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 plan. Show all posts
Showing posts with label plan. Show all posts
Monday, March 21, 2016
Wednesday, November 25, 2015
Glesen Company sponsors a defined benefit pension plan for its employees
Glesen Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2008 and 2009.
AND SO ON
Instructions
(a) Prepare a pension worksheet presenting both years 2008 and 2009 and accompanying computations including the computation of the minimum liability (2008 and 2009) and amortization of the unrecognized loss (2009) using the corridor approach.
(b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year.
(c) At December 31, 2009, prepare a schedule reconciling the funded status of the pension plan with the pension amounts reported in the financial statements.
Click here for the solution: Glesen Company sponsors a defined benefit pension plan for its employees
AND SO ON
Instructions
(a) Prepare a pension worksheet presenting both years 2008 and 2009 and accompanying computations including the computation of the minimum liability (2008 and 2009) and amortization of the unrecognized loss (2009) using the corridor approach.
(b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year.
(c) At December 31, 2009, prepare a schedule reconciling the funded status of the pension plan with the pension amounts reported in the financial statements.
Click here for the solution: Glesen Company sponsors a defined benefit pension plan for its employees
Wednesday, November 11, 2015
On January 1, 2008, Diana Peter Company has the following defined benefit pension plan balances
P20-1 (Two-Year Worksheet) On January 1, 2008, Diana Peter Company has the following defined benefit pension plan balances.
Projected benefit obligation $4,200,000
Fair value of plan assets $4,200,000
The interest (settlement) rate applicable to the plan is 10%. On January 1, 2009 the company amends its pension agreement so that prior service costs of $500,000 area created. Other data related to the pension plan are as follows.
2008 2009
Services costs 150,000 180,000
Prior service costs amortization 0 90,000
Contributions (funding) to plan 140,000 185,000
Benefits paid 200,000 280,000
Actual return on plan assets 252,000 260,000
Expected rate of return on assets 6% 8%
Instructions
a.) Prepare a pension worksheet for the pension plan for 2008 & 2009
b.) For 2009, prepare the journal entry to record pension related amounts.
Click here for the solution: On January 1, 2008, Diana Peter Company has the following defined benefit pension plan balances
Projected benefit obligation $4,200,000
Fair value of plan assets $4,200,000
The interest (settlement) rate applicable to the plan is 10%. On January 1, 2009 the company amends its pension agreement so that prior service costs of $500,000 area created. Other data related to the pension plan are as follows.
2008 2009
Services costs 150,000 180,000
Prior service costs amortization 0 90,000
Contributions (funding) to plan 140,000 185,000
Benefits paid 200,000 280,000
Actual return on plan assets 252,000 260,000
Expected rate of return on assets 6% 8%
Instructions
a.) Prepare a pension worksheet for the pension plan for 2008 & 2009
b.) For 2009, prepare the journal entry to record pension related amounts.
Click here for the solution: On January 1, 2008, Diana Peter Company has the following defined benefit pension plan balances
Tuesday, November 10, 2015
Differentiate between a defined contribution pension plan and a defined benefit pension plan
Chapter 20: Question 2
Differentiate between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.
Click here for the solution: Differentiate between a defined contribution pension plan and a defined benefit pension plan
Differentiate between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.
Click here for the solution: Differentiate between a defined contribution pension plan and a defined benefit pension plan
Mantle Company sponsors a defined benefit pension plan
P20-4 (Pension Expense, Minimum Liability, Journal Entries for 2 Years) Mantle Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2007 and 2008.
Plan assets (fair value), December 31 - 2007: $380,000 2008: $465,000
Projected benefit obligation, January 1 - 2007: $600,000 2008: $700,000
Prepaid/(accrued) pension cost balance, January 1 - 2007: (40,000) 2008: $?
