1. On January 1 of the current reporting year, Coda Company’s projected benefit obligation was $30 million. During the year, pension benefits paid by the trustee were $4 million. Service cost was $10 million. Pension plan assets earned $5 million as expected. At the end of the year, there was no net gain or loss and no prior service cost. The actuary’s discount rate was 10%.
Required:
Determine the amount of the projected benefit obligation at December 31.

2.. Pension data for Matta Corporation include the following for the current calendar year:
Required:
Assuming no change in actuarial assumptions and estimates, determine the service cost component of pension expense for the current year.

3. The following information relates to Schmidt Sausage Co.’s defined benefit pension plan during the current reporting year:
Required:
Determine the amount of pension plan assets at fair value on December 31.

4. Several years ago, Western Electric Corp. purchased equipment for $20,000,000. Western uses straight-line depreciation for financial reporting and MACRS for tax purposes. At December 31, 2012, the carrying value of the equipment was $18,000,000 and its tax basis was $15,000,000. At December 31, 2013, the carrying value of the equipment was $16,000,000 and the tax basis was $11,000,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $25,000,000. A tax rate of 35% applies to all years.
Required:
Prepare one journal entry to record Western’s income tax expense for the current year. Show well-labeled computations for the income tax payable and the change in the deferred tax account.

5 – 6. Gallo Light began operations in 2013. The company sometimes sells used warehouses on an installment basis. In those cases, Gallo Light reports income in its income statement in the year of the sale. In its income tax return, though, Gallo Light reports installment income by the installment method. Installment income in 2013 was $90,000, which Gallo Light expects to collect equally over the next three years. The tax rate is 30%, but based on an enacted law, is scheduled to become 35% in 2015.
Gallo Light’s pretax accounting income from the 2013 income statement was $830,000, which includes $40,000 of interest revenue from an investment in municipal bonds. There were no differences between accounting income and taxable income other than those described above.
Required:
5. Prepare the appropriate journal entry to record Gallo Light’s 2013 income taxes. Show calculations.
6. What is Gallo Light’s 2013 net income?
Solution for #5:

Solution for #6::

7. At the end of its first year of operations, Hutton Corporation had a current liability of $300,000 for unearned rent. This was the only difference between pretax accounting income and taxable income. Assume an income tax rate of 40%.
Required:
The tax liability from the tax return is $750,000. Prepare the journal entry to record income taxes for Hutton’s first year of operations. Show well-labeled computations.

1. Consider the following:
I. Present value of vested benefits at present pay levels.
II. Present value of nonvested benefits at present pay levels.
III. Present value of additional benefits related to projected pay increases.
Which of the above constitutes the accumulated benefit obligation?

A. I & II.

B. I, II, III.

C. II & III.

D. II only.

2. A company’s defined benefit pension plan had a PBO of $265,000 on January 1, 2013. During 2013, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2013 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2013, was:

A. $225,000.
B. $305,000.
C. $331,500.
D. None of the above is correct.

3. An underfunded pension plan means that the:

A. PBO is less than plan assets.
B. PBO exceeds plan assets.
C. ABO is less than plan assets.
D. ABO exceeds plan assets.

4. Pension gains related to plan assets occur when:

A. The return on plan assets is higher than expected.
B. The vested benefit obligation is less than expected.
C. Retiree benefits paid out are less than expected.
D. The accumulated benefit obligation is more than expected.

5. The amortization of a net gain has what effect on pension expense?

A. Decreases it.
B. Has no effect on it.
C. Increases it (but only by the amount over 10% of the PBO).
D. Increases it (regardless of the amount).

6. Amortizing prior service cost for pension plans will:

A. Decrease assets.
B. Increase liabilities.
C. Increase shareholders’ equity.
D. Decrease retained earnings

7. Scallion Company received the following reports of its defined benefit pension plan for the current calendar year:

The long-term expected rate of return on plan assets is 10%. Assuming no other data are relevant, what is the pension expense for the year?
A. $197,000.
B. $227,000.
C. $172,000.
D. $202,000.

8. Colombo Enterprises has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $14,000; interest cost, $6,000; benefits paid for the year, $9,000; ending PBO, $89,000; and the expected return on plan assets, $10,000. There were no other pension-related costs. The journal entry to record the annual pension costs will include a debit to pension expense for:

A. $20,000.
B. $15,000.
C. $12,000.
D. $10,000.

9. A statement of comprehensive income does not include:

A. Net income.
B. Losses from the return on assets exceeding expectations.
C. Losses from changes in estimates regarding the PBO.
D. Prior service cost.

