# FSA - let's do more fsa guys.

Interest Expense = 401 Pretax Income = 1789 Net Income = 930 Capitalized Interest = 141 Amortization of interest = 47 Tax Rate = 35% What is the adjusted Net Income?

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513

We both are going to be sorry on exam if thats what we come up with. :(((((

still working on it, I think you add back \$141 of interest to the net income and back out that \$47 that was expensed, but I know there is more

Which reading does it come from?

this is pure FSA stuff – out of book 3

I am feeling very weak… all of you should be feeling humble too. cuz this is supposed to be easy points on FSA.

Pepps, it shoud be: Pre-tax Income (for example 2006)=1789 adjust for expensed interest: 141 Pre-tax Income (adjusted)= 1,648 After Tax(1-0.35)=1,071 However, the data in the question do not appear consistent. I mean, if you just calculate the net profit from the pre-tax profit doesnt reconcile.

daj224 Wrote: ------------------------------------------------------- > still working on it, I think you add back \$141 of > interest to the net income and back out that \$47 > that was expensed, but I know there is more I am a fool! I meant to say \$141 gets deducted from EBT b/c it was previously omitted by firm. Sorry! Strangedays may have it here, but come we do not do anything with that AMORTIZATION ammt???/

adjustment of Pretax income for amortized depreciation on the capitalized asset: 1789+47 1836 adjustment to expense the the capitalized interest: 1836-141=1695 apply taxes: NI=.65*1695=1,101.75

daj224 Wrote: ------------------------------------------------------- > daj224 Wrote: > -------------------------------------------------- > ----- > > still working on it, I think you add back \$141 > of > > interest to the net income and back out that > \$47 > > that was expensed, but I know there is more > > > I am a fool! I meant to say \$141 gets deducted > from EBT b/c it was previously omitted by firm. > Sorry! > > Strangedays may have it here, but come we do not > do anything with that AMORTIZATION ammt???/ Amortization is a cost already occurred (this is why is reported in the income statement)… therefore I think it is not helpfult for adjustment man!

map1 Wrote: ------------------------------------------------------- > adjustment of Pretax income for amortized > depreciation on the capitalized asset: 1789+47 > 1836 > adjustment to expense the the capitalized > interest: 1836-141=1695 > apply taxes: NI=.65*1695=1,101.75 yeah, this is what I was teetering towards. Strangedays is not doing an amort adjustment tho, so I am worried.

map1 Wrote: ------------------------------------------------------- > adjustment of Pretax income for amortized > depreciation on the capitalized asset: 1789+47 > 1836 > adjustment to expense the the capitalized > interest: 1836-141=1695 > apply taxes: NI=.65*1695=1,101.75 map how come your NI is greater after adjustment? clearly wrong!!

ups:D Adjusted NI = NI+(1-tax rate)*(amortization-capitalized interest)=868.9 i am so f-up

map1 Wrote: ------------------------------------------------------- > ups:D > > Adjusted NI = NI+(1-tax > rate)*(amortization-capitalized interest)=836 huh? I have never seen an equation like this

strangedays Wrote: ------------------------------------------------------- > Pepps, > it shoud be: > > Pre-tax Income (for example 2006)=1789 > > adjust for expensed interest: 141 > > Pre-tax Income (adjusted)= 1,648 > > After Tax(1-0.35)=1,071 > > > However, the data in the question do not appear > consistent. I mean, if you just calculate the net > profit from the pre-tax profit doesnt reconcile. I think the question is not clear. I mean, is the amortization quote refering to prior years or this year? Because things would be different.

strangedays Wrote: ------------------------------------------------------- > strangedays Wrote: > -------------------------------------------------- > ----- > > Pepps, > > it shoud be: > > > > Pre-tax Income (for example 2006)=1789 > > > > adjust for expensed interest: 141 > > > > Pre-tax Income (adjusted)= 1,648 > > > > After Tax(1-0.35)=1,071 > > > > > > However, the data in the question do not appear > > consistent. I mean, if you just calculate the > net > > profit from the pre-tax profit doesnt > reconcile. > > > I think the question is not clear. I mean, is the > amortization quote refering to prior years or this > year? Because things would be different. Strange, This year, why would prior year amortization affect this year’s NI? it’d wouldn’t.

\$1101 ?? I am soooo lost on this one

I think we need to visit Income statement to solve this problem. What are you guys thinking Pretax Income here is? Pretax Income not only does not include Tax Expense. But it also does not include Interest expense. Don’t know how that helps but thought i’d throw that in there, cuz i am not getting this question right.