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intermediate accounting volume 2

Intermediate Accounting Volume 2 2nd Edition Hanlon, Hodder, Nelson, Roulstone, Dragoo - Solutions

Blues Company implemented a defined benefit pension plan for its employees. The following data are provided for 2021 and 2020. Determine the employer's contribution in 2021. 2021 2020 Projected Benefit Obligation, December 31 $187,500 $175,000 Plan Assets, December 31.... 168,750 150,000 Actual
The Blackhawk Company implemented a defined benefit pension plan for its employees. The following data are provided for 2021.a. Determine the balance in Plan Assets on January 1, 2021.b. Determine the actual rate of return on plan assets for 2021 . Account Balances, Dec. 31 Projected Benefit
As of December 31, 2020, the projected benefit obligation and plan assets of a noncontributory defined benefit plan sponsored by Durasell Inc. were as follows. Determine the funded status of Durasell Inc.'s pension plan. Projected benefit obligation Plan assets at fair value... $312,000 300,000
The following information pertains to Qdobe Corporation's defined benefit pension plan for 2020. Assume no beginning balance in Accumulated OCI-Pension Gain/Loss. What amount should Qdobe report as pension expense in its 2020 income statement? Service cost Actual and expected gain on plan assets.
Clark Kent Co. approved a prior service obligation of \(\$ 120,000\) on January 1,2020 , which granted retroactive benefit to employees. Assuming an average remaining service period of 10 years for all active plan participants, what is the effect on pension expense of the prior service cost?
On June 1, 2018, West Corporation established a defined benefit pension plan for its employees. The following information was available in 2020 : Balance Projected Benefit Obligation.. Plan Assets.... Accumulated OCI-Pension Gain/Loss Jan. 1, 2020 $3,625,000 Cr. 3,750,000 Dr. 637,500 Cr.
For 2021, compute the amortization of the account, Accumulated OCI-Pension Gain/Loss, assuming that the company uses the corridor approach in determining the minimum amortization to recognize. Assume that the average remaining service life of employees is 10 years.
Kidman Inc. sponsors a defined benefit plan and determined that for the current year of 2020, service cost was \(\$ 10,000\), interest cost was \(\$ 2,100\), and the expected (and actual) return on plan assets was \(\$ 2,000\). Kidman will contribute \(\$ 1,800\) to the plan on December 31, 2020.
Lets Go Inc. sponsors a defined benefit plan and determined that for the current year of 2020, service cost was \(\$ 250,000\), amortization of prior service cost was \(\$ 1,800\), interest cost was \(\$ 21,100\), and the expected (and actual) return on plan assets was \(\$ 18,000\). LetsGo will
The following pension-related values are determined on December 31, 2020, for BNW Inc. Compute the net pension asset (liability) to be recorded on the balance sheet on December 31, 2020. Projected benefit obligation... $100,000 Accumulated benefit obligation.... 80,000 Plan assets at fair
At the end of 2020, after recording pension expense, Talent Co. has the following balances: Accumulated OCIPension Gain/Loss \(\$ 6,000\) (debit) and Projected Benefit Obligation \(\$ 100,000\) (credit). During the year 2021, Talent Co. experienced a \(\$ 500\) actuarial gain on its PBO and an
Pharrell Inc. sponsored a defined pension plan for its employees. For the year ended December 31, 2020, Pharrell recorded pension expense of \(\$ 2,500\) (including service cost of \(\$ 1,500\) ) and a \(\$ 200\) unexpected loss on plan assets. Pharrell calculated the December 31, 2020, balance in
Levine Co. sponsored a defined benefit plan, which included January 1, 2020, balances of \(\$ 5,000\) and \(\$ 4,800\) in Plan Assets and Projected Benefit Obligation, respectively. During 2020, the company incurred \(\$ 1,000\) in service cost, made plan contributions of \(\$ 210\), and paid
Hewlatt Inc. sponsors a defined contribution plan for its employees. In 2020, salaries eligible for a 3\% payment toward defined contribution plans of employees are \(\$ 880,000\). Hewlatt funded \(100 \%\) of its obligation to fund \(3 \%\) toward contribution plans as of the end of the year.
