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Intermediate Accounting 17th Edition James D. Stice, Earl K. Stice, Fred Skousen - Solutions

Denton Equipment Inc. furnishes you with the following list of accounts.Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,000Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000Accumulated Depreciation .
Following is a list of account titles and balances for Pennington Investment Corporation as of January 31, 2011.Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,400Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted account balances and supplemental information for Brockbank Research Corp. as of December 31, 2011, are as follows:Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,160Accounts Receivable—Trade . . . . . . . . . . . . . . .
The accountant for Sierra Corp. prepared the following schedule of liabilities as of December 31, 2011.Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,000Notes payable—trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The following balance sheet was prepared by the accountant for Midway Company.Midway CompanyBalance SheetJune 30, 2011AssetsCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,500 Investment securities—Trading (includes
The financial position of St. Charles Ranch is summarized in the following letter to the corporation’s accountant.Dear Dallas:The following information should be of value to you in preparing the balance sheet for St. Charles Ranch as of December 31, 2011. The balance of cash as of December 31 as
The bookkeeper for Chordwise Music, Inc., reports the following balance sheet amounts as of June 30, 2011.Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $295,300Other assets . . . . . . . . . . . . . . . . . . . . .
The following balance sheet is submitted to you for inspection and review.Appalachian Freight CompanyBalance SheetDecember 31, 2011AssetsCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,050Accounts receivable . . . . . .
The accountant for Delicious Bakery prepares the following condensed balance sheet.Delicious BakeryCondensed Balance SheetDecember 31, 2011Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,415Less: Current liabilities . . . . . . .
Blake Matthews incorporated his paper manufacturing operations on January 1, 2011, by issuing 5,000 shares of $1 par common stock to himself. The following balance sheet for the new corporation was prepared.Looseleaf CorporationBalance SheetJanuary 1, 2011Cash . . . . . . . . . . . . . . . . . . .
1. Which of the following is the true purpose of information presented in notes to the financial statements?(a) To provide disclosures required by generally accepted accounting principles.(b) To correct improper presentation in the financial statements.(c) To provide recognition of amounts not
Forbes annually provides a list of the most valuable companies in the world. The top 10 most valuable companies in the United States, from the 2007 Forbes 2000, follow.As an analyst for a securities broker, you are asked the following questions concerning some of the figures.1. Microsoft has total
Following are summaries of the balance sheets of five companies. The amounts are all stated as a percentage of total assets. The five companies are€¢ BankAmerica, a large bank€¢ Kelly Services, a firm that provides temporary employees€¢ Yahoo!, an Internet
The Piedmont Computer Company has brought legal action against ATC Corporation for alleged monopolistic practices in the development of software. The claim has been pending for two years, with both sides accumulating evidence to support their positions. The case is now ready for trial. ATC
Bohr Company has a credit agreement with a syndicate of banks. In order to impose some limitations on Bohr’s financial riskiness, the credit agreement requires Bohr to maintain a current ratio of at least 1.4 and a debt ratio of 0.55 or less.The following summary data reflect a projection of
First Federal Finance Co. has a large investment securities portfolio. In the “old days,” First Federal was allowed to value these securities at the lower of cost or market. Statement of Financial Accounting Standards No. 115 now requires current market valuation on the balance sheet for most
Technology Unlimited, Inc., uses a fiscal year ending June 30. The auditors completed their review of the 2011 financial statements on September 8, 2011. They discovered the following subsequent events between June 30 and September 8.(a) Technology split its common stock 2 for 1 on August 15.