10. Gains and losses can occur with pension plans when:

A. Either the PBO or the return on plan assets turns out to be different than expected.
B. Either the ABO or the return on plan assets turns out to be different than expected.
C. Either the PBO, the ABO, or the return on plan assets turns out to be different than expected.
D. Either the PBO or the ABO turns out to be different than expected.

11. Castillo Company has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $18,000; interest cost, $5,000; benefits paid for the year, $9,000; ending PBO, $89,000; the expected return on plan assets, $10,000; and cash deposited with pension trustee, $17,000. There were no other pension-related costs. The journal entry to record the annual pension costs will include a credit to the PBO for:

A. $13,000.
B. $17,000.
C. $18,000.
D. $23,000.

12. At December 31, 2012, Mongo, Inc., reported in its balance sheet a net loss of $3 million related to its pension plan. The actuary for Mongo at the end of 2013 increased her estimate of future salary levels. Mongo’s entry to record the effect of this change will include:

A. A debit to loss-OCI and a credit to PBO.
B. A debit to PBO and a credit to loss-OCI.
C. A debit to pension expense and a credit to PBO.
D. A debit to pension expense and a credit to loss-OCI.

13. A result of inter-period tax allocation is that:

A. Large fluctuations in a company’s tax liability are eliminated.
B. The income tax expense is allocated among the income statement items that caused the expense.
C. The income tax expense in the income statement is the sum of the income taxes payable for the year and the changes in deferred tax asset or liability balances for the year.
D. The income tax expense shown in the income statement is equal to the deferred taxes for the year.

14. Which of the following circumstances creates a future taxable amount?

A. Service fees collected in advance from customers: taxable when received, recognized for financial reporting when earned.
B. Accrued compensation costs for future payments.
C. Straight-line depreciation for financial reporting and accelerated depreciation for tax reporting.
D. Investment expenses incurred to obtain tax-exempt income (not tax deductible).

15. Which of the following usually results in an increase in a deferred tax liability?

A. Accrual of estimated operating expenses.
B. Revenue collected in advance.
C. Prepaid operating expenses, currently deductible.
D. All of the above are correct.

16. For its first year of operations, Tringali Corporation’s reconciliation of pretax accounting income to taxable income is as follows:

Tringali’s tax rate is 40%.
What should Tringali report as its income tax expense for its first year of operations?

A. $120,000.
B. $114,000.
C. $106,000.
D. $8,000.

17 – 18. Isaac Inc. began operations in January 2013. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer’s installment payments.
In 2013, Isaac had $600 million in sales of this type. Scheduled collections for these sales are as follows:

Assume that Isaac has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes.

17. Ignoring operating expenses and additional sales in 2014, what deferred tax liability would Isaac report in its year-end 2014 balance sheet?

A. $54 million
B. $144 million
C. $126 million
D. $180 million.

18. Suppose that, in 2014, legislation revised the income tax rates so that Isaac would be taxed in 2015 and beyond at 40%, rather than 30%. Assume that there were no other differences in income for financial statement and tax purposes. Ignoring operating expenses and additional sales in 2014, what deferred tax liability would Isaac report in its year-end 2014 balance sheet?

A. $168 million
B. $144 million
C. $126 million
D. $240 million.

19. Alamo Inc. had $300 million in taxable income for the current year. Alamo also had a decrease in deferred tax assets of $30 million and an increase in deferred tax liabilities of $60 million. The company is subject to a tax rate of 40%. The total income tax expense for the year was:

A. $390 million.
B. $210 million.
C. $150 million.
D. $180 million.

20. During the current year, Stern Company had pretax accounting income of $45 million. Stern’s only temporary difference for the year was rent received for the following year in the amount of $15 million. Stern’s taxable income for the year would be:

A. $30 million.
B. $60 million.
C. $50 million.
D. $45 million.

21 – 22. Information for Kent Corp. for the year 2013:

Reconciliation of pretax accounting income and taxable income:

Cumulative future taxable amounts all from depreciation temporary differences:

The enacted tax rate was 30% for 2012 and thereafter.
21. What should be the balance in Kent’s deferred tax liability account as of December 31, 2013?

A. $5,200.
B. $7,500.
C. $25,000.
D. None of the above is correct.

22. What should Kent report as the current portion of its income tax expense in the year 2013?

A. $45,900.
B. $49,500.

C. $54,000.

D. None of the above is correct.

23. Of the following temporary differences, which one ordinarily creates a deferred tax asset?

A. Completed-contract method for long-term construction contracts for tax reporting.
B. Installment sales for tax reporting.
C. Accrued warranty expense.
D. Accelerated depreciation for tax reporting.