Mallard Company sponsors a pension plan with the following pension benefit:\[ \underset{\text { Benefit paid at each }}{\text { year-end during retirement }}=\frac{\text { Number of years worked } \times \text { Annual salary at retirement }}{25} \]Credit for service began January 1, 2010,
Garcia Co. has a PBO balance on January 1,2020 , of \(\$ 146,000\). The actuaries provided the following information: PBO December 31,2020 , balance, \(\$ 140,000\); interest cost, \(\$ 13,000\); actuarial gain on the PBO, \(\$ 24,000\); prior service cost amendment (causing additional obligations)
The following items are related to a defined pension plan:Items relate to 2020 unless otherwise indicateda. December 31,2020 , projected benefit obligation balanceb. December 31, 2020, plan asset balance \( \qquad \)c. Loss (gain) related to changes in actuarial assumptionsd. Cash funding by the
Kulver's Inc. sponsored a defined benefit plan in 2020. Plan assets had a January 1, 2020, balance at fair value of \(\$ 130,000\) and a December 31, 2020, balance at fair value of \(\$ 134,800\). The actual return on plan assets is \(6 \%\). The trustee paid \(\$ 18,000\) of benefits to
The following information pertains to a company's defined benefit plan.Requireda. Calculate benefits paid to retirees in 2020.b. Calculate any actuarial gain or loss on the PBO in 2020. Balance Fair value of plan assets, Jan. 1, 2020... Fair value of plan assets, Dec. 31, 2020 Projected benefit
Stars Inc. has a noncontributory defined pension plan for its employees. During 2020, the company had service cost of \(\$ 60,000\), an expected return on plan assets of \(\$ 9,280\), amortization of prior service cost of \(\$ 2,000\), amortization of net pension loss of \(\$ 2,222\), and benefits
Determine how the following three defined benefit plans would be reported on Brittany Inc.'s balance sheet given the following information on December 31, 2020 (assuming all amounts are noncurrent). Plan #1 Plan #2 Plan #3 PBO $100,000 PBO $540,000 PBO ABO 60,000 ABO Plan assets at fair value..
Spears Company presents the following information related to its pension plan for 2020, before recording pension expense.Requireda. Determine the amortization of Accumulated OCI-Pension Gain/Loss for 2020, using (1) corridor (minimum amortization) and (2) straight-line amortization based on average
Rico Corporation initiated a defined benefit pension plan on January 1, 2020. The plan does not provide any retroactive benefits for existing employees. The pension funding payment is made to the trustee on December 31 of each year. The following information is available for 2020 and
On January 1, 2020, K. Crew Inc. reported a \(\$ 6,000\) credit balance in its Accumulated OCI—Pension Gain/Loss account related to its pension plan. During 2020, the following events occurred.- Actual return on plan assets was \(\$ 8,000\), and expected return on plan assets was \(\$ 10,000\).-
The following data relate to a defined benefit pension plan for Hollistir Co.Requireda. Compute pension expense for 2020. Hollistir amortizes the full pension gain/loss over average service life of 15 years, using the straight-line method.b. Compute the PBO at December 31, 2020.c. Compute fair
Everglade Co. reported the following balances related to its noncontributory defined pension plan.Additional information related to the plan.The January 1, 2020, balance in OCI-Pension Gain/Loss is zero.Required Using the corridor approach, compute the following.a. Amortization of OCI-Pension
Amex Company started a noncontributory defined benefit pension plan on January 1, 2019. The records of Amex Company indicate the following for the year 2020.Requireda. Compute net pension expense for 2020 assuming that the January 1, 2020, Accumulated OCI-Pension Gain/Loss is amortized in 2020 over
2020 records of Lexxus Company provided the following data related to its noncontributory defined benefit pension plan.Requireda. Compute 2020 net periodic pension expense reported by Lexxus.b. Prepare a 2020 reconciliation for (1) plan assets and (2) projected benefit obligation.c. Provide the
Mac Company has a noncontributory defined benefit pension plan, with the following data available.Requireda. Provide the computation for interest cost assuming a discount rate of \(8 \%\).b. Compute net pension expense. Assume that prior service cost will be amortized over a 10 -year average
The following data relate to a pension plan for ISPN Inc.Requireda. Provide the entries related to the defined pension plan for 2020 assuming a discount rate of \(8 \%\). Amortize Accumulated OCI-Pension Gain/Loss using the straight-line method over 15 years.b. Assuming pension expenses are not
