umuc acct311 quiz 3 latest july 2015

| June 11, 2016

Question
Intermediate Accounting II

Quiz #3

Acct 311, Summer, 2015

Student: ________________________________ Date: July 5, 2015 by 11pm (EDT)

Administrative Notes:

This quiz is open book & open notes.
A calulator should be used.
Write directly on this exam (or at your option, you may present your answers in an excel file – this is optional and not a requirement).
Show your work for full credit; present your work in good form (i.e., ALL numbers displayed properly and labelled correctly)
Due Date for maximum credit: Sunday, July 5, 2015 by 11pm (EDT)
Last day quiz will be accepted with grade penalties for late submisison: Monday, July 6, 2015, at 11pm
Your answers to this quiz are to be your own work; you are not to use any outside sources (e.g., internet search engines, etc); you are not to discuss this exam with classmates before the ‘official’ solutions are sent out.
Solutions will be posted on July 7, 2015

This quiz consists of the following:

Component

Points

Problems 1 to 7 are worth a total of 50 points.

Record your answers directly after the questions (or as an option, in excel). Each problem is allocated a number of points; allocate your time accordingly. Show your work.

50

25 multiple choice questions allocated 2 points each.

50

Total Points

100

Problems

1.

On January 1 of the current reporting year, Zheng, Inc 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 Lewis, Inc includes 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 Hershey 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, Bell Electric Corp. purchased equipment for $20,000,000. Bell 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. Edison Light began operations in 2013. The company sometimes sells used warehouses on an installment basis. In those cases, Edison Light reports income in its income statement in the year of the sale. In its income tax return, though, Edison Light reports installment income by the installment method. Installment income in 2013 was $90,000, which Edison 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.

Edison 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 Edison Light’s 2013 income taxes. Show calculations.
6. What is Edison 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.

Sylvester 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.

Demich 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.

Venice 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:

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