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How Fast Do You Need to Work the Exam?

noreply@blogger.com (Go Figure) — Mon, 30 Jan 2012 15:19:00 +0000

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January 30, 2012

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Lesson 111

From: Joe

(1) – Okay, it is still early but I am delighted to report that our traffic (in terms of pages viewed) is up by over 24 percent in 2012 compared to the same period in 2011. That is fantastic. And, since we do not advertise, this has to be because you folks obviously like us and take the time to tell others about us. One way you can do that is to forward this newsletter via the link at the end of the newsletter. Thanks! Thanks a million!

(2) – Here is a modified version of a posting I made recently on our CPAreviewforFREE Facebook page:

The more you know about the CPA Exam the more likely you are to pass. I am always amazed by how many candidates walk into the test site a bit confused by the process. Trust me, on the day you take any part of the CPA Exam, you only want one thing on your mind: getting the points you need to pass. Any degree of confusion makes achieving that goal more difficult.

The Candidate Bulletin is the official handbook for individuals who plan to take the Uniform Certified Public Accountant (CPA) Examination. They have written and modified it enough now so that it covers virtually anything you might want to know about the exam. It covers such topics as how to apply, how and when to schedule the examination, what rules are in effect at test centers, when to expect scores, and what topics are covered on the examination. It also includes information about the examination structure, the roles and responsibilities of CPA Examination partners (the AICPA, NASBA, and Prometric), and board of accountancy contact information. You can download the Candidate Bulletin or by going to the AICPA exam website and clicking on “For Candidates.”

(3) – This was also placed on our Facebook page although I have rewritten some parts.

If we boil things down to the very basics, there are only three reasons why people fail to pass a part of the CPA exam. At some point, you need to think about all three.

----First, candidates that fail to get 75 might not have yet attained quite enough understanding of the material. As we all know, there are many tough topics covered on each exam. Your knowledge has to be quite broad. And, it has to be really there.

----Second, the candidate knows enough to pass but makes too many careless mistakes during the exam. We all make a few of those but you cannot afford to make many. I have graded enough tests over the past 41 years to realize that people can be incredibly careless.

----Third, while taking the exam, the candidate does not manage the time well. Candidates either rush through too quickly (making careless mistakes) or they go slowly so that they are not able to finish on time.

I want to look at time management today. As you prepare for the exam, it is important occasionally to practice at the speed you need on the CPA Exam to get a feel for what is required. If you practice like you are crawling, it is hard to sprint when you get to the real exam.

So, how fast do you need to work during the CPA Exam?

Let’s take financial accounting (FAR) and auditing and attestation (AUD) as examples. Both of these sections have seven task-based simulations. If we assume you can complete each of those seven in 10 minutes (probably a reasonable goal if you really hustle), then you have to work the 90 multiple-choice questions at an average rate of about 1 minute and 50 seconds each. That should show you why time management is important. As you practice, see how close to that speed you can get. Please don’t get obsessed by that goal but gradually work to get faster and faster so you’ll be ready when it is time to take the CPA Exam. You can eventually move up to the speed you need but you do have to learn to stay focused and keep pushing. Speed is a good thing to practice to make sure you are ready on test day. On our website, our questions are probably a bit harder than average because we want you to learn more than enough. For that reason, when working FAR or AUD on www.CPAreviewforFREE.com, you will probably want to shoot for an average of one question every 2 minutes or maybe every 2 ½ minutes.

Regulation (REG) only takes 3 hours and you have 72 multiple-choice questions and six task-based simulations. If the task-based simulations take 10 minutes each, that leaves 120 minutes for the multiple-choice questions or 1minute and 40 seconds each. That’s a little shorter time frame but the REG questions tend to be a bit less complex so that is still a doable goal.

BEC also only has 3 hours and you get 72 multiple-choice questions along with three written communication questions. Assuming the written communication questions take 20 minutes each, you can still finish the multiple-choice questions if you are able to work them at a one minute and 40 second rate.

It is not that these rates are good or bad. They simply alert you to the speed you need to achieve to get through the exam at the moment you run out of time.

(4) – My good friend Paul Clikeman who teaches Auditing here at the University of Richmond told this story to his class yesterday as they began to prepare for their first examination in about a week. He then conveyed the story to me over lunch at Taco Bell.

The New York Giants and the New England Patriots are going to play in the Super Bowl in about ten days. When did those players earn the right to play for the championship? You may think they earned that right last Sunday when they beat a couple of other good teams. But, the truth is, they earned this right last summer when they worked out in very hot weight rooms and practiced under a blistering sun learning how to run plays correctly. That was months ago but the work they did then is just now paying off. There is never any guarantee that a person is going to win. Things do happen. But you can stack the odds in your favor by doing the work so that you are well prepared. It is easy for a football player to slack off in the summer when there are no games being played and the championship seems forever a way. Only individuals with true dedication are able to do the work and get themselves ready in plenty of time.

You have a test coming up. You can put it off; you can procrastinate. You can wait until the last minute. You can always find something more interesting to do. But, if you do, the information will just be jumbled up in your head when you start the test. If you truly want to do well, if you truly want to be a winner, you’ll get this material learned and get it learned well in advance. You’ll start doing the work now. You’ll have the energy to do the work before it becomes an emergency. That is not easy but that’s how you stack the odds in your favor.

Tom Brady and Eli Manning have a game to play in 10 days. What do you think they are doing today? Do you think they are playing videos games and lying around? My guess is that they are working as hard as they possibly can to be ready and at their very best. My guess is that they are watching films and practicing plays as hard as they can because they both want to be champions. They both want to be winners.

If you want to win, prove it!!! Don’t just say you want to win – prove it!!! Start getting yourself ready for the exam now so that when you walk into the room on test day, you’ve got the odds stacked in your favor that you will walk out a winner.

(5) – Practice – and, now, as always, here are a couple of practice questions. Assume each one adds a point. Go get ‘em.

FAR

Company A and Company Z start operations this year and both are identical in every way except that Company A used a periodic FIFO system for its inventory while Company Z used a perpetual FIFO system for its inventory. They each bought 1,000 units for $30 each and sold 800 for $40 each. They each then bought 1,000 more units for $40 each and sold 800 for $50 each. Finally, they each bought 1,000 more units for $50 each and sold 700 for $60 each. What is the difference in their reported net income figures?

A. Company A’s net income will be $7,000 higher than Company Z’s net income

B. Company Z’s net income will be $7,000 higher than Company A’s net income

C. Company A’s net income will be $4,200 lower than Company Z’s net income

D. Company A and Company Z will report the same net income

Answer is D

Periodic and perpetual FIFO systems always arrive at the same reported figures for ending inventory and cost of goods sold. Thus, the net income totals are the same. That is not true for either LIFO or averaging. Here, under either periodic or perpetual, inventory purchases are 3,000 units costing $120,000 ($30,000 + $40,000 + $50,000). Because 2,300 units are sold (800 + 800 + 700), the ending inventory is 700 units. Under FIFO, those remaining units always have the cost of the last units acquired during the year or $50 each for a total of $35,000. Cost of goods sold is $120,000 less $35,000 or $85,000.

Auditing

The Holthouser Company reports inventory on its balance sheet at $435,000. In examining this company’s financial statements, the independent auditing firm is least likely to be concerned about which of the following?

A. This inventory contains some damaged items.

B. A portion of this inventory is not on hand in the company’s warehouse.

C. The age of the inventory has increased rather significantly since the previous year.

D. The physical inventory was taken by individuals who were not properly trained.

Answer is B

The independent auditor is most concerned about issues that could indicate the presence of a material misstatement. If inventory is damaged or old, the reported value will likely require reduction. If that reduction has not been made (or not been made properly), the reported balance can be materially misstated. If the physical count was incorrectly taken, the balance may also be wrong by a material amount. However, inventory is often not physically being held by a company. The goods may be out on consignment, for example, or in transit. The mere failure to be in the warehouse does not signify a likely misstatement.

Regulation

In federal income tax laws, what is the significance of a Section 179 expense?

A. A Section 179 expense can only be taken by companies that have been in business for less than five years.

B. A Section 179 expense is one that relates to research and development costs.

C. A Section 179 expense is a specified amount of the cost of qualifying personal property that can be expensed at the time of acquisition rather than capitalized.

D. A Section 179 expense is a contribution that is made to a charitable organization that can be expensed for tax purposes even though it is not spent to generate revenue.

Answer is C

To encourage smaller companies to buy more machinery and equipment, a specified amount of the cost (within certain limitations) of qualifying personal property can be expensed at the time of acquisition rather than being capitalized and depreciated over a set period.

BEC

The Adventure Corporation wants to issue $10 million in bonds to finance the construction of a new warehouse. Company officials believe that interest rates might well fall over the next two years. Thus, they fear that they will be stuck paying a rate of interest that is higher than the market rate for a long period of time. Which type of bond should they consider to reduce this interest rate risk?

A. Zero coupon bonds

B. Serial bonds

C. Floating rate bonds

D. Term bonds

Answer is C

Normally, the interest rates to be paid on a bond are set by the bond indenture and will not change. However, with a floating rate bond, the interest to be paid is adjusted every period as the prevailing rates move up and down. A zero coupon bond pays no cash interest but is sold at a deep discount. A term bond pays interest periodically with the face value paid in full on the maturity date. A serial bond pays both interest and principal each period over the life of the bond.

Have a great week!!!

Joe Hoyle

President and CoFounder

CPA review for FREE

www.CPAreviewforFREE.com

New MCQ's to practice, Tips and Exam News

noreply@blogger.com (Go Figure) — Wed, 02 Nov 2011 13:50:00 +0000

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

October 31, 2011 (Happy Halloween for those in the USA)

Over 2,200 FREE CPA Review Questions and Answers Available for YOU (for FREE)

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Lesson 106

From: Joe

(1) – People always ask us: “CPAreviewforFree.com provides such a great service for so many people – how can I help?” That’s easy—don't pay all those other guys thousands of dollars for mediocre materials. Go to our store and (at the very least) review what we have to sell to help you pass the CPA Exam. It’s good stuff and it’s a lot less expensive. You can support us by buying one of our products. Those products are offered to help provide the financial support we need in order to stay in business.

You can also help us by asking your firm HR manager/partner to contact us about how CPAreviewforFREE can save thousands of dollars per intern/employee by using our proven materials.

We are able to spend all these countless hours for exactly one reason: people just like you are willing to buy our products and support our efforts to be helpful to so many people around the globe.

(2) – Speaking of helping people:

From GB: “I purchased the Accounting Points to Pass and they really helped.“

From KG: “Just wanted to say thanks again for the excellent information on this website. I've passed two exams on the first try using it. . . . Thanks, and I will be using this site for my last 2 exams without hesitation. Great tool for study.”

From JC: “Thank you so much for creating this site. It’s been a huge resource throughout my studying process. Got my scores back the other day and got an 81 on AUD and a 75 on BEC! Like you guys say, anything beyond a 75 means you studied too hard! I already got an 81 on FAR so now on to REG!”

Ah, such notes just make us all smile around here.

(3) - The Wall Street Journal had a great article on Wednesday, October 26 titled “Toughest Exam Question: What is the Best Way to Study?” I personally thought it was super – even going so far as to talk about what you should eat on the morning of an exam. After so many years of watching students take tests (and often doing poorer than they should), I liked everything they said in this article. Further down in the article, there is another short essay titled “Tips on Conquering Test-Day Jitters.”

If you are going to be taking the CPA Exam (or if you know anyone who is a student and will be taking tests in the future), it would be a great idea to read both of these articles.

(4) – I am not sure how many of the people who get these emails might be impacted by this announcement but it is interesting to see how the CPA Exam is moving more and more toward becoming a completely international exam.

Starting in February 2012, the CPA Exam will be given in Brazil.

(5) – It is amazing where a person can manage to find inspiration. I have often said that inspiration is everywhere in life if you’ll just open up your eyes and look for it. Inspiration is there is you are willing to receive it. It is almost like all of life wants to encourage you to succeed. We seem to live in a negative time where everyone is angry about everything. But, if you will stay positive and look around you with an open mind, you’ll be surprised how much inspiration there really is.

I was watching a video recently about Islamic Art at the Metropolitan Museum of Art. The moderator showed this lovely bowl that was approximately 1,000 years old (you had to wonder how it could have possibly survived for so long without being cracked or crushed). It had on it a very interesting and intricate design. It was an extremely pretty piece. The moderator then went on to explain that the design was really the words “planning before work protects you from regret.” The words were the design.

I liked that idea—the need for planning before work. I rush around a lot and have a lot of regret. Frequently, I start working on something and only then do I try to figure out what I want to get done. Probably not surprising, I’m often inefficient and wind up wasting lots of valuable time.

Ever since I watched that art video, I have been trying to do a better job of “planning before work.” I want to get back into the habit of (a) writing down what I want to do over the next few hours and then (b) putting those tasks in order of priority before I get started. I’ll list 5-10 things that I need to get done and then circle them one at a time and write 1, 2, 3, etc. to indicate what I need to do first, second, and so on.

It really has helped me. I’m starting to get more accomplished. I work a lot of hours but often get frustrated that I don’t accomplish as much as I should. Too often, I spend a lot of time and get really tired but wind up feeling like I have under-achieved.

“Planning before work” seems to be helping me. It forces me to consider what I need to get done and what I really can defer.

So, when you next sit down to plan your day or your studies. You might try listing out what needs to be done and then prioritize that list. I find, in preparing for the CPA exam, that it is very easy to do everything BUT study for the exam. If you don’t give studying a high priority, it is often easy to put it off until tomorrow so that it simply never gets done. And, that is no way to get those 75 points you need to pass this exam.

Check out the bowl that I found inspirational, it can be located at the following URL. Can you imagine, it is 1,000 years old and the message is still special.

(6) – As many people know, I write college textbooks. One of my books is free online. It is a basic Financial Accounting textbook. If you know anyone who just wants to read basic Financial Accounting, click here. You can see the table of contents and read any chapter that you want. This is not a bad way to review the basics of financial accounting without having to spend money.

(7) – Okay, I know some baseball fans are happy and some baseball fans are upset by the World Series. However, it is hard not to feel good about the St. Louis Cardinals. About 5-6 weeks ago, no one gave them a chance of even getting into the playoffs. They were out of it and they seemed to have no hope at all. But, not only did they get into the playoffs on the very last day of the season, they went all the way to the final game and became the champions.

It would have been so easy for those players to have given up back in September.

It would have been so easy to say “we just can’t make it so why kill ourselves trying.”

It would have been so easy to say “we are just not good enough this time, maybe we can do better next year.”

But they didn’t give up and things started to go better and they managed to win it all.

In sports, there is nothing quite like watching the final out of the championship game when all the players rush together to celebrate. What a wonderful feeling. Success! Victory!

I know a lot of the people who get these email lessons may be feeling discouraged. It might feel like you are never going to pass. It is easy to give up. Or, at the least, not study so hard. It is easy to feel defeated. But if you tell yourself that you can’t win, you’ll never get anywhere. The moment St. Louis gave up, their season would have been over. That didn’t give up; they came back; they won.

I always say that giving up is the easiest thing in the world. It gives you an excuse to stop trying so hard. It is the mere fact that St. Louis didn’t give up even when things looked hopeless that makes their victory so much more exciting.

If victory were easy, it wouldn’t be fun.

If success were assured, you would never experience the excitement.

Yes, passing the CPA Exam is a real challenge. And, yes, you may fail parts. But, in the long run, the only way that you can fail is to give up. If you keep pushing, if you keep getting better, if you keep believing in yourself, if you keep adding points, then one day you are going to pass. And that day is one that you will remember for the rest of your life. Every time you think about the day that you received those passing grades you’ll feel this exciting tingle run up and down your spine – “it looked like I was going to come up short but I didn’t give in and, ultimately, I made it happen.”

That’s the definition of a champion.

St. Louis did it

So can you.

(9) – Time for some practice.

FAR – from my Intermediate Accounting class from Friday.

A company has $900,000 in revenues in Year One. Of that amount, $350,000 is taxable in Year 5 with the rest taxable immediately. The company also has $600,000 in expenses. Of this amount, $300,000 is deductible in Year One for tax purposes, $200,000 in Year Two, and $100,000 in Year Three. The company believes there is a 53 percent chance that it will have income in Year Two so the expenses can be deducted and that there is a 46 percent chance that it will have income in Year Three so the expenses can be deducted. The enacted tax rate is 40 percent. What is income tax expense-deferred to be recognized in Year One?

A. $20,000

B. $60,000

C. $80,000

D. $140,000

Answer is B

Deferred income taxes are recognized using a balance sheet approach. Deferred tax liabilities and assets are determined first and the expense is the amount needed to record those figures. Here, the deferred tax liability is the tax on the temporary difference that increases taxable income in Year 5 ($140,000 or $350,000 times 40 percent). The deferred tax asset is the tax on the temporary differences that will decrease taxable income in Years 2 and 3 ($200,000 + $100,000 = $300,000 and then times 40 percent to arrive at $120,000). However, for any deferred tax asset, the company must also recognize a reduction (a valuation allowance) if officials believe that the company is not more likely than not to have income in those years so that the expenses can be used to reduce that taxable income. The chance is over 50 percent in Year Two (53 percent) but not in Year Three (46 percent). Therefore, a valuation allowance is needed for Year Three ($40,000 or $100,000 x 40 percent). The deferred tax asset to be reported is really only $80,000 ($120,000 minus $40,000). Creating the deferred tax liability leads to an expense of $140,000. Creating the deferred tax asset leads to an expense reduction of $80,000. The net change of $60,000 ($140,000 minus $80,000) is the income tax expense-deferred.

Regulation

Samson and Delilah form a partnership to create a business. They will be equal partners. Samson contributes $13,000 in cash and several pieces of equipment. This equipment had originally cost $30,000 but now has a tax basis of $21,000. However, it had a fair value of $24,000. What is Samson’s tax basis in connection with his interest in this partnership?

A. $13,000

B. $34,000

C. $37,000

D. $43,000

Answer is B

Normally, there is no gain or loss for tax purposes in an exchange between a partner and a partnership. Therefore, without a recognized gain or loss, there is no reason to change the tax basis. The cash has a tax basis of $13,000 and the equipment has a tax basis of $21,000. The tax basis surrendered was $34,000. That becomes the taxpayer’s basis in the partnership.

Auditing

An auditor is currently examining invoices that explain additions recorded to the reporting company’s buildings and equipment account during the current year. In this particular test, what is the auditor most concerned about?

A. Net income is overstated.

B. Expenses are overstated.

C. Assets are understated.

D. Liabilities are understated.

Answer is A

The amounts have already been recorded as assets. It is likely that the amounts have also been recorded as liabilities (liabilities are credited to offset the debit to the asset account). Therefore, the assets and liabilities might be overstated but it is hard to see how they could be understated. And, since an asset has been recorded (rather than an expense), the expenses cannot be overstated. The auditor worries that the capitalized amount in the asset account really should have been an expense. For example, the amount might have been recorded as an asset to lower expenses and, therefore, inflate net income. The auditor is worried that net income is overstated.

BEC

A company has a quick ratio of 1.60 to 1.0 ($160,000/$100,000) and a current ratio of 2.00 to 1.0 ($200,000/$100,000). At the very last minute in a company’s fiscal year, it sells an additional $10,000 in inventory on account for $14,000. Which of the following is true after this last transaction is recorded?

A. The quick ratio is 1.74 to 1.0

B. The current ratio is 2.14 to 1.0

C. The current ratio is 2.10 to 1.0

D. The quick ratio is 1.64 to 1.0

Answer is A

Accounts receivable is included in determining the quick ratio but inventory is not. Thus, the only change here for the quick ratio is that accounts receivable goes up by $14,000 so the computation is now $174,000/$100,000 or 1.74 to 1.0. For the current ratio, both the change in accounts receivable (up $14,000) and inventory (down $10,000) are included. The net impact is an increase of $4,000 so that the current ratio is now $204,000/$100,000 or 2.04 to 1.0

Have a great week. Shoot for that victory.

Joe Hoyle

President and CoFounder

CPA review for FREE

www.CPAreviewforFREE.com

Great Tips on Exam from WSJ

noreply@blogger.com (Go Figure) — Mon, 31 Oct 2011 15:19:00 +0000

From Joe:

The Wall Street Journal had a great article on Wednesday, October 26 titled “Toughest Exam Question: What is the Best Way to Study?” I personally thought it was super – even going so far as to talk about what you should eat on the morning of an exam. After so many years of watching students take tests (and often doing poorer than they should), I liked everything they said in this article. And, further down in that article, they have another short essay titled “Tips on Conquering Test-Day Jitters.”

If you are going to be taking the CPA Exam (or if you know anyone who is a student and will be taking tests in the future), it would be a great idea to read both of these articles.

Hang in there and make every point count!

Practice tips, new questions and words to study by

noreply@blogger.com (Go Figure) — Thu, 13 Oct 2011 20:28:00 +0000

CPAreviewforFREE--Try us FIRST before you spend your hard-earned money. Lesson 104, Exam Results, Tips for Success, New Practice Questions Over 2,200 FREE CPA Review Questions and Answers Available for YOU (for FREE) 168 Weeks of Operation and 27,996,489 Page Views (an average of over 166,000 page views per week for over three years)

From: Joe (1) – Always love to hear from folks!!! Here's a few success stories.

From BK: “I just received my AUD and FAR scores, and I am very excited to say that I passed both this
summer! Besides sharing the good news, I just wanted to personally thank you for providing the CPA Review services that you offer to CPA candidates. I used your material extensively in my studying, and I really appreciate having those study materials available. Thank you for providing such a valuable service to accounting students. I am very grateful!”
From KM: “It's finally in (Audit came in and I had 83). Thank you so so much! I wouldn't have done it without your help, support and encouragement. God bless you for the excellent work you're doing. Will definitely keep in touch, and would be very willing to help in any way I can, should opportunities arise. With all my best wishes, abiding appreciation and esteem.”
From KW: “I just wanted to say THANK YOU for all your help. I just found out I passed my final section of the exam, and I could NOT have done it without you!! I have and will continue to recommend this website to everyone I know, despite their initial assumption that it can't possibly be as helpful as it really is. They quickly change their mind, as my enthusiasm says it all. My budget was extremely tight when purchasing CPA review materials, so when I realized my $600 XXXX set of books/CD-roms had all kinds of typos in them, I was disappointed. But, by [heavily] supplementing my studying of XXXX material with this website (and the extra [awesome] materials for purchase), I got the concepts down like nobody's business. I'm still in shock that I've finally passed, but I can't tell you how incredibly ridiculously wonderful it is for you to provide this INDISPENSABLE resource to everyone out there who desperately needs it! What you are doing and have done is changing people's lives. THANK YOU.”
From TS: “Hello! Just thought I'd say thanks and let you know that I passed AUD using ONLY your free website. How's that for a ROI? Time to focus on the next three! Thanks for everything.” (2) – Just so you know – I want to get a letter like that from YOU over the next months. You can do it. We believe in you. We want this kind of good news from YOU.

(3) – By the time you read this, we will have crossed 28 million (28,000,000???!!) page views since we got started. I remember, when we first began, thinking that I’d be thrilled if we ever hit one million page views. I am so very pleased that we have been able to help so many people reach their goal of passing the CPA Exam. It is not an easy test, it can be a real challenge. But, I firmly believe that with time, effort, and good quality materials, everyone can pass.

