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Sherrod, Inc. reported pretax accounting income of 76 million for 2011. The following information relates to differenc




Question;P16-7 Multiple differences, calculate;taxable income, balance sheet classification;Sherrod;Inc. reported pretax accounting income of 76 million for 2011. The;following information relates to differences between pretax accounting income;and taxable income;a. Income from installment;sales of properties included in pretax accounting income in 2011 exceeded that;reported for tax purposes by 3 million.;The installment receivable account at year-end had a balance of 4;million (representing portions of 2010 and 2011 installment sales), expected to;be collected equally in 2012 and 2013.;b.;Sherrod was assessed a penalty of 2 million by the;Environmental Protection Agency for violation of a federal law in 2011. The fine is to be paid in equal amounts in;2011 and 2012.;c.;Sherrod rents its operating facilities but owns one asset;acquired in 2010 at a cost of 80 million.;Depreciation is reported by the straight-line method assuming a;four-year useful life. On the tax;return, deductions for depreciation will be more than straight-line;depreciation the first two years but less than straight- line depreciation the;next two years ($ in millions).;Income Statement Tax Returns Differences;2010 $20;$26;$(16);2011 20;35 (15);2012 20;12 8;2013 20 7 13;$80;$80 $0;d.;Bad debt expense of 3;million is reported using the allowance method in 2011. For tax purposes the expense is deducted when;accounts prove uncollectible (the direct write-off method): 2 million in 2011. At December 31, 2011, the allowance for;uncollectible accounts was 2 million;(after adjusting entries). The balance was 1 million at the end of 2010.;e.;In 2011, Sherrod accrued an expense and related liability for;estimated paid future absences of 7 million relating to the company?s new paid;vacation program. Future compensation;will be deductible on the tax return when actually paid during the next two;years (4 million in 2012, 3 million in 2013).;f.;During 2010, accounting income included an estimated loss of;2 million from having accrued a loss contingency. The loss is paid in 2011 at which time it is;tax deductible.;Balances;in the deferred tax asset and deferred tax liability accounts at January 1;2011, were 1.2 million and 2.8 million, respectively. The enacted tax rate is 40% each year.;Requred;1.;Determine the amounts necessary;to record income taxes for 2011 and prepare the appropriate journal entry.;2.;What is 2011 net income?;3.;Show how any deferred tax;amounts should be classified and reported in the 2011 balance sheet.;E;17-10 Determine pension expense;Abbott and Abbott has a noncontributory;defined benefit pension plan. At;December 31, 2011, Abbott and Abbott received the following information;($ in the millions);Projected;Benefit Organization;Balance, January 1 $120;Service Cost;20;Interest;Cost;12;Benefits;paid;(9);Balance;December 31 $143;Plan Assets;Balance;January 1;$ 80;Actual return on plan assets 9;Contribution;2011;20;Benefits;paid;(9);Balance;December 31 $100;The;expected long-term rate of return on plan assets was 10%. There was no prior service cost and a;negligible net loss- AOCI on January 1, 2011.;Required;1.;Determine Abbott and Abbott?s;pension expense for 2011.;2.;Prepare the journal entries;record Abbott and Abbott?s pension, funding, and payments for 2011.;E 17-19 Record pension expense, funding, and gains and;losses, determine account balances;Beale;Management has noncontributory, defined benefit pension plan. On December 31, 2011 (the end of Beale?s;fiscal year), the following pension-related data were available.;Projected;Benefit Obligation;($ in millions);Balance;January 1, 2011 480;Service;Cost;82;Interest;cost, discount rate, 5% 24;Gain due;to changes in actuarial assumptions in 2011;(10);Pension;benefits paid;(40);Balance;December 31, 2011 536;Plan Assets;Balance;January 1, 2011;500;Actual;return on plan assets;40;(Expected;return on plan assets, 45);Pension;benefits paid;(40);Balance;December 31. 2011;570;January 1, 2011, balances;Pension;asset;20;Prior;service cost ?AOCI (amortization $8 per year);48;Net;gain-AOCI (any amortization over 15 years) 80;Required;1.;Prepare the 2011 journal entry;to record pension expense.;2.;Prepare the journal entry (s);to record any 2011 gains and losses.;3.;Prepare the 2011 journal;entries to record the contribution to plan assets, and benefit payments to;retirees.;4.;Determine the balances at;December 31, 2011, in PBO, plan assets, the net gain-AOCI and prior service;cost-AOCI and show how the balances changed during 2011. (t-accounts may be;useful).;5.;What amount will Beale report;in its 2011 balance sheet as a net pension asset or net pension liability for;the funded stat s of the plan?;P 17-6 Determine the PBO, plan assets, pension;expense, two years;Stanley-Morgan;Industries adopted a defined benefit pension plan on April 12, 2011. The provisions of the plan were not made;retroactive to prior years. A local;bank, engaged as trustee for the plan assets, expects plan assets to earn a 10%;rate of return. A consulting firm;engaged as actuary, recommends 6% as the appropriate discount rate. The service cost is 150,000 for 2011 and;200,000 for 2012. Year-end funding is;160,000 for 2011 and 170,000 for 2012.;No assumptions or estimates were revised during 2011.;Required;Calculate;each of the following amounts as of both December 31, 2011, and December 31;2012.;1.;Projected benefit obligation;2.;Plan assets;3.;Pension expense;4.;Netpension asset or net pension liability


Paper#50688 | Written in 18-Jul-2015

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