ACC303 test 3
Name: __________________________ Fall 08 Test 3 Accounting 3312
25 points
1.
Deferred income taxes.
Earl Co. at the end of 2007, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income
$ 750,000
Estimated expenses deductible for taxes when paid
1,200,000
Extra depreciation (1,350,000)
Taxable income
$ 600,000
Estimated warranty expense of $800,000 will be deductible in 2008, $300,000 in 2009, and $100,000 in 2010. The use of the depreciable assets will result in taxable amounts of $450,000 in each of the next three years.
Instructions
(a) Prepare a table of future taxable and deductible amounts.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007, assuming an income tax rate of 40% for all years.
25 points
2.
Pension plan calculations and journal entry.
On January 1, 2008, Stine Co. had the following balances:
Projected benefit obligation
$7,200,000
Fair value of plan assets
7,200,000
Other data related to the pension plan for 2008:
Service cost
315,000
Unrecognized prior service cost
-0-
Contributions to the plan
459,000
Benefits paid
450,000
Actual return on plan assets
432,000
Settlement rate
9%
Expected rate of return
6%
Instructions
(a) Determine the projected benefit obligation at December 31, 2008. There are no net gains or losses.
(b) Determine the fair value of plan assets at December 31, 2008.
(c) Calculate pension expense for 2008.
(d) Prepare the journal entry to record pension expense and the contributions for 2008.
25 points
3.
Lessor accounting—sales-type lease.
Piper Corp. is a manufacturer of truck trailers. On January 1, 2008, Piper Corp. leases ten trailers to Runyan Company under a six-year noncancelable lease agreement. The following information about the lease and the trailers is provided:
1. Equal annual payments that are due on December
25 points
1.
Deferred income taxes.
Earl Co. at the end of 2007, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income
$ 750,000
Estimated expenses deductible for taxes when paid
1,200,000
Extra depreciation (1,350,000)
Taxable income
$ 600,000
Estimated warranty expense of $800,000 will be deductible in 2008, $300,000 in 2009, and $100,000 in 2010. The use of the depreciable assets will result in taxable amounts of $450,000 in each of the next three years.
Instructions
(a) Prepare a table of future taxable and deductible amounts.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007, assuming an income tax rate of 40% for all years.
25 points
2.
Pension plan calculations and journal entry.
On January 1, 2008, Stine Co. had the following balances:
Projected benefit obligation
$7,200,000
Fair value of plan assets
7,200,000
Other data related to the pension plan for 2008:
Service cost
315,000
Unrecognized prior service cost
-0-
Contributions to the plan
459,000
Benefits paid
450,000
Actual return on plan assets
432,000
Settlement rate
9%
Expected rate of return
6%
Instructions
(a) Determine the projected benefit obligation at December 31, 2008. There are no net gains or losses.
(b) Determine the fair value of plan assets at December 31, 2008.
(c) Calculate pension expense for 2008.
(d) Prepare the journal entry to record pension expense and the contributions for 2008.
25 points
3.
Lessor accounting—sales-type lease.
Piper Corp. is a manufacturer of truck trailers. On January 1, 2008, Piper Corp. leases ten trailers to Runyan Company under a six-year noncancelable lease agreement. The following information about the lease and the trailers is provided:
1. Equal annual payments that are due on December