Reference no: EM131805818
Questions -
Q1. Basic Pension Worksheet
The following defined pension data of Rydell Corp. apply to the year 2010.
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Projected benefit obligation, 1/1/10 (before amendment)
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$560,000
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Plan assets, 1/1/10
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546,200
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Pension liability
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13,800
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On January 1, 2010 Rydell Corp. through plan amendment, grants prior service benefits having a present value of
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120,000
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Settlement rate
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9%
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Service cost
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58,000
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Contributions (funding)
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65,000
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Actual (expected) return on plan assets
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52,280
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Benefits paid to retirees
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40,000
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Prior service cost amortization for 2010
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17,000
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For 2010 , prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
Q2. 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.
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2010
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2011
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Plan assets (fair value), December 31
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$699,000
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$849,000
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Projected benefit obligation, January 1
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700,000
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800,000
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Pension asset/Liability, January 1
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140,000 Cr.
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?
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Prior service cost, January 1
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250,000
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240,000
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Service cost
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60,000
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90,000
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Actual and expected return on plan assets
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24,000
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30,000
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Amortization of prior service cost
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10,000
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12,000
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Contributions (funding)
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115,000
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120,000
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Accumulated benefit obligation, December 31
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500,000
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550,000
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Interest/settlement rate
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9%
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9%
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Compute pension expense for 2010 and 2011.
Prepare the journal entries to record the pension expense and the company's funding of the pension plan for both years.
Q3. Error Analysis; Correcting Entries
A partial trial balance of Dickinson Corporation is as follows on December 31, 2010.
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Dr.
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Cr.
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Supplies on hand
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$2,500
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|
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Accrued salaries and wages
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$1,500
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Interest Receivable
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5,100
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|
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Prepaid insurance
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90,000
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|
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Unearned rent
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-0-
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Accrued interest payable
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15,000
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Additional adjusting data:
1. A physical count of supplies on hand on December 31, 2010, totaled $1,100.
2. Through oversight, the Accrued Salaries and Wages account was not changed during 2010. Accrued salaries and wages on December 31, 2010, amounted to $4,400.
3. The Interest Receivable account was also left unchanged during 2010. Accrued interest on investments amounts to $4,350 on December 31, 2010.
4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2010.
5. $24,000 was received on January 1, 2010 for the rent of a building for both 2010 and 2011. The entire amount was credited to rental income.
6. Depreciation for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000.
7. A further review of depreciation calculations of prior years revealed that depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.
Instructions -
(a) Assuming that the books have not been closed, what are the adjusting entries necessary at December 31, 2010? (Ignore income tax considerations.)
(b) Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2010? (Ignore income tax considerations.)
Q4. Accounting Change and Error Analysis
On December 31, 2010, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets.
1. Depreciable asset A was purchased January 2, 2007. It originally cost $540,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2010, the decision was made to change the depreciation method from straight- line to sum-of-the-years'-digits, and the estimates relating to useful life and salvage value remained unchanged.
2. Depreciable asset B was purchased January 3, 2006. It originally cost $180,000 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero salvage value. In 2010, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $3,000.
3. Depreciable asset C was purchased January 5, 2006. The asset's original cost was $160,000, and this amount was entirely expensed in 2006. This particular asset has a 10-year useful life and no salvage value. The straight-line method was chosen for depreciation purposes.
Additional data:
1. Income in 2010 before depreciation expense amounted to $400,000.
2. Depreciation expense on assets other than A, B, and C totaled $55,000 in 2010.
3. Income in 2009 was reported at $370,000.
4. Ignore all income tax effects.
5. 100,000 shares of common stock were outstanding in 2009 and 2010.
Instructions -
Prepare all necessary entries in 2010 to record these determinations.
Complete the comparative retained earnings statements for Madrasa Inc. for 2009 and 2010. The company had retained earnings of $200,000 at December 31, 2008.