[jeff]

SO I know every test is different but does anyone have any insight on what has been heavily tested recently? I take the exam Monday and I need to narrow my focus….Thanks!

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Anonymous]

Not really good on those, what should I pay attention to? So it is not just as cut and dry as these original JEs? Lol

[Anonymous]

On January 2 of the current year, Cruises, Inc. borrowed $3,000,000 at a rate of 10% for three years and began construction of a cruise ship. The note states that annual payments of principal and interest in the amount of $1,300,000 are due every December 31. Cruises used all proceeds as a down payment for construction of a new cruise ship that is to be delivered two years after start of construction. What should Cruise report as interest expense related to the note in its income statement for the second year?

A.

$0

B.

$300,000

C.

$600,000

D.

$900,000

[Anonymous]

Would it be 600,000?

Yr 1

Int Exp 300000

Int Pay 300000

Yr 2

Int Exp 300000

Int Pay 300000

Am I missing something here?

[NoraU]

I vote for A. 0. they can capitalize the interest.

BEC 05/12/14 77
REG 08/25/14 82
FAR 11/25/14 80
AUD 02/25/15 72, 05/15/15 98! DONE!!!!!!!!!!!!!!!!!!!!!!

[Peterman25]

I think that the answer is A – $0. Interest on internally generated assets or assets that you construct for future cash flows can be capitalized (something like that).

And remember…interest expense for the period would be on one year's worth and not an accumulated total. Interest expense would be reported on the I/S.

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[Anonymous]

Good point, but is the cruise ship in the ordinary course of business or no?

[NoraU]

In my book (wiley) it says : Includes assets constructed for sale produced as discrete projects (e.g., ships).

BEC 05/12/14 77
REG 08/25/14 82
FAR 11/25/14 80
AUD 02/25/15 72, 05/15/15 98! DONE!!!!!!!!!!!!!!!!!!!!!!

[Anonymous]

So the answer would be zero? Thanks

Also, do you know when to use the income summary account?

[Anonymous]

Hi group! Hope everyone's studies are well..

Quick question: I'm confused on the difference between actual and expected return on plan assets for pensions.

I know the difference between the two in way of calculation, but not usage. Say I am given the proper information for both the actual and expected return on plan assets: which would I use to calculate pension expense? I was under the impression it would be actual, but am finding that some questions use expected (unless I'm misunderstanding the question).

In addition to calculating the pension expense, when calculating the asset or liability, assume again that enough information is given to calculate the ending fair value of plan assets using both the actual and expected return. Which would be used in this situation? Again I would assume actual return, but am unsure.

Thanks!!

[Anonymous]

@Art, expected is used per my study materials so as to smooth returns in the long run and avoid the possible volatility that would accompany using actual rate

[Anonymous]

Kent, Inc.'s, reconciliation between financial statement and taxable income for 20X2 follows:

Pre-tax financial income $150,000

Permanent difference (12,000)

---

138,000

Temporary difference-

depreciation (9,000)

---

Taxable income $129,000

=========

ADDITIONAL INFORMATION:

AT

12/31/X1 12/31/X2

---

---

Cumulative temporary differences

(future taxable amounts) $11,000 $20,000

The enacted tax rate was 34% for 20X1, and 40% for 20X2 and years thereafter.

In its December 31, 20X2, income statement, what amount should Kent report as current portion of income tax expense?

A.

$51,600

B.

$55,200

C.

$55,860

D.

$60,000

---

The answer is ‘A'. Can someone tell me why they use taxable inc. instead of pretax fin. inc. to find inc. tax expense?

I thought taxable inc. was for tax payable and pretax fin. inc. for the the exp. portion?

[Anonymous]

Pre-tax is the book income, you want the tax income for current expense.

[Anonymous]

I see. Thanks CPAHOPEFULL.

[Anonymous]

Btw, when is your test? Mine is on Wednesday and I'm already starting to get nervous LOL.

[Anonymous]

27th of Oct. I've been at it for more than a month now and am not sure how much I've really learned lol.

I wouldn't worry too much though. I'm sure you'll kill it.

[Author]

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