounts receivable system.   Which of the following controls are they most likely to test the operating efficiency?   A.   Controls where a significant deficiency exists B.   Controls that are suitably designed to prevent or detect a material misstatement C.   Controls that seem to be weaker than they were in the previous audit. D.   All controls relating to the audit must be tested.     Regulation   A company has a utility patent and a trademark.   An author has a copyright.   What are the valid lives of these rights?   A.   Utility patent – 20 years, Trademark – indefinite, and Copyright – life of author plus 70 years B.   Utility patent – 20 years, Trademark – 24 years, and Copyright – life of author C.   Utility patent – 27 years, Trademark – indefinite, and Copyright – life of author D.   Utility patent – 27 years, Trademark – 24 years, and Copyright – life of author plus 70 years   BEC   What is meant by nominal GDP (gross domestic product)?   A.   The price of all goods and services produced by a domestic economy for a year at current prices. B.   The price of all goods and services produced by a domestic economy at price-level adjusted prices. C.   The maximum amount of production that could take place in an economy without putting pressure on the general level of prices. D.   The price of all goods and services produced by labor and property supplied by the nation’s residents minus depreciation.       ANSWERS   FAR   Answer is D   Little Company is apparently worth a total of $40 million.   That is 1 million shares outstanding times $40 per share (a price considered reasonable for all the shares, even those not acquired by Big).   Of the total, the parent company acquired 80 percent or 800,000 shares.    Another (outside) party continues to hold the remaining 200,000 shares.   At the time of acquisition, they are worth $40 per share or $8 million in total.   That is reported on the balance sheet to indicate that assets are being consolidated at full value even though the parent only has an 80 percent ownership.   Some other party or parties continues to hold the remaining 20 percent of the $40 million subsidiary.   The balance sheet will balance because of the inclusion of this 20 percent non-controlling interest.   Auditing   Answer is B   A CPA has no need to tests the operating efficiency of an internal control unless it is well designed.   Based on this preliminary assessment, the auditor wants to rely on the control so that control risk can be assessed at a lower level and the necessary amount of substantive testing is reduced.   There is no potential benefit unless the control risk is well designed so only in that case will the auditor move on to do the testing for operating efficiency.   Regulation   Answer is A   Utility and plant patent last for 20 years but a design patent is only valid for 14 years.   A trademark must be renewed periodically but that process can go on indefinitely.   If owned by the author, a copyright is for the life of the author plus 70 years.   A copyright owned by a publishing house has a 95 year life (from the publication date) or 120 years from the creation date whichever expires first.     BEC   Answer is A   Nominal GDP is the price of all goods and services produced by a domestic economy for a year at current prices.   Real GDP is the price of all goods and services produced by a domestic economy at price-level adjusted prices.  Potential GDP is the maximum amount of production that could take place in an economy without putting pressure on the general level of prices.   Net domestic product is the price of all goods and services produced by labor and property supplied by the nation’s residents less depreciation.   Have a great week.   The October-November window is heading toward its end.  Remember that you can still sit for the exam until Dec 6.   Put in the time and effort necessary to end the year on an upswing.    You can do it!!!     Joe Hoyle President CPA Review for FREE

Do You Have a Strong Personal Goal?

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)   October 11, 2013 Lesson 141   From:   Joe   Vote Every Day Until October 13, 2013   WE NEED YOUR HELP.    Over the years, I have received thousands of emails from candidates saying “thanks for providing so many free questions and answers so that I was able to pass the CPA Exam.   Please let me know if I can ever return the favor.”   Okay, here is how you (yes, YOU) can help.   It is easy and simple.   We are participating in a contest to get a free Super Bowl commercial (wow, that sounds really impressive).   We have made it down to the final 250 contestants.   They are going to trim down the number again soon.    We need for you to go to the following website and vote for US once a day untilOctober 20.   When you're on the website working questions, click on the orange VOTE button in the right side of the page.   Please do it.   Please.   We would love to win.   And, it takes so little of your time.   Just once a day for a few seconds.   You can help us keep this website free to all.   Tell your friends and neighbors and enemies and strangers to vote also.   Let’s show the world that a free CPA Exam review program can garner genuine love and affection from its “customers.”   We cannot do it but YOU can do it!!!!   We offer you 2,400 free questions and answers.   We have done that now for years.   Return the favor and vote once a day untilOctober 20.   THANKS!!   Strive for a Personal Strong Goal   I was recently on a 16-day tour of Portugal and Spain.   We traveled constantly and walked 1-2 miles every day.   On the trip was a 91 year old woman.   Much to my surprise, she matched our hikes step for step, day after day.  She was amazing.        One evening at dinner, I asked her where she had been in the world.   Here was our conversation.   