FAR 2 Exam 1

Paige Corporation has Noncontributory, Funded, Defined Benefit Pension Plan. As of 12-31-2015, the projected benefit obligation (PBO) was $800,000. As a result of the passage of time during 2016 the PBO increased by $32,000. As a result of employees working during 2016 the PBO increased by $39,000. What is the interest for 2016 ?

$32,000

Royal Corporation has Noncontributory, Funded, Defined Benefit Pension Plan. As of 12-31-2015, the projected benefit obligation (PBO) was $800,000. As of 12-31-2015, the fair value of the pension plan assets was $600,000. Actuary's Discount Rate (Settlement Rate) is 5% per year. The expected rate of return is 6% per year. The actual rate of return was 7% for 2016. As a result of employees working during 2016 the PBO increased by $39,000. What is the interest for 2016 ?

$40,000

On 1-1-2024, Sands Corporation had an increase in a liability of $100,000 and as a result a decrease in shareholders' equity of $100,000. However, generally accepted accounting principles (GAAP) require that the associated loss of $100,000 be recognized in Other Comprehensive Income (Loss). The $100,000 loss will be recognized on the income statement by amortizing it over time. None of the loss was amortized in 2024. However, $5,000 of the loss was amortized in 2025. Sands had net income of $500,000 in 2025. What was Accumulated Other Comprehensive Income (Loss) as of 12-31-2025?

(95,000)

Presented below is the shareholders' equity section of the balance sheet of the Edwards Corporation as of 12-31-2017. Shareholders' Equity: Common Stock (Par Value of $1/Share) $100,000 Paid-in Capital in Excess of Par $1,900,000 Retained Earnings: $500,000 Total Shareholders' Equity: $2,500,000 -As of 12-31-2017, the 100,000 shares of common stock were issued (sold) for $2,000,000, i.e., an issue price of $20 per share. -The common stock has a par value of $1 per share -On 10-1-2018 Edwards repurchased 10,000 shares of its common stock for $240,000, i.e., $24 per share. Edwards accounts for the transaction as a treasury stock transaction, i.e, Edwards did NOT retire the shares. -On 12-4-2018 Edwards declared and paid $70,000 in cash dividends. -Edwards had net income of $100,000 in 2018. What was total shareholders' equity reported on the 123-31-2018 balance sheet of Edwards ?

2,290,000

Linseed has Noncontributory, Funded, Defined Benefit Pension Plan. As of 12-31-2016, the projected benefit obligation (PBO) was $468,000. As of 12-31-2016, the fair value of the pension plan assets was $536,000. As do may companies, Linseed tries to minimize its reported liabilities on the balance sheet while complying with generally accepted accounting principles (GAAP). On its 12-31-2016 balance sheet Linseed will report a

Pension Plan Asset of $68,000

Presented below is the shareholders' equity section of the balance sheet of the Hamilton Corporation as of 12-31-2017. Shareholders' Equity: Common Stock (Par Value of $1/Share) $100,000 Paid-in Capital in Excess of Par $1,900,000 Retained Earnings: $500,000 Total Shareholders' Equity: $2,500,000 -As of 12-31-2017, the 100,000 shares of common stock were issued (sold) for $2,000,000, i.e., an issue price of $20 per share. -The common stock has a par value of $1 per share -On 6-15-2018, Hamilton Corporation sold another 2,000 shares of its common stock for $54,000, i.e., $27 per share. Hamilton's 6-15-2018 journal entry to record the issue (sale) of the 2,000 shares would include a

credit to Paid-In Capital in Excess of Par for 52,000

Presented below is the owners' equity section of the balance sheet of the Washington Corporation as of 12-31-2018. Shareholders' Equity: Common Stock (Par Value of $1/Share) $100,000 Paid-in Capital in Excess of Par $1,900,000 Retained Earnings: $2,000,000 Total Shareholders' Equity: $4,000,000 -The 100,000 shares of common stock were sold for $2,000,000, i.e., an issue price of $20 per share. -The common stock has a par value of $1 per share -On 5-22-2019, Washington Corporation bought back 2,000 shares of its common stock for $100,000, i.e., $50 per share. -On 7-29-2019, Washington Corporation bought back 3,000 shares of its common stock for $153,000, i.e., $51 per share. -On 11-16-2019, Washington Corporation sold 4,000 shares of treasury stock for $210,000, i.e., $52.50 per share. -Washington uses the cost method in conjunction with the FIFO method in accounting for treasury stock transactions. The 11-16-2019 journal entry to record the sale of the 4,000 shares would include a