Jonathan Atwood, a student from England, shows you the following balance sheet from his father€™s British company. Jonathan knows that you are studying accounting and asks you to look at the statement. You immediately recognize some differences between this statement and the ones you
Aiga Company is a leading manufacturer of household plumbing materials. Aiga does not make the high-profile faucets and fixtures; instead, it makes the pipes and other connections that are usually out of sight under kitchen and bathroom sinks. You are Aiga Company’s chief financial officer. You
Locate the 2007 financial statements for The Walt Disney Company on the Internet.1. Compute a current ratio for Disney as of September 29, 2007. How does this current ratio compare with the prior year’s current ratio?2. Compute Disney’s asset turnover for 2007. Was the company more or less
With all due respect to Michael Jordan and the Chicago Bulls, the Boston Celtics are the most successful team in professional basketball history. Teams led by Bill Russell, Dave Cowens, John Havlicek, and Larry Bird have won a total of 17 NBA championships. The Celtics are also an unusual
Safeway operates 1,761 supermarkets in the United States and Canada. In the United States, Safeway is located principally in the Western, Southwestern, Rocky Mountain, Midwestern, and Mid-Atlantic regions. Albertson€™s operates 2,471 stores in 37 Northeastern, Western, Midwestern, and
Diageo is a United Kingdom (UK) consumer products firm, best known in the United States for the following brand names: Smirnoff, Johnnie Walker, J&B, Gordon€™s, Seagram€™s, and Guinness. Diageo€™s 2007 consolidated balance sheet follows.Re-create Diageo€™s
Refer to the 2006 balance sheet for Consolidated Edison, reproduced in Exhibit 3-6 on pages 108–110.1. Compute the following financial ratios for Consolidated Edison for 2006:(a) Debt ratio (total liabilities/total assets)(b) Current ratio (current assets/current liabilities)(c) Long-term debt
You are a member of the most popular student club on campus, the Accounting Antidefamation Organization. Recently, the field of accounting was savagely attacked in an article written by a militant economics student group and published in the student newspaper. The article charged that the balance
To help you become familiar with the accounting standards, this case is designed to take you to the FASB’s Web site and have you access various publications. Access the FASB’s Web site at www.fasb.org. Click on “Pronouncements & EITF Abstracts.” In the chapter, we discussed the
You are on the accounting staff of Chisos Manufacturing Company. Chisos has a $100 million loan with Rio Grande National Bank. One of the covenants associated with the loan is that Chisos must maintain a current ratio greater than 1.5. As of January 20, 2011, preliminary financial statement numbers
How should compensated absences be accounted for?
The sales manager for Off-Road Enterprises is entitled to a bonus equal to 12% of profits. What difficulties may arise in the interpretation of this profit-sharing agreement?
Distinguish between (a) a defined benefit plan and a defined contribution plan, (b) a contributory plan and a noncontributory plan, and (c) a multiemployer plan and a single employer plan.
What is meant by the word vesting?
What factors must actuaries consider in determining the amount of future benefits under a defined benefit plan?
What four accounting issues were addressed by the FASB in relation to defined benefit plans?
Distinguish between the accumulated benefit approach and the projected benefit approach in determining the amount of future benefits earned by employees under a defined benefit pension plan.
List and briefly describe the five basic components of net periodic pension expense.
Explain how prior service costs arise (a) at the inception of a pension plan and (b) at the time of a plan’s amendment.
How is the service cost portion of net periodic pension expense to be measured according to FASB Statement No. 87?
Does pension expense include the actual return on plan assets or the expected return? Explain.
Is prior service cost recognized as an expense in the period in which it initially arises?
The FASB permits the use of an average market value of plan assets for some pension computations. In other cases, the fair market value at a specific measurement date must be used. Under what circumstances is the average market value permissible?
Under FASB Statement No. 158, which pension-related items impact the reported amount of accumulated other comprehensive income?
Why is a corridor amount identified in recognizing gain or loss from pension plans?
What is the function of the pension disclosure requirement included in the pension standards?
Distinguish between a pension settlement and a pension curtailment.
What is meant by postretirement benefits, and what is the primary issue in accounting for their costs?
Describe the differences between pension plans and other postretirement benefit plans.
What is the full eligibility date, and why is it an important date in accounting for postretirement benefits?
Describe the major differences between the accounting for pensions and other postretirement benefits.
The company pays its employees each Monday for the work performed during the preceding 5-day work week. Total payroll for one week is $25,000. December 31 fell on a Wednesday. (1) Make the journal entry necessary to record wages payable as of December 31. (2) Make the journal entry necessary on the
Total wages and salaries for the month of January were $50,000. Because it is January, no employee has yet reached the FICA tax cap amount, so the full FICA tax percentage is applicable to the entire amount of wages and salaries. The same is true of the federal unemployment tax amount. The state
During Year 1 (the first year of the company€™s existence), employees of the company earned vacation days as follows:(1) Make the journal entry necessary at the end of Year 1 to record the unused vacation days earned during the year and (2) Make the journal entry necessary in Year 2 to
The manager is entitled to a bonus equal to 5% of her store’s earnings. The difficult part is that calculation of the store’s earnings includes a subtraction for the amount of the bonus. The store’s earnings before the bonus total $200,000. Calculate the store manager’s bonus.
The company has decided to restructure operations at one of its stores. As part of this restructuring, the company has determined that the store facility is impaired. The store originally cost $3,000,000 and has accumulated depreciation of $1,300,000. The fair value of the store is determined to be
Wu Company has established a defined benefit pension plan for its lone employee, Ronald Dalton. Annual payments under the pension plan are equal to Ronald’s highest lifetime salary multiplied by (2% × number of years with the company). As of the beginning of 2011, Ronald had worked for Wu
Refer to Practice 17-6. Compute Wu Company’s projected benefit obligation (PBO) as of January 1, 2011, assuming(1) An 8% discount rate and(2) A 12% discount rate.