(4) – As some of you know, I also write a blog about teaching where I talk about teaching accounting here at the University of Richmond. Last week on that blog, I quoted one of my all time favorite people – Vince Lombardi – the legendary football coach of the Green Bay Packers during the 1960s. “A man can be as great as he wants to be. If you believe in yourself and have the courage, the determination, the dedication, the competitive drive and if you are willing to sacrifice the little things in life and pay the price for the things that are worthwhile, it can be done.”
What a wonderful quote for anyone who plans to take on a challenge as significant as the CPA Exam. It has been argued recently that the people in our world today are not willing to make sacrifices. I absolutely do not believe that. I think people are more than willing to make sacrifices if they believe they have a fair chance. The CPA Exam is possible. Yes, it is tough. And, yes, sometimes people fail and have to try again. But it is possible and it is worth the sacrifice. As you see in the notes at the beginning of this email, the thrill of victory is magnificient. I think Coach Lombardi tells you everything you need to know in his few lines: ---A person “can be as great as he wants to be.” You are never going to pass the CPA Exam unless you seriously want it. It is not a stroll in the park. But I firmly believe that people have unlimited potential. It takes time, it takes patience, it takes work – but you can be as great as you want. Never underestimate what you can accomplish in this life. I firmly believe that too many people set their sights way too low. Go for GREAT. ---“Believe in yourself.” No one ever accomplished anything without having a belief, somewhere deep down inside of themselves, that they could do it. If you start out expecting to fail, it is just hard to do the work that is necessary.
But YOU can pass the CPA Exam.
Others just like you have done it and so can you.
You are strong enough to do the work necessary for success.
Never let doubts slip into your thinking.
Wash those doubts away – they are counterproductive. --- “Have the courage, the determination, the dedication, the competitive drive” – let’s assume someone went around with you all day and just watched you. What would they say about you? If someone had watched you for the past 24 hours, how would they evaluate your courage, your determination, your dedication, your competitive drive? Too often, we leave our courage and determination in our heads: “in my head, I’m a very determined person; in my head, I have a competitive drive that you wouldn’t believe.” But you don’t live inside your head. If you have these things, they need to be out in your real life. People should be able to see how competitive you are. People should see how determined you are.

Pay attention over the next couple of days—pretend that you are watching yourself. Are you really determined or is that just a fun fantasy? Do you have competitive drive or is it just something you would like to have? No one will ever ask more from you than courage, determination, dedication, and competitive drive. But, before you start claiming to have any of those, make sure they really are visible—something that is more than a dream. I once heard a basketball player say about Michael Jordan “his desire to beat you just seemed to radiant from his body.” ---“Willing to sacrifice the little things in life and pay the price” – success is not free. If it were, we’d be living in a world of very successful people. There is always a price to be paid. There is always a sacrifice. You give up your time. You give up your fun. Maybe you give up some sleep. The hardest part is that there is no guarantee. You can make the sacrifice but there will always be a risk. That’s what makes life exciting. But, you need to go into your exam preparation knowing that decisions will have to be made. Do I study or do I go to a movie? Do I answer questions or do I take a nap? Do I review some material or do I go have a drink with friends? Understand at the very beginning that it is a worthy goal but one that will require you to give up some things. Less nights out. Fewer parties. Less television. Fewer glasses of beer. People who succeed in life have to make that decision – what am I willing to give up? ---“It can be done.” Yes, exactly. People just like you earn those 75 points and so can you. People with your education and your smarts pass all the time and so can you. Go for it. If you’ve not started down that path to success, there’s no better guide than coach Lombardi.

(5) – At CPAreviewforFREE, we have a section titled CPA Exam Resources. In that section, we have a column “Tips for Success” where I occasionally provide my favorite tips for being successful—especially successful on the CPA Exam. I just added Tips 31 and 32 to that list. If you need a boost, you might try reading some more of those tips.

(6) – We love having you with us. Consider passing us along to your friends. Scroll to the very bottom of this email lesson (or any other email lesson) and click on the Forward to a Friend. We feel like the Wikipedia founder who asks their followers to donate money--except we're only asking that you forward us to others. This is where you'll find the unsubscribe button as well.

(7) -- We're not sure if you saw this from Accounting Today, but "Financial Accounting Standards Board chair Leslie Seidman said that many of the priority projects slated for convergence with the International Accounting Standards Board probably will not be settled until next year at the earliest." This doesn't change what appears on the CPA exam, but we want to keep you in the loop.

(8) – Let’s do some practice; let’s add some points. Let’s make some good things happen.

FAR On December 31, Year One, a company starts a defined benefit pension plan and gives its employees benefit for the years they have already worked. This creates a prior service cost of $200,000. An annual discount rate of 5 percent was used to arrive at this number. On that date, the workers have an average remaining work life of 10 years. Also, on the same day, the company funds the first $140,000 of this obligation with a cash transfer. Expected earnings on these assets is 8 percent per year. What appears on the Year One financial statements?

A. A decrease in income of $10,000
B. An increase in income of $11,200
C. A decrease in income of $20,000
D. A liability of $60,000

Answer is D

The projected benefit obligation is $200,000 because that is the amount created by the initial prior service cost. Plan assets are $140,000 as a result of the funding. Those two figures net together to report a liability of $60,000. The amortization of the prior service cost will increase expense in the future. The interest on the projected benefit obligation will increase expense in the future. The earnings on the plan assets will decrease income in the future.

Auditing & Attestation

During an audit, the CPA is attempting to substantiate an account balance using statistical sampling. The sample is drawn and the balance for the population is estimated and mathematically determined to be between $234,000 and $249,000. The company is reporting a balance of $243,000 so the CPA assumes that no further testing is necessary. The number falls within the appropriate range based on the sampling technique. Later, it is determined that the total for the population as a whole was materially different than the reported figure. What type of sampling risk is demonstrated here?

A. Control risk has been assessed too low
B. Control risk has been assessed too high
C. Incorrect acceptance has taken place
D. Incorrect rejection has taken place.

Answer is C

In sampling for attributes, the CPA is attempting to assess a percentage rate. That is often the error rate that occurs within a company’s internal control system. That type of testing concerns itself with assessing the level of control risk that is present. Here, it is not a percentage that is being estimated but rather a balance. That is done through sampling for variables which helps the auditor gain evidence to substantiate a reported figure. Does the sample indicate the population balance should be accepted? Does the sample indicate the population balance should be rejected? Here, the balance was accepted but really should not have been because reported figure was materially different than the population total. That is an incorrect acceptance.

Regulation

John and Wendy Wykoski filed their tax return for this year. They had total income for tax purposes of $50,000. They also had four payments: student loan interest of $100, alimony paid to ex-spouse of $200, unions due of $400, and travel required by job of $600. What is adjusted gross income for this couple?

A. $48,700
B. $49,100
C. $49,300
D. $49,700

Answer is D

Student loan interest and alimony payments are deductions that taxpayers can take in arriving at adjusted gross income. Union dues and travel required by a job are both miscellaneous itemized deductions that can only be deducted if they are greater in total than 2 percent of adjusted gross income.

BEC

Thompson Corporation is considering making an investment in a donut maker. It will cost $200,000 and last for 10 years. The company expects it to generate a positive cash inflow each year of $60,000. Depreciation expense is $20,000 per year so the donut maker will have a reported net income of $40,000 per year. The desired rate of return is 8 percent per year. The present value of $1 in 10 years at an annual rate of 8 percent is .47. The present value of an ordinary annuity of $1 per year for 10 years at an annual rate of 8 percent is 6.71. What is the net present value of this donut maker?

A. A positive $68,400
B. A positive $82,000
C. A positive $202,600
D. A positive $402,600

Answer is C

This donut maker will generate cash inflows of $60,000 per year. The present value of those cash flows at an 8 percent rate is $60,000 x 6.71 or $402,600. Since the asset costs $200,000, the present value is larger (has a positive net present value) of $402,600 less $200,000 or $202,600.

Study Hard
Be Determined
Make Good Things Happen
I want to hear from you that you have knocked out the CPA Exam.
I know you can do it.

Joe Hoyle President and CoFounder CPAreviewforFREE

CPAreviewforFREE--Tips to Add Points at School and on the CPA Exam, New MCQ's

noreply@blogger.com (Go Figure) — Wed, 21 Sep 2011 14:18:00 +0000

CPAreviewforFREE--Try us FIRST before you spend your hard-earned money. 166 Weeks of Operation and 27,707,860 Page Views (an average of over 166,000 page views per week for over three years)Lesson 103---Use CPAreviewforFREE to Achieve Better Grades in College Courses, Tips to Pass the CPA Exam, Add Points Now From: Joe (1) – Although I have been teaching now at my university for over 2 weeks, I realize that a lot of college classes begin in the next day or two so WELCOME BACK!!! Good luck – have a great semester!!! Learn it all!!! We have a lot of college students who get these email lessons. I hope you are excited about a new school year and the chance to expand what you know. If you are taking Intermediate Accounting, Advanced Accounting, or Governmental Accounting, you might want to consider our Points to Pass (FAR) program. We have taken topics from all across those three courses (leases, governmental, bonds, consolidations, and the like). We have picked our 250 favorite questions from those topics and we have set them up in a computer software program so you can work them 1,000s of times with different numbers every time. This is the best way in the world to practice these complex topics until you know each concept perfectly. Yes, of course, you can certainly use this program to pass the CPA Exam but until you get there, you can use it now to help you make an A plus in Intermediate, Advanced, or Governmental. Click Points to Pass program to work an example of working that basic question over and over until you can do the problem in your sleep. You’ll be surprised how quickly you can master even the most complicated financial accounting question using Points to Pass. (2) – As most people probably know, I live in Richmond, Virginia, where we had both an earthquake and a hurricane in the last two weeks. It is so very easy to get upset with all of the problems in the world today but when you survive two fairly serious natural disasters back-to-back, it is not a bad idea to stop and be grateful. When I listen to people on television these days (who always seem to be upset), I’m always reminded of what someone asked me one time: “Are you a person who sees the glass as half-full or as half-empty?” Don’t let yourself become obsessed with the glass being half-empty. There is nothing like a couple of big natural disasters to make a person become a bit happier with a half-full glass. When you walk away from such serious problems without broken limbs or a broken house, it is good to be thankful for what you do have. I have never done a survey but I’d bet a lot of money that people who view the glass as half-full pass the CPA Exam a lot quicker than people who view it as half-empty. (3) – On our website, we have a section titled CPA Exam Resources. I put a lot of interesting stuff there. One of those sections is “Tips for Success” where I occasionally post a tip for success on the CPA Exam – I think I’m up to 30 tips for success. In fact, I just posted a few new ones. I liked one of them so well that, after getting it posted, I copied it so I could share it with you. I guess I like the ones that I know pertain to me as much as they do to you. From Tips for Success When I used to teach live review classes, I would have a “you need to get serious” discussion at the end of the first day. One of my strong suggestions is that, during the time of preparing for the CPA Exam, all major distractions must be put completely out of reach. I would usually close that pep talk with the plea: “take a big sheet of paper and tape it directly over the face of your television and leave it there until you pass the exam.” Today, I would certainly update that admonition to include computer screens, Blackberries, iPhones, iPads, video games, Facebook, email, Twitter, and beer. The truth is that life is just full of wonderful distractions that are constantly calling us to come out and play. Many of us have become addicted to distractions. It is easy to let those distractions eat up all your valuable productive time so that, at the end of each day, we have accomplished nothing real. Make a list of your favorite distractions. Yes, you do know what they are. Then, decide how you are going to limit the amount of your time they consume. If you cannot control your own distractions, you might as well forget about the CPA Exam or any other true accomplishments in life. There are only 24 hours in a day and every minute you allow yourself to get distracted is a minute less that you have for the CPA Exam. If it is Facebook or the CPA Review, you’ve just got to choose the CPA Exam. Make it your goal, starting right now, to identify your personal distractions and begin to put a limit on them. In today’s world, this might be my very best piece of advice. (4) – We have somewhere between 25,000 and a gazillion people who get these email lessons every 10-14 days. Well, we actually have 25,000 right now but would love to have a gazillion. However, if you are ready to stop receiving them, you certainly have that right. Simply scroll down to the bottom of this lesson and you should find an “unsubscribe” button. If you click it, we will remove your name. We absolutely do not want to remove your name but we will. That, of course, is your right. (5) – One of the problems in studying for the CPA Exam is that it is easy to get discouraged. You have a bad day studying and you can’t shake off the negative feelings. You miss a couple of questions and you get discouraged. You forget something you thought you knew and you start to get stressed out. Don’t put unreasonable pressure on yourself. It is easy to forget that you just need to pass. You don’t need to be perfect. You just need to get 75 points. Unfortunately, sometimes, when you are really under pressure, common sense flies out the window. I was reading yesterday about a well-known college basketball program, a team that always seems to be prepared and do well. They don’t win them all but they do win a lot. The article was talking about what that team did when they had a bad game or when they messed up something. Instead of sitting around losing their confidence, they would all start yelling “Next Play!!!” – in other words, if you are going to win, you have to keep moving forward. You cannot let a setback set you back. Of course, we all need to learn from our mistakes but you simply cannot dwell on them. You can’t let the stress and pressure get in the way of your goal – to get better and win (pass the CPA Exam). So, when things look a bit bleak, I want you to think “Next Play” which means “forget messing up, let’s get back to moving forward.” I liked that. In fact, I found myself today whispering “Next Play” to myself whenever something happened and I didn’t like my action. You can just use up so much energy with the negatives. “I can’t do this,” “I can’t pass,” “I’m stupid,” “I want to quit.” Good gosh – you are never going to accomplish a single thing in life if you spend your energy pushing yourself toward failure. From now on, when something happens, and you feel those negative thoughts beginning to creep in, yell “Next Play” and move right on. The thoughts that you want to have: “I’m getting better” “I’m going to make it” “I will pass this exam” “Today I will add some points” “It is not easy but it is certainly passable” That’s the kind of energy that I want from you. Only energy that propels you forward. (6) – Time for a little practice. Work the four questions below. If you get all four, that’s wonderful, pat yourself on the back. If you get three correct, make sure you can do the other one by this time tomorrow. If you get two correct, make sure you can do the other two by this time tomorrow. If you get one correct, make sure you can do the other three by this time tomorrow. And, if you happen to miss them all, that’s not the end of civilization – just make sure you can do all four by this time tomorrow. FAR The Fitzhugh Corporation starts the year with accounts receivable of $200,000 and an allowance for doubtful accounts of $10,000 (credit balance). During the year, credit sales of $700,000 were made and cash of $600,000 was collected. Receivables totaling $12,000 were written off as uncollectible. At the very last moment of the year after all the above, one of the receivables written off (a $3,000 amount) was actually collected. If the company estimates that 5 percent of its ending receivables will prove to be uncollectible, what bad debt expense should be reported for the year? A. $13,400 B. $13,500 C. $14,400 D. $14,600 Answer is A When the percentage of receivables method is used, bad debt expense is not computed. It is the amount needed to change the allowance for doubtful accounts to the proper balance. Here, ending receivables are $288,000, which is $200,000 + $700,000 - $600,000 - $12,000 + $3,000 - $3,000. Notice the $3,000 balance was removed as part of the $12,000. When it becomes good again, the $3,000 is added back in and then subtracted to reflect the payment. The allowance must be 5 percent of $288,000 or $14,400. The allowance has a $1,000 credit balance, which is $10,000 - $12,000 + $3,000. The beginning balance was $10,000 but only (by the end) $9,000 in receivables were actually written off. To change the allowance from its current $1,000 credit to a $14,400 credit requires bad expense of $13,400. Auditing & Attestation Deshawn Brookshire CPA is auditing the financial records of Montreal Corporation. On a worksheet for land, buildings, and equipment, a machine is shown with a cost of $240,000 and accumulated depreciation of $76,000. The machine was bought two years ago. Under the accumulated depreciation figure, the auditor has placed a small mark to reference the testing that was done. Which of the following is least likely to be the explanation for that mark? A. The auditor has recalculated the depreciation for each of the two years of operation. B. The auditor has verified the current value of the machine. C. The auditor has looked into any changes made during the current period in the accumulated depreciation balance. D. The auditor believes the method used in computing depreciation is appropriate according to U. S. GAAP. Answer is B The mark is with the accumulated depreciation. Normally, in connection with accumulated depreciation, an auditor is expected to verify that an appropriate method is applied and has been calculated properly. In addition, the auditor will want to investigate any changes to accumulated depreciation other than annual depreciation. For example, a repair expense might have been incorrectly capitalized through a reduction in accumulated depreciation. If the auditor does look into the value of the asset, the auditor’s mark would have been made under the book value of the asset because that is the number in question. However, the auditor is unlikely to consider the fair value of this machine unless evidence is uncovered to indicate that an impairment problem might exist. Regulation The Hammerstine Corporation is privately-held. During the current year, the company raised a considerable amount of money for expansion of its plant and operations through the public sale of negotiable notes. Which of the following is true of this transaction? A. It does not make the company subject to the registration requirements of the Securities Act of 1933. B. It only makes the company subject to the limited time provisions of the registration requirements of the Securities Act of 1933. C. It only makes the company subject to the capital equivalent provisions of the registration requirements of the Securities Act of 1933. D. It makes the company subject to the registration requirements of the Securities Act of 1933. Answer is D The company is now an issuer of securities to the public. As an issuer of securities to the public, the company must obey and follow the registration requirements of the Securities Act of 1933. BEC Following is the official definition for a term: “A process, effected by an entity’s board of directors, management and other personnel, applied in a strategic setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.” Which of the following terms is being defined here? A. Total quality management (TQM) B. Enterprise risk management (ERM) C. Risk response and reward (3R) D. Strategic initiative feedback (SEF) Answer is B In simple terms, ERM encompasses all actions that a company undertakes to determine the amount of risk that is deemed reasonable and appropriate while measuring the actual amount of risk being faced at all times to keep the two in agreement. Labor Day is over – time to get back to work. Add some points and make good things happen!!! Joe Hoyle President CPA Review For FREE

CPA Exam Passing Rates, Work More Questions and Pass that Exam

noreply@blogger.com (Go Figure) — Mon, 22 Aug 2011 15:51:00 +0000

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

August 22, 2011

CPA Review for FREE

Over 2,200 FREE CPA Review Questions and Answers Available for YOU (for FREE)

163 Weeks of Operation and 26,870,995 Page Views (an average of over 164,000 page views per week for over three years)

Lesson 102

From: Joe

(1) – There are about 10 days left in the July-August testing window for the CPA Exam. Because many people wait until the very end of the window to take the exam, I realize that a lot of you who are reading this email are getting very close to the time to enter the exam site. A few last minute thoughts.

--Many people get close to 75. Therefore, the points you add here at the end may well be the difference between passing and failing. Keep adding points for as long as you can. Each question might be the difference between 74 and 75.
--Try to review all of the material briefly within the last week of the exam. You want every single topic to be fresh in your mind. Any topic that you have not looked at in the last week is probably a bit stale.
--It is far better to be relaxed and rested than it is to over-study. One of the biggest mistakes that people make is trying to push themselves to complete exhaustion right before the exam and then they are mystified by how many careless mistakes they make during the actual exam. Few people do well at any 3-4 hour task if they start out very tired. Use the last 24 hours to get relaxed and rested.
--Few things on the exam are more important than time management. Have a plan for how quickly you want to work each question and then stay aware of your time throughout the exam.
--Read the information that they send you about taking the test in advance and follow their rules precisely. You don’t want anything upsetting your calmness on the day of the exam. You want this to be an entirely calm and uneventful experience.
--By the way they grade, you can miss a lot of questions and still pass. In fact, they expect you to miss quite a significant number. Don’t let weird topics and odd questions rattle you. Too many candidates get four questions they know and one that they don’t know and become obsessed (and badly distracted) by the one they didn’t know. If it really is an odd question, eliminate as many answers as possible and take a guess.

At the end, walk away and tell yourself: “I gave it my very best and that’s all I can do and I’m not going to spend another second worrying about it.”

(2) – Remember, if you really don’t want to pay a fortune for mediocre CPA Review, we have a number of products that can help you gain the points you need to pass at a very low price.

---For $15 per month per part, you can get our Essentials. For each part, the Essentials contains:
a. Hundreds of slides of content to cover all of the topics you need to know to pass.
b. A study guide that merges all our free questions and answers with the content material that is provided in the Essentials and tells you what to do at each study session.
c. Approximately 10 examples of simulations (for each part other than BEC) and written communication questions (for BEC)

---For $29.99 per month, you can get (for FAR only so far) our Points to Pass software program. This computer program allows you to practice 250 of our most important questions an infinite number of times, each time with different numbers and answers. To work an example of our Points to Pass program, click here and start automatically working a demo question on leases. To our knowledge, no other review course has this software testing program.

Work that basic question over and over until you can do the problem in your sleep. You’ll be surprised how quickly you can master even the most complicated question using Points to Pass.
d. Remember that we have 250 specially picked questions in the Points to Pass program just like the demo question that you can work dozens of time until you can work each one backwards and forwards.

(3) – I was in a meeting two weeks back with the CPA Examiners. Here are the pass rates for the first two quarters of 2011. As you can see, they are a little lower than in recent years. The folks from the AICPA said they had expected a slight drop because of the various changes made in January 2011 in the exam (adding task based simulations, moving the written communications questions to BEC, adding IFRS, and the like). They said that when a licensing exam changes in some way the scores usually drop for a quarter or two until candidates adapt. So, they expect higher pass rates to come back very soon.

--AUD – 46 percent
--BEC – 45 percent
--FAR – 43 percent
--REG – 43 percent

(4) – This is our 102nd lesson and we have literally had people get all 102 of these lessons over the last few years. For others of you, this is probably your first email lesson from CPAreviewforFREE. We want everyone to know that you always have the right to unsubscribe whenever you wish. Scroll to the bottom of this or any other lesson and you’ll find a link that allows you to unsubscribe.

We love having you, especially if you stay around for 102 lessons. However, you do have the legal right to unsubscribe and we want you to know that we honor that right.

(5) - Today (Monday, August 22), classes begin here at the University of Richmond. It is my 41st year as a college teacher. I always love the start of a new year. Students come into class and every single person has the ability to do well. When students walk in on the first day, every one of them could make an A or a B simply by putting in the time and doing the work. There is the universal opportunity for people to succeed. I will like that feeling as I stare out at my students today. The only thing that stands between each of those students and success are the stumbling blocks that they place there themselves.

When you deal with college students, you eventually hear every possible excuse and then some. I don’t want excuses. I’m not trying to be a hard guy but I want success.

I want them to do a moderate amount of work and think about that material (“debits are on the left and credits are on the right – there are only two variables here, how tough can this be?”) If they do the work and do it consistently, they’ll all make an A or a B.

For me, it is all about the start of a new year. No matter how bad things have been in the past, we start over and everyone is on an even playing field. No matter what you did in previous classes, everyone starts off at the same spot and what you make of it is up to you. Whether you have been an A+ student in the past or a C- student, this is a new year and this is a new opportunity to show what you can do.

One of the things I like, though, is to try to extend this “newness.” Why focus on a new year? Every day is a new day. Every day holds infinite possibilities. Every day brings the chance that you can make something wonderful happen.

I think we all get locked into negative thinking – “this is a bad week,” “this is a bad month,” “2011 has been a tough year for me,” “I’ve always struggled with standardized tests.” I sometimes hear this negative thinking as a litany that just colors a person’s entire existence.

Would your friends say that you are a positive person or would your friends say that you are a negative person? True me – it is always better to be a positive, optimistic, upbeat person. If your friends would refer to you as a negative person, today is a good day to start making a change.

Today is Monday, August 21. I don’t know what happened to you on August 20 or 19 or any other day and I don’t really care. I just care about today. It is such a wonderful opportunity. At the end of this day, you can be different – you can be better. And, you can help make the people around you better. You can be different and you can make a difference.