Rollo Company has a defined benefit pension plan. At the end of the current reporting period, December 31, 2020 , the following information was available:Requireda. Create a worksheet to summarize the pension data at the end of 2020. Assume that Rollo uses the corridor approach in amortizing the
Information for the Jenkins Company defined benefit pension plan follows. Jenkins uses the straight-line method to amortize prior service cost and corridor amortization for gains and losses.Requireda. Prepare the December 31, 2019, presentation of funded status.b. Prepare the entries to record 2020
Laker Company has a noncontributory defined benefit pension plan. The company must record its pension expense for the year ended December 31, 2020. The following data are available (\$ thousands).Requireda. Create a worksheet to summarize the pension data at the end of 2020. Assume that Laker uses
The following information relates to the contributory, defined pension plan of Klarbrun Inc.Requireda. Prepare the portion of the pension disclosure showing the components of pension expense.b. Prepare the portion of the pension disclosure showing the reconciliation of the projected benefit
Terms relating to concepts discussed in this chapter along with descriptions of the terms are included in the following two lists.Required Match each term, 1 through 14, with the most appropriate description a through n. 1. Projected benefit obligation 2. Expected return on a. b. c. plan assets -
Pension items discussed in this chapter along with account effects are included in the following two lists.Required Match each pension item, \(a\) through \(l\) with the account effect \(l\) through 9 . More than one account effect may apply to a pension item. Account Effects 1. Increase pension
L. Bryan is a participant in a pension plan. Information on the plan and Bryan's involvement follows.Plan inception: Jan. 1,2020 Bryan's first day with the company: Jan. 1,2020 Bryan's expected service period: 20 years Bryan's expected final salary: \(\$ 100,000\)Retirement period: 10 years Brian's
The Jets Company sponsors a pension plan with the following pension benefit formula:\(\begin{aligned} & \text { Benefit paid at each year-end } \\ & \text { during retirement }\end{aligned}=2 \% \times(\) Number of service years) \(\times\) (Annual salary at retirement)Credit for service began
The following information pertains to a pension plan for Guccii Company that recognizes only the minimum amortization of unrecognized gains and losses through the corridor approach.Requireda. Compute Guccii's pension expense for 2020.b. For 2021, compute the following amounts:1. Plan asset balance,
Netflicks Inc. has a noncontributory defined benefit pension plan.Requireda. How much did the PBO increase during 2020? Name five items that could have caused the PBO to change.b. How much did pension plan assets change during 2020? Name three items that could have caused the change in plan
Information for a pension plan for J. Q. Morgan Inc. follows.J. Q. Morgan Inc, elects to amortize pension gain/loss into income for the period using the straight-line method (10-year average remaining service period) without applying the corridor approach. The expected rate of return on plan assets
Mason Company has a noncontributory defined benefit pension plan. On December 31, 2020, information about the pension plan included the following.Requireda. Prepare a reconciliation of plan assets for 2020 .b. Compute the plan's funded balance on the beginning and ending dates.c. Provide the 2020
Luloo Inc. has a defined benefit pension plan. At the end of the current reporting period, December 31, 2020, the following information was available.Requireda. Create a worksheet to summarize the pension data at the end of 2020. Assume that the company amortizes accumulated prior service costs
Cruise Company has a noncontributory defined benefit pension plan. The annual accounting period ends on December 31. The following plan information relates to the year 2020.Requireda. Create a worksheet to summarize the pension data at the end of 2020. Assume that Cruise uses the corridor approach
The following schedule provides two years of information for Rhino Inc. related to its defined benefit plan.In 2021 , Rhino Inc. made a contribution to pension plan assets. Payout to retirees in 2021 totaled \(\$ 40,000\). The discount rate is \(8 \%\). Expected return on plan assets is \(9 \%\).