Unrecognized prior service cost, January 1 - 2007: $250,000 2008: $240,000
Service cost - 2007: $60,000 2008: $90,000
Actual and expected return on plan assets – 2007: $24,000 2008: $30,000
Amortization of prior service cost - 2007: $10,000 2008: $12,000
Contributions (funding) - 2007: $110,000 2008: $120,000
Accumulated benefit obligation, December 31 - 2007: $500,000 2008: $550,000
Additional pension liability balance, January 1 - 2007: $50,000 2008: $?
Interest/settlement rate - 2007: 9% 2008: 9%
Instructions
(a) Compute pension expense for 2007 and 2008.
(b) Prepare the journal entries to record the pension expense and the company’s funding of the pension plan for both years.
(c) Compute the minimum liability for 2007 and 2008.
(d) Prepare the journal entries to record the minimum liability for both years.
Click here for the solution: Mantle Company sponsors a defined benefit pension plan
Plan assets (fair value), December 31 - 2007: $380,000 2008: $465,000
Projected benefit obligation, January 1 - 2007: $600,000 2008: $700,000
Prepaid/(accrued) pension cost balance, January 1 - 2007: (40,000) 2008: $?
Unrecognized prior service cost, January 1 - 2007: $250,000 2008: $240,000
Service cost - 2007: $60,000 2008: $90,000
Actual and expected return on plan assets – 2007: $24,000 2008: $30,000
Amortization of prior service cost - 2007: $10,000 2008: $12,000
Contributions (funding) - 2007: $110,000 2008: $120,000
Accumulated benefit obligation, December 31 - 2007: $500,000 2008: $550,000
Additional pension liability balance, January 1 - 2007: $50,000 2008: $?
Interest/settlement rate - 2007: 9% 2008: 9%
Instructions
(a) Compute pension expense for 2007 and 2008.
(b) Prepare the journal entries to record the pension expense and the company’s funding of the pension plan for both years.
(c) Compute the minimum liability for 2007 and 2008.
(d) Prepare the journal entries to record the minimum liability for both years.
Click here for the solution: Mantle Company sponsors a defined benefit pension plan
Sunday, September 27, 2015
Beale Management has a noncontributory, defined benefit pension plan
E 17-19 Record pension expense, funding, and gains and losses; determine account balances
Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2011 (the end of Beale's fiscal year), the following pension-related data were available:
Projected Benefit Obligation ($in millions)
Balance, January 1, 2011 $480
Service cost 82
Interest cost, discount rate, 5% 24
Gain due to changes in actuarial assumptions in 2011 (10)
Pension benefits paid (40)
Balance, December 31, 2011 $536
Plant Assets Balance, January 1, 2011 $500
Actual return on plan assets 40
(Expected return on plan assets, $45)
Cash Contributions 70
Pension benefits paid (40)
Balance, December 31, 2011 $570
January 1, 2011, balances:
Pension asset $20
Prior service cost-AOCI (amortization $8 per year) 48
Net gain-AOCI (any amortization over 15 years) 80
Required:
1. Prepare the 2011 journal entry to record pension expense.
2. Prepare the journal entry(s) to record any 2011 gains and losses.
3. Prepare the 2011 journal entries to record the contribution to plan assets and benefit payments to retirees.
4. Determine the balances at December 31, 2011, in the PBO, plan assets, the net gain–AOCI, and prior service cost–AOCI and show how the balances changed during 2011. [Hint: You might find T-accounts useful.]
5. What amount will Beale report in its 2011 balance sheet as a net pension asset or net pension liability for the funded status of the plan?
