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Problem 1- Measuring and Recording Pension Expense...

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Problem 1- Measuring and Recording Pension Expense Presented below is information related to the pension plan of Vector Inc. For the year 2010. 1. The service cost of pension expense is $450,000. 2. The projected benefit obligation and the accumulated benefit obligation at the beginning of the year are $570,000 and $525,000, respectively. The settlement rate is 10%. 3. The expected return on plan assets is 9%. The actual return on plan assets is $49,000. 4. The unrecognized prior service cost at the beginning of the year is $260,000. The average remaining service-life of the employees is 5 years. 5. At the beginning of the period, the fair value of pension plan assets is $525,000. 6. The company had an unrecognized net loss at the beginning of the period of $170,000. Any amortization of unrecognized net loss is recognized on straight-line basis over the average remaining service-life of the employees. 7. The contribution made to the pension fund in 2010 was $435,000. Benefits paid from the fund in 2010 totaled $85,000. a. Determine the pension expense to be reported on the income statement for 2010. Show all computations. Round all Computations to nearest dollar. b. Prepare the journal entry to record pension expense for 2010. c. Determine the projected benefit obligation at December 31, 2010. d. Determine the fair value of plan assets at December 31, 2010. Problem 2 - Leases On January 1, 2011, Foley Company (as lessor) entered into a noncancelable lease agreement with Pinkley Company for machinery which was carried on the accounting records of Foley at $4,530,000 and had a market value of $4,800,000. Minimum lease payments under the lease agreement which expires on December 31, 2020, total $7,100,000. Payments of $710,000 are due each January 1. The first payment was made on January 1, 2011 when the lease agreement was finalized. The interest rate of 10% which was stipulated in the lease agreement is the implicit rate set by the lessor. The effective interest method of amortization is being used. Pinkley expects the machine to have a ten-year life with no salvage value, and be depreciated on straight-line basis. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. a. From the lessee's viewpoint, what kind of lease is the above agreement? From the lessor's viewpoint, what kind of lease is the above agreement? b. What should be the income before income taxes derived by Foley from the lease for the year ended December 31, 2011? c. Ignoring income taxes, what should be the expenses incurred by Pinkley from this lease for the year ended December 31, 2011? D. What journal entries should be recorded by Pinkley Company on January 1, 2011? E. What journal entries should be recorded by Foley COmpany on January on January 2011?

 

Paper#7987 | Written in 18-Jul-2015

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