Voss Company has a noncontributory defined benefit pension plan for its employees. The data available at yearend are as follows.Required Prepare worksheets to summarize the pension data at the end of 2020 and 2021. Assume that Voss Company uses the corridor approach in amortizing any pension
Andros Company has a noncontributory defined benefit pension plan. The data for the two years are as follows.Requireda. Prepare worksheets to summarize the pension data at the end of 2020 and 2021. Assume that Andros Company uses the corridor approach in amortizing any pension gain/loss.b. Provide
Jack Company has a noncontributory defined benefit pension plan. The company will record its pension expense for the year ended December 31, 2020.Requireda. Prepare a worksheet to summarize the pension data at the end of 2020. Assume that Jack uses the corridor approach in amortizing any pension
This problem involves three years of accounting for the defined benefit pension plan of Americo's Inc. The pension plan for the company has been in existence for several years before January 1, 2020. The following data relates to the plan.On January 1,2020 , the company retroactively granted three
At December 31, 2020, as a result of its defined benefit pension plan, Creste Company had a balance in Accumulated OCI-Pension Loss and an underfunded pension balance. Creste's pension plan and its actuarial assumptions have not changed since it began operations in 2010. Creste has made annual
Ethics Case GAAP accounting for pension plans has been criticized by those who maintain that it provides a wealth of opportunity for sponsors to manipulate and smooth earnings. Would you propose changes to these standards?Required Briefly discuss the provisions of the accounting standards that
Judgment Case An alternative conceptualization of pension expense that had been proposed at various times before the current standards, would have based annual pension expense on the required annual contribution needed to fully fund the estimated total pension benefit at retirement. It is called
We are the auditors for Frito Inc., which is in considerable financial difficulty. In particular, debt covenants may be violated if liabilities are increased. In addition, the client's balance in retained earnings is minimal as a result of excessively high dividends and diminished earnings in the
Rogers Inc., has a defined benefit pension plan for its 2,000 employees. It provides covered employees with a pension equal to \(1.5 \%\) of their average salary during the two calendar years of highest pay times the number of years of service, with a maximum of 30 years. Benefits are based on an
Describe the role and responsibilities of the employer. the trustee, and the employees in their involvement in a defined benefit pension plan.
What are actuarial assumptions used to develop estimates of future retirement benefit payments of a pension plan?
Employer Mac sponsors a defined benefit pension plan. The estimated pension expense for 2020 is \(\$ 100,000\), the first year of the plan. Provide the balance sheet presentation for each of the following separate scenarios.a. Mac contributes \(100 \%\) of the pension expenseb. Mac contributes \(80
Employee Justin will receive an annual pension benefit of \(\$ 12,000\) for five years, starting on December 31, 2021. Assuming an interest rate of \(8 \%\), how much must be in the pension fund on January 1 , 2021? Explain why the answer is not \(\$ 60,000\).
Employer Beeber must build a pension fund of \(\$ 50,000\) by December 31,2024 . Five equal annual payments are made into the fund starting on December 31, 2020. The fund will earn \(8 \%\). What is the amount of each payment? Explain why it is not \(\$ 10,000\).
Explain why accounting for defined benefit plans must be based on assumptions and estimates.
What is the pension benefit formula?
Explain why pension expense is not simply recognized when benefits are paid to employees.
What does attribution mean in pension accounting?
Two special features of pension accounting are (a) income smoothing in the income statement, and (b) offsetting in the balance sheet. Explain each feature.
List and define the five components of pension expense.
Define and explain the projected benefit obligation (PBO).
What information is typically found in the report from the trustee on plan assets?
Explain what is meant by underfunded pension plan.
Explain the difference between the projected benefit obligation and the accumulated benefit obligation.
Explain the primary approaches for amortizing unrecognized pension costs.
In the case of unrecognized prior service cost, first incurred during 2020, amortization may or may not be appropriate at the end of 2020 . Explain why.
Briefly explain intraperiod tax allocation.
Briefly describe the balance sheet approach in accounting for income taxes.
Explain why deferred income tax can be either an asset or a liability.
Explain the main overriding reasons why pretax GAAP income and taxable income are often quite different.
Differentiate between a temporary difference and a permanent difference.
How are deferred tax accounts presented on the balance sheet?
Suppose Wilson Company has one item that gives rise to a temporary difference and that item is expected to continue indefinitely. Specifically, Wilson prepays the following year's annual rent of \(\$ 100,000\) each December 31. In years subsequent to the first year, what will the effects be of this
Explain the difference between a deferred tax liability and a deferred tax asset.
Define net operating loss (NOL) carryforwards. Briefly explain the process of a tax loss carryforward.
With respect to NOL carryforwards, how does uncertainty affect the accounting treatment?
Is deferred tax arising from an NOL carryforward classified as current or noncurrent?
Explain the limitation on the carrying value of deferred income tax assets.
How does a company account for a change in tax rates?
Describe the two-step process required when uncertain tax positions are taken.