I don’t care how much or how little you have studied for the CPA Exam in the past. You’ve got a new day to add points. I always say that any day where you can add 2-3 points is a great day. Maybe it didn’t happen yesterday but, gosh, it can happen today.

Go and start working questions. Don’t put it off. Don’t give me excuses. Imagine your grade getting slightly higher and higher as you work each new question. Read the question, come up with your answer, read my answer, make a few notes (10 words or less) if you need to. Then, move on to the next question. This is not rocket science. It is learning how to answer questions. And the best way to learn how to answer questions is to read questions, come up with your answer, read my answer, take a few notes.

Make it happen.
Today!!!
Today!!!
Today!!!

It is a new day – make it a great one.

(6) – Need some encouragement. Need some ideas. Read “Tips for Success.” Read a tip or three every day. I think they’ll give you an energy boost.

(7) – Time to practice. Let’s get started on adding those 2-3 points for today.

FAR

Smile Today is a private not-for-profit organization. In Year One, Smile Today receives a check for $24,000 that must be used to pay for dental work for impoverished children. In Year Two, the money is paid to a local dentist for work that she did on 180 local children who could not afford to have proper dental care. What is recorded within unrestricted net assets during Year Two as reported by Smile Today?
A. Nothing is reported.
B. A decrease of $24,000 to be pay for the dental work.
C. An increase of $24,000 as a result of the original donation.
D. Both an increase and a decrease of $24,000.

Answer is D

In a private not-for-profit organization, a designated gift of this type is initially (Year One) recorded as an increase in temporarily restricted net assets. Subsequently, when the money is spent as specified or when the required time period has passed, this amount is removed from temporarily restricted net assets and added to unrestricted net assets. At the same time, the $24,000 paid to the dentist for the work done is reported as an expense within unrestricted net assets. Consequently, both the support and the expense are reported in unrestricted net assets in Year Two when the money is properly spent.

Auditing and Attestation

The January Company is a small corporation that sells men’s clothing in Billings, Montana. The company does not issue securities to the public and is not required to have audited financial statements. However, Jeter and Cano, CPAs are hired to do a review of the company’s annual financial statements. In performing the review, the CPAs discover that a material amount of expenses was capitalized during the year. How does this impact the report issued by the CPAs?
A. An adverse opinion must be rendered because the company did not follow U.S. GAAP.
B. A disclaimer of opinion must be rendered because the company did not follow U.S. GAAP.
C. The material misstatement must be disclosed by the CPAs in a separate paragraph to their report.
D. The CPAs must decide between a qualified opinion and an adverse opinion based on the magnitude and nature of the problem.

Answer is C

An opinion is given as the result of an audit. The CPAs carried out a review and not an audit so no type of opinion can be rendered at all. For a review, CPAs are required to include an extra explanatory paragraph in their report to draw attention to any material departure from U.S. GAAP.

Regulation

The Morganton Corporation has revenues of $100,000, expenses of $80,000, and charitable contributions of $5,000. Which of the following is true?
A. Taxable income is $18,000 and $3,000 in contributions can be carried over for five years.
B. Taxable income is $20,000 and $5,000 in contributions can be carried over indefinitely.
C. Taxable income is $15,000 and there are no amounts to be carried over.
D. Taxable income is $19,000 and $4,000 in contributions can be carried over for three years.

Answer is A

A corporation first computes its net income without the contributions taken into consideration. Here, that is $20,000 ($100,000 less $80,000). Charitable contributions of up to 10 percent of that figure ($2,000 in this case) can then be deducted. That drops taxable income to $18,000. The remainder of the contributions ($3,000) can be carried forward for up to five years.

BEC

The Lenoir Company produces several types of widgets in two departments. In the first department, there are three separate activities and, in the second department, there are four separate activities. The production process has a significant amount of overhead and officials believe that it is especially important to assign the overhead to each type of widget as precisely as possible. If activity-based costing is used, which of the following statements is true?
A. Overhead is assigned one time, at the end of the process in the second department.
B. Overhead is assigned two times, at the end of each of the two departments.
C. Overhead is assigned for each separate activity, three times in the first department and four times in the second.
D. One continuous overhead rate is applied as each widget moves through the production process.

Answer is C

Activity-based costing attempts to assign overhead as accurately as possible by dividing up the entire process into activities, each with its own identified cost driver. For example, in the first activity in department one, officials may believe that overhead is caused by direct labor hours and should be assigned in that way. In the second activity in department one, perhaps overhead is assumed to be related to the cost of direct materials and is assigned that way. Whenever overhead is particularly large, its assignment to individual products becomes especially important. Activity-based costing does that using separate cost drivers for each identifiable activity.

Have a great week!!
Remember that each new day is a wonderful opportunity so make the most of it!!

Joe Hoyle

www.CPAreviewforFREE.com

You can do it, Points to Pass New Demo, Survey Results

noreply@blogger.com (Go Figure) — Fri, 19 Aug 2011 19:32:00 +0000

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

Lesson 101—In this lesson--Points to Pass New Demo, More Survey Results, Grading Changes in 2011, A word from Joe

From: Lynn (No, Joe hasn't gone anywhere!)

POINTS TO PASS NEW DEMO

Ready to try Points to Pass? Not sure what it is or how it works? We thought you might like to give Points to Pass a try since it's not like any other CPA review product. Go to our store, scroll down to Points to Pass and click on the link "Example PtP Question". That's it! You'll work an UNLIMITED number of questions based on just that one demo question until you get the concept down perfectly.

If you like what you see, it is only one dollar per day for all 250 Points to Pass questions! For an infinite number of questions. Yep, $29.99 per month.

MORE SURVEY RESULTS

A tip to see our site in a larger font size: Open up your browser to CPAreviewforFREE and press the Control and "+" keys again and again to zoom in. No, you don't have to hit the Shift key to achieve the upper case "+".

Many of you mentioned that there's no phone number on the website to contact us and felt that we lose a bit of legitimacy because of it. We also have a 98% customer satisfaction rate with our current email support system and we run a very tight ship to keep prices down which we pass along to you!

GRADING CHANGES AS OF JAN 2011

You may or may not be aware of the grading changes that took effect in January 2011. Because they moved all the written communication questions to BEC, they had to change that. You can find everything about scoring now here.

WORDS FROM JOE

You might find this interesting. On one particular day recently, we measured our traffic by city. We were interested in learning where people came from who used our materials. Here are the top eight:
--New York City
--Hyderabad, India
--Chicago
--Washington, DC
--Los Angeles
--Houston
--San Francisco
--Philadelphia

Wherever you are, we are glad you are with us.

I love what Michael Jordan had to say: “Obstacles don't have to stop you. If you run into a wall, don't turn around and give up. Figure out how to climb it, go through it, or work around it.”

Does this sound like you?

--“I simply cannot find the time to study.”

Always be ready to study whenever a free minute or two pops up. Too many people take 30 minutes just to get ready to study. Everything has to be aligned perfectly. You can’t do that. You always have to be ready to get some work done if you have even the slightest chance. Always carry note cards in your pocket, for example. When a free moment shows up, pull them out and start reviewing. Or, for a small fee, you can download all of our questions and answers. Carry them with you at all times and if you have even one minute, that is a perfect chance to work a question or two.

--“I mean to study but somehow it never happens. Each day is the same – I’m a person with good intentions.”

At the start of every day, write down exactly when you are going to study and for how long. Then, when those times arise, stop everything else and make it happen. Nothing beats a schedule. If you say “at 7:30 in the morning, I’m going to study for 30 minutes before I head to work” then that should be an absolute necessity. If you say “at 5:00 each evening, I’m going to study for 45 minutes before I start to cook dinner” then you must not let that time slip by. Set the schedule and then hold yourself to that schedule.
I was talking with a friend of mine the other day and he mentioned the seminal work by Booker T. Washington “Up From Slavery” which was his autobiography, published 110 years ago. My friend had read it recently and mentioned one line that had made a real difference to him: "I have learned that success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome while trying to succeed."

YOU can do it!

noreply@blogger.com (Go Figure) — Wed, 17 Aug 2011 14:10:00 +0000

CPAreviewforFREE Survey Results, New Practice Questions, Points to Pass

noreply@blogger.com (Go Figure) — Wed, 03 Aug 2011 00:50:00 +0000

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

Lesson 100—In this lesson--Some Survey Results, New Points to Pass Launch, Motivation, Study Aids, 4 New Practice Questions

From: Joe

SURVEY RESULTS

THANKS to everyone who took a minute to answer our CPAreviewforFREE survey. We’ll be commenting on additional results in future newsletters. Here’s one thing we discovered immediately:
A 94% approval rating. 76% of the respondents said that the quality of our content was better or the same than the other review programs they had used while another 18 percent said that we were the only review program they had used. That is a pretty impressive statistic.

One of the comments we received from Question 8 of the survey: “I have no suggestion but I will say your questions helped me pass all 4 parts on the first try. I have recommended your site to many people. You have done an excellent job.”

Gosh, that is great to hear.

POINTS TO PASS LAUNCH

We have been having great success with our new Points to Pass product designed specifically for FAR. You still have 622 free FAR questions and answers available for use at any time at www.CPAreviewforFREE.com. However, I personally selected 250 of the most important of those FAR questions. We then built the Points to Pass software program that would constantly change those 250 questions and make them 2,500 questions or even 2,500,000 questions. Computers do marvelous things. Here’s the great part: You can work those especially important questions as many times as you like until you can do them in your sleep.

You can take each question and work it over and over with different numbers and different variables until you know the process backwards and forwards.

Or, you can go to any FAR category (Financial Statement Structure of Not-for-Profit Organizations as just one example) and keep working questions in that category for hours and days and even weeks. The computer program will keep changing the numbers and other variables of the questions I selected and then feed each new question to you until you have the whole category down perfectly.

Countless questions by individual question.
Countless questions by individual category.

I have always argued that the very very very best way to pass the CPA Exam is to work questions and read answers. Everything else does help but working questions and reading answers is the best. Do that one thing long enough and you’ll pass. However, UNTIL NOW, there has not been a way to have enough good questions available to work. People run out of questions pretty quickly in every program. But Points to Pass solves that problem by providing an infinite number of variations to the 250 most important questions in FAR.

And it is only one dollar per day. Yep, $29.99 per month. For an infinite number of FAR questions.

WORDS TO STUDY BY

I was talking with a friend of mine the other day and he mentioned the seminal work by Booker T. Washington “Up From Slavery” which was his autobiography, published 110 years ago. My friend had read it recently and mentioned one line that had made a real difference to him: "I have learned that success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome while trying to succeed."

We are halfway through the July-August testing window for the CPA Exam. I realize that a lot of people who read these email lessons are gearing up to take part of the exam before the end of August.

It can be a tense time.

Many of you are worrying about passing or failing. Worry can become a constant mental distraction. As I have said often in these emails, I think your worry is misplaced. If it were me, I wouldn’t allow the words “pass” or “fail” into my vocabulary. I would worry, but only about one specific thing: adding points. How can you add a point or two today? Any other question or any other goal is probably unimportant. That should be the first thing you think about when you wake up in the morning and the last thing you evaluate when you go to sleep at night.

However, my friend’s comment from “Up From Slavery” made me start thinking about the obstacles we all face when pushing to achieve success. What obstacles do you face in your quest to pass the CPA Exam? And, what can you do to overcome those obstacles?

Maybe it is not the CPA Exam that is the problem. Maybe it is the obstacles you face each day. Maybe you let them stop you. Maybe you let them keep you from success.

Here are a couple obstacles that are pretty common in CPA Review.

--“By the time I finish all my work, I’m too tired to study.”

If possible, study first and then do your other work when you begin to get tired. Sweeping the floor can be done when you are half asleep but studying can’t. Unloading the dishwasher can be done without being too alert but studying can’t. Washing out the bath tub doesn’t take many brain cells but studying does.

--“There are just not enough hours in the day for me to do everything and get in my study time.”

Take a moment each day to evaluate what you really “must do.” People often structure their lives to stay incredibly busy. Then, when they try to add something important like the CPA Exam, there just doesn’t appear to be any available time. Perhaps some of those things that you’ve added to your life can be delayed a bit until the exam is passed. Do you have to water your plants every day or can you make it every third day? Do you have to dust your furniture quite so often? Do you have to go to the gym every single day? Can you grocery shop once a week rather than twice? When you are studying for the CPA Exam, it is not a bad idea – before you do anything other than study – to ask yourself “can this task be delayed for a day?” Yeah, there are things you really must do but not everything you do each day is a “must do.”

Think about your obstacles – those things in your life that keep you from putting in the time and effort needed to pass the CPA Exam. Then, figure out how to work your way around those obstacles. You can do it!! That is the mark of success.

STUDY AIDS
When you are working questions on www.CPAreviewforFREE.com, keep a list of all the questions you miss. Keep that list in two columns. One column is for all questions that you miss because there was some part of the question that you didn’t know. The other column is for all questions that you miss because you were careless. You read a word wrong or missed a computation or you started working before you read the entire question.

It is especially important that you train yourself to keep the “careless list” at close to zero. Over time, as you study and practice, the “don’t know list” will go down automatically. However, the “careless list” is based entirely on your ability to stay focused and pay attention. You want to train your mind and your eyes to read all of the questions and pick out the important data and put them together. If you allow yourself to be sloppy while you study, that habit will carry over into the actual exam. So, stop being careless.

Don’t let yourself pick up bad habits. Don’t let yourself get used to missing questions because you are being careless. That is an awful habit. When it comes to that one attribute of the CPA Exam, don’t settle for 75. Shoot for 100 or, in other words, as you study work to have no questions at all missed because of carelessness.

PRACTICE TIME

Let’s see if we can add four points to your scores.

FAR

The Potter Corporation has been in business for four years. The completed contract method has been used for all of those years to recognize revenue on construction projects. At the end of the fourth year, company officials decide to change to the percentage of completion method. That method would have increased income in the first three years by $80,000 and in Year Four by $30,000. How is this change in accounting principle reported?
A. Retroactively – the reported income for the first three years is increased by $80,000.
B. Currently – only the $30,000 amount for the current year is changed.
C. Cumulatively – the entire $110,000 income effect is recognized in the current year.
D. In the future – no changes are made until next year

Answer is A

This change is a change in an accounting principle. Most changes in accounting principle (such as this one) are handled retroactively. The previously reported numbers are changed to align them with the new principle. A change in an accounting estimation is different. It is handled currently and then into the future.

Auditing

The Malfoy Company makes a huge purchase of inventory near the end of Year Two that is shipped to the company on December 30, Year Two. It is sent FOB shipping point. However, no record is made of this inventory until it is received on January 9, Year Three. In looking at the company’s Year Two financial statements, which of the following is most likely to alert the auditor that a recording error has occurred?

A. The Year Two current ratio is much higher than the Year One current ratio
B. The Year Two gross profit is much lower than the Year One gross profit
C. The Year Two inventory turnover is much higher than the Year One inventory turnover
D. The Year Two working capital is much lower than the Year One working capital

Answer is C

Nothing has been recorded in Year Two even though the goods (and the related debt) belong to Malfoy because of the FOB point. The goods were not received in Year Two and, therefore, could not have been sold. Cost of goods sold was not affected by the purchase and, thus, the gross profit is correctly stated. There are only two mistakes. Inventory is too low and accounts payable is also too low by the same amount. Those mistakes offset so that both working capital and the current ratio are also correctly reported. However, inventory turnover is cost of goods sold divided by the average inventory for the period. If inventory was too low at the end of Year Two, then the average inventory will also be too low. Therefore, since cost of goods sold is correctly stated, the inventory turnover will be too high.

Regulation

Owners of the Granger Partnership have decided to liquidate and go out of business. Hermione is one of the partners who holds a partnership interest of $5,000. The only thing she receives from the liquidation is a machine with a book value of $7,000 but a fair value of $7,600. Hermione held a 20 percent ownership in the partnership. What gain does Hermione recognize for tax purposes on the receipt of this liquidation distribution?
A. Zero
B. $1,520
C. $2,000
D. $2,600

Answer is A

Normally, in a partnership liquidation where the partner only receives nonmonetary assets, the partner picks up the new property at the basis of the old partnership so that no gain is recognized. Therefore, Hermione will record the machine on her tax records as having a basis of $5,000. The old partnership basis of $5,000 goes away and is replaced by a new basis for the machine of $5,000. There is no difference so there is no taxable gain.

BEC

The Weasley Company takes 77 days on the average to sell its inventory. It takes 43 days on the average to pay for that inventory. It takes 52 days on the average to collect the money from a sale. For the Weasley Company, what is the cash conversion cycle?
A. 68 Days
B. 86 Days
C. 129 Days
D. 172 Days

Answer is B

The cash conversion cycle is the number of days that it takes a company to buy inventory and pay for it and then sell it and collect the money. Therefore, it is the time that it takes to sell inventory less the time it takes to pay for the inventory plus the time it takes to collect the resulting account receivable. Here, that would be 77 days less 43 days plus 52 days or 86 days.

August is ready to start – make it a great month. Make it the month that you study for and pass the next part of the CPA Exam.

Prepare for the CPA Exam - wikiHow

noreply@blogger.com (Go Figure) — Fri, 08 Jul 2011 20:43:00 +0000

Prepare for the CPA Exam - wikiHow

New Points to Pass Unlimited FAR Question Bank

noreply@blogger.com (Go Figure) — Fri, 08 Jul 2011 14:59:00 +0000

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

July 8, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,200 FREE CPA Review Questions and Answers Available for YOU (for FREE)

157 Weeks of Operation and 25,375,351 Page Views (an average of over 160,000 page views per week for three solid years)

Lesson 99

From: Joe

(1) – We crossed over 25 million page views recently. Because the average person typically looks at about 22 pages on our site with each visit, that means that www.CPAreviewforFREE.com has been used over one million times in three years by future CPAs gaining the knowledge they need to pass. Can you imagine, 1,000,000 visits by accountants adding points to their score for free? I find that both wonderful and amazing. People from around the world get to work with the same database so that they can all pass the exam and get on with their careers (and not have to pay an arm and a leg).

(2) – For those of you taking FAR in July and August, we are introducing our newest product: Points to Pass. It is set up so that you can practice each topic in FAR literally an infinite number of times. We all know that practice is the way to pass—this is the ultimate tool for practicing.

Are you missing too questions in a particular topic such as inventory, consolidations, or leases? Points to Pass doesn’t provide you with just 10 or 20 additional questions but an UNLIMITED SUPPLY OF QUESTIONS FOR EACH TOPIC IN FAR. You can keep working questions in every topic until you have them completely under control.

For example, we have 23 questions currently about inventory in our database. Let’s say you are struggling with that topic and want to keep practicing after you finish those 23. Well, if you have Points to Pass, you can get more and more and more Inventory questions for as long as you want.

Here’s how it works. We have taken each of the FAR topics and designated about half of those questions as especially important. We have then created a computer program that will change one or more of the essential variables in each of those questions so that you can work them again but with different numbers. So, the 23 inventory questions can become 50 or 100 or 1,000. Just keep working until you are comfortable with that topic and then move to the next one and do it again.

To start practicing with Points to Pass, log into your account at www.CPAreviewforFREE.com and click on Manage Your Purchases>New Subscriptions and select Points to Pass for a 1 month package for only $29.99 or 3 months for only $89.97.

If you have a question about Points to Pass, send an email to info@cpareviewforfree.com

(3) – Always love to hear from you folks who are taking (or have taken) the CPA Exam!!!

FROM BR: “I passed!!! I passed 3 parts (BEC, AUD, and REG) using only your software, simulations, and subscription notes.... Thank you so much for providing this site; it has been a life saver!!!! Thank you so much.”

FROM SD: “I just wanted to say ‘THANK YOU’ for your dedication and hard work in providing a truly free CPA review service. There were many days that my mind was exhausted from studying and I would want to ‘rest’ it but I would get an email from you and it would perk me up to try your practice questions. Sometimes our brains need a ‘re-boot’ and your emails always did the trick for me. I passed my first CPA exam on October 8, 2010 & my final part on May 23, 2011 and all on the first try. I truly believe in your ‘get a point every day’ theory and feel like it helped me push through some very tough material.”

FROM KM: “Just wanted to thank you for the pointers you gave me. I got the Reg part with an 80 after going through your subscription material. Unfortunately my Auditing had expired, but am very confident of getting it back on July 10 when I retake it.”

FROM VT: “I just got my REG score back today. I passed with a 75. That was my first attempt at REG so I am happy that I passed.... Thank you for your website. I used your website as 50% of my study material and the other is a book I bought at Borders. I am attempting to pass without having to spend a lot of money. We will see how that goes by the end of September.”

FROM RJ: “After receiving scores of 60, 60, 72 and then 65 I found out yesterday that I received a score of 88 on the Audit and Attestation part of the CPA exam! I stared at the computer screen for about a minute before the score actually registered in my mind and realized that I passed!!! It's really great to see what a passing score looks like! … Now it's on to adding points in BEC! Every time I sit down to study I remember what you always say ‘add points,’ ‘add points,’ ‘add points.’

FROM TM: “I have cleared all 4 papers at first attempt. I used your free material as well as bought BEC and Reg subscriptions. They were very useful. Thanks for your help.”

FROM CD: “I'm loving the essential material on CPAReviewForFree. I'm telling everyone I know who is studying for the exam to use that instead of the other guys. Thanks.”

(4) – And, now for the legal stuff. You received this email because you have signed up for it. We love having you. We love hearing from you (see above). We love being helpful. I’ve been writing these email lessons for well over a decade and I’m sure I can go on for another decade or two, maybe even another millennium. However, you absolutely do have the legal right to unsubscribe whenever you wish. So, on any email lesson, if you scroll to the bottom, you’ll find a link that is labeled “Unsubscribe.” If you need to go, we understand. But, we do hope you’ll tell anyone and everyone about www.CPAreviewforFREE.com and its attempt to create world harmony through the universal passing of the CPA Exam.

(5) – I really like to spend each Fourth of July in Yorktown, Williamsburg, and Jamestown, Virginia because so much of our country’s history took place in those 10-15 miles. You can see where the British surrendered at the end of the Revolution. You can see where Thomas Jefferson went to school. You can see where the early settlers risked their lives to start the Jamestown Colony. Yeah, it is my favorite place to spend Independence Day.

Driving home on the 4th, I was listening to some music on the radio and a group sang a song that just seemed to fit the mood of that trip: “No one remembers what you didn’t do.” Those people at Yorktown, Williamsburg, and Jamestown are remembered because of what they managed to accomplish.

Okay, passing the CPA Exam is not on the same planet as winning the Revolutionary War or founding a colony in a new world. I do realize that. But the things that count in this life are the things that you accomplish. It is not easy, I fully understand. I passed the CPA Exam myself – I know how hard it is to do all that work. However, nothing was ever accomplished by not trying. Nothing good comes from giving up. Life is about doing.

I am a firm believer that everyone can pass the CPA Exam. Yes, you have to put in the time. You have to work enough questions. You have to read enough answers. You have to take enough notes. It is not easy. That’s what makes it worth doing.

No one is ever going to remember what you don’t do.

Life is meant to be lived by doing. Do the work and pass that exam.

You’ll always be so glad you put in that work.

(6) – I posted part of the following message on our Facebook page yesterday – here’s the entire message.

Many, many people reading these lessons will be taking one or more parts of the CPA Exam during the roughly 8 weeks that remain until the end of August. Sometime in the next 8 weeks, an awful lot of you will walk into a testing center somewhere in this world and take a section of the CPA Exam. Whether you pass or fail that exam depends very much on how well you use these last days and weeks. The points you add at the end are the most important because that is the stuff you’ll remember the best.

It is easy to get tired and discouraged and find reasons not to study, especially here in the summer when the weather can be so beautiful. We are all human; it is very easy to find reasons NOT to do the work.

