Problem 17-6 Determine the PBO; plan assets; pension expense; two years [LO17-3, 17-4, 17-6]
Stanley-Morgan Industries adopted a defined benefit pension plan
on April 12, 2018. The provisions of the plan were not made
retroactive to prior years. A local bank, engaged as trustee for
the plan assets, expects plan assets to earn a 10% rate of return.
A consulting firm, engaged as actuary, recommends 6% as the
appropriate discount rate. The service cost is $250,000 for 2018
and $360,000 for 2019. Year-end funding is $260,000 for 2018 and
$270,000 for 2019. No assumptions or estimates were revised during
2018.
Required:
Calculate each of the following amounts as of both December 31, 2018, and December 31, 2019: (Enter your answers in thousands (i.e., 200,000 should be entered as 200).)
In: Accounting
WILL RATE.
The records for Bosch Co. show this data for 2018:
| ● | Gross profit on installment sales recorded on the books was $480,000. Gross profit from collections of installment receivables was $320,000. | |
| ● | Life insurance on officers was $3,800. | |
| ● | Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Bosch may deduct 14% for 2018. | |
| ● | Interest received on tax exempt Iowa State bonds was $9,000. | |
| ● | The estimated warranty liability related to 2018 sales was $21,600. Repair costs under warranties during 2018 were $13,600. The remainder will be incurred in 2019. | |
| ● |
Pretax financial income is $700,000. The tax rate is 30%. Prepare a schedule starting with pretax financial income and compute taxable income. Prepare the journal entry to record income taxes for 2018. |
In: Accounting
The Prince-Robbins partnership has the following capital account balances on January 1, 2018: Prince, Capital $ 170,000 Robbins, Capital 160,000 Prince is allocated 70 percent of all profits and losses with the remaining 30 percent assigned to Robbins after interest of 10 percent is given to each partner based on beginning capital balances. On January 2, 2018, Jeffrey invests $97,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 10 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2018, the partnership reports a net income of $45,000. Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018 . Determine the allocation of income at the end of 2018.
In: Accounting
On January 1, 2018, Whittington Stoves issued $810 million of its 10% bonds for $746 million. The bonds were priced to yield 12%. Interest is payable semiannually on June 30 and December 31. Whittington records interest at the effective rate and elected the option to report these bonds at their fair value. One million dollars of the increase in fair value was due to a change in the general (risk-free) rate of interest. On December 31, 2018, the fair value of the bonds was $762 million as determined by their market value on the NYSE.
Required:
1. Prepare the journal entry to record interest on June 30, 2018
(the first interest payment).
2. Prepare the journal entry to record interest on December 31,
2018 (the second interest payment).
3. Prepare the journal entry to adjust the bonds to their fair
value for presentation in the December 31, 2018, balance sheet.
In: Accounting
The following selected account balances were taken from ABC Company's accounting records during 2018: January 1, 2018 December 31, 2018 Inventory 69,000 35,000 Accounts payable 47,000 41,000 Long-term notes payable 165,000 130,000 Income tax payable 11,000 7,000 Investments 89,000 68,000 Accounts receivable 77,000 84,000 Land 60,000 89,000 Common stock 100,000 175,000 Retained earnings 26,000 41,000 The following information was taken from ABC Company's 2018 income statement: Sales revenue $422,000 Cost of goods sold 361,000 Gain on sale of investments 11,000 Income tax expense 22,000 Net income $ 50,000 Calculate the net cash flow from financing activities for 2018. If your answer is negative, place a minus sign in front of your answer (e.g., -1234).
In: Accounting
In 2018, Borland Semiconductors entered into the transactions described below. In 2015, Borland had issued 175 million shares of its $1 par common stock at $30 per share.
Required: Assuming that Borland retires shares it reacquires, record the appropriate journal entry for each of the following transactions: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
On January 2, 2018, Borland reacquired 9 million shares at $28.00 per share.
On March 3, 2018, Borland reacquired 9 million shares at $33 per share.
On August 13, 2018, Borland sold 1 million shares at $38 per share.
On December 15, 2018, Borland sold 2 million shares at $33 per share.
In: Accounting
Hall Corp. purchases a new machine on October 1, 2018. Year end is December 31.
