E16-1:\u00a0(Compensated Absences) Zero Mostel Company began operations on January 2, 2008. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate. Additional information is as follows.\tE16-12:\u00a0(Basic Pension Worksheet) The following defined-benefit pension data of Doreen Corp. apply to the year 2008. \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tProjected benefits obligation, January 1, 2008 (before amendment)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$ 560,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tPlan assets, January 1, 2008\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t546,200\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tPension liability\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t13,800\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tOn January 1, 2008Doreen Corp., through plan amendment, grants prior service benefits having a present value of\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t100,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tSettlement rate\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t9%\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tAnnual pension service cost\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t58,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tContributions (funding)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t55,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tActual return on plan assets\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t52,280\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tBenefits paid to retirees\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t40,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tPrior service cost amortization for 2008\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t17,000\t\t\t\t\t\t\t\u00a0\tInstructions:\u00a0For 2008, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense and the year-end balance in the related pension accounts.\tE17-2:\u00a0(Lessee Computations and Entries; Capital Lease with Guaranteed Residual Value) Delaney Company leases an automobile with fair value of $ 8,725 from John Simon Motors, Inc., on the following terms.\t\t\tNoncancelable term of 50, months.\t\t\tRental of $ 200 per month (at end of each month; present value at 1% per month is $ 7,840).\t\t\tEstimated residual value after 50 months is $ 1,180. (The present value at 1% per month is $ 715.) Delaney Company guarantees the residual value of $ 1,180.\t\t\tEstimated economic life of the automobile is 60 months.\t\t\tDelaney Company’s incremental borrowing rate is 12% a year (1% a month). Simon’s implicit rate is unknown.\t\u00a0\tInstructions:\t\t\tWhat is the nature of this lease to Delaney Company?\t\t\tWhat is the present value of the minimum lease payments?\t\t\tRecord the lease on Delaney Company’s books at the date of inception.\t\t\tRecord the first month’s depreciation on Delaney Company’s books. (Assume straight-line.)\t\t\tRecord the first month’s lease payment.\tE17-8:\u00a0(Amortization Schedule and Journal Entries for Lessee) Laura Leasing Company signs an agreement on January 1, 2008, to lease equipment to Plote Company. The following information relates to this agreement.\t\t\tThe term of the Noncancelable lease is 5 years with no renewal option. The equipment has an estimated economic life of 5 years.\t\t\tThe fair value of the asset at January 1, 2008, is $ 80,000.\t\t\tThe asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $ 7,000, none of which is guaranteed.\t\t\tPlote Company assumes direct responsibility for all executor costs, which include the following annual amounts: (1) $ 900 to Rocky Mountain Insurance Company for insurance, and (2) $ 1,600 to Laclede County for property taxes.\t\t\tThe agreement requires equal annual rental payments of $ 18,142.95 to the lessor, beginning on January 1, 2008.\t\t\tThe lessee’s incremental borrowing rate is 12%. The lessor’s implicit rate is 10% and is known to the lessee.\t\t\tPlote Company uses the straight-line depreciation method for all equipment.\t\t\tPlote uses reversing entries when appropriate.\t\u00a0\tInstructions:\u00a0(Round all numbers to the nearest cent.)\t\t\tPrepare an amortization schedule that would be suitable for the lessee for the lease term.\t\t\tPrepare all of the journal entries for the lessee for 2008 and 2009 to record the lease agreement, the lease payments, and all expenses related this lease. Assume the lessee’s annual accounting period ends on December 31.\tE18-11:\u00a0(Change in Estimate – Depreciation) Peter M. Dell Co. purchased equipment for $ 510,000 which was estimated to have a useful life of 10 years with a salvage value of $ 10,000 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2008, it is determined that the total estimated life should be 15 years with a salvage value of $ 5,000 at the end of that time.\t\u00a0\tInstructions: \ufffd \ufffd\u00a0\t\t\tPrepare the entry (if any) to correct the prior years’ depreciation.\t\t\tPrepare the entry to record depreciation for 2008.\tE18-23:\u00a0(EPS with Convertible Bonds and Preferred Stock) On January 1, 2008, Crocker Company issued 10-year, $ 2,000,000 face value, 6% bonds, at par. Each $ 1,000 bond is convertible into 15 shares of Crocker common stock. Crocker’s net income in 2008 was $ 300,000, and its tax rate was 40%. The company had 100,000 shares of common stock outstanding throughout 2008. None of the bonds were converted in 2008.\t\u00a0\tInstructions:\tCompute diluted earnings per share for 2008.\tCompute diluted earnings per share for 2008, assuming the same facts as above, except that $ 1,000,000 of 6% convertible preferred stock was issued instead of the bonds. Each $ 100 preferred shares are convertible into 5 shares of Crocker’s common stock.<\/p>\n","protected":false},"excerpt":{"rendered":"
E16-1:\u00a0(Compensated Absences) Zero Mostel Company began operations on January 2, 2008. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation days may be Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-199289","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/199289","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=199289"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/199289\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=199289"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=199289"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=199289"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}