It is a much bigger challenge to find reasons each day TO study. Why should YOU study today? Make it a habit every day to find one good reason for you to do what has to be done:

I want to add a point today. I want to do the work to add a point today. Why is that?

I don't ever want to ever take this exam again.
I want my parents, my spouse, my friends, my kids to be proud of me.
I want to show my boss what I know.
I want my resume to say "CPA."
I want to get that promotion.
I know I can do it so I might as well get it done.
I want to feel good about myself.
I want that “I did it” feeling when I see those scores.

In these last 8 weeks, it is very easy to get into a "I dread study" routine. Occasionally, I hear from people who tell me: "I'm going to study today but I am going to hate every second of it." Trust me, that makes it 10 times more difficult to put in the time. It is just hard to be efficient at preparation when you only have negative reasons to study.

Don't approach your studies as a negative - that's one of the primary problems with our school system; learning is too often viewed as a negative by the students. Find a good positive reason to study today:

I want to show my spouse (or my girl friend or boy friend) that I can make 75.
I want to prove to my teacher in college that I was smarter than he thought.
I want to get a new job and this will help my search.
I'll get a raise or a bonus when I pass.
I want to watch television again or go to the movies.
I want to be able to play with my kids more next fall.
I want to prove to the world that I can do it.

If you look, there are many many good reasons to study today.

Come at this exam in an aggressive, positive manner. It should not be a torture to be dreaded but a challenge to be conquered. Study is not a punishment; study - just like exercise - will make you better and, thus, better able to conquer the challenge you face.

(7) – Ah, time for a bit of practice – take out a pencil and piece of paper and see how many of these you can get correct.

FAR

A nongovernmental not-for-profit organization (Charity A) receives a gift of $50,000 that must be conveyed to another, separate not-for-profit organization. Which of the following statements is true?

A – Charity A will record contribution revenue of $50,000 in all cases.
B – Charity A will record contribution revenue of $50,000 but it must be labeled as temporarily restricted.
C – Charity A will record contribution revenue of $50,000 but only if it has variance powers to change the beneficiary.
D – Charity A cannot record contribution revenue but must record a liability of $50,000 to the other charity.

Answer is C

Normally, when a not-for-profit organization receives a gift that must be conveyed to another charity, it is merely serving to convey the money and records it as a liability (answer D). However, if the initial charity is giving variance powers so that it does have the ability to change beneficiary, then it has genuine control over the money. Under that situation, Charity A records the gift as contribution revenue and not as a liability.

Auditing & Attestation

A CPA is performing an independent audit of the Longston Corporation. The CPA is currently doing a test of the controls surrounding the recording of accounts receivable. Shirley Jones is the internal auditor for Longston and has offered to help in performing these tests of controls. Which of the following is true?

A – The CPA cannot allow the internal auditor to provide any direct assistance in the tests of controls.
B – The CPA should not have let the internal auditor know what testing was being considered.
C – The CPA can allow the internal auditor to provide direct assistance in the tests of these controls.
D – The CPA can allow the company accountant to be of direct assistance but not the internal auditor.

Answer is C.

The CPA may receive assistance from the internal auditor in providing tests of controls (and also substantive testing procedures) with proper oversight. The CPA will probably be interested in making sure the internal auditor is properly competent by verifying her education, certification, and work experience and by examining her previous work for this client. The CPA will also need to ensure that her work is properly reviewed. However, if all of that seems appropriate, the CPA can get direct assistance from the internal auditor in doing tests of controls.

Regulation

Ligano serves as an agent for Boswell. Boswell has only given Ligano the authority to carry out 4 specific actions on his behalf. However, Ligano carries out an action in Boswell’s name that is not one of those four. The agent (Ligano) lacked authority to legally bind the principal (Boswell). Boswell decides to affirm the act and do the specified work despite Ligano’s lack of authority. What action has Boswell taken?
A – Reimbursement by judgment
B – Ratification
C – Reference by priority
D – Reference by remainder

Answer is B

Whenever an agent (such as an employee) takes an action without proper authority, once informed, the principal must either ratify it (agree to be bound to the agreement) or repudiate it (inform the other party that the principal will not be bound by the agreement because the agent did not have proper authority).

BEC

The Swinton Company wants to open a new retail outlet in Manchester. Swinton officials go to the local bank and borrow $500,000 to start operations and agree to pay an annual interest rate of 8 percent. As part of the agreement, Swinton must maintain a cash balance in the local bank of $40,000. What is the effective cost to Swinton of borrowing this money for one year? (rounded)
A – 8.2 percent
B – 8.5 percent
C – 8.7 percent
D – 8.9 percent

Answer is C

Swinton only gets $460,000 from the bank to use because $40,000 must stay with the bank. The annual cost of the loan is an interest charge of $40,000 ($500,000 times 8 percent). If Swinton pays $40,000 per year to get $460,000, the annual cost of the loan is $40,000/$460,000 or 8.7 percent.

You’ve got roughly 8 weeks left in the July-August window. Let’s make the very best of that time to add points and get 75 and pass.

Joe Hoyle
Co-Founder and President

CPA Review for FREE
www.CPAreviewforFREE.com

New Practice Questions Added--Success Requires Courage

noreply@blogger.com (Go Figure) — Tue, 14 Jun 2011 14:47:00 +0000

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

June 14, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,200 FREE CPA Review Questions and Answers Available for YOU

154 Weeks of Operation and 24,755,208 Page Views (an average of over 160,000 page views per week for approximately three solid years)

Lesson 98

From: Joe

(1) – Do you ever wonder whether all those other review programs ever pay any attention to CPA Review for FREE (www.CPAreviewforFREE.com)? If you ask them, they will tell you that they pay no attention to us at all.

Well, here’s some information you might find interesting.

---We are able to trace where the traffic to our website comes from. Last month, we had 269 visits from one of the major review courses—IN ONE MONTH! We don’t know what they were looking for but they sure were interested in our website.

---Another major review course now boasts on its website “Experience the best in CPA Exam Review for FREE. Just enter….” I even wrote that review program to suggest that they needed to hire someone who could come up with some new ideas of their own. At the very least, they could have made it sound different.

---Another CPA review website just recently started bragging that they are going to start giving away a “FREE study planner.” Oh my goodness, where did that idea come from, I wonder? What a coincidence.

Okay, here is my point – these other review programs are asking for thousands of your dollars. They have one goal: your money in their pockets And, yet, they can’t even come up with their own ideas.

--We are the innovative ones.
--We are the ones who have the ideas.
--We are the ones who care about you enough to do this week in and week out.
--All those other review programs have is just fancy marketing.
--Don’t be fooled.
--When’s the last time they had a creative educational idea that they didn’t get from us?

So, shouldn’t you go directly to the source?
Shouldn’t you trust the people who actually come up with the ideas and not the ones who follow 8 steps behind?

--Our 2,200 questions and answers are free – always have been, always will be.
--Our subscription service has hundreds of pages of content about each topic you need to know.
--Our subscription service has examples of ten task-based simulations per part and numerous written communication questions for BEC.
--Our subscription service provides a study guide to show you how to combine our free questions and our subscription service.
--Our subscription service cost $15 per month per part. Yeah – 50 cents per day.

What do we ask? Give us $15 and try one part for one month. At the end of that month, give us another $15 or give the other guys $2,500. That is a very reasonable approach. Worst case scenario – you lose $15. Best case scenario – you save thousands.

Why not go with the people who have all the real ideas and not the ones who obviously don’t?

(2) – In my last email, I talked all about our latest (and potentially greatest) addition to CPA Review: Points to Pass. Questions that you can work over and over until you can get them right every time. We have had a lot of questions about how soon that will be available. We plan to roll out the FAR version in the next week or two. Stay tuned.

(3) – If you are a college student, I want you to know that we will have an exhibit table at the Beta Alpha Psi convention in Denver this August. If you are a member of BAP and will be there, please stop by the booth and say hello. We have the niftiest gifts to hand out. I stole five of them for myself.

(4) – We posted the following note on our Facebook page a couple of days ago. This is exactly what we want to hear from each of you. This is what victory sounds like. This is what success feels like. This is what we want for you.

“I just wanted you to know that I used CPAreviewforfree.com and have just been issued my CPA license from the North Carolina Board of Accountancy. Thanks for all you have done to help me and so many others prepare for this exam. RB, CPA”

Our wants are simple – we want to see you get four grades of 75 so you can move on with your life and your career (with your money still in your pocket).

(5) – They played a great basketball game on Sunday night. It was a game that went back and forth. One team got ahead and then the other team caught up and got ahead. It proved to be the final game of the season because Dallas won and took the championship.

Those guys had been practicing and playing for at least 9-10 months day in and day out.
--Do you think they ever got tired along the way?
--Do you think they ever got discouraged?
--Do you think they ever wanted to slack off?
--Do you think they ever wanted to give up?

Of course they did – it is a long season that requires an incredible amount of work—day after day, week after week. But, they won the championship because they stuck with it. Even in the dark days, they kept pushing themselves on.

Giving up is easy. Slacking off is easy.

You know how it starts. One day you quit studying early and promise yourself to make up the time tomorrow. But, tomorrow, you study a bit less. Studying less feels good and you start to make excuses. When you don’t want to do something, any excuse will work. You start to give yourself permission to lose.

Sticking with it takes courage. Sticking with it takes heart.

If you ask the Dallas players today how success feels, I guarantee they will tell you it feels absolutely wonderful. They had a dream of being the champions and now they have the trophy. They will always know what being the champion feels like.

Your dream is to pass the CPA Exam.
Your dream is to get your scores and see 75 or more on all four parts.
Your dream is to be able to tell your friends and family that you have passed a very difficult test.

And, like a basketball championship, it is not easy. It is real work. They don’t give you points for smiling. They give you points because you are able to answer questions. And, you become able to do that through long hours of practice where you sit and answer questions and read answers and take notes.

They work in a hot gym for hours and hours. You sit in front of a computer screen and work question after question.

No, success is never easy. Success requires courage and heart.

Everyone wants success but not everyone is willing to do the work that it takes.

Dallas did it.
So can you.

(6) – To unsubscribe from these weekly email lessons, just scroll to the bottom of this screen or any other email lesson and click on “Unsubscribe.” We hope you’ll stay. We like talking with you. We appreciate it when you tell others about us (well, don’t tell those other review courses since they seem to like our ideas too much). We are glad to have you get these emails lessons.

Please stay just as long as you wish.

(7) – Let’s do some practice. More importantly, let’s add some points. My goal is always the same – after you read each of these questions and answers can you get them right the NEXT TIME you see them. If so, you are adding points and that’s the real secret to success on the CPA Exam.

Okay, here’s what I decided to do this week. I wanted to give you a feel for the information available in our subscription service. So, for each part of the exam, I went into our subscription service and picked a general topic (like inventory or contract law). Then, I randomly scrolled down through that topic and stopped. Wherever I landed, I took that material and used it to write the following questions for you. If you are using our subscription service, the answers to each question are readily available

FAR

The Lutz Company is using IFRS to prepare its annual financial statements. Under IFRS, revaluation of fixed assets is permitted but it must be done for an entire class of assets. One class of the company’s fixed assets has gone up in value. Another class of fixed assets has gone down in value. What is the impact of revaluation under IFRS?
A. Decrease in value reduces net income; increase in value increases accumulated other comprehensive income.
B. Decrease in value reduces net income; increase in value increases net income.
C. Decrease in value reduces accumulated other comprehensive income; increase in value increases accumulated other comprehensive income.
D. Decrease in value reduces accumulated other comprehensive income; increase in value increases net income.

Answer is A

Probably because of the conservatism that is inherent in much of financial accounting, if a class of assets goes down in value, IFRS reflects that revaluation as a reduction in net income. However, if a class of assets goes up in value, IFRS reflects that revaluation as an increase in accumulated other comprehensive income (within stockholders’ equity on the balance sheet) rather than in net income.

Auditing and Attestation

In auditing, what is meant by the term “inherent risk?”

A. It is the chance that a reporting entity will go bankrupt regardless of its current financial position.
B. It is the chance that a material misstatement will exist in a financial statement assertion, assuming no re¬lated internal controls are in place.
C. It is the chance that an independent auditor will make a mistake purely because of being a human being.
D. It is the chance that an independent auditor will see a material misstatement but not recognize that it a material misstatement.

Answer is B.

When an audit is started, the independent auditor needs to assess the inherent risk which is the chance that a material misstatement exists in one of the financial statement assertions. Companies with great accounting systems, well-trained employees and transactions that do not contain a lot of risk may have virtually no inherent risk. Material misstatements probably will not occur. Other companies with poorly designed accounting systems or untrained employees or very risky transactions may have an incredible amount of inherent risk. As you can imagine, the work that the independent auditor does to reduce audit risk to an acceptably low level is impacted significantly by the assessed level of inherent risk.

BEC

The Jones Corporation is publicly-held and subject to the rules of the SEC. In the current period, to reduce its registration costs, the company issued unregistered bonds directly to a specific number of accredited investors. This practice is common. What is it called?

A. Undisclosed sale
B. Private placement
C. Accredited sale
D. Approved sale

Answer is B

The SEC has certain rules that permit the private placement of securities. These rules allow the sale of securities with only a limited amount of registration and disclosure information which will save the company money. Such an issuance is referred to as a private placement.

Regulation

The Lambert Company bought a piece of equipment this year on October 9. The company’s tax return is filed on a calendar year basis. MACRS (the Modified Accelerated Cost Recovery ) is used to determine depreciation for income tax purposes. Which of the following is true as to the amount of depreciation that can be recognized in this initial year?

A. Lambert can take no depreciation
B. Lambert should take a full year of depreciation.
C. Lambert can take depreciation for 3/12 of the year.
D. Lambert can take depreciation for 1/2 of the year.

Answer is D.

According to the rules of MACRS, personal property is treated as placed in service or disposed of at the midpoint of the taxable year, resulting in a half-year of depreciation for the year in which the property is placed in service or disposed of by the company.

Hey, it is a beautiful day here in Richmond. I hope it is beautiful wherever you are today.

Work hard
Add points

We really do want you to pass and get on with your lives.

Do me a favor – give someone a hug today and tell them that you are cheering for them. It might make all the difference in the world to that person.

Joe Hoyle
Co-Founder and President

CPA Review for FREE
www.CPAreviewforFREE.com

Go Forth Boldly and Challenge the CPA Exam

noreply@blogger.com (Go Figure) — Tue, 07 Jun 2011 17:46:00 +0000

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

June 7, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,200 FREE CPA Review Questions and Answers Available for YOU

153 Weeks of Operation and 24,621,047 Page Views

Lesson 97

From: Joe

(1) – We just added a few additional Tips to our “Tips for Success” column on our website (www.CPAreviewforFREE.com). Go to the homepage and you’ll see “CPA Exam Resources” in the lower left. “Tips for Success” should be the fourth article on that list.

(2) – I am truly excited that, in two weeks, we will be adding a brand new product to our list. We are always thinking of ways to help you pass. Okay, for now, it is only for FAR. It addresses the concern that every candidate must face:
--You work a question.
--You miss the question.
--You read the answer carefully.
--You think you understand the answer so you want to work another question again to see if you can get it correct this time. (Have you really learned it?) However, you already know the answer to that question so it really doesn’t prove anything to do the same question again.

What you really want is another question in the same category that you can keep working as many times as you want as long as you want--unlimited questions! Yea, that would be a big help.

Welcome to: POINTS TO PASS

If you subscribe to this program, the software will generate a stream of new questions so that you can try again (and again and again) until you are sure you have mastered the material. The best way to practice is to practice and Points to Pass allows you to do that for as long as you want.

Points to Pass will generate an entirely new question.

If you really understand the concept, you will get the correct answer. If not, you can read the answer carefully and try again with a newly generated question until you are comfortable with this computation.

I just think this is the absolute greatest way ever to prepare for the CPA Exam. And we will have FAR available on a subscription basis in about two weeks – stay tuned.

(3) – I was in Norfolk, Virginia a few weeks back on a Sunday morning. I walked into an old-timey bookstore, the kind you used to see before they started getting to be the size of large barns. The first thing I noticed was a little sign that asked the question “what would you set out to do in life if you had no fear of failure?”

Interesting question – one that I have thought a lot about since that morning. We are all ruled (at least somewhat) by fear. There are lots of things that we really want to do except we are afraid to try. We are timid. We all hold back because we worry about what might happen if we do not succeed. Instead of focusing on what we might be able to accomplish, we try to stay totally safe. Failure gets built up in our minds until it is this huge ogre that is going to hurt us with an ax.

Come on, really?

I’ve known lots of people who became so obsessed with the possibility of failure that they would not even take the exam. They were never able to walk in and take it for fear of failure.

What will really happen if you fail the CPA Exam?

--You’ll feel bad for a day or two.
--You’ll wonder how you could have gotten a few more questions correct.
--You’ll fuss that you got too many weird questions.
--You’ll wish you had been a bit more careful and managed your time better.

And then you’ll move on and start thinking about getting back into your preparation. You’ll start adding points again and working to do things slightly better. Life is full of trial and error – you’ll start working on doing better the next time so you will pass.

So, put all thoughts of failure out of your mind. Such thoughts are never helpful and, in truth, those thoughts will just seem a lot scarier than necessary. The fear of failure will hold you back and make you cautious. Thinking about failure doesn’t do you any good and it will probably make you play scared.

I don’t like playing scared. That’s not what life is all about. Instead of thinking about failure, I want you to have Power Thoughts.
--I am going to learn this stuff.
--If other people can do this, so can I.
--It just takes time and I’m going to give it the time that it needs.
--If I add a point or two every day, I’ll be able to pass in no time.
--I will make the time today to get in the study that I need.
--I can make this happen.
--I can work one more question and read one more answer.

You need Power Thoughts. You need Power Thoughts every day to keep up your spirits. You don’t need to play scared. I recently heard a person mention a favorite saying of mine: “Why not go out on a limb? Isn't that where the fruit is?”

Go after the exam, don’t let it come after you.
Go after those hours of study.
Go after the knowledge you need.
Go after those points and don’t quit going for them until you have 75.

Go boldly after the CPA Exam. Nothing is accomplished by being afraid.

(4) – We love having 20,000 subscribers – we hope you’ll go out and get us some more subscribers. Explain to people what they are missing.

However, if you ever decide that you want to unsubscribe, just scroll to the bottom of this email and click on “unsubscribe.” You can do that if and when you are ready to stop receiving these email messages.

(5) – One of my former students came by my office this afternoon to talk about the CPA Exam. She graduated a few weeks ago and is studying hard so she can knock out some/all of the exam over the summer. She asked specifically about the three written communication questions included in BEC.

The best thing you can do for the written communications questions is to go to www.cpa-exam.org and click on Tutorial and Sample Tests. Then, select the Sample Tests for downloading. They will give you five multiple-choice questions. After you submit those answers, they give you two examples of written communications questions. That shows you the kinds of questions that you are going to see.

It is very important to understand that they include the following information (I may have missed a word or two but this is the basic idea).

“REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for infor¬mation that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organi¬zation, and the appropriate expression of ideas in professional correspondence. Use a standard business memo or letter format with a clear beginning, middle, and end. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation.”

In other words, write something that is clear and understandable and addresses the question in a professional manner. Make it look like it was written by a CPA.

I gave my student the following example: you might be told that a client runs a manufacturing operation and wants you to suggest a method for reporting a by-product that is created as a result of this process. That seemed like a reasonable question that a CPA might encounter in practice and would fall under the BEC topics.

My student then asked the obvious question. “What if I don’t know a specific method for handling a by-product? Do I just leave the answer blank and get a zero?”

Absolutely not!!! The answer is graded twice. First, it is read to determine whether it is “on topic” – in other words is the written answer about the accounting for by-products? If it is not, if you have written about deferred taxes or contract law, you get a zero regardless of how well written the answer is. The answer has to address the question.

If your answer is “on topic,” then the question goes through a second grading where points are given for your use of the English language as described above. Notice, that the second grading is about the use of the language and not about whether the answer is right or wrong. The rest of the BEC exam tests your knowledge of content. That is not the purpose of the written communication questions. So, you do have to be “on content,” you do have to write about the subject in question. After that, though, the points are given based on proper use of English and not on how well you did getting the answer perfectly correct.

(6) – Remember a free study guide is available to show you how to combine our free questions and answers with our content subscription service ($15 per month per part) if you’ll identify the part that you are going to study next in an email to Jhoyle@cpareviewforfree.com. It is not fair to ask you to spend money without showing you how the program works.

(7) – Review – let’s add some points. Let’s do some practice.

FAR – Just to show you how a program like Points to Pass works, I went to our free question and answer data base and selected a question and answer. Then, I made some changes so that you can try the topic again.

You can find the following question in our database of questions:
(a) - The James Company starts Year One with accounts receivable of $370,000 and an allowance for doubtful accounts of $22,200 (a credit balance). During the year, credit sales of $1.9 million were made and cash of $1.2 million was collected. Accounts with a total balance of $50,000 were written off during the period as uncollectible. Company officials believe that 6 percent of ending accounts receivables will eventually prove to be uncollectible. What should James Company report as its bad debt expense for this year?

A - $61,200
B - $68,400
C - $89,000
D - $92,000

The answer is C.

In applying the percentage of receivables approach to bad debts, the allowance for doubtful accounts is the balance being estimated. The ending receivable balance is $370,000 plus $1.9 million less $1.2 million less $50,000 or $1,020,000. Because 6 percent is the estimated amount of uncollectible accounts, the company needs to report an allowance for doubtful accounts of $61,200 ($1,020,000 x 6 percent). Bad debt expense is the amount of adjustment that is needed so that the year-end allowance reports this $61,200. Prior to the adjustment, the allowance has a debit balance of $27,800 (the original $22,200 credit reduced by $50,000 in accounts written off). The company must turn the $27,800 debit balance into the proper $61,200 credit balance. To do so, an expense of $89,000 is recognized.
**

Let’s assume you missed the above question, you read the answer carefully and now you want to try again. You tell Points to Pass to show you a second question on this topic and here is what you get.

(b) The Robertson Company starts Year One with accounts receivable of $510,000 and an allowance for doubtful accounts of $41,000 (a credit balance). During the year, credit sales of $2.3 million were made and cash of $1.9 million was collected. Accounts with a total balance of $60,000 were written off during the period as uncollectible. Company officials believe that 5 percent of ending accounts receivables will eventually prove to be uncollectible. What should Robertson Company report as its bad debt expense for this year?

A - $42,500
B - $61,500
C - $64,500
D - $69,500

The answer is B.

In applying the percentage of receivables approach to bad debts, the allowance for doubtful accounts is the balance being estimated. The ending receivable balance is $510,000 plus $2.3 million less $1.9 million less $60,000 or $850,000. Because 5 percent is the estimated amount of uncollectible accounts, the company needs to report an allowance for doubtful accounts of $42,500 ($850,000 x 5 percent). Bad debt expense is the amount of adjustment that is needed so that the year-end allowance reports this $42,500. Prior to the adjustment, the allowance has a debit balance of $19,000 (the original $41,000 credit reduced by $60,000 in accounts written off). The company must turn the $19,000 debit balance into the proper $42,500 credit balance. To do so, an expense of $61,500 is recognized.

AND, you can keep requesting questions under Points to Pass until you know exactly how to work this question. Every time I see this I just know how much it will help YOU to pass the FAR portion of the CPA Exam.

Auditing and Attestation

The treasurer of a company has stolen $10,000 in cash from the company. At the end of the year, he is afraid that he will be caught so he transfers $10,000 from one company bank account to another. He records the deposit on December 31 of the first year so that $10,000 cash is added. He does not record the withdrawal from the other account until January 1 of the second year. As a result, for one day, the company looks like it has $10,000 more than it really does. What is this deception called?