24. Estimated employee compensation expenses earned during the current period but expected to be paid in the next period causes:

A. An increase in a deferred tax asset.
B. A decrease in a deferred tax asset.
C. An increase in a deferred tax liability.
D. A decrease in a deferred tax liability.

25. At the end of the current year, Newsmax Inc. has $400,000 of subscriptions received in advance included in its balance sheet. A disclosure note reveals that the entire $400,000 will be earned in the next year. In the absence of other temporary differences, in the balance sheet one would also expect to find a:

A. Noncurrent deferred tax liability.
B. Noncurrent deferred tax asset.
C. Current deferred tax liability.
D. Current deferred tax asset.

WK 1 DQ

DQ 1

Paid-In Capital and the Balance Sheet

From Chapter 12, Ethical Issue 12-1. Complete all parts of the case and respond to at least two of your classmates’ postings.

Stan Sewell paid $50,000 for a franchise that entitled him to market software programs in the countries of the European Union. Sewell intended to sell individual franchises for the major language groups of Western Europe—German, French, English, Spanish, and Italian. Naturally, investors considering buying a franchise from Sewell asked to see the financial statements of his business.

Believing the value of the franchise to be $500,000, Sewell sought to capitalize his own franchise at $500,000. The law firm of St. Charles & LaDue helped Sewell form a corporation chartered to issue 500,000 shares of common stock with par value of $1 per share. Attorneys suggested the following chain of transactions:

a.Sewell’s cousin, Bob, borrows $500,000 from a bank and purchases the franchise from Sewell.

b.Sewell pays the corporation $500,000 to acquire all its stock.

c.The corporation buys the franchise from Cousin Bob.

d.Cousin Bob repays the $500,000 loan to the bank.

In the final analysis, Cousin Bob is debt-free and out of the picture. Sewell owns all the corporation’s stock, and the corporation owns the franchise. The corporation’s balance sheet lists a franchise acquired at a cost of $500,000. This balance sheet is Sewell’s most valuable marketing tool.

Requirements

1. What is unethical about this situation?
2. Who can be harmed? How can they be harmed? What role does accounting play?

DQ 2

Effects on Retained Earnings and the Income Statement

Discuss cash dividends and stock dividends. How is each recorded? When each is issued, what is the affect on assets, liabilities and owner’s equity? Respond to at least two of your classmates’ postings.

Wk 2 DQ

DQ 1The Statement of Cash Flows

From Chapter 14, Fraud Case 14-1. Complete all parts of the case and respond to at least two of your classmates’ postings by Day 7.

Frank Lou had recently been promoted to construction manager at a development firm. He was responsible for dealing with contractors who were bidding on a multi-million dollar excavation job for the new high-rise. Times were tough, several contractors had gone under recently, and the ones left standing were viciously competitive. That morning, four bids were sitting on Frank’s desk. The deadline was midnight, and the bids would be opened the next morning. The first bidder, Bo Freely, was a tough but personable character that Frank had known for years. Frank had lunch with him today, and after a few beers, Bo hinted that if Frank “inadvertently” mentioned the amount of the lowest bid, he’d receive a “birthday card” with a gift of cash. After lunch, Frank carefully unsealed the bids and noticed that another firm had underbid Bo’s company by a small margin. Frank took Bo’s bid envelope, wrote the low bid amount in pencil on it, and carried it downstairs where Bo’s son William was waiting. Later that afternoon, a new bid came in from Bo’s company. The next day, Bo’s company got the job, and Frank got a birthday card in his mailbox.

Requirements

1.Was Frank’s company hurt in any way by this fraudulent action?

2.How could this action hurt Frank?

3.How can a business protect against this kind of fraud?

DQ 2Financial Statement Analysis
Discuss what high current ratios indicate and why are businesses with extremely high current ratios (example: 25.0) at risk? Explain what a high accounts receivable turnover indicates to a business? Respond to at least two of your classmates’ postings.

Week 3

DQ 1Introduction to Managerial Accounting

From Chapter 16, Ethical Issue 16-1. Complete all parts of the case and respond to at least two of your classmates’ postings.

Becky Knauer recently resigned from her position as controller for Shamalay Automotive, a small, struggling foreign car dealer in Upper Saddle River, New Jersey. Becky has just started a new job as controller for Mueller Imports, a much larger dealer for the same car manufacturer. Demand for this particular make of car is exploding, and the manufacturer cannot produce enough to satisfy demand. The manufacturer’s regional sales managers are each given a certain number of cars. Each sales manager then decides how to divide the cars among the independently owned dealerships in the region. Because of high demand for these cars, dealerships all want to receive as many cars as they can from the regional sales manager.

