P17-16 Comprehensive-reporting a pension plan; pension spreadsheet; determine changes in balances; two years
Actuary and trustee reports indicate the following changes in the PBO and plan assets of Lakeside Cable during 2011:
Prior service cost at Jan. 1, 2011, from plan amendment at the beginning of 2009 (amortization: $4 million per year) $32 million
Net loss-pensions at Jan. 1, 2011 (previous losses exceeded previous gains) $40million
Average remaining service life of the active employee group 10 years
Actuary's discount rate 8%
($in millions)
PBO Plan Assets
Beginning of 2011 $300 Beginning of 2011 $200
Service cost 48 Return on plan assets
Interest cost, 8% 24 7.5% (10% expected) 15
Loss (gain) on PBO (2) Cash contributions 45
Less: Retiree benefits (20) Less: Retiree benefits (20)
End of 2011 $350 End of 2011 $240
Required:
1. Determine Lakeside’s pension expense for 2011 and prepare the appropriate journal entries to record the expense as well as the cash contribution to plan assets and payment of benefits to retirees.
2. Determine the new gains and/or losses in 2011 and prepare the appropriate journal entry(s) to record them.
3. Prepare a pension spreadsheet to assist you in determining end of 2011 balances in the PBO, plan assets, prior service cost-ACOI, the net loss-ACOI, and the pension liability.
Click here for the solution: Actuary and trustee reports indicate the following changes in the PBO and plan assets of Lakeside Cable during 2011
Showing posts with label Changes. Show all posts
Showing posts with label Changes. Show all posts
Monday, March 21, 2016
Monday, October 26, 2015
Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011
E 18-18 Transactions affecting retained earnings
Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011. At January 1, 2011, the corporation had outstanding 105 million common shares, $1 par per share.
Retained Earnings ($ in millions)
90 Beginning balance
Retirement of 5 million common
Shares for $22 million 2
88 Net income for the year
Declaration and payment of a
$0.33 per share cash dividend 33
Declaration and distribution
Of a 4% stock dividend 20
123 ending balance
Required:
1. From the information provided by the account changes you should be able to recreate the transactions that affected Brenner-Jude’s retained earnings during 2011. Prepare the journal entries that Brenner-Jude must have recorded during the year for these transactions.
2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2011.
Click here for the solution: Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011
Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011. At January 1, 2011, the corporation had outstanding 105 million common shares, $1 par per share.
Retained Earnings ($ in millions)
90 Beginning balance
Retirement of 5 million common
Shares for $22 million 2
88 Net income for the year
Declaration and payment of a
$0.33 per share cash dividend 33
Declaration and distribution
Of a 4% stock dividend 20
123 ending balance
Required:
1. From the information provided by the account changes you should be able to recreate the transactions that affected Brenner-Jude’s retained earnings during 2011. Prepare the journal entries that Brenner-Jude must have recorded during the year for these transactions.
2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2011.
Click here for the solution: Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011
Sunday, September 13, 2015
Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards
Auditing P 3-31
Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards. This standard reads, "The auditor must identify in the auditor's report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period." Assume that the following list describes changes that have a material effect on a client's financial statement for the current year:
1. Correction of a mathematical error in inventory pricing made in a prior period.
2. A change from prime costing to full absorption costing for inventory valuation.
3. A change from presentation of statements of individual companies to presentation of consolidated statements.
4. A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred because future benefits of the costs have become doubtful. The new accounting method was adopted in recognition of the change in estimated future benefits.
5. A change from the completed-contract method to the percentage-of completion method of accounting for long-term construction contracts.
6. A change in the estimated useful life of previously recorded fixed assets based on newly acquired information.
7. A change to including the employer share of Social Security (FICA) taxes as "retirement benefits" on the income statement from including it with "other taxes."
8. A change from FIFO method of inventory pricing to the LIFO method of inventory pricing.
Identify the type of change described in each item above, and state whether any modification is required in the auditor's report as it relates to the second standard of reporting. Organized your answer sheet as shown. For example, a change from the LIFO method of inventory pricing to the FIFO method in inventory pricing would appear as shown.
Assume that each item is material.