A. Kiting
B. Lapping
C. Simultaneous Origination
D. Zero Line Fraud

Answer is A

When money is moved from one account to another but the deposit and the withdrawal are recorded in different time periods to inflate the amount of cash being reported, the term “kiting” is used to identify that fraud.

BEC

A company spends $100,000 to produce 20,000 pounds of product A. However, in that process, 3,000 pounds of product Z are produced. It is viewed as a by-product because it can only be sold for $5 per pound after spending $3 per pound to process it enough to be sold. The company chooses to record this by-product at its net realizable value. What is the cost of a pound of product A?

A. $4.25 per pound
B. $4.50 per pound
C. $4.70 per pound
D. $5.00 per pound

Answer is C

The net realizable value of the by-product is the $5.00 sales price less the $3.00 to be spent on processing or $2.00 per pound. For 3,000 pounds, that is a net realizable value of $6,000. The by-product is recorded at its net realizable value so $6,000 is moved from the $100,000 cost into a by-product inventory account. That leaves $94,000 assigned just to product A. There are 20,000 pounds of product A so the cost is $4.70 per pound.

Regulation

Mr. and Mrs. Stremble were married at the age of 30 and lived together until the current year when Mrs. Stremble died at the age of 70. Mr. Stremble received $100,000 in cash from a life insurance policy. They had paid, as a couple, a total of $40,000 in premiums over the years on this policy. What amount of income must he include in his current tax return as a result of receiving the $100,000 payment?

A. Zero
B. $60,000
C. $80,000
D. $100,000

Answer is A.

Life insurance premiums paid by the couple were never deductible but the proceeds, when received at the time of death, are not taxable. Money from a life insurance policy is not viewed as “income” and, therefore, is not taxed as taxable income.

Have a great week. It has been a beautiful day here in Richmond. Enjoy each day but make sure to make time to do your studies and add some points. Don’t be afraid – go forward boldly.

Joe Hoyle
President
CPA review for FREE

www.CPAreviewforFREE.com

Words for Success--Do the Work and Pass the CPA Exam

noreply@blogger.com (Go Figure) — Tue, 31 May 2011 15:21:00 +0000

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

May 31, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,200 FREE CPA Review Questions and Answers Available for YOU

152 Weeks of Operation and 24,487,209 Page Views (without a penny being spent on marketing)

Lesson 96

From: Joe

(1) – We have distributed an amazing number of FREE study guides to the folks who have identified their next exam in an email to Jhoyle@cpareviewforfree.com. These study guides explain how to combine our 2,200 free questions and answers with our subscription service to create a comprehensive CPA Exam review program for $15 per month per part (50 cents per day – try to beat that on eBay).

However, the question we always get is: “Can you explain how your subscription service actually works?” Seems like a reasonable question. So, at the end of this email, I’ll give you a demonstration of one very small part of our subscription service. I hope that proves helpful in understanding how our program will get you through this exam for a whole lot less than $2,500.

(2) – We’ve added something new to the home page of our website (www.CPAreviewforFREE.com). Under our CPA Exam Resources section, we already have three important articles:

--Using CPA Review for FREE to Prepare for the CPA Exam.
--Applying for the CPA Exam
--Structure of the CPA Exam

We believe all of these would be helpful to every candidate.

We have now added a fourth article: “Tips for Success.” Over the years, we have distributed scores of tips for success on our Facebook page. Over the last few days, I have gathered my top 60 or so of these tips. Because we have so many, I posted the first ten this week and I’ll post another batch every week or two until they are all posted.

Go to www.CPAreviewforFREE.com. Go to “CPA Exam Resources” on the home page. Click on “Tips for Success.” I probably wouldn’t sit down and read this material all at once like you might a novel. Most people don’t need 60 tips for success at one time. Instead, every day or two, if you feel the need for some encouragement or a boost of energy, go to the website and read a couple.

We hope they help. As always, we are trying our best to do everything we can possibly do to assist you in getting the 75 points you need to pass the CPA Exam. Hope our Tips for Success makes the journey a bit easier.

(3) – I attended a lovely wedding here in Richmond this past Sunday. It was held in a beautiful church that was constructed in 1848. Because of the US Civil War, there are few buildings standing in Richmond that are so old.

During the ceremony, the pastor talked directly to the young couple. He told them there are certain words that they should say to each other so often, during their lives together, that they wear those words out. “Wear these words out” was kind of the theme of his remarks. To the bride and groom, he suggested the words: “I am sorry” and “I’m so very grateful.” Probably good advice for any newlyweds (or anyone else, for that matter).

I liked that idea of “wearing words out.” So, I started thinking: If I were talking to my CPA Exam candidates, what words would I suggest that they “wear out” over the course of their study.

Here’s my suggestion for words that you might want to wear out over the next few weeks or months as you prepare to pass the CPA Exam.

"I'm tired but I can still study a bit longer.” Too many people obsess over being tired and let it control what they can accomplish. At the first hint of tired, they give up and quit. Successful people get to the point where they are tired and then they keep going. That is one true mark of people who succeed in this life.

“I missed this problem but now I see how it works.” Passing the CPA Exam is all about making progress. If you get a question correct, you really learn nothing. If you miss a question and move on, you really learn nothing. But the most important moment is when you miss a question, read the answer carefully, and figure out how to work it right the next time. Now, that’s success.

“I’m not trying to be perfect; I just want to answer enough questions to pass.” It is very easy to get stuck trying to learn it all. I’ve known way too many people who gave up before they ever took the exam because they couldn’t achieve perfection. Don’t worry about trying to answer every question correctly. Once again, as above, the only important goal is making progress.

“The CPA Exam is a mile wide and an inch deep.” The CPA Exam that you take will try to cover a little bit about everything in the world of accounting, auditing, tax, and the like. As you study, it is much more important to cover all the topics a little bit than to cover any topic in too much depth and detail.

“When I get to the exam, I’m going to watch my time closely.” I’m convinced that, once you have put in your 60-100 hours of preparation for each part, the biggest problem is time management during the exam. If you rush too fast, you’ll make careless mistakes. If you work too slowly, you won’t finish. It is very important, as I said in my previous lesson (Lesson 95 that can be found in the Blog Archives in the right hand navigation), that you get used to working at an appropriate “exam speed.”

Okay, I could probably come up with 25 other sets of words to wear out as you prepare for the CPA Exam but these five form a pretty good foundation. I’m not sure that I wouldn’t write them down and tape them to your wall and read through them each and every day.

Wear those words out.

(4) – Personal note to all 20,000 of our subscribers (yeah, this means YOU). We love having you. We really hope we provide a benefit. I never go anywhere (like a wedding) that I don’t think about things to tell you that might help you pass the CPA Exam.

However, if you ever decide that you are ready to unsubscribe, it is easy to do. Scroll to the bottom of any one of these email lessons. You’ll find a link to unsubscribe. Click on that and follow the directions. You have every right to manage your emails. If you are ready to unsubscribe, go for it.

(5) – Yesterday, while I was dressing for the wedding, I watched the last 10 laps of the Indianapolis 500. If you follow car racing at all, you already know what happened. A young rookie was leading the race going into the last lap. He had a good sized lead and was going to win fairly easily. The announcers were already talking about him being the champion. There was really nothing in his way of winning. As he took the very last turn (he could see the finish line), his car slid into the wall. He wasn’t hurt but he lost the race. He let it get away. He had driven by that wall 199 previous times that day with no problem but on that last time, for no apparent reason, he crashed.

Whenever I talk with people about the CPA Exam, I always tell them to take nothing for granted. If you know the topic, make sure you continue to do the work. If you feel good about an area, make sure you continue to do the work. If you have been studying all day and you are going to work a few more problems, make sure you continue to do the work. If you are actually taking the CPA exam and you have been working for nearly 3 or 4 hours, make sure you continue to do the work.

It is easy to lose your focus. It is easy to start day dreaming or just start thinking of something else. It is easy to get distracted. Things are always happening that catch your attention. When you are studying, your mind should be on one thing and one thing only: How do I get this particular question in front of me answered correctly? When you are taking the exam itself, your mind should be on one thing and one thing only: How do I get this one particular question in front of me answered correctly?

My assumption is that most people actually study enough hours to pass the exam. However, during those hours, it is easy to get distracted and wind up accomplishing nothing. You don’t just need 60-100 hours per part; you need 60-100 hours of concentrated study per part. Make sure you continue to do the work.

My assumption is that most people who take the CPA Exam actually have enough knowledge in their heads to pass. However, during the exam itself, it is easy to get distracted and wind up making mistakes. Don’t worry about the lights, the seat, the computer screen, the noise, the heat, the cold, the other people. When you are taking the CPA Exam only one thing matters: How do I get this particular question in front of me answered correctly?

Studying for the CPA Exam is not a game. It is not for play. It deserves your undivided attention. You don’t want to lose the race just because you failed to do something that you had done before and should have been able to do again.

(6) – I want to close today by giving you a full-scale illustration of our Subscription Service. As we’ve said, it costs $15 per month per part. Let’s look at FAR. If you subscribe to the FAR material, what do you get for your $15?

--You get 10 examples of our illustrations of what we believe task-based simulations look like.
--You get a study guide to show how to combine our free questions and our subscription service to create a comprehensive program (this is the study guide you can get for free by sending a note to Jhoyle@cpareviewforfree.com).
--For FAR, you get content information divided into 23 different topic areas – everything from consolidations to earnings per share and inventory to government accounting. Those topic areas contain hundreds of slides presenting the information we believe you need to know to pass that part of the CPA Exam.

What does this content information look like? I decided to select accounts receivable as my illustration because it is one of the shortest topics and won’t use up so much space in your email box.

So, quite literally, here is our content material for Accounts Receivable within the FAR part of the CPA Exam as covered by our subscription service

SLIDE ONE

Accounts Receivables

Accounts receivable is normally reported as a current asset because collection is expected within one year. It reflects amounts owed to a company by its customers.

Accounts receivable should be disclosed in the balance sheet at net realizable value (the cash expected – the total amount owed to the company less the estimated amount of uncollectibles). Receivables from company officers, employees, and affiliate companies should be separately disclosed.

SLIDE TWO

Cash discounts (such as 2/10, n/30) give a discount if the customer pays within a certain period of time. In this example, a 2 percent discount can be taken if payment is made in 10 days but any remaining amount must be paid in total in 30 days.

When a discount is offered, account receivable can be recorded by either the net method or the gross method.

SLIDE THREE

Net method. The seller (and the buyer if that company so chooses) reports the transaction at the net amount (after the discount) which assumes the discount will be taken. A $100 sale is recorded at only $98 if a 2 percent discount is available. If paid in time, cash is debited for $98 and the $98 account receivable is removed. However, the $2 discount might not be taken so that the entire $100 is collected. In that case, the extra $2 collection is recorded as interest.

SLIDE FOUR

Gross method. The seller (and, possibly, buyer) reports these transactions at the gross amount which assumes the discount will not be taken. A $100 sale is recorded at $100. The only problem is that the $2 discount might still be taken so that only $98 is collected. The $2 reduction is recorded as a sales discount by the seller. “Sales discounts” reduce Sales on the income statement.

SLIDE FIVE

Bad Debts. Bad Debt Expense is reported on the income statement and the Allowance for Bad Debts is reported on the balance sheet as a reduction to Accounts Receivable.

The allowance method of recording bad debts is used in US GAAP because it matches the expense with the timing of the revenue. An alternative, the direct method, does not recognize any expense until an account proves uncollectible. This method is not allowed under US GAAP.

SLIDE SIX

The allowance method estimates the amount of uncollectible accounts based on past experience and present industry, company, and economic conditions. Bad debt expense is recognized in the same period as the sale. Because the actual bad accounts have not yet been identified, a contra valuation account (an Allowance for Bad Debts – which might also be called something like an Allowance for Doubtful Accounts) is established for the amount of the receivables estimated to be uncollectible.

SLIDE SEVEN

The adjusting entry to record Bad Debt Expense for the period and establish the proper balance in the Allowance for Bad Debts is made at the end of each period.

Bad Debt Expense estimated amount
Allowance for Bad Debts estimated amount

SLIDE EIGHT

When an account actually proves to be uncollectible (the customer dies, moves away, files for bankruptcy or just refuses to pay), the account is written off. However, the expense has already been recognized in the previous estimation entry and should not be recorded again.

Allowance for Bad Debts uncollectible amount
Accounts Receivable uncollectible amount

If this account is ever collected in the future, the above entry is reversed to reinstate the balance before collection is recorded.

SLIDE NINE

One key element of this reporting is left to be shown. How does the company estimate the amount of its bad debts in the first entry shown previously? There are two methods to determine the annual charge to bad debt.

(1) Percentage of sales method
(2) Percentage of receivable method (or a variation – the aging method)

SLIDE TEN

Regardless of the method being used, at the end of each period, the reporting company will have a bad debt expense account with a balance that is zero because no estimation has yet been recorded for the period.

It will also have an Allowance for Bad Debts but that account will have a remaining balance that can either be a debit or a credit. The Allowance balance is its beginning balance for the period less the amount of accounts written off during the period (but plus any accounts that were written back on the books because of latter collection).

SLIDE ELEVEN

PERCENTAGE OF SALES METHOD

Multiply the appropriate percentage times the sales balance for the period. This is the balance that should be reported for Bad Debt Expense.

Because the Bad Debt Expense account has a zero balance, the amount determined by the computation is added directly to Bad Debt Expense (and also to the Allowance for Bad Debts). If the estimation is for $36,000, then the adjusting entry is for $36,000. Bad Debt Expense will equal the estimation. The Allowance for Bad Debts will be its previous balance as adjusted by this final entry.

SLIDE TWELVE

PERCENTAGE OF RECEIVABLES METHOD

Multiply the appropriate percentage times the accounts receivable balance at the end of the period. This is the balance that should be reported as a credit for the Allowance for Bad Debts.

That contra account already has a balance that may be either a debit or a credit. The adjusting entry records the amount needed to bring this previous account balance to the new estimation. If a $3,000 credit was in the allowance account and the estimation is now $40,000, then the adjusting entry is for $37,000. If a $1,000 debit was in the allowance account and the estimation is now $40,000, then the adjusting entry is for $41,000.

SLIDE THIRTEEN

Pledging of receivables. Pledging is an agreement whereby a company’s accounts receivable are used as collat¬eral for loans. Customers whose accounts have been pledged are not aware of this situation so their payments are still remitted to the original company. The pledged accounts merely serve as security to a lender. The only accounting issue relating to pledging is that of adequate disclosure. The accounts receivable, which remain assets of the borrowing entity, continue to be shown as current assets on its balance sheet but must be identified as having been pledged.

SLIDE FOURTEEN

Factoring of receivables. Factoring is the sale of receivables to a buyer known as a factor. The transfer of receivables “without recourse” means that the factor (the buyer) assumes the risk of loss from any noncollection. Thus, once this type of factoring arrangement is com¬pleted, the seller has no further involvement with the accounts. The receivables are removed from the books of the seller and the difference between the cash received and the car¬rying value of those receivables is recognized as a gain or loss.

SLIDE FIFTEEN

Another possibility is factoring “with recourse” where a monetary amount must be returned to the buyer if a specified amount is not collected from the receivables. In recording the transfer of the receivables, the seller must take into account any anticipated repayment amount. For example, if cash of $100,000 is guaranteed but the seller only anticipates that the buyer will collect $98,000, a $2,000 liability is recorded by the seller at the time of sale. The accounts receivable are removed from the seller’s books and this liability is recognized; the cash received is also recorded and the difference is a gain or loss.

SLIDE SIXTEEN

Several Important Ratios Involving Current Assets

Solvency ratios or amounts—Any ratio or computation that measures an entity's short-term viability by its ability to pay its debts as they come due.

---Acid-test (quick) ratio—It is the sum of the quick assets (cash, receivables, and short-term investments) divided by the total of the current liabilities.
---Current ratio—It is computed by taking the total of all current assets (the quick assets plus inventory, prepayments, and supplies) and dividing it by the total of current liabilities
---Working capital—It is computed by taking the total of the current assets and subtracting the current liabilities

SLIDE SEVENTEEN

Operational efficiency ratios or amounts—A ratio or computation that measures an entity's ability to make good use of its assets

---Receivable turnover—It measures how rapidly cash is collected from credit sales. It is computed by taking the net credit sales for a period divided by the average of the net receivables for the same period.
---Number of days’ sales in receivables—The average length of time receivables are out¬standing, which reflects the efficiency of credit and collection policies. It is the receivable balance divided by average credit sales per day.

SLIDE EIGHTEEN

Now that you have gone through all of these slides for accounts receivable, go back to our free questions and answers and work all of the questions provided under “Accounts Receivable.” This should help you get to the point where you can pass Accounts Receivable. Once you can pass the topics, you can pass FAR.

Take good notes, especially for any questions that you miss. A good note is one that takes 10 words or less and explains anything that you might have missed that would prevent you from getting the question correct.

Have a great week!!!

Joe Hoyle
Co-Founder and President
CPA Review for FREE

www.CPAreviewforFREE.com

How many review courses have you used?

noreply@blogger.com (Go Figure) — Fri, 20 May 2011 19:47:00 +0000

So many of the big review courses claim passing candidates as their own and while that may be true, we hear from many that they've used materials from other courses. So how many prep courses have you used?

Auditing Subscription Service Now Available

noreply@blogger.com (Go Figure) — Fri, 13 May 2011 19:53:00 +0000

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

May 12, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,200 FREE CPA Review Questions and Answers Available for YOU

149 Weeks of Operation and 23,661,776 Page Views (without a penny spent on marketing)

Lesson 94

From: Joe

(1) - Our Auditing and Attestation subscription service is now up and running!!! For a mere $15 per month (50 cents per day), you can get
---377 slides of information covering everything you need to know about Auditing and Attestation
---10 task-based simulations covering audit reports, reviews, compilations, internal control, and much more
---a complete 24 step study guide to prepare you to take and pass the Auditing and Attestation section of the CPA Exam.

All for that just 50 cents per day.

We now have a complete CPA Exam review service available for you!!

**Free Questions and Answers**
--Auditing and Attestation
--Financial Accounting & Reporting
--BEC
--Regulation

**Subscription Service (each part for $15/month)**
--Auditing and Attestation
--Financial Accounting & Reporting
--BEC
--Regulation

Trust me - you don’t have to spend $2,500. That is highway robbery. For $15 per month, we can give you thousands of free questions and the content you need to pass AND a study guide to tell you what to do.

Try us first, before you spent thousands. Why not try us for a month and see if you can save thousands?

Okay, I know you want to know more about how the subscription service works. So, send me an email at Jhoyle@cpareviewforfree.com and tell me what part of the exam you plan to take next. I’ll send you the study guide for that part. As we like to say down here in the South, it is not good idea to buy a pig in a poke. We believe in our program and want you to see how our program works. Just send me an email (jhoyle@cpareviewforfree.com and let me know what part you plan to take next and I’ll send you our study guide by return email. You can see how our program is designed.

I’ve been in this business for over 30 years. I designed this program so that you can pass AND pay as close to zero as possible.

--If you are truly wealthy and are dying to spend thousands of dollars, then nothing I can say is going to change your mind. Nothing—that money is burning a hole in your pocket.

--However, if it were me, I’d invest $15 first and try this program for one month. That’s just common sense. At the end of a month, you can give us another $15 or you can give the other guys $2,500 but at least you’ll know what works for you. Come on – accountants should be smart enough to see that trying one month for $15 is a good idea.

**To purchase any of our subscription services:
You must be registered to purchase any of our content. Then, just login to your account at www.CPAreviewforFREE.com and click on “Paid Content” to choose the section and select the package you wish to purchase which is only $15/one month or $30 for three months

(2) – In case you missed it above, send me a note at Jhoyle@cpareviewforfree.com and tell me the part that you are going to take next and I’ll send you our study guide for that part ABSOLUTELY FREE. (Our favorite term around here - “absolutely free.”)

(3) – Recently, I have been posting daily messages on our Facebook page. I just like giving everyone a daily boost of “you can do it – put in the time and energy and make it happen.”)

However, I wrote an entry the other day that I have thought a lot about over the last few days. Here’s what I had to say:

“If you don’t dream enough, work becomes work – pure drudgery. However, if you dream about what you want to accomplish, work becomes a real joy. So, dream about passing the CPA Exam. If you don’t enjoy studying, maybe you are not dreaming enough. From Oliver Wright: ‘I got more thrill out of flying before I had ever been in the air at all – while lying in bed thinking how exciting it would be to fly.’”

I’ve had a terribly busy spring schedule and, in all honesty, work has really started to feel like drudgery to me. I can do it but there’s no real spark there. There’s not been enough excitement. I have just gone through the motions to get it done. I find that a whine and moan a lot. Not enough joy.

So, after I wrote that entry above, I decided that I probably was speaking to me more than to anyone else.

Since then, I have really worked on dreaming about what I want to see happen.
--I dream about having really efficient days where I just seem to work without stopping and everything goes well. I dream about having the energy to get up and get things done.
--I dream about finishing projects and saying to myself “I did it. I made it happen.”
--I dream about doing a good job and that wonderful, wonderful feeling of accomplishment.
--I dream about looking up one day and smiling and saying “it worked out just like I hoped it would.”

I have a request. Stop reading and ask yourself a couple of questions.
--Over the last few weeks would you say that your study for the CPA Exam has been drudgery or a joy?
--Over the last few weeks do you find yourself whining more than you’d like to admit?
--Over the last few weeks have you tried to avoid studying at all costs?
--Over the last few weeks when you have studied have you wanted to quit almost as soon as you started?

If the answer to these questions all tend to be in the “I’m sick to death of studying” mode, then maybe it is time for you to start dreaming. Every morning when you get up, take an extra minute or two and dream:
--Dream that you study and you are perfectly focused and just seem to learn every piece of information that you cover. It is all just very clear.
--Dream that you go to take the CPA Exam and you feel the exaltation as you realize that you know most of the questions. You catch the tricks and understand what they want.
--Most of all, dream about getting your scores and seeing four grades of 75 or above. Dream about how good that is going to feel. Dream about telling your mother, father, husband, wife, son, daughter, boss, coworkers, etc. Dream about that wonderful sense of accomplishment. Dream about yelling out “I DID IT!!!!”

I think you’ll find that having dreams of what you want to do will reenergize your spirits. We are all human. We all get sick of this stuff. It is easy to forget why you got started in the first place. Take five minutes a day – take five minutes every day – and dream about success, victory, and accomplishment. Dream great dreams!!!!

Speaking strictly for me, it really has helped. I feel better about my work and feel better about the whole process of working.

Motivation seeps away pretty quickly if you don’t stop to refill the tanks. Dreaming will help.

(4) – We are delighted to have everyone of you on this email service (and on our Facebook page). Please stay as long as you wish. I’ve been writing these lessons now for about 15 years; I’m pretty sure I can write them for another 15. However, if you ever decide you are ready to unsubscribe, just go to the bottom of this email (or any other email from us) and click on the “unsubscribe” button. Our goal is to help and motivate. Our goal is not to fill up your email box.

(5) – Okay, practice time. Let’s see if we can add some points – ABSOLUTELY FREE!!!

FAR

Living plants and animals are referred to as biological assets for accounting purposes. Assume a company has a large fruit orchard. Under IFRS, how should this asset be reported on a company’s balance sheet?

A. Fair value
B. Fair value less estimated cost to sell
C. Historical cost
D. Historical cost less accumulated depreciaton

Answer is B

Under US GAAP, the orchard would be reported at historical cost less accumulated depreciation like most other long-lived assets. But, under IFRS, biological assets are reported at fair value less the estimated cost that it would take to sell them.

