accounting homework due on friday 02/01/13 im willing to pay 10 dollars

1.Lockard

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C

ompany purchased machinery on January 1,

2

012, for $167,2

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8

0. The machinery is estimated to have a salvage value of $16,728 after a useful life of 8

years

.
(a

)

Compute

2012

depreciation expense using the sum-of-the-years’-digits method.

(b)

Compute 2012 depreciation expense using the sum-of-the-years’-digits method assuming the machinery was purchased on

A

pril 1, 2012.
(Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 2,520.)

(a)

Depreciation expense

$

(b)

Depreciation expense

$

(a)

($167,280 – $16,728 )

x

8/36*

=

$33,456

(b)

[($167,280 – $16,728 ) x 8/36] x

9

/12

=

$25,092

*[8(8 + 1)] ÷ 2 = 36

2.Dickinson Inc. owns the following assets.

Asset

Cost

Salvage

Estimated Useful Life

A

$71,600

$7,160

10

years

B

68,900

6,890

5 years

C

195,160

9,520

12 years

Compute the composite depreciation rate and the composite life of Dickinson’s assets.
(Round answers to 1 decimal place, e.g. 4.8

%

or 4.8 years.)

Asset

A

=

B

=

C

=

Composite depreciation rate

%

Composite life

years

Depreciation Expense

($71,600 – $7,160)/10

$ 6,444

($68,900 – $6,890)/5

12,402

($195,160 – $9,520)/12

15,470

$34,316

Composite rate = $34,316/$335,660 = 10.2 %

Composite life = $312,090*/$34,316 = 9.1 years

3.Jurassic Company owns equipment that cost $1,524,600 and has accumulated depreciation of $643,720. The expected future net cash flows from the use of the asset are expected to be $847,000. The fair value of the equipment is $677,600.
Prepare the journal entry, if any, to record the impairment loss.
(If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

4.Wenner Furnace Corp. purchased machinery for $315,270 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $16,950, production of 271,200 units, and working hours of 25,000. During 20

13

, Wenner Corp. uses the machinery for 2,650 hours, and the machinery produces 28,815 units.
From the information given, compute the depreciation charge for

2013

under each of the following methods.
(Round answers to 0 decimal places, e.g. $45,892.)

(a)

Straight-line

$

(b)

Units-of-output

$

(c)

Working hours

$

(d)

Sum-of-the-years’-digits

$

(e)

Double-declining-balance

$

(a)

$315,270 – $16,950

=

$298,320

; $298,320 ÷ 10 yrs.

=

$29,832

(b)

$298,320 ÷ 271,200 units

=

$1.10; 28,815 units x $1.10

=

$31,697

(c)

$298,320 ÷ 25,000 hours

=

$11.93 per hr.; 2,650 hrs. x $11.93

=

$31,615

=

=

2

(d)

10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 =

55

OR

n(n + 1)

10(11)

55
2

x

=

55

x

$298,320

x

=

55

10 x $298,320

1/3

$18,080

9

2/3

32,544

Total for 2013

$50,624

(e)

=

=

Total for 2013

$315,270 x 20% x 1/3

$21,018

[$315,270 – ($315,270 x 20%)] x 20% x 2/3

33,629

$54,647

5.In 1985, Abraham Company completed the construction of a building at a cost of $4,313,000 and first occupied it in January 1986. It was estimated that the building will have a useful life of 40 years and a salvage value of $

136,200

at the end of that time.
Early in 1996, an addition to the building was constructed at a cost of $1,066,900. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $

45,

400

.
In

20

14

, it is determined that the probable life of the building and addition will extend to the end of 2045 or 20 years beyond the original estimate.
(a) Using the straight-line method, compute the annual depreciation that would have been charged from 1986 through 1995.
(Round answer to 0 decimal places, e.g. $45,892.)

$

Annual depreciation

from 1986 through 1995

(b) Compute the annual depreciation that would have been charged from 1996 through 2013.
(Round answer to 0 decimal places, e.g. $45,892.)