Item No. Type of Change Should Auditors report be modified?
Example An accounting change from one GAAP "Yes" to another GAAP
Click here for the solution: Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards
Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards. This standard reads, "The auditor must identify in the auditor's report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period." Assume that the following list describes changes that have a material effect on a client's financial statement for the current year:
1. Correction of a mathematical error in inventory pricing made in a prior period.
2. A change from prime costing to full absorption costing for inventory valuation.
3. A change from presentation of statements of individual companies to presentation of consolidated statements.
4. A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred because future benefits of the costs have become doubtful. The new accounting method was adopted in recognition of the change in estimated future benefits.
5. A change from the completed-contract method to the percentage-of completion method of accounting for long-term construction contracts.
6. A change in the estimated useful life of previously recorded fixed assets based on newly acquired information.
7. A change to including the employer share of Social Security (FICA) taxes as "retirement benefits" on the income statement from including it with "other taxes."
8. A change from FIFO method of inventory pricing to the LIFO method of inventory pricing.
Identify the type of change described in each item above, and state whether any modification is required in the auditor's report as it relates to the second standard of reporting. Organized your answer sheet as shown. For example, a change from the LIFO method of inventory pricing to the FIFO method in inventory pricing would appear as shown.
Assume that each item is material.
Item No. Type of Change Should Auditors report be modified?
Example An accounting change from one GAAP "Yes" to another GAAP
Click here for the solution: Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards
Sunday, September 6, 2015
The following totals were drawn from Independence City’s “Schedule of Changes in Capital Assets by Function and Activity”
P. 7-4 Governments sometimes add to, but do not delete, their capital assets.
The following totals were drawn from Independence City’s “Schedule of Changes in Capital Assets by Function and Activity,” included in the city’s financial statements for the year ending June 30, 2012:
General capital assets, July, 1, 2011 $33,276,151
Additions/transfers-in 459,430
Deletions/transfers-out (265,795)
General capital assets, June 30, 2012 $33,469,786
The complete schedule disaggregates the data by function (e.g., general government, public safety, public works, health and welfare, culture, and recreation) and subfunction (e.g., park maintenance, recreation, tourism). Another schedule, “Schedule of General Capital Assets by Source,” shows the beginning and ending balances of the specific types of assets:
Type of Asset 2012 2011
Land $ 8,209,380 $ 8,209,380
Buildings $ 9,293,847 $ 9,292,611
Improvements other $ 1,088,307 $ 1,088,307
than buildings
Office furniture and $ 4,863,535 $ 4,536,506
equipment
Mobile equipment $ 7,834,277 $ 8,073,945
Other equipment $ 2,180,440 $ 2,075,402
Total $ 33,469,786 $ 33,276,151
1. Assume that the assets, excluding land, had an average useful life of 20 years. What percentage of the total assets, excluding land, would you expect to have been retired each year?
2. What percentage of the assets (beginning of year values). Excluding land, were actually retired during 2012 (assuming that all deletions/transfers out represent retirements?
3. What was the average useful life of the assets as implied by this percentage?
4. Assume that the entire $265,795 of the deletions and transfers-out applied to the mobile equipment. What would have been the useful life of the equipment as suggested by the percentage of the equipment retired?
Click here for the solution: The following totals were drawn from Independence City’s “Schedule of Changes in Capital Assets by Function and Activity”
The following totals were drawn from Independence City’s “Schedule of Changes in Capital Assets by Function and Activity,” included in the city’s financial statements for the year ending June 30, 2012:
General capital assets, July, 1, 2011 $33,276,151
Additions/transfers-in 459,430
Deletions/transfers-out (265,795)
General capital assets, June 30, 2012 $33,469,786
The complete schedule disaggregates the data by function (e.g., general government, public safety, public works, health and welfare, culture, and recreation) and subfunction (e.g., park maintenance, recreation, tourism). Another schedule, “Schedule of General Capital Assets by Source,” shows the beginning and ending balances of the specific types of assets:
Type of Asset 2012 2011
Land $ 8,209,380 $ 8,209,380
Buildings $ 9,293,847 $ 9,292,611
Improvements other $ 1,088,307 $ 1,088,307
than buildings
Office furniture and $ 4,863,535 $ 4,536,506
equipment
Mobile equipment $ 7,834,277 $ 8,073,945
Other equipment $ 2,180,440 $ 2,075,402
Total $ 33,469,786 $ 33,276,151
1. Assume that the assets, excluding land, had an average useful life of 20 years. What percentage of the total assets, excluding land, would you expect to have been retired each year?