4M Inc. showed income tax on its tax return of \(\$ 4,800\) on December 31,2020 , and had a tax rate of \(25 \%\). If taxable income were equal to pretax GAAP income for 2020, determine the amount of net income that 4 M Inc. recognized in 2020 on its financial statements.
Aquafena Inc. recognized taxable income of \(\$ 100,000\) for the year ended December 31, 2020. Aquafena calculated a deferred tax asset and a deferred tax liability of \(\$ 12,000\) and \(\$ 8,000\), respectively, on December \(31,2020\). The tax rate is \(25 \%\). Assume zero beginning balances
Alexa Inc. recorded the following deferred tax amounts.If the company had current tax expense of \(\$ 26,000\) in 2020 , determine total income tax expense for 2020. Deferred tax liability Deferred tax asset December 31, 2019 December 31, 2020 $ 5,000 13,000 $8,500 6,000
On December 31, 2020, Lexxus Inc. recorded an unrealized gain in income of \(\$ 5,000\) related to its trading debt securities originally purchased on December 15,2020 , for \(\$ 20,000\). Lexxus recognized pretax GAAP income of \(\$ 80,000\) in 2020 and had a tax rate of \(25 \%\).a. Determine the
Assuming the same information from Brief Exercise 18-21, record the income tax journal entry on December 31, 2020. Assume zero beginning balances in deferred tax accounts.Exercise 18-21On December 31, 2020, Lexxus Inc. recorded an unrealized gain in income of \(\$ 5,000\) related to its trading
Alexa Inc. purchased equipment in 2018 for \(\$ 50,000\) with no residual value. On December 31,2020 , accumulated depreciation using the straight-line method for financial reporting was \(\$ 15,000\). For tax purposes, Alexa uses MACRS depreciation resulting in \(\$ 35,600\) in accumulated
Underwood Co. had current tax expense of \(\$ 20,000\) for the year ended December 31, 2020. The ending deferred tax asset balance was \(\$ 6,000\), which was a \(\$ 4,000\) increase from January 1,2020 . The tax rate is \(25 \%\). Calculate income tax expense for 2020 .
On December 31, 2020, Delta Inc. recorded \(\$ 28,000\) of deferred revenue (a liability) on customer deposits received in advance of the satisfaction of performance obligations. However, this amount is taxable in 2020 when cash was received. Assume a tax rate of \(25 \%\) and pretax GAAP income of
Assuming the same information in Brief Exercise 18-25, record the income tax journal entry on December 31, 2020. Assume zero beginning balances in deferred tax accounts and there are no other differences between accounting and tax incomes.Exercise 18-25On December 31, 2020, Delta Inc. recorded \(\$
Rangee Rover Inc. recorded pretax GAAP income of \(\$ 89,000\) in 2020. The GAAP basis of accounts receivable (net) is \(\$ 6,000\) less than the tax basis of accounts receivable. Assuming a tax rate of \(25 \%\), record the income tax journal entry on December 31, 2020. Assume zero beginning
Assume the same information as in Brief Exercise 18-27 except that the Deferred Tax Asset account had a December 31, 2019, balance of \(\$ 1,800\). Record the income tax journal entry on December 31, 2020.Exercise 18-27Rangee Rover Inc. recorded pretax GAAP income of \(\$ 89,000\) in 2020. The GAAP
Bell Corp. recognized \(\$ 38,000\) in current income tax expense in 2020. Pretax GAAP income was \(\$ 89,000\) and deferred income tax expense is \(\$ 6,000\) for 2020 . Prepare (a) the income tax section of the income statement for Bell Corp. for 2020 and (b) the disclosure of current and
Maui Resort Inc. determined that the balance in its deferred tax asset account on December 31, 2020, was \(\$ 50,000\). Management reviewed all available positive and negative evidence to estimate that \(30 \%\) of the deferred tax asset was more likely than not to be realized. The valuation
Assume Company A and Company B each had a balance in deferred tax assets of \(\$ 250,000\). However, Company A has a valuation allowance related to the deferred tax asset of \(\$ 200,000\) while Company B has a valuation allowance of \(\$ 5,000\). What can you infer about Company A and B based upon
Starbucks Corporation recognized the following amounts in a recent annual report on Form 10-K.a. Calculate the deferred tax asset valuation allowance as a percentage of deferred tax assets for fiscal years 2016 and 2015.b. Based on your results in part \(a\), does it appear that the company

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