$

Annual depreciation from 1996 through 2013

(c) Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in

2014

.
(If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(d) Compute the annual depreciation to be charged beginning with 2014.
(Round answer to 0 decimal places, e.g. $45,892.)

$

Annual depreciation expense—building

(a) 1986–1995—($4,313,000 – $136,200) ÷40 =

$104,420/yr

.

(b)

=

=

1996–2013—

Building

($4,313,000 – $136,200) ÷40

$104,420/yr

Addition

($ 1,066,900 – $45,400) ÷ 30

34,050/yr.

$138,470/yr.

(d)

Salvage value

Remaining useful life

÷ 32 years

Annual depreciation

Revised annual depreciation

Building

Book value: ($4,313,000 – $2,923,760*)

$ 1,389,240

Salvage value

136,200

1,253,040

Remaining useful life

÷ 32 years

Annual depreciation

$ 39,158

*$104,420 x 28 years = $2,923,760

Addition

Book value: ($1,066,900 – $612,900**)

$454,000

45,400

408,600

$ 12,769

**$34,050 x 18 years = $612,900

Annual depreciation expense—building ($39,158 + $12,769)

$51,927

6.Presented below is information related to equipment owned by Pujols Company at December 31, 2012.

Cost

$22,104,000

Accumulated depreciation

to date

2,456,000

Expected future net cash flows

17,192,000

Fair value

10,806,400

Assume that Pujols will continue to use this asset in the future. As of December 31, 2012, the equipment has a remaining useful life of 5 years.
(a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2012.
(If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(b) Prepare the journal entry to record depreciation expense for 2013 using straight-line method.
(If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(c) The fair value of the equipment at December 31, 2013, is $12,52

5,600

. Prepare the journal entry (if any) necessary to record this increase in fair value.
(If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(a)

Cost

$22,104,000

2,456,000

Fair value

10,806,400

Accumulated depreciation

Carrying amount

19,648,000

Loss on impairment

$8,841,600

(b)

5 years

New carrying amount

$10,806,400

Useful life

Depreciation per year

$2,161,280

7.Conan O’Brien Logging and Lumber Company owns 3,400 acres of timberland on the north side of Mount Leno, which was purchased in 2000 at a cost of $610 per acre. In 2012, O’Brien began selectively logging this timber tract. In May of 2012, Mount Leno erupted, burying the timberland of O’Brien under a foot of ash. All of the timber on the O’Brien tract was downed. In addition, the logging roads, built at a cost of $

159,000

, were destroyed, as well as the logging equipment, with a net book value of $

346,500

.
At the time of the eruption, O’Brien had logged 20% of the estimated 540,000 board feet of timber. Prior to the eruption, O’Brien estimated the land to have a value of $230 per acre after the timber was harvested. O’Brien includes the logging roads in the depletion base.
O’Brien estimates it will take 3 years to salvage the downed timber at a cost of $

700,500

. The timber can be sold for pulp wood at an estimated price of $2 per board foot. The value of the land is unknown, but must be considered nominal due to future uncertainties.
(a) Determine the depletion cost per board foot for the timber harvested prior to the eruption of Mount Leno.
(Round per unit answer to 2 decimal places, e.g. 0.45.)

$

Depletion cost per board foot

(b) Prepare the journal entry to record the depletion prior to the eruption.
(Round per unit answer to 2 decimal places, e.g. 0.45 for computational purpose and final answer to 0 decimal places, e.g. $45,892. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(c) If this tract represents approximately half of the timber holdings of O’Brien, determine the amount of the extraordinary loss due to the eruption of Mount Leno for the year ended December 31, 2012.

$

Extraordinary loss due to the eruption of Mount Leno

(a)

=

=

Original cost

$610 x 3,400

$2,074,000

Deduct residual value of land

$230 x 3,400

782,000

1,292,000

Cost of logging road

159,000

Depletion base

$1,451,000

$1,451,000

=

$2.69 depletion per board foot

540,000 ft.