Auditing & Attestation

An auditor must make an assessment of control risk as part of the process to determine how much substantive testing must be done to reduce overall audit risk to an acceptably low level. Which of the following is not one of the five components that make up internal control?

A. Checks and balances
B. Monitoring
C. Control environment
D. Risk assessment.

Answer is A

The five components of internal control are (1) control environment—the organization’s commitment to having a strong internal control, (2) risk assessment—the organization’s ability to anticipate problems and work to prevent them in advance, (3) control activities-the policies and procedures in place to help ensure that the organization’s systems are working as intended by management, (4) information and communication-the organization’s ability to gather significant data and get it to the people who need it in a timely fashion, and (5) monitoring—the assessment of internal control by the organization over time to ensure that internal control properly adapts as changes are needed.

BEC

What is meant by the term “economic profit?”

A. It is just a different way of saying net income.
B. It is the amount of profit being earned in excess of a normal profit.
C. It is equivalent to gross margin.
D. It is the same as return on assets.

Answer is B.

Economic profit is any profit earned in excess of a normal amount of profit. In economics, it is important because it is assumed that additional competition will be drawn to areas where an economic profit can be earned so that, in the long run, it will be eliminated by the added competition. In fact, the term is also referred to as “excess profits” which is more self-explanatory.

Regulation
A company owes a bank $10,000. The company cannot pay. Jones is a surety on the debt for $6,000. Smith is also a co-surety on the same debt for $6,000. The bank releases Jones without reservation of rights against Smith. For what amount is Smith now obligated to the bank in connection with this debt?

A. Zero
B. $3,000
C. $5,000
D. $6,000

Answer is B

Initially, each co-surety is liable in for the amount that each has personally guaranteed. However, when the bank released one co-surety without reservation of rights against the other, the remaining co-surety is also released, but only to the extent that his right of contribution is affected. In other words, Smith has lost the right to step into the bank's shoes against Jones for contribution of $3,000, so is released to that extent.

Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com

Auditing & Attestation subscription service is now up and running!!!

noreply@blogger.com (Go Figure) — Thu, 12 May 2011 15:23:00 +0000

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

May 12, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,200 FREE CPA Review Questions and Answers Available for YOU

149 Weeks of Operation and 23,661,776 Page Views (without a penny spent on marketing)

Lesson 94

From: Joe

(1) - Our Auditing and Attestation subscription service is now up and running!!! For a mere $15 per month (50 cents per day), you can get
---377 slides of information covering everything you need to know about Auditing and Attestation
---10 task-based simulations covering audit reports, reviews, compilations, internal control, and much more
---a complete 24 step study guide to prepare you to take and pass the Auditing and Attestation section of the CPA Exam.

All for that just 50 cents per day.

We now have a complete CPA Exam review service available for you!!

**Free Questions and Answers**
--Auditing and Attestation
--Financial Accounting & Reporting
--BEC
--Regulation

**Subscription Service (each part for $15/month)**
--Auditing and Attestation
--Financial Accounting & Reporting
--BEC
--Regulation

Trust me - you don’t have to spend $2,500. That is highway robbery. For $15 per month, we can give you thousands of free questions and the content you need to pass AND a study guide to tell you what to do.

Try us first, before you spent thousands. Why not try us for a month and see if you can save thousands?

Okay, I know you want to know more about how the subscription service works. So, send me an email at Jhoyle@cpareviewforfree.com and tell me what part of the exam you plan to take next. I’ll send you the study guide for that part. As we like to say down here in the South, it is not good idea to buy a pig in a poke. We believe in our program and want you to see how our program works. Just send me an email (jhoyle@cpareviewforfree.com and let me know what part you plan to take next and I’ll send you our study guide by return email. You can see how our program is designed.

I’ve been in this business for over 30 years. I designed this program so that you can pass AND pay as close to zero as possible.

--If you are truly wealthy and are dying to spend thousands of dollars, then nothing I can say is going to change your mind. Nothing—that money is burning a hole in your pocket.

--However, if it were me, I’d invest $15 first and try this program for one month. That’s just common sense. At the end of a month, you can give us another $15 or you can give the other guys $2,500 but at least you’ll know what works for you. Come on – accountants should be smart enough to see that trying one month for $15 is a good idea.

**To purchase any of our subscription services:
You must be registered to purchase any of our content. Then, just login to your account at www.CPAreviewforFREE.com and click on “Paid Content” to choose the section and select the package you wish to purchase which is only $15/one month or $30 for three months

(2) – In case you missed it above, send me a note at Jhoyle@cpareviewforfree.com and tell me the part that you are going to take next and I’ll send you our study guide for that part ABSOLUTELY FREE. (Our favorite term around here - “absolutely free.”)

(3) – Recently, I have been posting daily messages on our Facebook page. I just like giving everyone a daily boost of “you can do it – put in the time and energy and make it happen.”)

However, I wrote an entry the other day that I have thought a lot about over the last few days. Here’s what I had to say:

“If you don’t dream enough, work becomes work – pure drudgery. However, if you dream about what you want to accomplish, work becomes a real joy. So, dream about passing the CPA Exam. If you don’t enjoy studying, maybe you are not dreaming enough. From Oliver Wright: ‘I got more thrill out of flying before I had ever been in the air at all – while lying in bed thinking how exciting it would be to fly.’”

I’ve had a terribly busy spring schedule and, in all honesty, work has really started to feel like drudgery to me. I can do it but there’s no real spark there. There’s not been enough excitement. I have just gone through the motions to get it done. I find that I whine and moan a lot. Not enough joy.

So, after I wrote that entry above, I decided that I probably was speaking to me more than to anyone else.

Since then, I have really worked on dreaming about what I want to see happen.
--I dream about having really efficient days where I just seem to work without stopping and everything goes well. I dream about having the energy to get up and get things done.
--I dream about finishing projects and saying to myself “I did it. I made it happen.”
--I dream about doing a good job and that wonderful, wonderful feeling of accomplishment.
--I dream about looking up one day and smiling and saying “it worked out just like I hoped it would.”

I have a request. Stop reading and ask yourself a couple of questions.
--Over the last few weeks would you say that your study for the CPA Exam has been drudgery or a joy?
--Over the last few weeks do you find yourself whining more than you’d like to admit?
--Over the last few weeks have you tried to avoid studying at all costs?
--Over the last few weeks when you have studied have you wanted to quit almost as soon as you started?

If the answer to these questions all tend to be in the “I’m sick to death of studying” mode, then maybe it is time for you to start dreaming. Every morning when you get up, take an extra minute or two and dream:
--Dream that you study and you are perfectly focused and just seem to learn every piece of information that you cover. It is all just very clear.
--Dream that you go to take the CPA Exam and you feel the exaltation as you realize that you know most of the questions. You catch the tricks and understand what they want.
--Most of all, dream about getting your scores and seeing four grades of 75 or above. Dream about how good that is going to feel. Dream about telling your mother, father, husband, wife, son, daughter, boss, coworkers, etc. Dream about that wonderful sense of accomplishment. Dream about yelling out “I DID IT!!!!”

I think you’ll find that having dreams of what you want to do will re-energize your spirits. We are all human. We all get sick of this stuff. It is easy to forget why you got started in the first place. Take five minutes a day – take five minutes every day – and dream about success, victory, and accomplishment. Dream great dreams!!!!

Speaking strictly for me, it really has helped. I feel better about my work and feel better about the whole process of working.

Motivation seeps away pretty quickly if you don’t stop to refill the tanks. Dreaming will help.

(4) – We are delighted to have everyone of you on this email service (and on our Facebook page). Please stay as long as you wish. I’ve been writing these lessons now for about 15 years; I’m pretty sure I can write them for another 15. However, if you ever decide you are ready to unsubscribe, just go to the bottom of this email (or any other email from us) and click on the “unsubscribe” button. Our goal is to help and motivate. Our goal is not to fill up your email box.

(5) – Okay, practice time. Let’s see if we can add some points – ABSOLUTELY FREE!!!

FAR

Living plants and animals are referred to as biological assets for accounting purposes. Assume a company has a large fruit orchard. Under IFRS, how should this asset be reported on a company’s balance sheet?

A. Fair value
B. Fair value less estimated cost to sell
C. Historical cost
D. Historical cost less accumulated depreciation

Answer is B

Under US GAAP, the orchard would be reported at historical cost less accumulated depreciation like most other long-lived assets. But, under IFRS, biological assets are reported at fair value less the estimated cost that it would take to sell them.

Auditing & Attestation

An auditor must make an assessment of control risk as part of the process to determine how much substantive testing must be done to reduce overall audit risk to an acceptably low level. Which of the following is not one of the five components that make up internal control?

A. Checks and balances
B. Monitoring
C. Control environment
D. Risk assessment.

Answer is A

The five components of internal control are (1) control environment—the organization’s commitment to having a strong internal control, (2) risk assessment—the organization’s ability to anticipate problems and work to prevent them in advance, (3) control activities-the policies and procedures in place to help ensure that the organization’s systems are working as intended by management, (4) information and communication-the organization’s ability to gather significant data and get it to the people who need it in a timely fashion, and (5) monitoring—the assessment of internal control by the organization over time to ensure that internal control properly adapts as changes are needed.

BEC

What is meant by the term “economic profit?”

A. It is just a different way of saying net income.
B. It is the amount of profit being earned in excess of a normal profit.
C. It is equivalent to gross margin.
D. It is the same as return on assets.

Answer is B.

Economic profit is any profit earned in excess of a normal amount of profit. In economics, it is important because it is assumed that additional competition will be drawn to areas where an economic profit can be earned so that, in the long run, it will be eliminated by the added competition. In fact, the term is also referred to as “excess profits” which is more self-explanatory.

Regulation
A company owes a bank $10,000. The company cannot pay. Jones is a surety on the debt for $6,000. Smith is also a co-surety on the same debt for $6,000. The bank releases Jones without reservation of rights against Smith. For what amount is Smith now obligated to the bank in connection with this debt?

A. Zero
B. $3,000
C. $5,000
D. $6,000

Answer is B

Initially, each co-surety is liable in for the amount that each has personally guaranteed. However, when the bank released one co-surety without reservation of rights against the other, the remaining co-surety is also released, but only to the extent that his right of contribution is affected. In other words, Smith has lost the right to step into the bank's shoes against Jones for contribution of $3,000, so is released to that extent.

Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com

Break the Chains that are Keeping YOU from Success

noreply@blogger.com (Go Figure) — Wed, 04 May 2011 13:50:00 +0000

May 4, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,200 FREE CPA Review Questions and Answers Available for YOU

148 Weeks of Operation and 23,443,043 Page Views (without a penny spent on marketing)

Lesson 93

From: Joe

(1) – Would you like to help www.CPAreviewforFREE.com? We always tell people that we are only able to continue our operations because of the kindness of so many people. How can YOU help so that we can keep our 2,200 questions and answers available for FREE?

The answer is easy: Simply forward this email to a friend, acquaintance, stranger or someone else who might be interested in taking the CPA Exam. That’s the best way you can help us. Forward this email and just say – these email lessons are free and they’ll help you learn more about passing the CPA Exam. After that, it is up to the other person to go on to our website and register and check the box that they want to get CPA Exam information (these email lessons).

Especially in May and June, it is helpful if we can get the word out to college students who are graduating and, thus, starting to do some serious thinking about the CPA Exam. At this time of the year, those are some of our prime targets. They often spent $2,500-$3,000 (that they probably don’t have) before they even know that we exist. The big courses want you to think that you have no alternative. Don’t let that happen.

(2) – By the way, those of you who are teachers might be interested in reading my teaching blog that I created in connection with my Financial Accounting textbook.

http://m1e.net/c?128895165-44nNhN/l.klSs%406419717-DhrtMNOAYMhwE

If you know a teacher, forward the URL.

(3) – I know we have a lot of international candidates who read these email lessons. You may have seen the following announcement from the AICPA on our Facebook page:

International applications for the Uniform CPA Examination are now being accepted by participating state boards of accountancy. Candidates who wish to sit for the Exam in Japan, Bahrain, Kuwait, Lebanon, or the United Arab Emirates should visit NASBA’s website for the updated list of state boards, a breakdown of fees, and the updated Candidate Bulletin:

http://m1e.net/c?128895165-2EWBD3juWEuF6%406419718-02j786rs0vu36

If you’re unsure of your eligibility or would like more information, the AICPA Exam website’s International Examination FAQs provide a good starting point:
http://m1e.net/c?128895165-voKD1BqEZuT02%406419719-o6iKRAXYjZZAk

(4) – We have a lot of people preparing to take one or more sections of the CPA Exam before the end of the April-May testing window. As in many endeavors in life, it is important to finish up your study strong. You want to go into the testing site with a lot of momentum. You want to make the last days and weeks of study your very best.

We wake up each morning bearing a lot of chains that hold us back from reaching our goals. These are self-inflicted weaknesses that we cling to which keep us from shining and keep us from achieving our potential.

---We believe that we are not smart enough to pass the CPA Exam. That is just a chain that we cling to that holds us back.
---We believe that we are not able to find the time needed for study—another chain that we use to keep ourselves from advancing. It is easy to blame family, friends, and job.
---We judge ourselves to be lazy or weak. You are only as lazy and weak as you think you are. It is the thinking that makes it so.

“I’m just not strong enough to pass the CPA Exam” is easy to say and easy to believe but all it does is hold us back.

We hide under these chains so that we don’t have to face the responsibilities of being successful. A lot of us just don’t want to deal with being successful. It’s easier to wallow around and make excuses and stay lazy.

The world needs for you to stop being timid and push yourself to success.

When you wake up tomorrow morning, wake up a different person. Don’t wake up as a scared person who feels that they are incapable of winning. That is pure baloney. Wake up a different person tomorrow – a person who has put fears and self-doubts and excuses behind. Wake up a different person tomorrow – if you can simply get rid of (a) your fears, (b) your self-doubt, and (c) your excuses, if you can break through your own chains, then that person tomorrow will have a better chance of passing the CPA Exam.

My younger daughter has cerebral palsy. Despite the problems that CP creates, she is the hardest working person that I know. Last month, she received her Gold Award – the highest award that any Girl Scout can achieve. At the ceremony, the leaders read a poem by Marianne Williamson that I think applies to us all. It talks about having the courage to break through your chains to use your talents well and wisely. It was perfect for the Girl Scouts but it was also perfect for people taking the CPA Exam. My two favorite lines are “your playing small does not serve the world” and “we are all meant to shine.” I think that is true about everyone and everything we do.

“Our deepest fear is not that we are inadequate.
Our deepest fear is that we are powerful beyond measure.
It is our light, not our darkness that most frightens us.
We ask ourselves,
Who am I to be brilliant, gorgeous, talented, fabulous?
Actually, who are you not to be?
You are a child of God.
Your playing small does not serve the world.
There is nothing enlightened about shrinking
so that other people won't feel insecure around you.
We are all meant to shine, as children do.
We were born to make manifest the glory of God that is within us.
It's not just in some of us; it's in everyone.
And as we let our own light shine,
we unconsciously give other people permission to do the same.
As we are liberated from our own fear,
our presence automatically liberates others.”

Okay, tomorrow morning, when you get out of bed, it is going to be a new day. Start by leaving your old chains behind. Walk away from those things that you are using to hold yourself back. Forget the excuses. Throw out the self-doubt. You have the ability to pass the CPA Exam if you will just finish strong, if you’ll just put in the hours you need here at the end.

Shine – do the work – make the progress. Answer as many questions as you can. Learn from your mistakes.

This is accounting. It is not easy but it is not rocket science either. You don’t have to be perfect. You merely have to pass. People just like you pass every day. It takes time and patience and perseverance but it doesn’t take any quality that you don’t already have.

Go get it – wake up tomorrow a new person – a person who is going to get the points needed to pass the CPA Exam. Leave your chains of fear and doubt behind.

(5) – As always, we are legally bound to tell you that you can unsubscribe from these emails. If we weren’t legally bound, we wouldn’t tell you because we hope you’ll stay. There is no variable cost (using a good old accounting term) of one more subscriber. So please stay as long as you can.

But, if you ever do want to unsubscribe, scroll to the bottom of any email lesson and you’ll find the appropriate button and it will remove you from our list.

(6) – I am always thrilled to get emails from successful candidates who have made good use of all our free questions and answers. Here are a couple of recent emails. (This is the part of this email lesson that the leaders of all those big programs don’t want you to hear. YOUR money is paying for THEIR Mercedes-Benz. Our success scares them.)

From KM: I finally did it on my own and without taking a class. I wanted to thank you for recommending cpareviewforfree.com because it really helped me target what areas were my weaknesses. It was nice to be able to do multiple choice questions online where the answer is presented to me instantly, instead of having to flip through pages and pages to find the right answer. I couldn't have done it without it.

From KW: I was one that you encouraged through this tedious process. Each week, I looked forward to receiving your e-mails because it seemed I was out of gas! I studied using many sources and tested with your questions to gauge myself. I am excited to tell you I no longer need the encouraging words or questions. I mean that in the best way. On 3/24/2011, I received my FAR grade (final section). I have passed all sections! Thank you, Thank you, Thank you!

From OP: Just a thank you note for all your help over the past year or more. I just got word last week that I passed the last section of my exam. I am so happy, especially at 58 years old. God Bless you for all your efforts in helping so many to achieve their dreams.....

And, I know what some of you are going to ask: I drive a 1997 Subaru station wagon (which is red and has 119,000 miles on it).

(7) – Okay, let’s do some practice – time to add some points. That should be your constant chant: add points, add points.

---FAR – Here is one of the 37 questions that I asked on my final exam for Intermediate Accounting II last week. Most of my students did well on this question; let’s see how well you do.

In Year One, the Alba Company has sales revenues of $600,000. The company has no other revenues and expenses except for a warranty expense of $160,000. The company expects these warranties to be satisfied as follows: $30,000 in Year Two, $60,000 in Year Three, and $70,000 in Year Four. The enacted tax rate is 24 percent. The company believes that there is 58 percent chance that it will have adequate taxable income in Year Two to absorb the warranty expense but that likelihood drops to 51 percent in Year Three, and 39 percent in Year Four. On its December 31, Year One balance sheet, what does this company report as its total net deferred income tax asset (noncurrent)?
A. $14,400
B. $16,800
C. $21,600
D. $31,200

Answer is A

The $30,000 temporary difference in Year Two creates a deferred tax asset but it relates to a Warranty Payable that will be settled next year and, thus, is reported as a current liability. Deferred tax effects created by current accounts are themselves reported as current. The question is asking for the noncurrent asset to be reported. The $60,000 and $70,000 temporary differences will not be settled until Years Three and Four. For those two, the related Warranty Payable is noncurrent. Thus, the deferred tax asset is also noncurrent which is what the question is asking. The total asset would be $130,000 times 24 percent or $31,200. However, the likelihood of receiving the benefit of the Year Four figure (the $70,000 temporary difference) is not more likely than not (not over 50 percent). Thus, that part of the deferred tax asset ($70,000 times 24 percent or $16,800) must be removed by establishing a valuation allowance. The deferred tax asset to be
recognized is $31,200 but the valuation allowance for that amount is $16,800 so that the net deferred tax asset is $31,200 less $16,800 or $14,400.

---Auditing & Attestation - The following question comes from one of our ten audit simulations that we will have in our subscription service for Auditing that we hope to have available within the next week.

Cox Company is being audited by Brown & Yellow CPAs. This public accounting firm has offices in five locations but this audit is primarily performed out of the Baltimore office. Smith is a partner in this firm and works out of the Baltimore office but does not participate in the Cox Company audit. Jones is also a partner in this firm but works out of the Philadelphia office and does not participate in the Cox Company audit. The CPA firm is now trying to determine who in the firm qualifies as a covered member of this engagement so audit independence rules can be verified. Which of the following is true?

A. Smith and Jones are both covered members for this audit engagement.
B. Smith is a covered member but Jones is not
C. Jones is a covered member but Smith is not
D. Neither Smith nor Jones is a covered member

Answer is B

A covered member is any individual on the audit engagement team, anyone who can influence either the engagement or the members of the engagement team, and the partners in the office in which the engagement is primarily performed. Thus, all partners in the Baltimore office would be covered members whereas other partners would only be covered members if they were part of the engagement team or had some influence on it. The designation of the covered members is important because those individuals must abide by specific independence rules toward the audit client.

---Regulation – I wrote the following question by looking (randomly) at the 2010 IRS instruction book for the 1040 form. I have always thought that was one of the very best ways to prepare for the individual income tax part of the Regulation exam—use the instruction manual.

Mr. Jones is a high school counselor and Mrs. Jones is an elementary school aide who works 1,000 hours per year. Mr. Jones spent $200 of his own money for educational software that was common and accepted in his field. Mrs. Jones spent $320 of her own money for books that were also ordinary and necessary for her job. If a joint return is filed, how much of a deduction can they take in arriving at their adjusted gross income for the tax year?
A. $200
B. $450
C. $500
D. $520

Answer is B

I might as well quote the 1040 instructions for this one. “If you were an eligible educator in 2010, you can deduct on line 23 up to $250 of qualified expenses you paid in 2010. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses on line 23. You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A, line 21. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. Qualified expenses include ordinary and necessary expenses . . . .” So, Mr. Jones can deduct his $200 but Mrs. Jones can only deduct $250 of her expenses. The remaining expenses can be listed as an itemized deduction on Schedule A.

---BEC – I was reading a friend’s managerial accounting textbook recently and came upon the question “what is a cost driver?” so I wrote the following question based on the reading I was doing.

Buffalo Bakery produces donuts but has had trouble determining an accurate cost for its overhead and, thus, has been uncomfortable with setting a price. The accountant is unsure about the cost driver that has been utilized. In this situation, what is meant by a cost driver?

A. The quantity of expensive materials (such as sugar) used in the production process.
B. The number of hours that the machine operators must work.
C. The actions that cause increases in costs such as electricity, rent, and indirect materials
D. The potential for shortages in vital items both in material and equipment.

Answer is C.

According to my friend’s textbook, a cost driver is the action that causes (or “drives”) the costs associated with the activity. Company officials are concerned about the cost of overhead (all costs associated with production other than direct material and direct labor). In determining the cost for a manufactured item, costs must be anticipated for overhead such as electricity, rent, and indirect materials. Such costs do not change randomly. All changes have a cause and those causes are referred to as cost drivers. By determining the cost driver for each cost, the accountant can anticipate the amount that will have to be spent at different levels of production.

We are into the month of May – time to push off chains and start making good things happen that will bring you those points that you need to pass the CPA Exam.

Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com

Find Your Mistake and Use It to Improve

noreply@blogger.com (Go Figure) — Sun, 10 Apr 2011 21:25:00 +0000

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

April 10, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,200 FREE CPA Review Questions and Answers Available for YOU

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Lesson 92

From: Joe

(1) – Some great news – we just added eight brand new task-based simulations for FAR to our subscription service. Now, for just $15 per month (50 cents per day), you get hundreds of slides of content, separated out by topic for easy access. You also get a study guide. And you get task-based simulations that cover:
--Land Buildings and Equipment
--Bond Investments
--Leases
--Cash Flows
--Earnings per Share
--Current Assets
--Consolidations
--Government Accounting I
--Government Accounting II
--Not-for-Profit Accounting

More good news: we just added eight brand new task-based simulations for Regulation to our subscription service. Regulation is also just $15 per month for hundreds of content slides and you get task-based simulations that cover:
--Sales and Exchanges
--Corporate Income and Expenses
--Deductions
--Itemized Deductions
--Individual Taxes-Income
--Corporate Taxes-Other Issues
--Partnership Income Taxes
--Other Areas of Taxation
--Bankruptcy
--Sales

Our subscription service for BEC ($15 per month) currently has 29 written communication questions that cover a variety of areas such as financial management, economics, managerial accounting, and corporate governance (plus, of course, all of the hundreds of content slides).