Click here for the solution: Beale Management has a noncontributory, defined benefit pension plan
Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2011 (the end of Beale's fiscal year), the following pension-related data were available:
Projected Benefit Obligation ($in millions)
Balance, January 1, 2011 $480
Service cost 82
Interest cost, discount rate, 5% 24
Gain due to changes in actuarial assumptions in 2011 (10)
Pension benefits paid (40)
Balance, December 31, 2011 $536
Plant Assets Balance, January 1, 2011 $500
Actual return on plan assets 40
(Expected return on plan assets, $45)
Cash Contributions 70
Pension benefits paid (40)
Balance, December 31, 2011 $570
January 1, 2011, balances:
Pension asset $20
Prior service cost-AOCI (amortization $8 per year) 48
Net gain-AOCI (any amortization over 15 years) 80
Required:
1. Prepare the 2011 journal entry to record pension expense.
2. Prepare the journal entry(s) to record any 2011 gains and losses.
3. Prepare the 2011 journal entries to record the contribution to plan assets and benefit payments to retirees.
4. Determine the balances at December 31, 2011, in the PBO, plan assets, the net gain–AOCI, and prior service cost–AOCI and show how the balances changed during 2011. [Hint: You might find T-accounts useful.]
5. What amount will Beale report in its 2011 balance sheet as a net pension asset or net pension liability for the funded status of the plan?
Click here for the solution: Beale Management has a noncontributory, defined benefit pension plan
Abbott and Abbott has a noncontributory, defined benefit pension plan
E 17-10 Determine pension expense
Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2011, Abbott and Abbott received the following information:
($in millions)
Projected Benefit Obligation
Balance, January 1 $120
Service cost 20
Interest cost 12
Benefits paid (9)
Balance, December 31 $143
Plant Assets
Balance, January 1 $80
Actual return on plan assets 9
Contribution 2011 20
Benefits paid (9)
Balance, December 31 $100
The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss AOCI on January 1, 2011.
Required:
Determine Abbott and Abbott’s pension expense for 2011. Prepare the journal entries to record Abbott and Abbott’s pension expense, funding, and payment for 2011.
Click here for the solution: Abbott and Abbott has a noncontributory, defined benefit pension plan
Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2011, Abbott and Abbott received the following information:
($in millions)
Projected Benefit Obligation
Balance, January 1 $120
Service cost 20
Interest cost 12
Benefits paid (9)
Balance, December 31 $143
Plant Assets
Balance, January 1 $80
Actual return on plan assets 9
Contribution 2011 20
Benefits paid (9)
Balance, December 31 $100
The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss AOCI on January 1, 2011.
Required:
Determine Abbott and Abbott’s pension expense for 2011. Prepare the journal entries to record Abbott and Abbott’s pension expense, funding, and payment for 2011.
Click here for the solution: Abbott and Abbott has a noncontributory, defined benefit pension plan
Sunday, September 13, 2015
Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2011
E 17-27 Postretirement benefits; components of postretirement benefit expense
Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2011:
Service cost 124
Accumulated postretirement benefit obligation, Jan 1 700
Prior service cost AOCI 50
Prior service cost AOCI none
Net gain AOCI (2011 amort, 1) 91
retiree benefits paid (end of year) 87
contribution to health care benefit fund (end of year) 185
Discount rate 7%
Required:
1. Determine the postretirement benefit expense for 2011.
2. Prepare the appropriate journal entries to record the postretirement benefit expense, funding, and retiree benefits for 2011.
Click here for the solution: Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2011
Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2011:
Service cost 124
Accumulated postretirement benefit obligation, Jan 1 700
Prior service cost AOCI 50
Prior service cost AOCI none
Net gain AOCI (2011 amort, 1) 91
retiree benefits paid (end of year) 87
contribution to health care benefit fund (end of year) 185
Discount rate 7%
Required:
1. Determine the postretirement benefit expense for 2011.
2. Prepare the appropriate journal entries to record the postretirement benefit expense, funding, and retiree benefits for 2011.
Click here for the solution: Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2011
Tuesday, September 8, 2015
BIKE Company starts with $3,000 cash to finance its business plan to produce bike helmets with a simple assembly process
Understanding Revenue Recognition
For this assignment, turn to page 364 in your textbook (Chapter 6 of Financial Statements Analysis), and complete Case 6-1, Understanding Revenue Recognition.
