Question 1.
Santo Corp., a company whose stock is publicly traded, provides a noncontributory defined benefit pension plan for its employees. The company's actuary has provided the following information for the year ended December 31, 2008:
Projected benefit obligation $1,200,000
Accumulated benefit obligation 1,050,000 Fair value of plan assets 1,650,000
Service cost 480,000
Interest on projected benefit obligation 48,000
Amortization of unrecognized prior service cost 120,000
Expected and actual return on plan assets 165,000
The market-related asset value equals the fair value of plan assets. Prior contributions to the defined benefit pension plan equaled the amount of net periodic pension cost accrued for the previous year end. No contributions have been made for 2008 pension cost. In its December 31, 2008 balance sheet, Santo should report an accrued pension cost of?___________________
Use the following information for question 2.
Heerey Co. provides retirement benefits to employees through a funded defined benefit pension plan. The company administering the plan provided the following information for the year ended December 31, 2008:
Plan assets at fair value $1,600,000
Accumulated benefit obligation 1,780,000
Pension expense 400,000
Employer's contribution, 12/1/08 480,000
Unrecognized prior service cost 40,000
On December 31, 2007, the accrued/prepaid pension cost account had a debit balance of $60,000. Assume that the fair value of the plan assets is equal to the market-related asset value. Prior to 2008, the fair value of plan assets exceeded the accumulated benefit obligation.
Question 2.
In Heerey's December 31, 2008 balance sheet, what is the amount of the minimum pension liability?____________________________
Question 3.
Jensen, Inc. maintains a defined benefit pension plan for its employees. As of December 31, 2008, the market value of the plan assets is less than the accumulated benefit obligation. The projected benefit obligation exceeds the accumulated benefit obligation. In its balance sheet as of December 31, 2008, Jensen should report a minimum liability in the amount of the
a. excess of the projected benefit obligation over the value of the plan assets.
b. excess of the accumulated benefit obligation over the value of the plan assets.
c. projected benefit obligation.
d. accumulated benefit obligation.
Use the following information for question 4.
Kimm, Inc. acquired 30% of Carne Corp.'s voting stock on January 1, 2006 for $360,000. During 2006, Carne earned $150,000 and paid dividends of $90,000. Kimm's 30% interest in Carne gives Kimm the ability to exercise significant influence over Carne's operating and financial policies. During 2007, Carne earned $180,000 and paid dividends of $60,000 on April 1 and $60,000 on October 1. On July 1, 2007, Kimm sold half of its stock in Carne for $237,000 cash.
Question 4:
The carrying amount of this investment in Kimm's December 31, 2006 balance sheet should be
a. $360,000.
b. $378,000.
c. $405,000.
d. $333,000.
Question 5:
On January 1, 2007, Sloane Co. purchased 25% of Orr Corp.'s common stock; no goodwill resulted from the purchase. Sloane appropriately carries this investment at equity and the balance in Sloane's investment account was $480,000 at December 31, 2007. Orr reported net income of $300,000 for the year ended December 31, 2007, and paid common stock dividends totaling $120,000 during 2007. How much did Sloane pay for its 25% interest in Orr?
a. $435,000.
b. $510,000.
c. $525,000.
d. $585,000.