Question 1: Ferreri Company received the following selected information from its pension plan trustee concerning the operation of the company's defined benefit pension plan for the year ended December 31, 2014.
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January 1, 2014
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December 31, 2014
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Projected benefit obligation
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$1,439.500
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$1,468,100
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|
Market-related and fair value of plan assets
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865.000
|
1,293,400
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Accumulated benefit obligation
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1,400,700
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1,511,540
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|
Accumulated OCI (G/L)-Net gain
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0
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(193,950 )
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The service cost component of pension expense for employee services rendered in the current year amounted to 578,600 and the amortization of prior service cost was 5110,840. The company's actual funding (contributions) of the plan in 2014 amounted to $341,900. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of 51,108,400 on January 1. 2014. Assume no benefits paid in 2014.
Determine the amounts of the components of pension expense that should be recognized by the company in 2014. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Prepare the journal entry to record pension expense and the employer's contribution to the pension plan in 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Indicate the pension-related amounts that would be reported on the income statement and the balance sheet for Ferreri Company for the year 2014.
Question 2:
Gottschalk Company sponsors a defined benefit plan for its 100 employees. On January 1, 2014, the company's actuary provided the following information.
| Accumulated other comprehensive loss (P$C) |
$153,000 |
| Pension plan assets (fair value and market-related asset value) |
190,500 |
| Accumulated benefit obligation |
264,200 |
| Projected benefit obligation |
383 |
The average remaining service period for the participating employees is 10 years. All employees are expected to receive benefits under the Ilan. On December 31, 2014, the actuary calculated that the present value of future benefits earned for employee services rendered in the current year amounted to 556,000: the projected benefit obligation was 5496,100: fair value of pension assets was 5277,200; the accumulated benefit obligation amounted to 5371,800.
The expected return on plan assets and the discount rate on the projected benefit obligation were both 10%.
The actual return on plan assets is 516,700. The company's current year's contribution to the pension plan amounted to 570,000. No benefits were paid during the year.
Determine the components of pension expense that the company would recognize in 2014.
Prepare the Journal entry to record the pension expense and the company's funding of the pension plan in 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Compute the amount of the 2014 increase/decrease In gains or losses and the amount to be amortized in 2014 and 2015.
Indicate the pension amounts reported in the financial statement as of December 31, 2014. (Enter negative amounts using either a negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000).)
Question 3:
Indiana Jones Corporation enters into a 7-year lease of equipment on January 1, 2014, which requires 7 annual payments of $37,050 each, beginning January 1, 2014. In addition, Indiana Jones guarantees the lessor a residual value of $18,590 at lease-end. The equipment has a useful life of 7 years.
Prepare Indiana Jones' January 1, 2014, journal entries assuming an interest rate of 11%.
Question 4:
On January 1, 2014, Burke Corporation signed a 6-year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $9,781 at the beginning of each year, starting January 1, 2014. The machine has an estimated useful life of 7 years and a $4,880 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke's incremental borrowing rate is 9%, and the lessor's implicit rate is unknown.
Compute the present value of the minimum lease payments.
Prepare all necessary journal entries for Burke for this lease through January 1, 2015.
Assume that on January 1, 2014, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement.
1. The agreement requires equal rental payments of $72,000 beginning on January 1, 2014.
2. The fair value of the bilking on January 1, 2014 is $440,000.
3. The building has an estimated economic life of 12 years, with an unguaranteed residual value of $10,000. Kimberly-Clark depredates similar buildings on the straight-tine method.
4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.
5. Kimberly-Clark's incremental borrowing rate is 12% per year. The lessees implicit rate is not known by Kimberly-Clark.
6. The yearly rental payment includes $2,471 of executory costs related to taxes on the property.
Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and 2015. Kimberly-Clark's corporate year-end is December 31.
Question 5:
The following facts pertain to a noncancelade lease agreement between Mooney Leasing Company and Rode Company, a lessee.
| Inception date: |
1-May-14 |
| Annual lease payment due at the beginning of each year, beginning with May 1, 2014 |
$19,687.57 |
| Bargain-purchase option price at end of lease term |
$3,550.00 |
| Lease terrn |
5 years |
| Economic life of leased equipment |
10 years |
| Lessor's cost |
$66,500.00 |
| Fair value of asset at May 1, 2014 |
$81,500.00 |
| Lessor's implicit rate |
12% |
| Lessee's incremental borrowing rate |
12% |
The collectability of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the cods yet to be incurred by the lessor. The lessee assumes responsibility for all executory cods.
Prepare a lease amortization schedule for Rode Company for the 5-year lease term.
Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and 2015. Rode's annual accounting period ends on December 31. Reversing entries are used by Rode.