BIKE Company starts with $3,000 cash to finance its business plan to produce bike helmets with a simple assembly process. During the first month of business the company signs sales contracts for 1,300 units (sales price of $9 per unit), produces 1,200 units (production cost of $7 per unit), ships 1,100 units, and collects in full for 900 units. Production costs are paid at the time of production. The company has only two other costs:
This is the entire problem. Do you think it will be completed by tonight? Sorry but i need it by then.
1. Commission of 10% of the selling price when the company collects from the customer;
2. Shipping costs of $0.20 per unit paid at time of shipment. Selling price and all costs per unit have been constant and are likely to remain the same.
A. Prepare comprehensive (side by side) balance sheets and income statements for the first month of BIKE Company for each of the following three alternatives:
1. Revenue is recognized at the time of shipment
2. Revenue is recognized at the time of collection
3. Revenue is recognized at the time of production
Note: net income for each of the three alternatives is (1) $990, (2) $810, and (3) $1080 respectively.
B. The method where revenue is recognized at the time of collection, known as the installment method, is except the bull for financial reporting in unusual and special cases. Why is BIKE Company likely to prefer this method for tax purposes? (one line simple answer)
C. Comment on the usefulness of the installment method for a credit analyst is using both the balance sheet and income statement.
Click here for the solution: BIKE Company starts with $3,000 cash to finance its business plan to produce bike helmets with a simple assembly process
For this assignment, turn to page 364 in your textbook (Chapter 6 of Financial Statements Analysis), and complete Case 6-1, Understanding Revenue Recognition.
BIKE Company starts with $3,000 cash to finance its business plan to produce bike helmets with a simple assembly process. During the first month of business the company signs sales contracts for 1,300 units (sales price of $9 per unit), produces 1,200 units (production cost of $7 per unit), ships 1,100 units, and collects in full for 900 units. Production costs are paid at the time of production. The company has only two other costs:
This is the entire problem. Do you think it will be completed by tonight? Sorry but i need it by then.
1. Commission of 10% of the selling price when the company collects from the customer;
2. Shipping costs of $0.20 per unit paid at time of shipment. Selling price and all costs per unit have been constant and are likely to remain the same.
A. Prepare comprehensive (side by side) balance sheets and income statements for the first month of BIKE Company for each of the following three alternatives:
1. Revenue is recognized at the time of shipment
2. Revenue is recognized at the time of collection
3. Revenue is recognized at the time of production
Note: net income for each of the three alternatives is (1) $990, (2) $810, and (3) $1080 respectively.
B. The method where revenue is recognized at the time of collection, known as the installment method, is except the bull for financial reporting in unusual and special cases. Why is BIKE Company likely to prefer this method for tax purposes? (one line simple answer)
C. Comment on the usefulness of the installment method for a credit analyst is using both the balance sheet and income statement.
Click here for the solution: BIKE Company starts with $3,000 cash to finance its business plan to produce bike helmets with a simple assembly process
Sunday, September 6, 2015
The City of Sweetwater maintains an Employees’ Retirement Fund, a single-employer, defined benefit plan that provides annuity and disability benefits
7-13 The City of Sweetwater maintains an Employees’ Retirement Fund, a single-employer, defined benefit plan that provides annuity and disability benefits. The fund is financed by actuarially determined contributions from the city’s General Fund and by contributions from employees. Administration of the retirement fund is handled by General Fund employees, and the retirement fund does not bear any administrative expenses. The Statement of Net Assets for the Employees’ Retirement Fund as of July 1, 2011, is shown here:
CITY OF SWEETWATER
Employees' Retirement Fund
Statement of Net Assets
As of July 1, 2011
Assets
Cash $ 50,000
Accrued interest receivable 135,000
Investments, at fair value:
Bonds 4,500,000
Common stocks 1,300,000
Total assets 5,985,000
Liabilities
Accounts payable and accrued expenses 350,000
Net assets held in trust for preparation for benefits $5,635,000
During the year ended June 30, 2012, the following transaction occurred:
The interest receivable on investments was collected in cash.
