ACCT 2

Encore Industries owned investment securities with a book value of $45 million on August 12. At that time, Encore's board of directors declared a property dividend consisting of these securities. The fair value of the securities was as follows: Declaration - August 12 $58million Record date - September 1 62million Distribution date - September 20 60million What amount of gain should Encore recognize in earnings in connection with this property dividend?

$13 million 58M-45M

The Colorado Copper Company sponsors a defined benefit pension plan. The following information pertains to that plan: Projected benefit obligation at Jan. 1, 2021 $144million Service cost for 2021 36million Retiree benefits paid (end of year) 30million Discount rate 10% No change in actuarial estimates occurred during 2021. What is CCC's projected benefit obligation at December 31, 2021?

$164.4 million. Beginning balance ($144) + service cost ($36) + interest expense ($144 × 10%) − benefits paid ($30) [in millions]

Information regarding the defined benefit pension plan of Melrose Products included the following for 2021 ($ in millions): Plan assets, January 1 $350 Plan assets, December 31 525 Retiree benefits paid (end of year) 85 Return on plan assets 50 What were the employer contributions to the pension plan at the end of 2021?

$210 million: Beginning balance ($350) + actual return ($50) + contributions (?) − retiree benefits paid ($85) = ending balance ($525) [in millions]

Information regarding the defined benefit pension plan of Glavin Industries included the following for 2021 ($ in millions): Plan assets, January 1 $210 Retiree benefits paid (end of year) 150 Actual return on plan assets 30 Employer contributions to the pension plan (end of year) 126 Expected rate of return on plan assets 10% What was the amount of Glavin's plan assets at December 31, 2021?

$216 million: Beginning balance ($210) + actual return ($30) + contributions ($126) − retiree benefits paid ($150) = ending balance (?) [in millions]

Information regarding the defined benefit pension plan of Neo Products included the following for 2021 ($ in millions): Plan assets, January 1 $210 Plan assets, December 31 315 Return on plan assets 30 Employer contributions to the pension plan (end of year) 126 What amount of retiree benefits was paid at the end of 2021?

$51 million: Beginning balance ($210) + actual return ($30) + contributions ($126) − retiree benefits paid (?) = ending balance ($315) [in millions]

The corporate charter of Pharaoh Tent Co. authorized the issuance of 6 million, $1 par common shares. During 2021, its first year of operations, Pharaoh had the following transactions: February 4 sold 4 million shares at $15 per share October 12 retired 1 million shares at $18 per share December 30 sold the 1 million shares at $20 per share What amount should Pharaoh report as additional paid-in capital in its December 31, 2021, balance sheet?

$61 million On Feb 4, additional paid-in capital was credited for $56 [4 million shares × $14/share ($15 − $1 par)]. On Oct 12, it was debited for $14 (1 million shares × $14/share). On Dec 30, it was credited for $19 [1million shares × $19/share ($20 − $1 par)].

Treasury stock transactions may cause:

A decrease in the balance of retained earnings. The only impact on shareholders' equity accounts of treasury stock transactions are: Paid-in capital - treasury stock may either increase or decrease, and retained earnings may decrease.

Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

D D

What is the effect of the declaration and subsequent issuance of a 5% stock dividend on each of the following? Retained earnings Paid-in capital

D I The stock dividend is a capitalization of retained earnings.

Dunavant Service Company views share repurchases as treasury stock. Dunavant purchased shares and then later sold the shares at more than their acquisition price. What is the effect of the sale of the treasury stock on each of the following?

N I

What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following? Retained earnings Paid-in capital

N N

Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following?

N N The treasury stock is deducted from total shareholders' equity as a separate line item - it is not part of either paid-in capital or retained earnings.

What is the effect of the declaration and subsequent issuance of a stock split (effected in the form of a stock dividend) on each of the following?

N N Common stock is increased for the par value of the shares issued, and paid-in capital-excess of par is debited for the same amount. Both of these accounts are paid-in capital accounts

Chapman Chairs, a family-owned corporation, declared and distributed a property dividend from its overstocked inventory in place of its usual cash dividend. The inventory's book value exceeded its fair value. The excess is:

Reported as a loss. A property dividend is recorded at the fair value of the assets distributed. This may require revaluing the assets prior to recording the dividend which can produce a gain or loss.

In an employer-sponsored defined benefit pension plan, the interest cost included in the pension expense represents:

The increase in the projected benefit obligation due to the passage of time. Interest cost is the amount of interest that accrues on the beginning of the period projected benefit obligation (PBO).

Amortizing a net loss for pensions and other postretirement benefit plans will

decrease retained earnings and increase accumulated other comprehensive income.

A statement of comprehensive income does not include:

return on plan assets. Return on plan assets is reported in the income statement as a component of pension expense and is not reported as a component of other comprehensive income.