(b)

=

=

Depletion, 2012: 20% x 540,000 bd. ft.

108,000 bd. ft.;

108,000 bd. ft x $2.69

$290,520

(c)

782,000

Loss of timber [$1,292,000 – ($1,292,000 x 20%)]

$1,033,600

Cost of salvaging timber

700,500

Less recovery ($2 x 432,000 bd. ft.)

(864,000

)

$870,100

Loss of land value

Loss of logging roads [($159,000 – (20% x $159,000)]

127,200

Logging equipment

346,500

Extraordinary loss due to the eruption of Mt. Leno

$2,125,800

1.AMR Corporation (parent company of American Airlines) reported the following for 2009 (in millions).

Service cost

$333

Interest on P.B.O.

712

Return on plan assets

566

Amortization of prior service cost

13

Amortization of net loss

145

Compute AMR Corporation’s 2009 pension expense.

Service cost

Interest on P.B.O.

Return on plan assets

)

Amortization of prior service cost

Amortization of net loss

Pension expense

Pension expense

$ millions

$333,000,000

712,000,000

(566,000,000

13,000,000

145,000,000

$ 637,000,000

2.Mancuso Corporation amended its pension plan on January 1, 2012, and granted $154,770 of prior service costs to its employees. The employees are expected to provide 2,010 service years in the future, with 365 service years in 2012.
Compute prior service cost amortization for 2012.

$

=

=

Prior service cost amortization for 2012

Cost per service year:

$154,770/2,010

$77

2012 amortization:

365 x $77

$28,105

3.Lahey Corp. has three defined benefit pension plans as follows.

Pension Assets
(at Fair Value)

Projected Benefit
Obligation

Plan X

$615,200

$543,900

Plan Y

942,000

762,400

Plan Z

561,200

722,500

How will Lahey report these multiple plans in its financial statements?

Pension

$

Pension

$

Pension Assets
(at Fair Value)

Projected Benefit
Obligation

Pension Asset/
Liability

Plan X

$615,200

$543,900

$71,300 asset

Plan Y

942,000

762,400

$179,600 asset

Plan Z

561,200

722,500

$161,300 liability

4. The following facts apply to the pension plan of Boudreau Inc. for the year 2012.

%

Service cost

Plan assets, January 1, 2012

$

490,400

Projected benefit obligation, January 1, 2012

490,400

Settlement rate

8

42,360

Contributions

(funding)

25,320

Actual and expected return on plan assets

48,040

Benefits

paid to retirees

33,690

Using the preceding data, compute pension expense for the year 2012. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2012 and the year-end balances in the related pension accounts.

Pension Asset/
Liability

Projected Benefit
Obligation

Service cost

BOUDREAU INC.
Pension Worksheet—2012

General Journal Entries

Memo Record

Items

Annual Pension
Expense

Cash

Plan
Assets

Balance, January 1, 2012

Interest cost

Actual return

Contributions
Benefits

Journal entry, December 31

Balance, December 31, 2012

5.Ferreri Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2012.

January 1, 2012

December 31, 2012

Projected benefit obligation

$1,421,300

$1,451,200

Market-related and fair value of plan assets

885,100

1,280,410

Accumulated benefit obligation

1,673,800

1,794,160

Accumulated OCI (G/L)—Net gain

0

(192,130

)

The service cost component of pension expense for employee services rendered in the current year amounted to $79,900 and the amortization of prior service cost was $120,360. The company’s actual funding (contributions) of the plan in 2012 amounted to $306,800. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,203,600 on January 1, 2012. Assume no benefits paid in 2012.

(a)

Determine the amounts of the components of pension expense that should be recognized by the company in 2012.
(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Components of Pension Expense

$

Interest on projected benefit obligation

=

(10% x $1,421,300)

=

$142,130

Expected return on plan assets

=

(10% x $885,100)

=

($88,510)

6.The actuary for the pension plan of Gustafson Inc. calculated the following net gains and losses.

