[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!

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

[Peterman25]

Are you able to use the spreadsheet tool in the exam to set bond amortization tables? Is it just a limited version of Excel?

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[Anonymous]

Thanks Peterman, so OC is automatically the number when it is the lowest?

Larkin Co. reported a taxable loss of $10,000 in 20X1, its first year of operations, and taxable income of $0 in 20X2. Larkin had no temporary or permanent differences in either 20X1 or 20X2. At the end of 20X1 Larkin believed that 30% of the operating loss carryforward would not be realized; therefore, a valuation allowance of $1,200 (30% of $10,000 NOL × 40% tax rate) was necessary. At the end of 20X2, Larkin believes that the valuation allowance is no longer necessary. Assuming a tax rate of 40%, Larkin should report total income tax expense (benefit) in 20X1 and 20X2 of:

Select an answer:

A.

$0 in 20X1 and $0 in 20X2.

B.

$(4,000) in 20X1 and $0 in 20X2.

C.

$(2,800) in 20X1 and $0 in 20X2.

D.

$(2,800) in 20X1 and $(1,200) in 20X2.

[Peterman25]

Is the answer D?

My net benefit is $2800 in X1 and then I get the 1200 valuation back in $X2?

Good point on the LCM. If your cost is the lowest of all 4 of your numbers (cost plus the 3 for your market calculation) then cost will be your number.

BEC 7/14 - PASS
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AZ license - Official 8/20/2015

[Anonymous]

Also, I have a lot of trouble with payroll taxes, any advice?

Lime Co.'s payroll for the month ending January 31, 20X1, is summarized as follows:

Total wages $10,000

Federal income tax withheld 1,200

All wages paid were subject to the Federal Insurance Contributions Act (FICA). FICA tax rates were 7.65% each for employee and employer. Lime remits payroll taxes on the 15th of the following month. In its financial statements for the month ending January 31, 20X1, what amounts should Lime report as total payroll tax liability and as payroll tax expense?

Select an answer:

A.

Liability: $1,200; Expense: $1,530

B.

Liability: $1,965; Expense: $1,530

C.

Liability: $1,965; Expense: $765

D.

Liability: $2,730; Expense: $765

[Anonymous]

Peterman you are right!

[Peterman25]

Is the answer C?

As employer, your expense is ONLY the portion that you are required to pay as the employer. If employee and employer both have to pay 7.65% (for a combined total of 15.3%) then your expense is only $765.

Employer acts as a withholding agent for the employee. The employee portion is their expense and not that of the employer. My answer assumes that the employer liability is what the employer has to remit on behalf of the employee and then the employer's portion = $1965.

BEC 7/14 - PASS
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AZ license - Official 8/20/2015

[Anonymous]

That's what I thought but the answer is D.

[Anonymous]

Alpha Hospital, a large not-for-profit entity, has adopted an accounting policy that does not imply a time restriction on gifts of long-lived assets. Alpha received investments subject to the donor's requirement that investment income be used to pay for outpatient services. Indicate the manner in which this transaction affects Alpha's financial statements.

A.

Increase in unrestricted revenues, gains, and other support

B.

Increase in temporarily restricted net assets

C.

Increase in permanently restricted net assets

D.

No required reportable event

[Peterman25]

Right…RTFQ..it is because FICA does not equal federal income tax.

So it is 1200 + 765 (employer) + 765 (employee) = 2730.

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AZ license - Official 8/20/2015

[Peterman25]

Is it C? increase in the permanently restricted net assets? I don't see how you can have investment income if you don't restrict the investment.

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[Peterman25]

A lessor entered into a lease on December 31, 20X2 that will be accounted for as a direct financing lease. The lease calls for 10 payments, beginning on December 31, 20X3, of $4,000 each. The lessee’s incremental borrowing rate is 6% and the present value of an ordinary annuity of $1 at 6% for 10 periods is 7.360. The machine has a 10 year life and cost the lessor $30,000. How much profit or loss will be recognized by the lessor in 20X2 and how much depreciation expense will be recognized by the lessee in 20X3, assuming the machine is depreciated on a straight-line basis?

Grrrrr…I am trying to copy the MCQ answers, but Roger's won't let me…

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AZ license - Official 8/20/2015

[Peterman25]

On November 1, 20X1, Mason Corp. issued $800,000 of its 10-year, 8% term bonds dated October 1, 20X1. The bonds were sold to yield 10%, with total proceeds of $700,000 plus accrued interest. Interest is paid every April 1 and October 1. What amount should Mason report for interest payable in its December 31, 20X1, balance sheet?

A 17,500

B 16,000

C 11,667

D 10,667

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AZ license - Official 8/20/2015

[Anonymous]

You are right it was C, but to your question is it B?

[Anonymous]

@Peterman25

Do you have the answer explanation for the bond question?

[Mehwish]

Data regarding ball Corp's available-for-sale securities follow:

Dec 31, Year 1- Cost= $150,000 FV $130,000

Dec 31, Year 2- Cost= $150,000 FV $160,000

Fair value option is not elected.

I understand that the amount reported on OCI would be $30,000 for year 2. But the amount reported on Accumulated OCI should be $10,000 or $30,000?

I kept thinking its $10,000, but the book says $30,000.

Can someone explain this?

Thanks.

[Author]

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