2. What percentage of the assets (beginning of year values). Excluding land, were actually retired during 2012 (assuming that all deletions/transfers out represent retirements?
3. What was the average useful life of the assets as implied by this percentage?
4. Assume that the entire $265,795 of the deletions and transfers-out applied to the mobile equipment. What would have been the useful life of the equipment as suggested by the percentage of the equipment retired?
Click here for the solution: The following totals were drawn from Independence City’s “Schedule of Changes in Capital Assets by Function and Activity”
Saturday, August 22, 2015
Described below are three independent and unrelated situations involving accounting changes
P11-10 Accounting changes; three accounting situations
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2011 before any adjusting entries or closing entries are prepared.
a. On December 30, 2007, Rival Industries acquired its office building at a cost of $10,000,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2011, the estimate of useful life was revised to 28 years in total with no change in residual value.
b. At the beginning of 2007, the Hoffman Group purchased office equipment at a cost of $330,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-of-the-years'-digits method. On January 1, 2011, the company changed to the straight-line method.
c. At the beginning of 2011, Jantzen Specialties, which uses the sum-of-the-years'-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net income by $445,000.
Click here for the solution: Described below are three independent and unrelated situations involving accounting changes
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2011 before any adjusting entries or closing entries are prepared.
a. On December 30, 2007, Rival Industries acquired its office building at a cost of $10,000,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2011, the estimate of useful life was revised to 28 years in total with no change in residual value.
b. At the beginning of 2007, the Hoffman Group purchased office equipment at a cost of $330,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-of-the-years'-digits method. On January 1, 2011, the company changed to the straight-line method.
c. At the beginning of 2011, Jantzen Specialties, which uses the sum-of-the-years'-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net income by $445,000.
Click here for the solution: Described below are three independent and unrelated situations involving accounting changes
Sunday, July 19, 2015
We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively
We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively. Explain when it is appropriate to report the changes prospectively. Provide examples.
Click here for the solution: We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively
Click here for the solution: We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively
The net changes in the balance sheet accounts of Barney Corporation for the year 2010 are shown below
The net changes in the balance sheet accounts of Barney Corporation for the year 2010 are shown below.
Account Debit Credit
Cash $ 82,000
Short-term investments $121,000
Accounts receivable 83,200
Allowance for doubtful accounts 13,300
Inventory 74,200
Prepaid expenses 17,800
Investment in subsidiary (equity method) 20,000
Plant and equipment 210,000
Accumulated depreciation 130,000
Accounts payable 80,700
Accrued liabilities 21,500
Deferred tax liability 15,500
8% serial bonds 80,000
Common stock, $10 par 90,000
Additional paid-in capital 150,000
Retained earnings—Appropriation for
bonded indebtedness 60,000
Retained earnings—Unappropriated 38,000
$643,600 $643,600
An analysis of the Retained Earnings—Unappropriated account follows:
Retained earnings unappropriated, December 31, 2009 $1,300,000
Add: Net income 327,000
Transfer from appropriation for bonded indebtedness 60,000
Total $1,687,000
Deduct: Cash dividends $185,000
Stock dividend 240,000 425,000
Retained earnings unappropriated, December 31, 2010 $1,262,000
1. On January 2, 2010 short-term investments (classified as available-for-sale) costing $121,000 were sold for $155,000.
2. The company paid a cash dividend on February 1, 2010.
3. Accounts receivable of $16,200 and $19,400 were considered uncollectible and written off in 2010 and 2009, respectively.
4. Major repairs of $33,000 to the equipment were debited to the Accumulated Depreciation account during the year. No assets were retired during 2010.