She:   Oh, I have been pretty much everywhere in the world. Me:   Okay, have you been to Tanzania? She:   Sure, I was there in about 1987. Me:    Have you been to India? She:   I’ve been to both the north and the south of India. Me:   Have you been to Japan? She:   Lived there for a while. Me:   Have you ever been to Antarctica? She:   Actually, I have been there fairly recently on a tour.   I was stunned by her ability to see the world.   So, I asked her the question that I really wanted to know:   More...     Words, Actions or Both?    I am reading a book (published in 1997) titled A Regular Guy by Mona Simpson who is the half-sister of Steve Jobs.   The “hero” of the book is a creative and unique individual who starts an innovative company and gets very rich and appears (obviously) to be patterned after Mr. Jobs.   I am not at all certain what the relationship was between Simpson and Jobs but, in this book, the “hero” does a lot of interesting things – many of which seem just plain eccentric but some seem truly like a genius.     About halfway through the book, the daughter of the “hero” looks at him and makes a really tough assessment:   “but what he said was better than he was.”   I stopped and read that line several times and wondered how often it applied to me.   We all talk about what we are going to do, how much we are going to accomplish in life.   We tell people all about our hopes and aspirations.   But is that just talk or is it something that seriously guides our lives and pushes us forward?     Suppose someone went along behind us each day and wrote day everything we had to say.   Which would be better:   the words on that page or the actions we take?   We talk about accomplishments but are they just mere words or are we capable of matching our words by our works?  More useful actions...     Let’s add some points.   Let’s do some practice.    The answers are at the end of all quesitons.   FAR   Assets and liabilities occasionally have to be reported at fair value.   Fair values can be determined in many different ways.   To help accountants know which is the best method to use to determine fair value, FASB created a three-level fair value hierarchy.   Which of the following is not true about that hierarchy? a.   An investment in Ford Motor Co. shares is valued at its stock price which is a Level 1 valuation. b.   A potential asset retirement obligation is valued at the present value of the estimated future cash flows which is a Level 1 valuation. c.   A building acquired in trade is valued based on the recent sales price of a nearby building that was similar which is a Level 2 valuation. d.   A donut franchise is valued based on the sales price of a similar pastry franchise a few miles away which is a Level 2 valuation.     Regulation   The Gemini Corporation has a production machine with a tax basis of $80,000 and a fair value of $91,000.   It is traded for a newer model machine with a fair value of $100,000.   Gemini also pays cash of $8,000.   Which of the following is true? a.   No taxable gain and the tax basis of the new asset is $100,000 b.   No taxable gain and the tax basis of the new asset is $88,000 c.   $1,000 taxable gain and the tax basis of the new asset is $100,000 d.   $1,000 taxable gain and the tax basis of the new asset is $88,000     Auditing   The Aragon Company has two bank accounts.   A check for $20,000 is drawn on bank one late on December 31 and deposited into bank two on the same day.    In preparing a year-end bank reconciliation for bank two, the check is listed as a deposit in transit.   In preparing a year-end bank reconciliation for bank one, the check is not listed as outstanding.   What is the client most likely doing here? a.   A wash transfer b.   Kiting c.   A reciprocal transaction d.   Realignment posting     BEC   A company holds $300,000 in cash in a bank account.    The company views this balance as a speculative balance.   Which of the following is most likely to be true? a.   The money is being held in case a litigation claim is lost b.   The money is being held in case a weather emergency arises c.    The money is being held in case unexpected repairs are required in an electric generator d.    The money is being held in case inventory prices from suppliers suddenly drops.     Answers:   FAR Answer is B   According to FASB, Level 1 valuations are preferred because they are based on active market prices (such as the stock price for Ford shares).   Level 2 comes next which is based on observable inputs such as the sales price of a nearby building or franchise.   Those sales prices are real not assumptions.   Level 3 valuations are the least desirable because they are based on unobservable inputs that are based on assumptions.   Using the present value of future cash flows is only an estimate and cannot be observed until time passes.    The asset retirement obligation is a Level 3 valuation rather than Level 1.   REG Answer is B   This is a trade of like-kind property.   No gain is recognized in such trades unless boot (cash) is received.   Here, the cash is paid so the trade creates no taxable gain.   Thus, the new asset is recorded at the tax basis of the property surrendered:   previous machine with a tax basis of $80,000 and cash with a tax basis of $8,000.   New asset has a total tax basis of $88,000.   Auditing Answer is B   By adding the money as a deposit in transit while not recording the reduction as an outstanding check, the company appears to have more money than it actually does have.   This inflation is known as kiting and is used to either make the company look better than it actually is or cover up for money that has been stolen.   BEC Answer is D   Answers a, b, and c are viewed as precautionary balances.   The money is being held to take care of unexpected difficulties that might arise.    A speculative balance provides the flexibility to take advantage of unexpected income opportunities.   The drop in the price of inventory would be one such opportunity.   The available money would allow the company to buy inventory at especially low prices.     Have a great week and vote for CPAreviewforFREE Go Go Go!!!!     Joe Hoyle President CPA Review for FREE