Chapter 13 1. Jane's Donut Co. borrowed $200,000 on January 1, 2009, and signed a two-year note bearing interest at 12%. Interest is payable in full at maturity on January 1, 2011. In connection with this note, what amount should Jane’s report as interest expense at December 31, 2009
$200,000 12% 12/12 = $24,000
3. Which of the following is a contingency that should be accrued? A. The company is being sued and a loss is reasonably possible and reasonably estimable. B. The company deducts life insurance premiums from employees' paychecks. C. The company offers a two-year warranty and the expenses can be reasonably estimated. D. It is probable that the company will receive $100,000 in settlement of a lawsuit.
15. 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%. What was the amount of the total income tax expense for the year?
16. The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis by $150,000 at December 31, 2009. This was a result of differences between straight line depreciation for financial reporting purposes and MACRS for tax purposes. The asset was acquired earlier in the year. Boze has no other temporary differences. The enacted tax rate is 30% for 2009 and 40% thereafter. How should Boze report the deferred tax effect of this difference in its December 31, 2009, balance sheet? (what account and what amount?)
$150,000 40% = $60,000
A liability of $60,000
Chapter 17 17. A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2009. During 2009, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2009 was $80,000. Plan assets (fair value) increased during the year by $45,000. Required: Determine the amount of the PBO at December 31, 2009.
18. Data for 2009 were as follows: PBO, January 1, $240,000 and December 31, $270,000; pension plan assets (fair value) January 1, $180,000, and December 31, $230,000. The projected benefit obligation was underfunded at the end of 2009 by: A. $30,000. B. $60,000. C. $20,000. D. $40,000. Assuming no other relevant data exist, what is the pension expense for the year?
20. Oregon Co.'s employees are eligible for retirement with benefits at the end of the year in which both age 60 is attained and they have completed 35 years of service. The benefits provide 15 years reimbursement for health care services of $20,000 annually, beginning one year from the date of retirement. Ralph Young was hired at the beginning of 1973 by Oregon after turning age 22 and is expected to retire at the end of 2011 (age 60). The discount rate is 4%. The plan is unfunded. The PV of an ordinary annuity of $1 where n = 15 and i = 4% is 11.11839. The PV of $1 where n = 2 and i = 4% is 0.92456 What is the present value of Ralph's net benefits as of his expected retirement date, rounded to the nearest dollar?