Obviously, our 2,200 questions and answers are free and will always stay free. But if you need additional help at a reasonable price, try our subscription service for a month and see if it won’t add the points you need to pass your next part of the CPA Exam.

(2) – Several people have asked when our subscription service for Auditing and Attestation will be ready. Unfortunately, my elder daughter spent most of March in the hospital and that has thrown my work schedule behind a bit. She is out now, though, so I hope to get Auditing and Attestation up and running shortly.

(3) – We’ve received a number of nice notes recently. Can’t publish them all but here are a few. This is EXACTLY what I want from you – to hear the good news that you have passed that exam. And, also, that you have saved a ton of money.

FROM MH: “I just wanted to say thanks for the site. Using only this site I received scores of 78 - BEC, 77 - FAR, 75 - REG and 70 - AUD. I ended up retaking AUD and just received my score of 88. This site saved me a ton of money.”

FROM RR: “I'm RR from Los Angeles, CA. I cried this morning when I saw that I passed AUD with 84. This is my last part of the CPA Exams. This has been a very long journey for me. I graduated from College more than 25 years ago in a foreign country so it was really difficult for me but when a friend introduced me to your website, I found a new hope. Your inspiring words kept me going. I used your free questions to better understand what I could hardly understand from the review materials that I paid for in the big CPA review. Joe, you are my hero, you are a very nice person and I thank God for people like you.”

FROM TL: “For the last 18 months I have always read your emails, and I prayed that one day I could write to you and let you know that I passed all sections... Here is that email: It was a long journey and I almost lost my BEC credit. I took FAR twice and every time I missed it by 2-3 point. I had studied for that section probably 1,000 hours by the third and last time, but for the last time I only had a chance to study 20 hours. I knew it would be impossible to pass, but nothing is impossible with God. With being 8 months pregnant and working full time, I needed all the help and support and encouragement, and your emails and online questions were defiantly among the top resources I used. Thank you and you may know that you are making a difference in people's lives and it is very appreciated. THANK YOU, and may God bless you and your family.”

Gosh, everyone here at www.CPAreviewforFREE.com is just delighted to be able to help such wonderful folks reach their dreams. I really do appreciate all the emails.

(4) – Here is one more email that I have separated out because the writer actually includes some studying advice that I give within the subscription service. Not bad advice to think about no matter how you are going about studying.

FROM MH: “I want to thank you for your devotion to the profession and the support you provide to all future CPAs. I just retrieved my score online on Regulations which was my last section to pass and I could not believe my eye when I saw 80! I have been trying to pass since I graduated from college in ’02. I failed many times but I would always get back up and try again. I had all the excuses to fail: full time job, married with two children, and I doubted myself because English is not my first language and I was not the smartest student in my class. You got me through when you said all these excuses do not matter, but what matters the most is how hard you work. One of my favorite quotes which is put on my Outlook reminder is “You have one day and one day only when you can accomplish something”. Then I followed the study plan that you laid-out. Which is where you said that ‘I think you can boil the exam preparation down to four things at its very core:

A – Work as many problems as you possibly can. Problems are like physical exercise—the more you do the stronger you get.
B – Read the answers very carefully, especially for the problems you miss. The answers help you fill in the gaps in your knowledge. The single best way to add points is to miss a question and then figure out how to get it right the next time.
C – Take short notes. I like 3 by 5 cards with a basic question on one side and a short answer on the other. Whatever form they take, keep them to a few words and only the stuff that really makes a difference. Carry them with you everywhere.
D – Review your notes on a regular basis to keep everything as fresh in your head as you can. If you have not reviewed a topic in the last 10-14 days, the knowledge is probably beginning to fade.’”

I realize that I wrote that myself so I am biased but that does seem like excellent advice in preparing for the CPA Exam. Work those questions, read those answers, keep note cards with only a few essential words, carry those cards with you everywhere, and review those cards whenever you have ten free seconds.

(5) – We have a gazillion or maybe two gazillion good folks who get these email lessons every week or two (more often when my daughter is out of the hospital). We love having you; we love working with you; we love hearing from you; and—most of all—we love celebrating your success with you. It doesn’t always happen on the first time but if you keep adding points, you are going to make it.

However, if you are ready to stop getting these email lessons, always know that you can scroll to the bottom of any lesson and there will be a link that will allow you to unsubscribe and have your name removed. Stay as long as you want but when you are ready to leave, don’t hesitate to unsubscribe.

(6) – I was lying in bed this morning wondering what I could write that would help you add points and the words conveyed by MH (above) ran through my head “The single best way to add points is to miss a question and then figure out how to get it right the next time.”

I have long believed that the answer to virtually all questions is developed in a sequential pattern. You figure out A, then you figure out B, then you figure out C, and eventually you arrive at the answer. Some questions only have 2-3 steps whereas others might have a dozen. The answer is really a puzzle where you put the pieces together in the proper order.

Therefore, if you miss a question, it doesn’t mean that you missed the entire question. Rather, it means that at some point in this series you made a misstep. I believe it is locating that misstep that is essential to your adding points and passing the CPA Exam. It just seems to me that missing a question does not do you any good unless you can isolate the step that tripped you up. Saying you missed a lease question is not helpful. Saying you missed a particular step (such as determining the life of the asset) is quite helpful especially if you follow up with “and now I know how to get that step correct myself.”

Let’s do a question together so I can show you what I mean by working the question as a series of steps.

Assume you go to take the FAR part of the CPA Exam and you get 74 points and you have one more question left. If you get it right, you’ll probably pass but if you miss it you’ll get the dreaded grade of 74. Here is the question. (And before someone asks – no, you do not actually know your score while you are taking the exam. This is just hypothetical.)

On January 1, Year One, Company A leases equipment for eight years for $10,000 per year with the first payment to be made immediately and every January 1 thereafter. The equipment has a ten-year life. At the end of eight years, Company A can buy the equipment for $9,000. That $9,000 is not viewed as a bargain because the asset is only expected to be worth $7,000 at that time. Company A has an incremental borrowing rate of 10 percent but does not know the implicit interest rate that the lessor built into the contract. The present value of $1 in eight years at a 10 percent annual rate is .424. The present value of an annuity due of $1 for eight years at a 10 percent annual rate is 5.868. The present value of an ordinary annuity of $1 for eight years at a 10 percent annual rate is 5.335. Company A uses the straight-line method of depreciation. What is the total expense that Company A should recognize for Year Two?

GETTING TO THE ANSWER: Here is the sequence of steps that I would follow to get this question answered correctly. Could you make it through each of these steps? If not, where would you falter? It is THAT step that you want to focus your attention on.

--ONE – What is the question asking? It is amazing to me how often students/candidates try to answer a question without getting a handle on what the question is. They are nervous and want to get started. Thus, that start trying to solve a question and they don’t even know what the question is. Take a deep breath and make sure you are comfortable that you know what is being asked. Here, Company A has leased an asset and you are asked for the total expense in the SECOND YEAR. If it is an operating lease, that will be rent expense based on the amount paid. If it is a capital lease, there will be depreciation expense for the cost of the asset and interest expense on the liability.
--TWO – Is it a capital lease or an operating lease? The lease is for 8 years out of 10. That is 75 percent or more of the life of the asset. That meets one of the four criteria so it must be reported as a capital lease.
--THREE – As a capital lease, you must start off by determining the cash flows. Here that is $10,000 per year at the start of each of the next eight years. The $9,000 is not included because it is not viewed as a bargain. The lessee does not expect to make that payment.
--FOUR – You find the present value of the future cash flows (which basically removes all future interest from those cash flows). Since the first payment is made immediately, it is an annuity due and the present value is $10,000 times 5.868 or $58,680.
--FIVE – The asset is only to be used for the eight-year life of the lease. Straight-line depreciation is used to allocate the cost of the asset to expense so depreciation each year will be $58,680 divided by 8 years is $7,335. At the end of those eight years, Company A will give the equipment back to the owner/lessor so the $7,000 residual value has nothing to do with Company A.
--SIX – The first $10,000 payment is made immediately so the liability for this capital lease falls from $58,680 to $48,680 and remains at that figure for all of Year One. Interest is determined at 10 percent so interest expense for the first year is $4,868. Interest is not explicitly paid in a lease so the amount is computed and recognized by compounding—it is added to the liability. That increases the liability from $48,680 to $53,548. The next $10,000 payment reduces that liability to $43,548 at the beginning of the second year. That is the balance for the second year so interest is 10 percent of $43,548 or $4,355 rounded.
--SEVEN – Question asks for total expense for Year Two. Depreciation expense is $7,335. Interest expense is $4,355. Total expense is $11,690

The problem seemed terribly difficult but in seven, fairly easy steps, you walked right through it to the correct answer to get that point you needed to get from 74 to 75. YOU CAN DO THIS!!!

The key, though, is that if you missed any one of these seven steps did you stop right then and read the answer very carefully to figure out what you missed and how to get it right the next time. That is the key to getting better. That is the key to adding points. To me, that is the key to passing the CPA Exam.

(7) – Okay time for you to practice.

FAR

Company A leases a car on January 1, Year One for $20,000 per year for five years—the entire life of the vehicle. The first payment is made immediately with additional payments every January 1 in the future. Company A has an incremental borrowing rate of 10 percent per year but knows that the lessor built in an implicit interest rate (in setting the annual payments) of 12 percent per year. The present value of an annuity due for 5 years at 10 percent annual interest is 4.170. The present value of an annuity due for 5 years at 12 percent annual interest is 4.037. What does Company A report as its net liability for this lease on the December 31, Year Two balance sheet?

A. $54,714
B. $56,724
C. $57,832
D. $58,152

Answer is A

The lessee (Company A) uses its own incremental borrowing rate unless the lessor’s implicit rate is known and it is less. Here, the implicit rate is known but it is more so the lessee uses its own 10 percent rate. The cash flows are $20,000 per year and the present value factor for 10 percent and five years is 4.170. Present value of these cash flows is $20,000 times 4.170 or $83,400. Here, you are not worried with the asset but just with the liability. It is $83,400 at first but an immediate payment reduces it by $20,000 to $63,400. Interest for the first year is 10 percent or $6,340. In a lease, that is not paid but, rather, compounded bringing the total up to $69,740 ($63,400 + $6,340). The second payment (made on January 1, Year Two) reduces the liability by $20,000 to $49,740. Based on that balance, interest for the second year is $4,974. Compounding that expense at the end of the second year brings the balance up to $54,714 ($49,740 + $4,974).

BEC

A company makes widgets using 3 pounds of product X with a standard cost of $4.00 per pound. The company bought 11,000 pounds of product X for $45,700 and then used 9,100 pounds to produce 3,000 widgets. What was the unfavorable material price variance?

A. $1,391
B. $1,406
C. $1,635
D. $1,700

Answer is D

The 11,000 pounds that were acquired should have cost $4.00 per pound or $44,000. Those pounds actually cost $45,700 which was an extra (unfavorable) amount of $1,700.

Regulation

On January 1, Year One, the Jones family refinanced the mortgage loan on their home in order to reduce the previous 9 percent interest rate to a 5 percent rate. The old loan had a remaining life of 15 years while the new loan is for 20 years. The Jones family was required to pay $3,000 in points at that time as one of the costs of the refinanced loan. What amount of this $3,000 can the Jones family deduct in Year One?

A. Zero
B. $150
C. $200
D. $3,000

Answer is B

According to the instructions for the form 1040, “generally, you must deduct points you paid to refinance a mortgage over the life of the loan.” Here, the loan was for 20 years, so $150 of these points can be deducted each year ($3,000/20 years).

Auditing and Attestation

The independent audit firm of Zeller and Henson has been engaged to audit the Williams Corporation. In performing an audit, an assessment must be made of inherent risk. Which of the following situations would indicate that the level of inherent risk here should be assessed at a particularly high level?

A. The CPA assigned by Zeller and Henson to manage this audit has never worked on an engagement of this type before.
B. A particularly important control procedure is performed by a relatively new company employee.
C. The CPA firm has decided to perform negative confirmations of accounts receivable rather than positive confirmations.
D. The company employee who codes checks for recording purposes is relatively inexperienced.

Answer is D

The chance that a material misstatement will occur within the reporting company’s accounting system is known as inherent risk. If coding (assigning accounts for journal entry purposes) is done by an inexperienced person, the chances of errors occurring will go up. That increases the level of inherent risk. The chance that company control procedures will not discover or prevent a material misstatement is referred to as control risk (answer B). The chance that the independent auditor will fail to detect a material misstatement is known as detection risk (answer A). Positive and negative confirmations are used to gather evidence in hopes of reducing the overall audit risk to an acceptably low level.

Have a great week – add lots of points.

Let’s get this exam finished off sooner rather than later.

Joe Hoyle
Co-Founder
CPA Review for FREE

Break Through the Wall of Procrastination

noreply@blogger.com (Go Figure) — Tue, 29 Mar 2011 01:14:00 +0000

CPA Review for FREE
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Lesson 91

From: Joe

(a) – Sitting here on Saturday evening working to help everyone pass the CPA Exam. I wonder if the folks who run those big courses are working right now to help their candidates pass. It is 8:33 p.m., March 26 -- if you are an officer for a big CPA review course and you are working for your candidates TONIGHT, drop me an email at Jhoyle@cpareviewforfree.com and let me know. I’m curious (maybe “skeptical” is a better term) to know which review courses really put in the work for you guys.

(1) – We have a lot of readers who live and work in Japan. We here at www.CPAreviewforFREE.com want to express our deepest sympathies for all that your country has been through in recent days as a result of the recent earthquake. From what I can see on television, the devastation seems unbelievable. Every person in Japan is certainly in our thoughts.

(2) – I’ve received a lot of really nice emails in the last few days from CPA Exam candidates. Wish I could include a copy of every one that I receive but here are a couple.

From LQ: “Just found out I passed REG which means I completed all four parts!! Joe, many thanks to you and your team for such wonderful questions. I used the subscriptions also for practicing simulations. These helped me add a few points to my score for sure. I'm very excited and can't thank CPAreviewforFREE enough!"

From KC: "Thanks to CPA Review for free I passed all four sections my first time around. (Within a six month time frame.) Your site is an amazing resource and motivational tool. I bought one other study book per section for reference (except REG - I used your paid information) and spent under $140 on all my exam materials. I would suggest to anyone to try to pass one section with this site before spending hundreds of dollars on study materials. Thank you!!!!"

From RA: “I would like to thank you for this great website. I used it to prepare my CPA exam and today I got the result for the last part (REG). I have passed all the four parts thanks to the information that I learned from your website. This achievement is very important to me given I graduated more than twenty years ago and lot of the material was completely new for me.”

From CK: “I just got my score for REG - my final part - and I passed! I want to thank you for your help. Your words of wisdom really kept me going. Your words of encouragement kept me going. I have a wife and 7 children at home. I used to sit here at 11:30 PM and study. That's after a day's full of work and helping at home. I locked myself in a room and studied (not at home). I can tell you that I felt miserable. And then your emails arrived. It was like fresh cold water on a hot day. You wrote points like don't give up, keep going, focus on getting more points every day, etc. That gave me the push to continue studying. You made all the difference. It was the difference between sluggishly going thru the materials, and between enthusiastically going forward. I thank you very much. God should repay you for your help.”

From HK: “So, it’s been a really long journey, but I just found out today that I finally passed my last section. FAR no less. FAR was the section I struggled with most and I am just so grateful that I passed. This was also this first implementation of the new 2011 exam. Anyway, the passing of these exams could not have been done without your website, FOR SURE. You have all my gratitude, and my thanks. So Thank you, thank you, thank you... The questions on cpareviewforfree.com gave me the points needed to pass.”

All of these people saved their money and used www.CPAreviewforFREE.com and have achieved success on the CPA Exam. In these difficult times, there is no good reason to throw your money away. Give us a shot and see how you do. Pick a part that you like and use www.CPAreviewforFREE.com and go for it.

(3) – I know we have a lot of college students who use our materials and read these email lessons. In case you are interested (or in case you think one of your teachers would be interested), I do write a blog about teaching in college. I want to encourage better teaching because I think that will lead to better learning—something that is important for our country and our world. In case you are interested, the blog can be found at:

www.joehoyle-teaching.blogspot.com/

My most recent posting provides my thoughts on “The Top Five Mistakes that College Teachers Make.”

(4) – If, by chance, you are ready to unsubscribe from these lessons, please scroll to the end of this email lesson and click on the appropriate link.

(5) - As the spring gets here, more and more accountants begin to think about passing the CPA Exam. How do you manage to do the work that is needed for success? As I have said often in these email lessons over the years, your biggest enemy is procrastination. There just seems to be a thousand reasons in life pushing you to put off studying. It is such a difficult task to break through the wall of procrastination in order to do the necessary work that you need for success.

My wife takes “Good Housekeeping” magazine. I almost never even open the magazine. However, this morning, for no good reason, I picked up the new copy (April 2011) sitting on a table and found a fascinating article by Gretchin Rubin about how to beat our human tendency to procrastinate. I was immediately very interested. I like articles like this. She put forth a number of recommendations that should help you to stop putting off the study you really need to be doing. Here are a couple that she mentioned that were my favorites.

---“Do it first thing in the morning.” If you don’t like to do something (and studying isn’t always the most fun you can have), get it over with as quickly as you can. The longer you put it off during the day, the more likely it is that you will never get around to doing the work. As the day moves along, you get tired and your schedule gets full. Suddenly, it is bedtime and you haven’t studied for one minute. You have lost the entire day. Get up early and get some study time in before anything else happens. Then, no matter what takes place for the rest of the day, you’ll have added points to your score. You’ll never have a lost day. That’s a good motto for success: never lose a day.

---“Become a regular.” If you are constantly looking for time to study, you may never be able to find any. It is always a game of hide and seek with time. Thus, set aside one period of time, (even if it is only 20 minutes) to study every single day. During that time, study every day no matter what else happens. Having a defined time when you always study just helps make that a normal part of your life. When it becomes a normal part of your life, you won’t even consider putting it off.

---“Find ways to make the task more pleasant.” Yeah, studying can be a drag occasionally. In fact, as you study, it will seem more and more painful as time passes. Pretty soon, it can become almost impossible to keep going. Build in a reward mechanism. For example, promise yourself a small piece of chocolate or 4-5 jelly beans after each 15 minutes that you study. That gives you a good reason to study. Then, it is no longer about an exam that you might not be taking for months; you are working for a piece of candy that you’ll get in 15 minutes. Instant reward. Or, play music while you study. The words to songs may distract you but upbeat instrumental music can just make you feel better about the whole study process. When I am at work, I have a whole list of instrumental music that I listen to for energy.

---“Protect yourself from interruption.” If you start and stop studying ever 5 minutes, you’ll never get anything accomplished. Turn off your cell phone. Unplug your computer. Hang a sign on your door “Go away and leave me alone – I’m working to pass the CPA Exam.” If you find yourself praying for an interruption as you study, you are not going to be able to focus on the materials you need to learn. Once you start studying, you want to stay at study. So, think of every possible way that you could be interrupted and, before you start, try to rid yourself of those potential distractions.

--“Take a baby step.” You are never going to pass the CPA Exam in one day. Won’t happen. Success on the CPA Exam is the culmination of a long string of small improvements. So, every time that you sit down to study, remind yourself that you don’t have to hit a homerun. All you have to do is have an efficient study session so that you can add a point or two. Somehow, having a reasonable goal just makes the entire study process easier. It is terribly important that you get away from thinking of the CPA Exam as overwhelmingly difficult or even impossible. Who could possibly want to do a lot of work if they believe the goal cannot be achieved? Your goal today (and every day) is to make a baby step forward as you get closer and closer to passing the CPA Exam.

Okay, there were several more ideas in the article but this gives you some thoughts. You face procrastination every day; you need a plan to get over the wall that it creates to keep you from studying.

(6) – My younger daughter (Lara) hopes to become a pastry chef. So, last Sunday, we drove to Norfolk, Virginia to see “the Cake Boss” who is – I now know – a gentleman named Buddy Valastro who runs a family bakery in New Jersey. More importantly, I suppose, he has become famous on cable television as he tells viewers how to make great cakes and, also, how to deal with this family.

Here is a person who has taken a normal job and used it to become famous. There were 700 people in that room who hung on every word he had to say for nearly four hours.

Personally, I found three things he had to say to be especially interesting.

--First, he told the audience that he was a truly lucky guy but that he had also worked incredibly hard. He talked about getting up at 4 in the morning to go to the bakery. He talked about dropping out of high school to help in the bakery when his father got sick and died. The point that I took away: virtually all success (even on cable television) goes back to hard work. Few people succeed at anything whether it is making cakes or passing the CPA Exam without hard work. If you spend your time looking for shortcuts, you may simply not be cut out for success.

--Second, when he was given the chance to succeed in television, his wife told him that she was sure he would succeed because he was the most determined person in the world. The point that I took away: there are a lot of things in this world that will come between you and your goals. It is easy to let them throw you off the track. If you are going to succeed, you must learn to fight through adversity. If you don’t want success enough to fight through the problems, you really don’t want it. Be determined or don’t get started.

--Third, he had a problem with one of the demonstrations and he had to improvise. He turned to the audience and said that this is just what you have to do—take what you have and make the most of it. People are always looking for one more CPA review product. They are always looking for one more book or one more CD. It is usually not the review materials that are the problem. It is what you do with them that counts. Make the most of what you have been given.

Yeah, it was an interesting day. But I was surprised by how much the Cake Boss said that applied to any challenge, even the CPA Exam, and not just to the making of cakes. I am convinced that people who are successful tend to follow the same pattern, no matter what the field.
---Work incredibly hard,
---Be completed determined, and
---Make the best of what you have.

(7) – Practice time. Let’s add some points.

FAR

The City of Singler has a capital projects fund. The highest-level of decision-making authority for the city transfers $9 million from the general fund to this capital projects fund with the stipulation that the money must be used to construct Highway 66 out of town. In the balance sheet for this fund, the cash is shown as an asset. How is the fund balance reported?

A. Fund balance—restricted
B. Fund balance—committed
C. Fund balance—assigned
D. Fund balance—unassigned

Answer is B

Assets that have been designated for a particular purpose—not by an outside party but rather internally by the highest-level of decision-making authority—is reported as a “fund-balance committed.” The term “restricted” is used if the designation of purpose is made by an outside party. The term “assigned” is used if the decision about the asset’s use is made within the government but not by the highest-level of decision-making authority. The term “unassigned” is appropriate for assets where no stipulation of the future use has been made.

Auditing & Attestation

Jane Eyre works as a staff auditor for the CPA firm of East & West. She is currently working on the audit engagement of the Hitckcock Corporation. Her daughter is employed by Hitchcock. Her daughter is 27 years old and not a dependent of Jane Eyre. The firm is trying to determine whether Jane Eyre must be removed from the audit team because of a lack of independence. In applying these rules, which designation is applied to the daughter?

A. Close relative
B. Distant relative
C. Member of immediate family
D. General member of family

Answer is A

The AICPA defines a close relative as a parent, sibling, or nondependent child. A dependent child would be considered a member of the staff auditor’s immediate family.

BEC

A company has cost of goods sold for the past year of $900,000 and average inventory for the period of $100,000. The cost of goods sold is divided by average inventory to arrive at 9. What does the 9 represent?