Question 6:
Gordon Company started operations on January 1, 2009, and has used the FIFO method of inventory valuation since its inception. In 2014. it decides to switch to the average cost method. You are provided with the following information.
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Net Income |
Retained Earnings(Ending Balance) |
|
Under FIFO |
Under Average - Cost |
Under FIFO |
| 2009 |
5,101,720 |
$92,110 |
$100,300 |
| 2010 |
69,750 |
64,230 |
160,480 |
| 2011 |
89,650 |
79,420 |
235,400 |
| 2012 |
120,750 |
130,800 |
339,040 |
| 2013 |
300,480 |
292,190 |
590,990 |
| 2014 |
304,630 |
310,630 |
779,780 |
(a) What is the beginning retained earnings balance at January 1, 2011, if Gordon prepares comparative financial statements starting in 2011?
(b) what is the beginning retained earnings balance at January 1, 2014, d Gordon prepares comparative financial statements starting in 2014?
(c) what is the beginning retained earnings balance at January 1, 2015, if Gordon prepares single-period financial statements for 2015?
Question 7:
Peter Henning Tool Company's December 31 year-end financial statements contained the knowing errors.
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31-Dec-14 |
31-Dec-15 |
| Ending inventory |
$9.041 understated |
$7,081 overstated |
| Depreciation expense |
$2,611 understated |
|
An insurance premium of $56,490 was prepaid in 2014 covering the years 2014, 2015, and 2016. The entire amount was charged to expense in 2014. In addition, on December 31, 2015, fully depreciated machinery was sold for $18,600 cash, but the entry was not recorded until 2016. There were no other errors during 2014 or 2015, and no corrections have been made for any of the errors. (Ignore income tax considerations.)
(a) Compute the total effect of the errors on 2015 net income.
(b) Compute the total effect of the errors on the amount of Henning's working capital at December 31, 2015.
(c) Compute the total effect of the errors on the balance of Henning's retained earnings at December 31, 2015.
Question 8:
The income statement of Vince Gill Company is shown below.
VINCE GILL COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2014
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Sales revenue Cost of goods sold
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$6,999,000
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Beginning inventory
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$1,893,530
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Purchases
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4,482,800
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Goods available for sale
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6,376,330
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Ending inventory
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1,604,940
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Cost of goods sold
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4,771,390
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Gross profit
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2,227,610
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Operating expenses
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Selling expenses
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453,520
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Administrative expenses
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699,230
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1,152,750
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Net income
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$1,074,860
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Additional information:
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Additional information:
1. Accounts receivable decreased $316,950 during the year.
2. Prepaid expenses increased $171,400 during the year.
3. Accounts payable to suppliers of merchandise decreased $281,790 during the year.
4. Accrued expenses payable decreased $117,470 during the year.
5. Administrative expenses include depreciation expense of $53,400.
Prepare the operating activities section of the statement of cash flows using the direct method.
Question 9:
The accounts below appear in the ledger of Anita Baker Company.
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Jan. 1, 2014 Aug. 15 Dec. 31
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Credit Balance
Dividends (cash)
Net Income for 2014
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$14,340
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$50,110
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$41,140 26,800 76,910
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Jan. 1, 2014
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Debit Balance
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5140,220
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Aug. 3
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Purchase of Equipment
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$62,210
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202,430
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Sept. 10
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Cost of Equipment Constructed
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47,850
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250,280
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Nov. 15
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Equipment Sold
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$66,560
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183,720
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Jan. 1, 2014
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Credit Balance
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$83,090
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Apr. 8
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Extraordinary Repairs
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$21,340
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61,750
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Nov. IS
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Accum. Depreciation on Equipment Sold
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25,230
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|
36,520
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Dec. 31
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Depredation for 2014
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$16,830
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53,350
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From the postings in the accounts above, indicate how the information is reported on a statement of cash flows by preparing a partial statement of cash flows using the indirect method. The loss on sale of equipment (November 15) was $5,640.
Question 10:
The comparative balance sheets for Hinckley Corporation show the following information.
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December 31
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2014
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2013
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Cash
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$38,790
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$14,770
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Accounts receivable
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14,410
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11,810
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Inventory
|
14,370
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9,930
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Investments
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-0-
|
3,790
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Buildings
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-0-
|
30,480
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Equipment
|
52,720
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21,990
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Patents
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5,530
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7,210
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$125,820
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$99,980
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Allowance for doubtful accounts
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$3,370
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$4,690
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Accumulated depreciation-equipment
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2,140
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4,590
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Accumulated depreciation-building
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-0-
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6,180
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Accounts payable
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5,530
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3,790
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Dividends payable
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-0-
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4,340
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Notes payable, short-term (nontrade)
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2,540
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3,960
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Long-term notes payable
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31,740
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25,730
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Common stock
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43,130
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33,420
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Retained earnings
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37,370
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13,280
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$125,820
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$99,980
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Additional data related to 2014 are as follows.
