[jeff]

Welcome to the Q2 2016 CPA Exam Study Group for REG.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[Spartans92]

Can someone clarify this for me. Here are the two questions.
First: Simon, a C corporation, had a deficit in accumulated earnings and profits of $50,000 at the beginning of the year and had current earnings and profits of $10,000. At year end, Simon paid a dividend of $15,000 to its sole shareholder. What amount of the dividend is reported as income?

a.
$5,000
b.
$15,000
c.
$10,000
d.
$0
Second: On January 1 of the current year, Locke Corp., an accrual-basis calendar-year C corporation, had $30,000 in accumulated earnings and profits. For the current year, Locke had current earnings and profits of $20,000, and made two $40,000 cash distributions to its shareholders, one in April and one in September. What amount of the distributions is classified as dividend income to Locke's shareholders?
a.
$50,000
b.
$80,000
c.
$20,000
d.
$0

BEC- PASS

[Spartans92]

NVM ^^ LOL I realized the first one it had a beginning deficit hence its limited to the current E&P while for the second its a positive 30k total 50k with distribution of 80k. remaining 30k is capital gail (return of capital if no basis remains).

BEC- PASS

[Anonymous]

haha yep. also remember that current year E&P is allocated to each distribution pro rata, and then accumulated E&P is applied chronologically (i remember a variation of that question asking specifically about each distribution — $30k of the second distr. will be a return of capital)

[Spartans92]

Sorry, heres another question. Can someone explain why I deduct the 20k back out for the depreciation? What is the logic?

Azure, a C corporation, reports the following:
Pretax book income of $543,000.
Depreciation on the tax return is $20,000 greater than depreciation on the financial statements.
Rent income reportable on the tax return is $36,000 greater than rent income per the financial statements.
Fines for pollution appear as a $10,000 expense in the financial statements.
Interest earned on municipal bonds is $25,000.

What is Azure's taxable income?

BEC- PASS

[Bear-Bear]

^^^Because they are asking for taxable income, and the questions mentions that an additional 20k of depreciation is required for tax purposes compared to what was actually booked.

[Bear-Bear]

[Just3Letters]

Spartans, is answer $544k?

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[CPA2BEE]

Just3Letters and Bear-Bear you guys are both right. Any depreciation book-to-tax differences can be added or subtracted from taxable income depending on the nature.

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[Spartans92]

Ahhh.. I see. Thanks guys and yea just3. 544k is the answer.

BEC- PASS

[Anonymous]

ok so the answer is D but it should really be $100k. they rounded 5/9 to .56 to get $100,800. why?? i just spent so much time trying to figure this out when i actually had it in the first 10 seconds. have any of you experienced anything like this on the actual exam?

The partnership agreement for Owen Associates, a general partnership, provided that profits be paid to the partners in the ratio of their financial contribution to the partnership. Moore contributed $10,000, Noon contributed $30,000, and Kale contributed $50,000. For the year ended December 31, 20X1, Owen had losses of $180,000. What amount of the losses should be allocated to Kale?

A.
$40,000

B.
$60,000

C.
$90,000

D.
$100,800

[csvirk]

@DR honestly that's just stupid way to trick us. Are they really testing us on the concept of TAX material or 5th grade math rounding skills!!

FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84

[Bear-Bear]

Guys…it's gonna be so hard to start studying for AUD while waiting for my REG score. I started studying REG while waiting for my BEC score, but that is a different story. I basically knew I passed BEC, but didn't want to verbalize or think that because it seemed like bad luck. I seriously doubt I'm going to be walking out of Prometric on Saturday feeling super confident about REG. Though I would love to be pleasantly surprised. I'm just terrified of the SIMS.

So much of this game is psychological, I swear.

[Just3Letters]

@Cash A Mili, that is so dumb! They better not play the rounding game on the actual test. This isn't 3rd grade. I didn't experience any problems with rounding or dumb stuff like that on FAR so I'm not going to stress about it.

@Bear-Bear, I have to start studying for BEC while waiting for my score! I feel like if I pass REG I'm going to be so confident with BEC and AUD because I don't think I'll struggle much with those. But who knows?

Either way, one month is WAY too long of a wait 🙁

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Bear-Bear]

You're gonna love BEC compared to FAR and REG. Seriously.

[csvirk]

@just3 I will join you with BEC and Watch out for AUD!

FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84

[Author]

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