A. Inventory density
B. Cost availability
C. Inventory turnover
D. Cost performance analysis

Answer is C

Cost of goods sold divided by the average amount of inventory for the same period gives the inventory turnover (also known as inventory turnover ratio) which reflects how many times during the year that the reporting company sells an amount equal to its average inventory. It is used to measure the speed at which a company is able to sell its inventory.

Regulation

What is a gift causa mortis?

A. A gift of real property
B. A conditional gift in contemplation of death
C. A gift that will only occur after a specified event (a cause) has taken place
D. A gift that is transferred as part of a will.

Answer is B.
A gift causa mortis is a conditional gift made in contemplation of death. It is automatically revoked if the donor does not die of the impending illness or crisis. Such gifts can only be made when the donor is in a terminable condition.

Spring is coming and the air feels good. It is a great time to sit down and start studying to pass the CPA Exam. Why not make it a goal that you will pass several parts (if not all) of the CPA Exam by the end of the summer. Put in the time and effort and YOU CAN DO IT!!!

Joe Hoyle
Co-Founder
CPA Review for FREE
www.CPAreviewforFREE.com

Exam Grades Released

noreply@blogger.com (Go Figure) — Fri, 25 Mar 2011 21:52:00 +0000

Congrats to all of you who passed the CPA exam as well as those that passed the next part!

To those who didn't pass, here is Joe's "secret sauce" to help you pass the exam:

(1) – Pick the part of the exam that you like the most. It’s always easier to get started with a part you like.
(2) – Schedule to take that exam in roughly 40 days, let’s say the end of January.
(3)—Go to www.CPAreviewforFREE.com and read all the information under “resources.”
(4)—Start answering at least 15 questions per day.
(5)—Never guess. On the exam, you need to guess. In studying, never guess.
(6)—If you get a question correct, move on. Don’t sit and congratulate yourself.
(7)—If you miss a question, find the step you missed (see above) and figure out what you missed in that step. Write down 10 words or less to help you get the question/step right the next time you see it.
(8)—Never forget that you only need to get 75 points to pass. You are not seeking perfection.
(9)—When you get to the final 7-10 days, start going methodically back through your 10 word notes. You want to make sure you can get as many questions right as possible.
(10)—During the exam, watch your time very closely. You want to finish with about 10 seconds left. Don’t waste time but don’t get too rushed.
(11)—If you don’t know a question, eliminate as many answers as possible and take a guess. Don’t let a tough question get you rattled.

Help for Japan's Victims

noreply@blogger.com (Go Figure) — Tue, 15 Mar 2011 14:20:00 +0000

Our hearts and prayers go out to the victims and their families of the Japan earthquake and tsunami. It humbles us to see dreams interrupted to deal with tasks at hand that take immediate precedent. Our thoughts also go out to the brave men and women working with the damaged nuclear reactors.

Google has set up an info page which includes an easy way to donate to The Japanese Red Cross Society

For family members, the Japanese Red Cross Society has also provided the following link: Family link web site has been opened in cooperation with ICRC:
http://www.familylinks.icrc.org/eng/familylinks-japan

Thank you! Lynn

Characteristics for Success of the CPA Exam

noreply@blogger.com (Go Figure) — Sun, 13 Mar 2011 19:40:00 +0000

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

March 9, 2011

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Lesson 90

From: Joe

(1) – I want to start with the same information that I sent out last week about the CPA Exam going international. I know that, for a lot of our readers, this is exciting news.

Starting in 2011, the Uniform CPA Examination will be offered during the month of August in Japan, Bahrain, Kuwait, Lebanon and the United Arab Emirates. The international exam, which will be offered in English, is the same as the U.S. exam administered by the AICPA, NASBA, and Prometric in the United States. Future testing months during which the exam will be administered in Japan and the Middle East will be November 2011 and February, May 2012. Licensure requirements for international candidates are the same as for U.S. CPA candidates. Along with passing the Uniform CPA Examination, international candidates must meet educational and experience requirements as mandated by U.S. state boards of accountancy. In the United States, state boards have the governmental legal authority to award the U.S. CPA license. Registration for the international exam will begin on May 1, and applications may be made through certain U.S. state boards of accountancy offering eligibility for
international candidates. A list of participating state boards and information about fees will be posted on the NASBA website in April at www.nasba.org. Testing in the new international locations will be open to citizens and long-term residents of the countries in which the exam is being administered. In the Middle East, citizens of Egypt, Jordan, Oman, Qatar and Saudi Arabia may take the exam in one of the Middle East locations. U.S. citizens living abroad are eligible to test at any location.

(2) – Okay, we’ve got thousands of people who use www.CPAreviewforFREE.com for our free questions and answers each and every week.

--Most of them are preparing for the CPA Exam. Many of those folks have become disenchanted with the mediocre review programs that charge them thousands and are poorly put together.
--Others simply decided (as our motto suggests) to try us for free first before investing even a penny in a review program.
--Some use us along with other books and programs; some use our free questions along with our subscription service ($15 per month per part); and some folks use our questions all by themselves to pass.
--We also assist college students who are desperately trying to get an A in Intermediate Accounting, Advanced Accounting, Auditing, Business Law, Income Taxes, or the like. They use our questions as a way to practice and review.
--Other folks just use our questions to keep themselves in touch with a wide variety of accounting questions. I’m always fascinated by how many people write in to say “I passed the exam years ago but I still enjoy working 5-10 of your question each day to stay sharp.”

How you make use of www.CPAreviewforFREE.com is up to you. The 2,200 questions and answers are there for YOU. We are happy to make them available. When we first started, we would get a lot of questions like “what’s the catch?” There is no catch. By now, nearly three years in, most people have come to understand that. We are happy to be of help to you.

We do need to make enough money to support our site so when you pay to download the questions and answers or when you use our subscription service ($15 per month per part), you are really helping to keep us in business so that we can continue to help others. THANKS!!! We very much appreciate your support.

So, if you have never looked at our questions and answers, go online and start working. One hour per day working with our questions and answers and you have a great chance of passing the entire CPA Exam in 2011 FOR FREE.

We don’t want to see the high cost (and low quality) of other CPA review programs keep you out of the Accounting profession. I have long argued that the cost of CPA review is entirely unfair. The Accounting profession should be open to everyone, not just those people who can afford expensive review programs.

I was reminded of this last week when I got a wonderful email from an accountant in Iran who thanked me for what we were doing. Do you think those big review programs get many grateful emails from Iran? We are not out to save the world but we are glad to be of help to everyone who wants to be able to enter the Accounting profession—no matter where you live and no matter how much money you have.

And, of course, we are grateful for your support.

(3) – How Good Do You Have To Be? I am convinced that everyone is always a bit insecure about most important things. That is just human nature. So, when you start to consider taking the CPA Exam, there is always the sinking feeling that you are just not smart enough to be able to pass. Well, I’m here to tell you that is pure NONSENSE!!!! Yes, the CPA Exam is tough and requires work but anyone who is willing to put in the time and stays persistent should be able to pass the CPA Exam in a reasonable period of time. No matter how many doubts you may have-YOU CAN DO IT!!!

Assume that you bring in 100 candidates who are thinking about taking the CPA Exam. Do you have to be the smartest person in the room to pass? Of course not. Do you have to be one of the best prepared candidates in that room to succeed? No way. In school, we tend to focus on the very top students—that upper 10 percent that seem to know all the answers. Passing the CPA Exam isn’t like school. In most cases, the top 50 percent of the people (roughly) are going to pass each part while many of the rest are going to come close. And, in that bottom half are an awful lot of people who never got around to studying at all. Or, they studied a few hours, got distracted, and never got back to it.

In other words, most people who try do pretty well. That’s just the statistics. That’s the secret that those big review courses don’t want you to know.

So, yes, you do have to study and certainly you can fail. But you don’t have to be a genius to pass. You don’t have to be an A plus student to succeed. That’s all just a myth. You just have to get in the upper 50 percent. That bar is not set terribly high.

How do you get into the upper 50 percent? You study. You study. You study. It is not magic. You study. I always suggest that if you just want to pass (make 75) you should spend 60-100 hours per part. That is one hour per day for between 8 months to a bit over a year. That is not easy but it certainly is not impossible. If you get up a bit early, you can have that done every day before breakfast.

How do you spend 60-100 hours of studying per part?
It doesn’t take smarts.
What characteristics does it take? What helps people become winners on the exam?
--Desire
--Ambition
--Determination
--Self-control
--Patience
--Planning
--Being Methodical
--Persistency
--Being Driven

Yeah, when it comes to the CPA Exam, I would take any one of those characteristics over smarts. Anyone can have smarts and waste them away. But if you give me a person with the above characteristics, I’ll show you a real winner.

You can do it.

(4) – Need to unsubscribe? Well, we hate for you to leave us but you have the right to unsubscribe. Just scroll to the bottom of this email and you’ll find an unsubscribe button. Use it and we shall part. However, before you do so, why not forward this lesson to a friend who might be thinking of taking the CPA Exam and tell them they should go to www.CPAreviewforFREE.com and register and check the box for additional materials and those additional materials ONLY include these email lessons. And, before you leave, let me say one final time “Thanks so much for being with us.”

(5) – Time to practice. Notice that this first question is very similar to the first question in our previous lesson but with some small changes. Often in accounting, understanding the importance of small changes can make all the difference in the world.

FAR

On January 1, Year One, Ace Company completes construction work on a warehouse at a cost of $2 million and sells it to a bank for $2.3 million. It has a useful life of 30 years. Ace immediately leases it back for two years. What amount of gain is recognized by Ace during Year One?

A. Zero
B. $10,000
C. $150,000
D. $300,000

Answer is D

In a sale-leaseback arrangement, any gain on the sale is normally deferred and then written off as a reduction to the depreciation expense recognized in connection with the leased asset. However, if the leaseback is for a period of 10 percent or less of the life of the asset, the entire gain is recognized immediately. Here, the leaseback is for only two out of 30 years so that the gain is not deferred but recognized entirely at the time of sale.

Regulation (I went to our subscription service and picked this information at random).

A calendar-year corporation was organized and incurred organizational expenditures of $6,000. Assume the corporation begins business on April 1, Year One, and wants to maximize its deduction for organizational expenditures in that year. What amount can be deducted in Year One?

A. Zero
B. $300
C. $5,000
D. $5,050

Answer is D

Because the company has elected to maximize its deductions in Year One, they can deduct the first $5,000 immediately. The remaining $1,000 is amortized to expense over 180 months or $1,000 x 9/180 = $50. Although it does not apply here, if the organization expenditures are over $50,000, the company begins to lose the right to the initial $5,000 deduction so that more is subject to amortization.

Auditing and Attestation.

A publicly-held corporation is in the process of changing its president. Which of the following forms should be filed with the SEC to disclose this event?

A. Form 10-K
B. Form S-1
C. Form S-3
D. Form 8-K

Answer is D

According to the SEC’s website, “Form 8-K is the ‘current report’ companies must file with the SEC to announce major events that shareholders should know about.”

BEC

Numerous companies produce widgets. However, the only company that buys widgets on the market is the Ace Corporation which uses the widgets in its uniquely designed aircraft. In economics, how is this market described?

A. As a floating market
B. As a monopsony
C. As a category 2 market
D. As a market dominated by the Wilson effect

Answer is B

Candidates are likely to know of a monopoly—a situation where there is only one seller so that unfair pricing advantage can be taken over customers. A monopsony is the opposite situation where there are many sellers but only a single buyer. This buyer can often demand unreasonably low prices because the sellers have no other alternative sales for their goods.

Hope the sun is shining where you are today. Start using www.CPAreviewforFREE.com to add those points that you need in order to pass the CPA Exam. Let’s get it done in 2011.

Joe Hoyle
President and Co-Founder
CPAreviewforFREE

www.CPAreviewforFREE.com

CPA Exam Goes International in August

noreply@blogger.com (Go Figure) — Wed, 02 Mar 2011 23:08:00 +0000

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

March 1, 2011

CPA Review for FREE
www.CPAreviewforFREE.com

Over 2,100 FREE CPA Review Questions and Answers Available for YOU

139 Weeks of Operation and 21,875,544 Page Views (without a penny spent on marketing)

From: Joe

(1) - I normally only use our emails to provide you with email lessons.

However, the AICPA sent out the following press release today. I know that an awful lot of our readers will be extremely interested in this information. Therefore, I wanted to get it to you sooner rather than later. So, I’m sending it out rather than waiting until I could write an entire email lesson.

The actual press release can be found at:

http://m1e.net/c?90368637-bSPoKLag.815A%406226349-qgsX7oOYmqgYc

The American Institute of Certified Public Accountants, National Association of State Boards of Accountancy, and Prometric announced the international administration of the Uniform CPA Examination will be offered during the month of August in Japan, Bahrain, Kuwait, Lebanon and the United Arab Emirates. Registration begins in May.

The U.S. CPA exam is being offered internationally for the first time as a service to foreign nationals in response to rapidly escalating international demand for U.S. CPA licensure. In 2010, more than 10,000 international candidates traveled to the U.S. to take the U.S. CPA exam, a 22 percent increase from 2009. Nearly one-third of international candidates came from Japan.

“We are very pleased to be able to offer this program in Japan and several countries in the Middle East,” said Craig Mills, AICPA vice president for examinations and continuing professional education. “We believe the international administrations will provide additional opportunities for individuals who want to become U.S. CPAs. As we gain experience in international administrations, we are looking forward to expanding the program to other countries where there is interest.”

The international exam, which will be offered in English, is the same as the U.S. exam administered by the AICPA, NASBA, and Prometric in the United States. Future testing months during which the exam will be administered in Japan and the Middle East will be November 2011 and February, May 2012. Licensure requirements for international candidates are the same as for U.S. CPA candidates. Along with passing the Uniform CPA Examination, international candidates must meet educational and experience requirements as mandated by U.S. state boards of accountancy.

NASBA Executive Vice President & COO Ken L. Bishop said: "It makes excellent sense to extend the benefits of the U.S. state-based CPA examination and licensure processes to an international audience. We’re looking forward to implementing international CPA Examination administrations so that we may bring the examination to candidates who would like an opportunity to qualify as U.S. CPAs."

In the United States, state boards have the governmental legal authority to award the U.S. CPA license. Registration for the international exam will begin on May 1, and applications may be made through certain U.S. state boards of accountancy offering eligibility for international candidates. A list of participating state boards and information about fees will be posted on the NASBA website in April at www.nasba.org.

“Ensuring safe, secure delivery of the CPA exam has always been a priority for us,” said Bill Murtagh, senior vice president of client services and sales at Prometric. “Carrying our commitment to security to other key locations around the world will simply be an extension of the diligence we provide in the U.S. to support the integrity of this high-stakes exam.”

Testing in the new international locations will be open to citizens and long-term residents of the countries in which the exam is being administered. In the Middle East, citizens of Egypt, Jordan, Oman, Qatar and Saudi Arabia may take the exam in one of the Middle East locations. U.S. citizens living abroad are eligible to test at any location.

“The exam, regardless of where it’s administered, provides opportunities for personal growth and contributes to economic prosperity,” Mills said. “We continue to plan for an August administration in the Middle East and are hopeful that the local conditions will allow us to provide this service to the citizens of the region.”

Initially the exam will be offered internationally during a one month testing window per calendar-year quarter. An international testing FAQ sheet is available at the AICPA Uniform CPA Examination website – www.aicpa.org/cpa-exam.

(2) – I cannot send out one of these emails without a message. That’s just not my style.

People who pass the exam don’t need encouragement. For them, it is over and part of the past. It is the people who fail and then have to push themselves to try again that need encouragement. So, I’ll leave you with the words of one of my heroes (Vince Lombardi): "The greatest accomplishment," he said, "is not in never falling, but in rising again after you fall."

Or, as I might say: “if you get knocked down, use that as motivation to push yourself even harder the next time. Anyone can take a beating and then quit. Quitting is the easiest thing in the world. It is truly a unique individual who gets stronger from the experience. And, then, the eventual victory is even sweeter.”

(3) – And, as always, remember that you can unsubscribe from these lessons by clicking the button at the bottom of this email.

Joe Hoyle

Co-Founder
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Read Those Questions Carefully

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February 27, 2011

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Lesson 89

From: Joe

(I was going to send this message out several hours ago but my Internet connection went down completely. At such times, I am always reminded of how much we rely on technology.)

(1) – I gave an intermediate accounting test last week. I thought it was a pretty good test—the questions were hard without being impossible. However, there was one devious trick: The students had to read each question rather carefully. Okay, the test was in English and I used relatively small words but you had to actually read what it said rather than scan it quickly and guess at what was being asked.

It was the first test of the semester and the students were very tense and, unfortunately, some of them didn’t really read the questions. It wasn’t that they didn’t know the material; it was that they literally did not read the questions closely enough. Can you believe that? How could you ever try to answer a question without reading it carefully? It was an important test in their major and they didn’t focus on the question. Well, believe it or not, that happens way too often. Students are in such a hurry to start creating answers that they don’t pay sufficient attention to the question. They do not show the patience necessary to read the entire question before they start forming an answer.

Decades ago, candidates could buy back their CPA Exam answers so they could actually see what they had missed and try to do better the next time (the CPA Exam has obviously changed a lot over the decades). I would occasionally sit down with a candidate who had failed and we would go over the questions they missed very carefully. I cannot tell you how often the candidate would look up horror stricken during these sessions and cry out “I knew that question – how could I possibly have chosen the wrong answer? I must have read the question incorrectly.” There we go again, missing questions based on a poor reading.

I have a theory. If are sloppy when we practice, then, when we get to the real game, we will play sloppy. As the old saying goes, “you play like you practice.” In other words, when you practice, if you get used to scanning through questions quickly without focusing on what is being asked, you’ll be likely to do that on the real exam. In my classes, students often excuse themselves for dumb answers by lamenting “oh, I read the question wrong.” And, I will respond “don’t do that! You are picking up bad habits.”

As you work problem after problem to get yourself ready for the CPA Exam, work on focusing on the question to make sure you know
--what is being asked
--the facts that you have available

Then, in most cases, the problem is no more than putting those pieces together in the proper order.

If you miss a question during practice because you didn’t know what to do, that’s okay because you can then work on the topic and learn it. However, if you miss a question due to careless reading, you’ve wasted your time. You’ve not learned a single thing. That is probably the very worse outcome: a mistake by bad reading. Nothing at all happens that can be positive about that.

As you practice, read those questions ever so carefully. Learn to focus during your work sessions and you’ll be more likely to focus in the real exam. Don’t pick up bad habits. That focus will help you to stop giving away points on the CPA Exam through carelessness.

(2) – If you are ready to unsubscribe to these email lessons that I send out every week or two, you can easily scroll to the bottom of this lesson (or any other lesson) and you’ll find the world famous “Unsubscribe” button. Click on that and we will have parted. It will seem sad without you but you do have the right to unsubscribe whenever you so choose.

(3) – My good buddy Professor C. J. Skender at UNC sent me the following great quote. I had asked him what words had inspired him in his life.

“In Rocky IV, Rocky is talking with his son before leaving for Russia to fight Ivan Drago. ‘Going in one more round when you don't think you can, that's what makes all the difference in your life.’"

In studying to pass the CPA Exam (and in so many other things in life), we work until we get tired. Studying day after day can just wear a person totally out. Whether you succeed often depends on what you do AFTER you reach the point of being sick and tired of it all. Anyone can study well when they are fresh and just getting started. That doesn’t prove much. You start really making a difference when you get to the point where you want to quit. Then, what do you do? How tough are you?

A vast majority of people get tired and ready to quit and then they respond by quitting. It certainly takes nothing to put down the pencil and go watch television or go take a nap. That’s easy. That doesn’t make you stronger or more able to take on strong challenges.

It is a whole lot more difficult when you get tired to then push yourself to keep working for another 15-30 minutes. It takes something deep down inside of yourself to push on when you have reached the point when you start to think “Quit.”

Anyone can work well up to the point where you think “I’m ready to stop.” It is the real winners in life who can then push on for another 15-30 minutes even after they are dogged tired and ready to quit for the day.

As Rocky says, “Going in one more round when you don't think you can, that's what makes all the difference in your life."

(4) – Let’s do some practice. Remember to read the questions carefully to make sure you know the facts that are given and the actual question being asked. Don’t miss a single question because of poor reading.

FAR (we worked this problem today in my Intermediate Accounting II class).

On January 1, Year One, Ace Company completes construction work on a warehouse at a cost of $2 million and sells it to a bank for $2.3 million. Ace immediately leases it back for its entire 20 year life for lease payments that have a present value of $2.3 million. The straight-line method is to be used and the warehouse is expected to have no residual value at the end of that 20 years. What amount of depreciation expense is recognized by Ace for Year One?

A. Zero
B. $15,000
C. $100,000
D. $115,000

Answer is C

Initially, in this question, it looks like the depreciation should be the capitalized lease cost of $2.3 million allocated over 20 years at a rate of $115,000 per year. However, in a sale-leaseback arrangement where the asset is leased back for most of its life, any gain on the sale ($300,000 in this case) is not recognized but rather deferred. Then, that deferred gain is reduced over the life of the lease or, here, at the rate of $15,000 per year ($300,000 deferred gain divided over 20 years). The reduction of the deferred gain is not recognized as an actual gain but rather as a reduction of depreciation expense. Therefore, Ace will report depreciation expense of $100,000 ($115,000 less $15,000).

Regulation

My daughter made a ceramic soup bowl at her church. It was red and shaped like a heart. It had a value of $20. Right before the Super Bowl, it was auctioned off by the church and I paid $35 to buy it. What amount of itemized deduction can I claim on my individual income taxes?

A. Zero
B. $15
C. $20
D. $35

Answer is B

If you pay an amount to a qualified charity to acquire an item, then anything you pay over the fair value of the property is viewed as a donation to the organization. Because I paid $15 more than fair value, I can take that as a charitable contribution on my itemized deductions.

BEC

Internal controls are extremely important to the appropriate governance of any organization. In the United States, what group produced the framework for internal controls that is the most commonly used by organizations?

A. FASB
B. PCAOB
C. COSO
D. IASB

Answer is C

The internal control framework that is most commonly used in the United States is “Internal Control—Integrated Framework” produced by COSO. In this, COSO separates internal control into five components: control environment, risk assessment process, control activities, information and communication, and monitoring. COSO is the Committee of Sponsoring Organizations of the Treadway Commission.

Auditing and Attestation

The International Ethics Standards Board for Accountants (IAESB) operates within the International Federation of Accountants (IFAC). It produces ethical standards to be used by accountants around the world. Which of these statements reflects the rules created by the IAESB in connection with the acceptance of contingent fees?

A. The professional accountant should never accept a contingent fee.
B. The professional accountant should only accept contingent fees for audit engagements.
C. The professional accountant should make sure that necessary safeguards are in effect in connection with contingent fees.
D. The professional accountant should only accept contingent fees for tax engagements.

Answer is C.

Because this set of rules must be flexible enough to be applied around the world (where widely differing rules have long been accepted practice), these standards tend to be more general in nature. Note that A, B, and D are all very specific rules. In contrast, C is a general guideline. It does not indicate what is allowed or not allowed. Instead, it requires the company to set up proper safeguards.

Auditing and Attestation (bonus question because we really want you to pass)

In which paragraph of a standard unqualified audit report is the following sentence found: “An audit includes examining all evidence that supports the amounts and disclosures in the financial statements.”

A. First (introductory) paragraph
B. Second (scope) paragraph
C. Third (opinion) paragraph
D. None of the above

Answer is D

The auditor almost never examines all of the evidence for any reported amount or disclosure. Instead, as is explained in the scope paragraph, the auditor looks at evidence on a test basis. A test basis means that items are studied in samples and is sufficient to be able to provide the reasonable assurance which is given by a CPA in an unqualified opinion.

Joe Hoyle

Co-Founder
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