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. There was no prior service cost, nor were there deferred pension gains or losses. The following information relates to the pension plan during the year:Service
Refer to Practice 17-8. Compute pension expense for the year.
Refer to Practice 17-8. Make two summary journal entries necessary with respect to the pension plan for the year.
Refer to Practice 17-8. Enter all of the pension information, including the beginning balances, in a pension work sheet. Use the pension work sheet to display the computation of pension expense for the year as well as the ending balances for all pension related items.
On January 1, the company adopted a new defined benefit pension plan. Existing employees were given credit in the new plan for their past service to the company. This created an immediate projected benefit obligation of $1,000,000. The company has 30 employees; three of these employees are expected
As of January 1, the company had the following pension-related balances:Projected benefit obligation (PBO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(15,000)Fair value of pension fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to Practice 17-6 and Practice 17-7. Assume that as of January 1, 2011 Wu Company changed the discount rate it uses to compute the PBO from 8% to 12%. Assume that before this change, Wu Company had the following pension-related balances:Projected benefit obligation (PBO) . . . . . . . . . . .
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. Prior service cost was $2,000; it was being amortized on a straight-line basis over the 5-year average remaining life of the affected employees. The balance in the
The company had the following pension-related balances as of January 1:Projected benefit obligation (PBO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(20,000)Fair value of pension fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. Prior service cost was $2,000; it was being amortized on a straight-line basis over the 5-year average remaining life of the affected employees. The balance in the
Refer to Practice 17-17. Prepare the note disclosure necessary to reconcile the beginning balance in the pension fund and the ending balance in the pension fund.
Express Company paid one week’s wages of $21,200 in cash (net pay after all withholdings and deductions) to its employees. Income tax withholdings were equal to 17% of the gross payroll, and the only other deductions were 7.65% for FICA tax and $160 for union dues. Give the entries that should be
Aggie Co. sells agricultural products. Aggie pays its salespeople a salary plus a commission. The salary is the same for each salesperson, $1,000 per month. The commission varies by length of employment and is a percentage of the company’s total gross sales. Each salesperson starts with a
General Aviation Company employs six people. Each employee is entitled to three weeks€™ paid vacation every year the employee works for the company. The conditions of the paid vacation are(a) For each full year of work, an employee will receive three weeks of paid vacation (no vacation
Illinois Wholesale Company has an agreement with its sales manager entitling that individual to 7% of company earnings as a bonus. Company income for the calendar year before bonus and income tax is $350,000. Income tax is 30% of income after bonus.1. Compute the amount of bonus if the bonus is
Francisco Company has established a defined benefit pension plan for its lone employee, Derrald Ryan. Annual payments under the pension plan are equal to 3% of Derrald’s highest lifetime salary multiplied by the number of years with the company. Derrald’s salary in 2010 was $75,000. Derrald is
Pension plan information for Naperville Window Company is as follows:Assuming no change in actuarial assumptions, what is the pension service cost for2011?
Using the information given for the following three independent cases, compute the amount of pension-related asset/liability that would be reported on the balance sheet. Clearly indicate whether the amount would be shown as an asset or as a liability. Also compute the amount of pension-related
Queensland Company has five employees belonging to its pension plan. One employee is expected to retire each year over the next five years. On January 1, 2011, Queensland initiated an amendment to its pension plan that increased the PBO for the plan by $620,000. If Queensland amortizes the prior
Da Vinci Inc. has a workforce of 400 employees. A new pension plan is negotiated on January 1, 2011, with the labor union. Based on the provisions of the pension agreement, prior service cost related to the new plan amounts to $4,823,000. The cost is to be funded evenly with annual contributions
Osvaldo Awning Co. has prior service cost of $1,262,000 arising from a pension plan amendment. The board of directors decided to amortize this cost over the average remaining service period for its 45 employees on a straight-line basis. It is assumed that employees will retire at the rate of three
Longlee Electrical Company maintains a fund to cover its pension plan. The following data relate to the fund for 2011:Compute the 2011 actual return on the pension fund for LongleeElectrical.