Becky’s former employer, Shamalay Automotive, receives only about 25 cars a month. Consequently, Shamalay was not very profitable.

Becky is surprised to learn that her new employer, Mueller Imports, receives over 200 cars a month. Becky soon gets another surprise. Every couple of months, a local jeweler bills the dealer $5,000 for “miscellaneous services.” Franz Mueller, the owner of the dealership, personally approves payment of these invoices, noting that each invoice is a “selling expense.” From casual conversations with a salesperson, Becky learns that Mueller frequently gives Rolex watches to the manufacturer’s regional sales manager and other sales executives. Before talking to anyone about this, Becky decides to work through her ethical dilemma.

Requirement

1.Put yourself in Becky’s place.

a.What is the ethical issue?

b.What are your options?

c.What are the possible consequences?

d.What should you do?

DQ 2Job Order and Process Costing

Manufacturers use three inventory accounts. Name each one and explain what costs each contain.

Wk 4 DQ

DQ 1 Activity-Based Costing and Other Cost Management Tools

Fraud Case 18-1. Complete all parts of the case and respond to at least two of your classmates’ postings.

Anu Ghai was a new production analyst at RHI, Inc., a large furniture factory in North Carolina. One of her first jobs was to update the activity rates for factory production costs. This was normally done once a year, by analyzing the previous year’s actual data, factoring in projected changes, and calculating a new rate for the coming year. What Anu found was strange. The activity rate for “maintenance” had more than doubled in one year, and she was puzzled how that could have happened. When she spoke with Larry McAfee, the factory manager, she was told to spread the increases out over the other activity costs to “smooth out” the trends. She was a bit intimidated by Larry, an imposing and aggressive man, but she knew something wasn’t quite right. Then one night she was at a restaurant and overheard a few employees who worked at RHI talking. They were joking about the work they had done fixing up Larry’s home at the lake last year. Suddenly everything made sense. Larry had been using factory labor, tools, and supplies to have his lake house renovated on the weekends. Anu had a distinct feeling that if she went up against Larry on this issue, she would come out the loser. She decided to look for work elsewhere.

Requirements

1.Besides spotting irregularities, like the case above, what are some other ways that ABC cost data are useful for manufacturing companies?

2.What are some of the other options that Anu might have considered?

DQ 2Cost-Volume-Profit Analysis
Discuss how the following affect the break-even point:

Week 5

DQ 1The Master Budget and Responsibility Accounting

From Chapter 22, Ethical Issue 22-1. Complete all parts of the case and respond to atEthical Issue 22-1

Residence Suites operates a regional hotel chain. Each hotel is operated by a manager and an assistant manager/controller. Many of the staff who run the front desk, clean the rooms, and prepare the breakfast buffet work part-time or have a second job so turnover is high.

Assistant manager/controller Terry Dunn asked the new bookkeeper to help prepare the hotel’s master budget. The master budget is prepared once a year and is submitted to company headquarters for approval. Once approved, the master budget is used to evaluate the hotel’s performance. These performance evaluations affect hotel managers’ bonuses and they also affect company decisions on which hotels deserve extra funds for capital improvements.

When the budget was almost complete, Dunn asked the bookkeeper to increase amounts budgeted for labor and supplies by 15%. When asked why, Dunn responded that hotel manager Clay Murry told her to do this when she began working at the hotel. Murry explained that this budgetary cushion gave him flexibility in running the hotel. For example, because company headquarters tightly controls capital improvement funds, Murry can use the extra money budgeted for labor and supplies to replace broken televisions or pay “bonuses” to keep valued employees. Dunn initially accepted this explanation because she had observed similar behavior at the hotel where she worked previously.

Requirements

Put yourself in Dunn’s position. In deciding how to deal with the situation, answer the following questions:

1.What is the ethical issue?

2.What are my options?

3.What are the possible consequences?

4.What should I do?

DQ 2Flexible Budgets and Standard Costs

What are the benefits of standard costs?

How do businesses set those standards?

( I wrote the whole thing so you can have an idea abou the question as a whole. i just need answer for question number 4)

Capstone case:New century wellness group 

New Century Wellness Group offers a holistic approach to healthcare with an emphasis on preventive medicine as well as traditional medical care. In your role as an IT consultant, you willhelp New Century develop a new information system.

Background

Based on your earlier recommendations, New Century decided to continue the systems development process for a new information system. Now, at the end of the systems analysis phase, you are ready to prepare a system requirements document and give a presentation to the New Century associates. Many of the proposed system’s advantages were described during the fact-finding process. Those include smoother operation, better efficiency, and more user-friendly procedures for patients and New Century staff.