credit to paid-in capital from share repurchase for $8,000

The following information relates to the defined benefit pension plan of the Hansen Company. Only a single employee is covered by the plan. That employee has worked for Hansen since 1-1-2014 and she has earned pension benefits since 1-1-2014. Additional information is provided below. 1. Benefit formula: Upon retirement and upon reaching age 65, the employee will receive a pension payment annually (payments to be made as long as employee lives). -The first check will be issued one year after retirement. -The annual payment will be for 3% of employee's highest annual salary multiplied by the number of years of service. -Her salary has increased each year and is expected to increase each year in the future. 2. Expected Retirement Date: December 31, 2022 - she will reach age 65 at this time; first pension check is expected to be issued 12-31-2023 3. Expected Date of Death: January 1, 2030 - last (7th) pension check is expected to be issued 12-31-2029 4. Actuary's Discount Rate (Settlement Rate): 6% per year 5. Actual Annual Salary for 2016: $80,000 6. Expected Annual Salary for 2022: $90,000 What is the projected benefit obligation (PBO) as of 12-31-2016 ?

$31,876

Garcia Corporation has Noncontributory, Funded, Defined Benefit Pension Plan. As of 12-31-2015, the projected benefit obligation (PBO) was $600,000. As of 12-31-2015, the fair value of the pension plan assets was $800,000. Actuary's Discount Rate (Settlement Rate) is 4% per year. The expected rate of return is 5% per year. The actual rate of return was 6% for 2016. As a result of employees working during 2016 the PBO increased by $39,000. What is the actual return for 2016 ?

$48,000

On 1-1-2016, Shaw Corporation initiated a funded, noncontributory, defined benefit pension plan and gave employees credit for prior employment. The company complies with generally accepted accounting principles (GAAP). The actuary estimated the prior service cost to be $400,000 on 1-1-2016. Shaw contributed $300,000 to the pension fund on 1-1-2016, i.e., funded $300,000. The average remaining service period of current employees is approximately 8 years at all times. Service cost was $38,000 for 2016. The actual return on pension plan assets was 1% for 2016. The settlement rate (i.e., the actuary's discount rate) is 5% per year. The expected return on pension plan assets is 6% per year. The market related value of pension plan assets is the same as the fair value of pension plan assets. Shaw contributed $10,000 to the pension fund on 12-31-2016, i.e., funded $10,000. The accounting for pensions under generally accepted accounting principles (GAAP) allows a lot of deferral devices and a lot of smoothing devices and Shaw utilizes those devices. Required What is pension expense for 2016 for Shaw ?

$90,000

On 1-1-2016, Morton Corporation initiated a funded, noncontributory, defined benefit pension plan and gave employees credit for prior employment. The company complies with generally accepted accounting principles (GAAP). The actuary estimated the prior service cost to be $400,000 on 1-1-2016. Morton contributed $400,000 to the pension fund on 1-1-2016, i.e., funded $400,000. The average remaining service period of current employees is approximately 4 years at all times. Service cost was $38,000 for 2016. The actual return on pension plan assets was $4,000 for 2016. The settlement rate (i.e., the actuary's discount rate) is 5% per year. The expected return on pension plan assets was $24,000 for 2016. The accounting for pensions under generally accepted accounting principles (GAAP) allows a lot of deferral devices and a lot of smoothing devices and Morton utilizes those devices. Required What is Accumulated Other Comprehensive Income (Loss) reported on the 12-31-2016 balance sheet ?

(320,000)

The following information relates to the defined benefit pension plan of the Wilkerson Company. Only a single employee is covered by the plan. That employee has worked for Wilkerson since 1-1-2024 and she has earned pension benefits since 1-1-2024. Additional information is provided below. 1. Benefit formula: Upon retirement and upon reaching age 65, the employee will receive a pension payment annually (payments to be made as long as employee lives). -The first check will be issued one year after retirement. -The annual payment will be for 3% of employee's highest annual salary multiplied by the number of years of service. -Her salary has increased each year and is expected to increase each year in the future. 2. Expected Retirement Date: December 31, 2030 - she will reach age 65 at this time; first pension check is expected to be issued 12-31-2031 3. Expected Date of Death: January 1, 2037 (last (6th) pension check is expected to be issued 12-31-2036) 4. Actuary's Discount Rate (Settlement Rate): 5% per year 5. Actual Annual Salary for 2028: $100,000 6. Expected Annual Salary for 2030: $110,000 As always, assume that service cost is measured as of the 12-31, in this problem as of 12-31-2028. What is the service cost for 2028 ?