Member contributions in the amount of $400,000 were received in cash. The city’s General Fund also contributed $600,000 in cash.
Annuity benefits of $700,000 and disability benefits of $150,000 were recorded as liabilities.
Accounts payable and accrued expenses in the amount of $900,000 were paid in cash.
Interest income of $240,000 and dividends in the amount of $40,000 were received in cash. In addition, bond interest income of $140,000 was accrued at year-end.
Refunds of $130,000 were made in cash to terminated, nonvested participants.
Common stocks, carried at a fair value of $500,000, were sold for $480,000. That $480,000, plus an additional $300,000, was invested in stocks.
At year-end, it was determined that the fair value of stocks held by the pension plan had decreased by $50,000; the fair value of bonds had increased by $30,000.
Nominal accounts for the year were closed.
a.) Record the transactions on the books of the Employees’ Retirement Fund.
b.) Prepared a Statement of Changes in Net Assets for the Employees’ Retirement Fund for the Year Ended June 30, 2012.
c.) Prepare a Statement of Net Assets for the Employees’ Retirement Fund as of June 30, 2012.
Click here for the solution: The City of Sweetwater maintains an Employees’ Retirement Fund, a single-employer, defined benefit plan that provides annuity and disability benefits
CITY OF SWEETWATER
Employees' Retirement Fund
Statement of Net Assets
As of July 1, 2011
Assets
Cash $ 50,000
Accrued interest receivable 135,000
Investments, at fair value:
Bonds 4,500,000
Common stocks 1,300,000
Total assets 5,985,000
Liabilities
Accounts payable and accrued expenses 350,000
Net assets held in trust for preparation for benefits $5,635,000
During the year ended June 30, 2012, the following transaction occurred:
The interest receivable on investments was collected in cash.
Member contributions in the amount of $400,000 were received in cash. The city’s General Fund also contributed $600,000 in cash.
Annuity benefits of $700,000 and disability benefits of $150,000 were recorded as liabilities.
Accounts payable and accrued expenses in the amount of $900,000 were paid in cash.
Interest income of $240,000 and dividends in the amount of $40,000 were received in cash. In addition, bond interest income of $140,000 was accrued at year-end.
Refunds of $130,000 were made in cash to terminated, nonvested participants.
Common stocks, carried at a fair value of $500,000, were sold for $480,000. That $480,000, plus an additional $300,000, was invested in stocks.
At year-end, it was determined that the fair value of stocks held by the pension plan had decreased by $50,000; the fair value of bonds had increased by $30,000.
Nominal accounts for the year were closed.
a.) Record the transactions on the books of the Employees’ Retirement Fund.
b.) Prepared a Statement of Changes in Net Assets for the Employees’ Retirement Fund for the Year Ended June 30, 2012.
c.) Prepare a Statement of Net Assets for the Employees’ Retirement Fund as of June 30, 2012.
Click here for the solution: The City of Sweetwater maintains an Employees’ Retirement Fund, a single-employer, defined benefit plan that provides annuity and disability benefits
Distinguish between a strategic plan and a tactical plan
8-3 Distinguish between a strategic plan and a tactical plan. How are these two plans related?
Click here for the solution: Distinguish between a strategic plan and a tactical plan
Click here for the solution: Distinguish between a strategic plan and a tactical plan
In keeping with its long-term share repurchase plan, 2,000 shares were retired on July 1
In keeping with its long-term share repurchase plan, 2,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2011, was $2,100,000. The income tax rate is 40%.
As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows:
The market price of the common stock averaged $32 per share during 2011.
On July 12, 2009, Dow issued $800,000 of convertible 10% bonds at face value. Each $1,000 bond is convertible into 30 common shares (adjusted for the stock dividend).
Required:
Compute Dow's basic and diluted earnings per share for the year ended December 31, 2011.