Purchase price 100,000
Residual Value 5,000
Useful life 3 years
Estimated working hours during useful life 7,500
Machine usage in 2018 1,500
Machine usage in 2019 3,750
Machine usage in 2020 2,250
1. Calculate depreciation expense using the activity method for 2018
2. Prepare Hall Corp's journal entry to record 2018 depreciation on December 31, 2018
3. Calculate depreciation expense using the activity method for 2019
4. Prepare Hall Corp's journal entry to record 2019 depreciation on December 31, 2019
5. Calculate depreciation expense using the activity method for 2020
6. Prepare Hall's journal entry to record 2020 depreciation on December 31, 2020
In: Accounting
The Prince-Robbins partnership has the following capital account balances on January 1, 2018:
Prince, Capital $ 150,000
Robbins, Capital 140,000
Prince is allocated 60 percent of all profits and losses with the remaining 40 percent assigned to Robbins after interest of 6 percent is given to each partner based on beginning capital balances.
On January 2, 2018, Jeffrey invests $85,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 6 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2018, the partnership reports a net income of $24,000.
a. Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018.
b. Determine the allocation of income at the end of 2018.
In: Accounting
You are currently employed as partner in United & Party LLC, an accounting firm. The following three different audits were performed by your team for the year ended December 31, 2018:
Peoples Shelter, a non-profit organization. Except for salaries and allowances, the company has not kept vouchers or receipts for more than 60 per cent of its expenses.
Jack Holdings, Inc. Jack Holdings is a major construction company. Jack Holdings also purchases large vacant blocks of land that it later subdivides for the construction of houses and units to compensate for the irregularity of its contracted building projects. These are then sold on its own account. Your evidence strongly shows that the apportionment of costs to houses and units sold has been kept low in order to boost profits. In your opinion, this has resulted in the overvaluation of the unsold properties. The directors of the company do not agree and maintain that the stock of properties is correctly valued.
Vacation Dreamland Ltd. Vacation Dreamland booked a major German group to perform in selected cities in the U.S.A. The contract required that Vacation Dreamland should pay the group in US dollars but, to reduce costs, it did not hedge the amounts. Subsequent to year end, the German Mark fell against the US dollar and a substantial loss relating to the group’s tour was expected. The management of Vacation Dreamland tried unsuccessfully to renegotiate the band’s contract and was not able to obtain finance to cover the expected shortfall. Vacation Dreamland cancelled the tour and expects a substantial claim from the German group. Your analysis indicate that Vacation Dreamland does not have the income, cash or other assets to sustain such a loss.
Required:
Assuming that all amounts involved are material, identify:
The most likely auditor’s opinion that you would issue on each financial report for the year ending December 31, 2018 and
Discuss the justifications for each of the opinions.
In: Accounting
Royal Ltd. manufactures equipment that is sold or leased. On 31 December 2017 Royal leased equipment to Water Ltd. for a non-cancelable lease term of three years ending 31 December 2020 at which time possession of leased asset will revert back to Royal Ltd.
The equipment cost $300,000 to manufacture and has an expected useful life of six years. Its normal sales price (fair value) is $365,760. The residual value was guaranteed by Water Ltd. for $10,000 at the end of lease term. Water Ltd. estimated the fair value of the equipment at end of lease term will be around $5,000.
Under the lease, three equal annual payments of $130,960 are due on December 31 of each year. The first payment was made on 31 December 2017. Water Ltd.’s incremental borrowing rate is 12%. Water knows the interest rate implicit in the lease payment is 10%. Both companies use straight-line depreciation and have the fiscal year ended at 31 December of each year. (Please use the discount table provided in your calculation, no decimal points in rounding, for example, 130.7 should be written as 131.)
Required:
1. The present value of the minimum lease payment (PVMLP) is _____.
2. Prepare the appropriate entries for Water Ltd. on 31 December 2017 & 2018. Indicate the date for each entry. Narratives for journal entries are not required.
3. Prepare the appropriate entries for Royal Ltd. on 31 December 2017. Narratives for journal entries are not required.
4. Prepare appropriate entries for Water Ltd. on 31 December 2020. Indicate the date for each entry. Narratives for journal entries are not required.
5. On the statement of financial position, as of 31 December 2018, the balance for current liabilities for Water Ltd. relating to the lease is ______, and noncurrent liabilities relating to the lease is ______.
In: Accounting