15,193

Presented below is the owners' equity section of the balance sheet of the Lincoln Corporation as of 12-31-2018. Shareholders' Equity: Common Stock (Par Value of $1/Share) $100,000 Paid-in Capital in Excess of Par $1,900,000 Retained Earnings: $2,000,000 Total Shareholders' Equity: $4,000,000 -As of 12-31-2018, the 100,000 shares of common stock were issued (sold) for $2,000,000, i.e., an issue price of $20 per share. -The common stock has a par value of $1 per share -On 5-22-2019, Lincoln Corporation bought back 2,000 shares of its common stock for $102,000, i.e., $51 per share. -On 7-29-2019, Lincoln bought back 3,000 shares of its common stock for $150,000, i.e., $50 per share. -On 11-16-2019, Lincoln Corporation sold 4,000 shares of treasury stock for $208,000, i.e., $52 per share. -Lincoln treats accounts for the purchase of its common stock and subsequent resale of that treasury stock as treasury stock transactions, i.e., Lincoln does NOT retire the shares when repurchased. -Lincoln uses the cost method in conjunction with the weighted average method in accounting for treasury stock transactions. Lincoln's cost of the 4,000 shares of treasury stock sold on 11-15-2019 would be

201,600

On 1-1-2022, Lincoln Corporation had an increase in a liability of $80,000 and as a result a decrease in shareholders' equity of $80,000. However, generally accepted accounting principles (GAAP) require that the associated expense of $80,000 be recognized in Other Comprehensive Income (Loss). The $80,000 expense will be recognized on the income statement by amortizing (straight-line basis) it over 4 years beginning in 2022. Lincoln had net income of $300,000 in 2022. What was Comprehensive Income (Loss) for 2022 ?

240,000

On 1-1-2016, Granscher Corporation initiated a funded, noncontributory, defined benefit pension plan and gave employees credit for prior employment. The company complies with generally accepted accounting principles (GAAP). The actuary estimated the prior service cost to be $600,000 on 1-1-2016. Granscher contributed $500,000 to the pension fund on 1-1-2016, i.e., funded $500,000. The average remaining service period of current employees is approximately 5 years at all times. Service cost was $50,000 for 2016. The actual return on pension plan assets was $35,000 for 2016. The settlement rate (i.e., the actuary's discount rate) is 4% per year. The expected return on pension plan assets was $35,000 for 2016. The accounting for pensions under generally accepted accounting principles (GAAP) allows a lot of deferral devices and a lot of smoothing devices and Granscher utilizes those devices. Required What is Other Comprehensive Income (Loss) for 2016 ?

480,000

Millburn Corporation has a Defined Benefit Pension Plan. As of 1-1-2020, the projected benefit obligation (PBO) was $303,000. On 1-1-2020, a change in estimate, i.e., revision in assumption, related to the PBO, resulting in a decrease in the PBO to $297,000. As result of the change in estimate, i.e., revision of assumption, there would be an actuarial gain (loss) of how much on 1-1-2020?

6,000

On 1-1-2016, Hobbs Corporation initiated a funded, noncontributory, defined benefit pension plan and gave employees credit for prior employment. The company complies with generally accepted accounting principles (GAAP). The actuary estimated the prior service cost to be $700,000 on 1-1-2016. Hobbs contributed $600,000 to the pension fund on 1-1-2016, i.e., funded $600,000. The average remaining service period of current employees is approximately 6 years at all times. Service cost was $50,000 for 2016. The actual return on pension plan assets was 8% for 2016. The settlement rate (i.e., the actuary's discount rate) is 4% per year. The expected return on pension plan assets is 5% per year. The market related value of pension plan assets is the same as the fair value of pension plan assets. Hobbs contributed $150,000 to the pension fund on 12-31-2016, i.e., funded $150,000. As do many companies, Hobbs tries to minimize its reported liabilities on the balance sheet while complying with generally accepted accounting principles (GAAP). Required On its 12-31-2016 balance sheet Hobbs will report a pension plan

Asset of $20,000.

Presented below is the shareholders' equity section of the balance sheet of the Milton Corporation as of 1-14-2021. Shareholders' Equity: Common Stock (Par Value of $4/Share) $100,000 Paid-in Capital in Excess of Par $3,900,000 Retained Earnings: $400,000 Total Shareholders' Equity: $4,400,000 -Milton sold the 25,000 shares of common stock outstanding as of 1-14-2021 for $4,000,000, i.e., at an average price of $160/share. -On 1-15-2021, Milton Corporation bought back 1,000 shares of its common stock for $200,000, i.e., $200 /share, and immediately retired the shares at that time. Milton accounts for the transaction as a share buyback. Milton's 1-15-2021 journal entry will include a

Debit to Paid-In Capital in Excess of Par for 156,000