Click here for the solution: In keeping with its long-term share repurchase plan, 2,000 shares were retired on July 1
As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows:
The market price of the common stock averaged $32 per share during 2011.
On July 12, 2009, Dow issued $800,000 of convertible 10% bonds at face value. Each $1,000 bond is convertible into 30 common shares (adjusted for the stock dividend).
Required:
Compute Dow's basic and diluted earnings per share for the year ended December 31, 2011.
Click here for the solution: In keeping with its long-term share repurchase plan, 2,000 shares were retired on July 1
Wednesday, September 2, 2015
The Winthrop Company is constructing a five-year plan
The Winthrop Company is constructing a five-year plan. The firm’s ACP is currently 90 days, while its inventory turnover ratio is 3 X based on COGS. The company has forecast aggressive revenue growth along with efficiency improvements in manufacturing and credit and collections as follows. (Year 0 is the current year)
Year
0 1 2 3 4 5
Revenue ($000) $50.0 $57.5 $66.0 $76.0 $87.5 $100.0
Cost ratio 60% 59% 58% 57% 56% 55%
ACP (days) 90 70 60 50 45 40
Inventory turnover 3X 4X 5X 6X 6.5X 7X
For each planned year:
a. Calculate the COGS.
b. Calculate the A/R balance at year end.
c. Calculate the inventory balance at year end.
Click here for the solution: The Winthrop Company is constructing a five-year plan
Year
0 1 2 3 4 5
Revenue ($000) $50.0 $57.5 $66.0 $76.0 $87.5 $100.0
Cost ratio 60% 59% 58% 57% 56% 55%
ACP (days) 90 70 60 50 45 40
Inventory turnover 3X 4X 5X 6X 6.5X 7X
For each planned year:
a. Calculate the COGS.
b. Calculate the A/R balance at year end.
c. Calculate the inventory balance at year end.
Click here for the solution: The Winthrop Company is constructing a five-year plan
Livetree Ltd. Is developing a detailed financial plan for next year and expects to have the following fixed asset accounts by the end of this year ($000)
Livetree Ltd. Is developing a detailed financial plan for next year and expects to have the following fixed asset accounts by the end of this year ($000).
Gross $45,789
Accumulated Depreciation (26,328)
Net Fixed Assets $19,461
The capital plan already completed calls for expenditures of $7,042,000 on new equipment next year, which will be depreciated straight line over a 10-year period without a half-year convention. Assets currently on the books will depreciate by $4,258,000 next year. Develop Livetree’s ending fixed asset balances for the planned year.
Click here for the solution: Livetree Ltd. Is developing a detailed financial plan for next year and expects to have the following fixed asset accounts by the end of this year ($000)
Gross $45,789
Accumulated Depreciation (26,328)
Net Fixed Assets $19,461
The capital plan already completed calls for expenditures of $7,042,000 on new equipment next year, which will be depreciated straight line over a 10-year period without a half-year convention. Assets currently on the books will depreciate by $4,258,000 next year. Develop Livetree’s ending fixed asset balances for the planned year.
Click here for the solution: Livetree Ltd. Is developing a detailed financial plan for next year and expects to have the following fixed asset accounts by the end of this year ($000)
Friday, August 21, 2015
The executive officers of Coach Corp have a performance-based compensation plan
CA16-2 (Ethical issues—compensation plan) The executive officers of Coach Corp have a performance-based compensation plan. The performance criteria of this plan is linked to growth in earnings per share. When annual EPS growth is 12%, the Coach executives earn 100% of the shares; ifgrowth is 16%, they earn 125%. If EPS growth is lower than 8%, the executives receive no additonal compensation.
In 2006, Joanna Becker, the controller of Coach, reviews year-end estimates of bad debt expense and warranty expense. She calculates the EPS growth at 15%. Peter Reiser, a member of the executive group, remarks over lunch one day that the estimate of bad debt expense might be decreased, increasing EPS growth to 16.1%. Becker is not sure she should do this because she believes that the current estimate of bad debts is sound. On the other hand, she recognizes that a great deal of subjectivity is involved in the computation.