1. Equipment that had cost $12,260 and was 40% depreciated at time of disposal was sold for $4,070.
2. $9,710 of the long-term note payable was paid by issuing common stock.
3. Cash dividends paid were $4,340.
4. On January 1, 2014, the building was completely destroyed by a flood Insurance proceeds on the building were 531,900 (net of $2,910 taxes).
5. Investments (available-for-sale) were sold at $1,430 above their cost. The company has made simiar sales and investments in the past.
6. Cash was paid for the acquisition of equipment.
7. A long-term note for $15,720 was Issued for the acquisition of equipment.
8. interest of $3,240 and income taxes of $6,700 were paid in cash.
Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country.
Question 11:
Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2014. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2009. The client provides you with the information below.
ALMADEN CORPORATION
BALANCE SHEET
DECEMBER 31, 2014
| Assets |
Liabillities |
| Current assets |
$1,888,060 |
Current liabilities |
$968,350 |
| Other assets |
5,194,586 |
Long-term liabilities |
1,452,760 |
|
|
Capital |
4,661,536 |
|
$7,082,646 |
|
$7,082,646 |
An analysis of current assets discloses the following.
Cash (restricted in the amount of 5302,400 for plant expansion) $572,350
Investments in land 187,030
Accounts receivable less allowance of 530,970 482,660
Inventories (LIFO flow assumption) 646,020
$1,888,060
Other assets include:
Prepaid expenses $62,570
Plant and equipment less accumulated depreciation of 51,442,700 4,146,700
Cash surrender value of life insurance policy 85,820
Unamortized bond discount 36,576
Notes receivable (short-term) 163,100
Goodwill 253,550
Land 446,270
$5,194,586
Current liabilities include:
Accounts payable $512,420
Notes payable (due 2017) 158,920
Estimated income taxes payable 146,590
Premium on common stock 150,420
$968,350
Long- term liabilities include:
Unearned revenue $490,060
Dividends payable (cash) 200,700
8% bonds payable (due May 1, 2019) 762,000
$1,452,760
Capital includes: Retained earnings $2,817,636
Capital stock, par value 510; authorized 200,000 shares, 184,390 shares issued 1,843,900
$1,452,760
The supplementary information below is also provided.
1. On May 1, 2014, the corporation issued at 95.2, 5762,000 of bonds to finance plant expansion. The long-term bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use the straight-line method for discount amortization.
2. The bookkeeper made the following mistakes.
(a) In 2012, the ending inventory was overstated by $183,240. The ending inventories for 2013 and 2014 were correctly computed.
(b) In 2014, accrued wages in the amount of $227,240 were omitted from the balance sheet, and these expenses were not charged on the income statement.
(c) In 2014, a gain of $175,450 (net of tax) on the sale of certain plant assets was credited directly to retained earnings.
3. A major competitor has introduced a line of products that will compete directly with Almaden's primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor's line will bed comparable quality but priced 50% below Almaden's line. The competitor announced its new tine on January 14, 2015. Almaden indicates that the company will meet the lower prices that are high enough to cover variable manufacturing and selling expenses, but permit recovery of only a portion of fixed costs.
4. You learned on January 28, 2015, prior to completion of the audit, of heavy damage because of a recent fire to one of Almaden's two plants: the loss will not be reimbursed by insurance. The newspapers described the event in detail.
Analyze the above information to prepare a corrected balance sheet for Almaden in accordance with proper accounting and reporting principles. Prepare a description of any notes that might need to be prepared. The books are closed and adjustments to income are to be made through retained earnings.
Question 12:
Cineplex Corporation is a diversified company that operates in five (Efferent industries: A, B, C, D, and E. The following information relating to each segment is available for 2015.
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A
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B
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C
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D
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E
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Sales revenue
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$53,500
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$74,900
|
4582,200
|
438,600
|
454,600
|
|
Cost of goods sold
|
20,800
|
53,400
|
277,600
|
20,800
|
32,200
|
|
Operating expenses
|
9,970
|
53,500
|
244,300
|
12,150
|
18,290
|
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Total expenses
|
30,770
|
106,900
|
521,900
|
32,950
|
50,490
|
|
Operating profit (loss)
|
$22,730
|
$(32,000)
|
$60,300
|
$5,650
|
$4,110
|
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identifiable assets
|
$36,600
|
$89,600
|
4504,700
|
472,900
|
$53,400
|
Sales of segments 13 and C included intersegment sales of $22,710 and 4102,050, respectively.
(a) Determine which of the segments are reportable based on the:
(b) Prepare the necessary disclosures required by GAAP.
(b) Prepare the necessary discourses required by GAAP.