[wjun15]

During the current year, a trust reports the following information:

dividents $10,000

interest from corp bonds $12,000

tax exempt interest from state bonds – $4,000

capital gain (allocated to corpus) – $2,000

trustee fee (allocated to corpus) – $6,000

What is the trust’s accounting income?

The answer is $26,000 (dividends 12,000 + interest from corporate bonds $12,000 + tax exempt interest from state bonds $4,000)

can someone explain this? Why is the tax exempt interest from state bonds included as accounting income? Is accounting income not the same as taxable income? I think I am getting confused on what they mean by accounting income.

Are there differences between taxable income, estate income, and accounting income? I know the estate income includes capital gain allocated to corpus so this question is def not asking about estate income formula

Thanks!

[M.O.D.]

If you studied FAR, accounting income is GAAP income, which includes interest and realized gains.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Author]

Replies