Accounting problem
diaech
acct_3230_fall_2014_exercise_3-3.docxAccounting 3230
Part I:
Leonard Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 20X2 and 20X3.
|
|
20X2 |
20X3 |
|
Projected benefit obligation, January 1 |
$ 600,000 |
|
|
Plan Assets(fair value and market-related value), January 1 |
410,000 |
|
|
Pension Asset/Liability, January 1 |
190,000 CR. |
|
|
Prior Service Cost, January 1 |
160,000 |
|
|
Service cost |
40,000 |
$ 59,000 |
|
Settlement rate |
10% |
10% |
|
Expected rate of return |
10% |
10% |
|
Actual return on plan assets |
36,000 |
61,000 |
|
Amortization of prior service cost |
70,000 |
50,000 |
|
Annual Contributions |
97,000 |
81,000 |
|
Benefits paid to retirees |
31,500 |
54,000 |
|
Increase in projected benefit obligation due to changes in actuarial assumptions |
87,000 |
0 |
|
Accumulated benefit obligation at December 31 |
721,800 |
789,000 |
|
Average service life of all employees |
|
20 years |
|
Vested benefit obligation at December 31 |
|
464,000 |
(a) Prepare a pension worksheet presenting both years 20X2 and 20X3 and accompanying computations and amortization of the loss (20X3) 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) For 20X3, indicate the pension amounts reported in the financial statements.
Part II:
The accounting records of Scotty inc show the following data for 20X2.
1. Life insurance expense of officers was $9,000.
2. Equipment was acquired in early January for $300,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes Scotty used a 30% rate to calculate depreciation.
3. Interest revenue on State of New York bonds totaled $4,000.
4. Product warranties in 20X2 were $10,000. The reminder is estimated to be paid evenly in 20X3 and 2014.
5. Sales on accrual basis were $100,000. For tax purposes, $75,000 was recorded on the installments sales method.
6. Fines incurred for pollution violations were $4,200.
7. Pretax financial income was $750,000. The tax rate is 30%.
Instructions:
(a) Prepare a schedule starting with Pretax financial income in 20X2 and ending with taxable income in 20X2.
(b) Prepare the journal entry for 20X2 to record income taxes payable, income tax expense, and deferred income taxes.