Answer the following:
a) What, if any, is the ethical dilemma for Becker?
b) Should Becker's knowledge of the compensation plan be a factor that influences her estimate?
c) How should Becker respond to Reiser's request?
Click here for the solution: The executive officers of Coach Corp have a performance-based compensation plan
In 2006, Joanna Becker, the controller of Coach, reviews year-end estimates of bad debt expense and warranty expense. She calculates the EPS growth at 15%. Peter Reiser, a member of the executive group, remarks over lunch one day that the estimate of bad debt expense might be decreased, increasing EPS growth to 16.1%. Becker is not sure she should do this because she believes that the current estimate of bad debts is sound. On the other hand, she recognizes that a great deal of subjectivity is involved in the computation.
Answer the following:
a) What, if any, is the ethical dilemma for Becker?
b) Should Becker's knowledge of the compensation plan be a factor that influences her estimate?
c) How should Becker respond to Reiser's request?
Click here for the solution: The executive officers of Coach Corp have a performance-based compensation plan
Thursday, August 13, 2015
The following information is available for the pension plan of Radcliffe Company for the year 2012
E20-1 (Pension Expense, Journal Entries) The following information is available for the pension plan of Radcliffe Company for the year 2012.
Actual and expected return on plan assets $15,000
Benefits paid to retirees $40,000
Contributions (funding) $90,000
Interest/discount rate 10%
Prior service cost amortization $8,000
Projected benefit obligation, January 1, 2012 $500,000
Service cost $60,000
Instructions
(a) Compute pension expense for the year 2012.
(b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2012.
Click here for the solution: The following information is available for the pension plan of Radcliffe Company for the year 2012
Actual and expected return on plan assets $15,000
Benefits paid to retirees $40,000
Contributions (funding) $90,000
Interest/discount rate 10%
Prior service cost amortization $8,000
Projected benefit obligation, January 1, 2012 $500,000
Service cost $60,000
Instructions
(a) Compute pension expense for the year 2012.
(b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2012.
Click here for the solution: The following information is available for the pension plan of Radcliffe Company for the year 2012
Sunday, July 12, 2015
Gordon Company sponsors a defined benefit pension plan
(Pension Expense, Journal Entries for 2 Years) Gordon Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2010 and 2011.
2010 2011
Plan assets (fair value), December 31 $699,000 $849,000
Projected benefit obligation, January 1 700,000 800,000
Pension asset/Liability, January 1 140,000 Cr. ?
Prior service cost, January 1 250,000 240,000
Service cost 60,000 90,000
Actual and expected return on plan assets 24,000 30,000
Amortization of prior service cost 10,000 12,000 Contributions (funding) 115,000 120,000
Accumulated benefit obligation, December 31 500,000 550,000
Interest/settlement rate 9% 9%
(a) Compute pension expense for 2010 and 2011.
(b) Prepare the journal entries to record the pension expense and the company’s funding of the pension plan for both years.
Click here for the solution: Gordon Company sponsors a defined benefit pension plan
2010 2011
Plan assets (fair value), December 31 $699,000 $849,000
Projected benefit obligation, January 1 700,000 800,000
Pension asset/Liability, January 1 140,000 Cr. ?
Prior service cost, January 1 250,000 240,000
Service cost 60,000 90,000
Actual and expected return on plan assets 24,000 30,000
Amortization of prior service cost 10,000 12,000 Contributions (funding) 115,000 120,000
Accumulated benefit obligation, December 31 500,000 550,000
Interest/settlement rate 9% 9%
(a) Compute pension expense for 2010 and 2011.
(b) Prepare the journal entries to record the pension expense and the company’s funding of the pension plan for both years.
Click here for the solution: Gordon Company sponsors a defined benefit pension plan
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