)

)

Incurred during the Year

(Gain) or Loss

2012

$

308,400

2013

489,000

2014

(238,600

2015

(295,600

Other information about the company’s pension obligation and plan assets is as follows.

Projected Benefit
Obligation

2012

2013

2014

2015

As of January 1,

Plan Assets
(market-related asset value)

$4,005,700

$2,404,800

4,522,600

2,209,300

5,001,800

2,605,600

4,244,400

3,046,300

Gustafson Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total service-years for all participating employees is 5,600. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2012. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization.
Compute the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense for each of the years 2012, 2013, 2014, and 2015. Apply the “corridor” approach in determining the amount to be amortized each year.
(Round answers to 0 decimal places, e.g. 2,500.)

2012

$

2013

$

2014

$

2015

$

Year

Minimum Amortization of (Gain) Loss

The excess of the cumulative net gain or loss over the corridor amount is amortized by dividing the excess by the average remaining service period of employees. The average remaining service period is computed as follows:

=

Average remaining service life per employee

=

=

Expected future years of service

Average remaining service life per employee

Number of employees

5,600 14
400
2012

2013

489,000

2014

(238,600

)

2015

(295,600

)

Amortization of Net (Gain) or Loss

(Gain) or Loss For the Year
Ended December 31,

Amount

308,400
Year

2012

$4,005,700

$2,404,800

2013

4,522,600

2,209,300

308,400

2014

5,001,800

2,605,600

(c)

2015

4,244,400

3,046,300

(d)

(e)

Projected Benefit
Obligation (a)

Plan
Assets (a)

Corridor (b)

Accumulated
OCI (G/L) (a)

Minimum Amortization
of (Gain) Loss

$400,570

$0

$0

452,260

0

500,180

797,400

21,230

424,440

537,570

8,081

(a)

(b)

(c)

(d)

(e)

As of the beginning of the year.

The corridor is 10 percent of the greater of the projected benefit obligation or plan assets.

$797,400 – $500,180 = $297,220; $297,220/14 = $21,230

$797,400 – $21,230 – $238,600 = $537,570

$537,570 – $424,440 = $113,130; $113,130/14 = $8,081

7.Gordon Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2012 and 2013.

2012

2013

Plan assets (fair value), December 31

$1,407,786

$1,709,886

Projected benefit obligation, January 1

1,409,800

1,611,200

Pension asset/liability, January 1

281,960

Cr.

?

Prior service cost, January 1

503,500

483,360

Service cost

120,840

181,260

Actual and expected return on plan assets

48,336

60,420

Amortization of prior service cost

20,140

24,168

Contributions (funding)

231,610

241,680

Accumulated benefit obligation, December 31

1,007,000

1,107,700

Interest/settlement rate

8

%

8

%

(a)

Compute pension expense for 2012 and 2013.

Pension expense for 2012

$

Pension expense for 2013

$

2012

2013

Service cost

$120,840

$ 181,260

Interest cost ($1,409,800 x8%) and ($1,611,200 x8%)

112,784

128,896

Expected return on plan assets

(48,336

)

(60,420

)

Amortization of prior service cost

20,140

24,168

Pension expense

$205,428

$273,904

Interest cost = $490,400 x 0.08 = $39,232
Note: We show actual return on the worksheet to ensure that plan assets are properly reported. If expected and actual return differ, then an additional adjustment is made to compute the proper amount of pension expense.

Lahey reports a pension asset of $250,900 ($71,300 + $179,600) and a pension liability of $161,300.

[May also be computed as 20% of ($315,270 – 2/3 of 20% of $315,270)]

Accumulated Depreciation— Equipment = ($880,880 – $677,600) = $203,280
Recoverability test:
Future net cash flows ($847,000) < Carrying amount ($880,880); therefore, the asset has been impaired.

*($64,440 + $62,010 + $185,640) = $312,090

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