Rasband Photography has a pension plan covering its 100 employees. Rasband anticipates an 11% return on its pension fund. The fund trustee furnishes Rasband with the following information relating to the pension fund for 2011:Compute the difference between the actual and expected return on the
Melba Enterprises has a deferred gain of $425,000 relating to its pension plan as of January 1, 2011. Management has chosen to amortize this deferral on a straight-line basis over the 10-year average remaining service life of its employees, subject to the limitation of the corridor amount.
The computation of pension expense includes (1) a deferral of the difference between actual and expected return on the pension fund and (2) amortization of deferred pension gains and losses. Determine the proper addition (deduction) to pension expense related to deferred gains and losses and their
The accountants for Eden Financial Services provide you with the following detailed information at December 31, 2011. Based on these data, prepare the summary journal entries related to the recognition of pension expense and the pension contribution for 2011.Service cost . . . . . . . . . . . . . .
Fredco’s defined benefit pension plan had a PBO of $10,000,000 at the beginning of the year. This was based on a 10% discount rate (obligation discount rate). The fair value of pension plan assets at the beginning of the year was $10,400,000. These assets were expected to earn a long-term rate
The following information relates to the defined benefit pension plan of Mascare Company.January 1, 2011:PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,000FVPF . . . . . . . . . . . . . . . . . . . . . . . .
From the following information for each of three independent cases, prepare the pension note disclosure that outlines the items that go into the computation of the pension-related asset or liability reported in the balance sheet as well as the pension related accumulated other comprehensive income
Joey Department Store's employees are paid on the 6th and 22rd of each month for the period ending the last day of the previous month and the 15th of the current month, respectively. An analysis of the payroll on Monday, October 6, 2011, revealed the following data.It is determined that for the
Bags, Inc., a manufacturer of suitcases, has 10 employees; five are paid on a salary basis, and five are hourly employees. The employees and their compensation are as follows:Annual SalaryKen Scott (president) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ludwig Electronics Inc. has a plan to compensate its employees for certain absences. Each employee can receive five days' sick leave each year plus 10 days' vacation. The benefits carry over for two additional years, after which the provision lapses on a FIFO flow basis. Thus, the maximum
United Rental Company reported the following information related to its pension plan for the years 2011€“2014. The fund is administered by a separate outside trustee.Instructions:1. Prepare the required summary journal entries for each year to record pension expense and the pension
Staybrite Electronics Co. amended its pension plan effective January 1, 2011. The increase in the PBO occurring as a result of the plan amendment is $6,290,000. Staybrite arranged to fund the prior service cost by equal annual contributions over the next 15 years at 10% interest. The first payment
McGrath Financial Corp. has a defined benefit pension plan. As of January 1, 2011, the following balances were computed for the pension plan:Deferred pension gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 420,000Fair value of the pension
Averon Industrial, Inc., computed the following components of pension expense for the years 2011€“2013:Instructions:1. Compute the net periodic pension expense for the years 2011€“2013.2. Prepare the summary journal entries to record the computed pension expense in (1) and the
The information below was provided relative to the pension plan for Atlas Wholesale Company for the years 2011€“2013.Instructions:1. Compute the amount of net periodic pension expense for each of the three years. Assume that the deferred net pension loss relates only to the difference
The following information relates to the pension plan of Circle Manufacturing Company at December 31, 2011:(in thousands)Balances at December 31, 2011:PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,950Fair
The following data relate to the defined benefit pension plan of Haan Company: Balances at January 1, 2011:PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,500Prior service cost . . . . . . . . . . . . . . .
The actuaries for Interconnect Cable Company provided its accountants with the following information (in thousands of $) related to the company’s pension plan:December 31, 2010:Increase in PBO arising from plan’s amendment . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .
As of January 1, 2011, information related to the defined benefit pension plan of Leffingwell Company was as follows:PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,615,000Fair value of pension assets. . . . . .
A criticism of FASB Statement No. 87 is that it did not require companies to report the funding status of a defined benefit pension plan (overfunded if the plan assets exceed the projected benefit obligation and underfunded if the plan assets are less than the PBO) in the balance sheet. Some
The topic of pensions and other postretirement benefits was considered at length in an accounting theory class. The discussion centered on the following terms:(a) Representational faithfulness (b) Substance over form (c) Verifiability (d) Usefulness(e) Present value(f) Conservatism(g) Adequate
You plan to retire at age 65. You anticipate needing $5,000 per month ($60,000 per year) after you retire. You expect to live for 20 years after you retire. You will work for 40 years, from age 25 to 65. Your average salary per working year will be $100,000. You estimate that you can earn an
C. B. Seabright, a U.S. congresswoman, has just received from her staff an analysis of FASB Statement No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” Seabright is very influential in the formation of tax legislation and in federal regulation of

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