5. The wholly owned subsidiary reported a net loss for the year of $20,000. The loss was recorded by the parent.
6. At January 1, 2010, the cash balance was $166,000.
Instructions
Prepare a statement of cash flows (indirect method) for the year ended December 31, 2010. Barney Corporation has no securities which are classified as cash equivalents.
Click here for the solution: The net changes in the balance sheet accounts of Barney Corporation for the year 2010 are shown below
Account Debit Credit
Cash $ 82,000
Short-term investments $121,000
Accounts receivable 83,200
Allowance for doubtful accounts 13,300
Inventory 74,200
Prepaid expenses 17,800
Investment in subsidiary (equity method) 20,000
Plant and equipment 210,000
Accumulated depreciation 130,000
Accounts payable 80,700
Accrued liabilities 21,500
Deferred tax liability 15,500
8% serial bonds 80,000
Common stock, $10 par 90,000
Additional paid-in capital 150,000
Retained earnings—Appropriation for
bonded indebtedness 60,000
Retained earnings—Unappropriated 38,000
$643,600 $643,600
An analysis of the Retained Earnings—Unappropriated account follows:
Retained earnings unappropriated, December 31, 2009 $1,300,000
Add: Net income 327,000
Transfer from appropriation for bonded indebtedness 60,000
Total $1,687,000
Deduct: Cash dividends $185,000
Stock dividend 240,000 425,000
Retained earnings unappropriated, December 31, 2010 $1,262,000
1. On January 2, 2010 short-term investments (classified as available-for-sale) costing $121,000 were sold for $155,000.
2. The company paid a cash dividend on February 1, 2010.
3. Accounts receivable of $16,200 and $19,400 were considered uncollectible and written off in 2010 and 2009, respectively.
4. Major repairs of $33,000 to the equipment were debited to the Accumulated Depreciation account during the year. No assets were retired during 2010.
5. The wholly owned subsidiary reported a net loss for the year of $20,000. The loss was recorded by the parent.
6. At January 1, 2010, the cash balance was $166,000.
Instructions
Prepare a statement of cash flows (indirect method) for the year ended December 31, 2010. Barney Corporation has no securities which are classified as cash equivalents.
Click here for the solution: The net changes in the balance sheet accounts of Barney Corporation for the year 2010 are shown below
Tuesday, June 16, 2015
During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations
Problem 11-14 (P11-14) Changes and Corrections of Depreciation
During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations:
1. Machine A was purchased for $50,000 on January 1, 2005. Straight-line depreciation has been recorded for 5 years, and the Accumulated depreciation account has a balance of $25,000. The estimated residual value remains at $5,000, but the service life is now estimated to be one year longer than estimated originally.
2. Machine B was purchased for $40,000 on January 1, 2008. It had an estimated residual value of $5,000 and an estimated service life of 10 years. It has been depreciated under the double-declining-balance method for two years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method.
3. Machine C was purchased for $20,000 on January 1, 2009. Double-declining-balance depreciation has been recorded for one year. The estimated residual value of the machine is $2,000 and the estimated service life is five years. The computation of the depreciation erroneously included the estimated residual value.
Prepare the necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record the depreciation for 2010. (Assume that the debit is to Depreciation Expense.)
Click here for the solution: During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations
During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations:
1. Machine A was purchased for $50,000 on January 1, 2005. Straight-line depreciation has been recorded for 5 years, and the Accumulated depreciation account has a balance of $25,000. The estimated residual value remains at $5,000, but the service life is now estimated to be one year longer than estimated originally.
2. Machine B was purchased for $40,000 on January 1, 2008. It had an estimated residual value of $5,000 and an estimated service life of 10 years. It has been depreciated under the double-declining-balance method for two years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method.
3. Machine C was purchased for $20,000 on January 1, 2009. Double-declining-balance depreciation has been recorded for one year. The estimated residual value of the machine is $2,000 and the estimated service life is five years. The computation of the depreciation erroneously included the estimated residual value.
Prepare the necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record the depreciation for 2010. (Assume that the debit is to Depreciation Expense.)
Click here for the solution: During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations
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