You also must examine tangible costs and benefits to determine the economic feasibility of

several alternatives. If New Century decides to go ahead with the development process, the main options are to develop the system in-house or purchase a vertical package and configure it to meet New Century’s needs. You have studied those choices and put together some preliminary figures.

You know that New Century’s current workload requires six hours of office staff overtime per week at a base rate of S15 per hour. In addition, based on current projections, New Century willneed to add another full-time clerical position in about six months. Neither the overtime nor the additional job will be needed if New Century implements the new system. The current manual system also causes an average of three errors per day, and each error takes about 20 minutes to correct. The new system should eliminate those errors.

You estimate that by working full-time you could complete the project in a bout 12 weeks.

Your consulting rate, which New Century agreed to, is $35 per hour. If you design the new system as a data base application, you can expect to spend about $2,500 for a networked commercial package. After the system is operational and the staff is t rained, New Century should be able to handle routine maintenance tasks without your assistance.

As an alternative to in-house development, a vertical software package is available for about

$12,000. The vendor offers a lease-purchase package of S4,000 down, followed by two annual installments of $4,000 each. If New Century buys the package, it would take you about four weeks to install, configure, and test it, working full-time. The vendor provides free support during the first year of operation, but then New Century must sign a technical support agreement at an annual cost of S600. Although the package contains many of the features that New Century wants, most of the reports are pre-designed and it would be difficult to modify their Iayouts.

No matter which approach is selected, New Century probably will need you to provide about10 hours of initial training and support each week for the first three months of operation. After the new system is operational, it will need routine maintenance, file backups, and updating. These tasks will require about four hours per week and can be performed by a clinic staff member. In both cases, the necessary hardware and network installation will cost about S12,500.

In your view, the useful life of the system will be about five years, including the year in which the system becomes operational.

You are scheduled to deliver a presentation to New Century next week, and you will submit a system requirements document at that time. To prepare yourself, you reviewed the skills described in Part A of the Systems Analyst’s Toolkit, and you listed tips to remember, as follows:

Presentation Tips

• Use suitable visual aids.

• Use presentation software, if possible.

• Distribute handouts before, during, or after the presentation.

• Follow the guidelines in Part A of the Systems Analyst’s Toolkit.

• Keep your presentation to 30 minutes, including 5 minutes for questions.

System Requirements Document Tips

• Follow the guidelines in Part A of the Systems Analyst’s Toolkit.

• Include charts, graphs, or other helpful visual information in the document. Also include

other material to help the audience understand the new system and decide on the next step.

• Spell check and carefully proofread the entire document.

• For readability, t ry to keep the Flesch Reading Ease score above 60, and aim for a FleschKincaid

Grade Level of 8.0 to 9.0.

Tasks

1. Provide an overview of the proposed system, including costs and benefits, with an explana·

tion of the various cost-benefit types and categories.

2. Develop an economic feasibility analysis, using payback analysis, ROI, and present value

(assume a discount rate of 10%).

3. Prepare a context diagram and diagram 0 for the new system.

4. Provide a brief explanation of the various alternatives that should be investigated if development continues, including in-house development and any other possible strategies.

Students should attach a 1500-word analysis of a primary source. The essay should use at least one primary source and two scholarly secondary sources, and deal with a NON-EUROPEAN society prior to 1500. The essay should explain what the primary source tells us about the society that produced it. The essay should have a clear thesis that briefly explains what the primary source tells us, and the body of the essay should demonstrate the thesis to be true using evidence from the primary source itself in conjunction with information from the secondary sources. If you have any questions about whether or not your topic is NON-EUROPEAN or not, please see the professor or TA. If you have any questions about whether your primary or secondary sources are appropriate, please see the professor or TA. The essay should use the Chicago-Turabian footnote style (http://www.chicagomanualofstyle.org/tools_citationguide.html) for citations.

A PRIMARY SOURCE is a piece of writing (or other cultural artifact like art or tools) that was produced by the culture you want to study, during the time you want to study. A scholarly SECONDARY SOURCE is a recent piece of scholarship (not amateur commentary) that interprets and explains the history and culture of a society.  NON-EUROPEAN for this assignment means that the topic cannot deal with issues we commony think of as European, broadly defined. This means that students cannot do projects on medieval Europe, Rome, Greece, or European Christianity. Students who want to do a topic on Christianity should consult with the professor or TA first. If you have any doubt about your topic, please consult the professor or TA