Measuring and recording pension expense.
Presented below is information related to the pension plan of Zimmer Inc. for the year 2011.
(1) The service cost related to pension expense is $240,000 using the projected benefits approach.
(2) The projected benefit obligation and the accumulated benefit obligation at the beginning of the year are $300,000 and $280,000, respectively. The expected return on plan assets is 9% and the settlement rate is 10%.
(3) The accumulated OCI - prior service cost at the beginning of the year is $140,000. The company has a workforce of 200 employees, and all are expected to receive benefits under the plan. The total number of service-years is 1,000 and the service-years attributable to 2011 is 200. The company has decided to use the years-of-service method of amortization for these costs.
(4) At the beginning of the period, fair value of pension plan assets, $280,000. The company had an Accumulated OCI (loss) at the beginning of the period of $90,000. Any amortization of unrecognized net loss is recognized on a straight-line basis over the average remaining service-life of the employees.
(5) The contribution made to the pension fund in 2011 was $231,000.
Instructions
(a) Determine the pension expense to be reported on the income statement for 2011. (Round all computations to nearest dollar.)
(b) Prepare the journal entry (entries) to record pension expense for 2011.
Chicago contractors got $5,400,000 contract to construct a school building for the City of Chicago. Work on this contract began in 2013 and the financial data pertaining to this contract is available here.
Cost incurred till Dec.31, 2013 $1,080,000
Billings made to City $1,000,000
Amount collected from City $ 750,000
The estimated future cost to complete this contract is $3,240,000.
(a) Prepare Chicago contractors 2013 journal entries using percentage of completion method.
(b) Show how the contract accounts will appear in the Balance Sheet of Chicago Contractors on 12/31/2013.
Hertz Co. prepared the following reconciliation of its pretax financial statement income to taxable income for the year ended December 31, 2013, its first year of operations:
Pretax financial income $300,000
Nontaxable interest received on municipal securities (15,000)
Estimated warranties not deductible for tax purpose in 2013 30,000
Depreciation in excess of financial statement amount (50 ,000)
Taxable income $265,000
Hertz's tax rate for Year 2013 and for future years is 40%.
(a) In its Year 1 income statement, what amount should Hertz report as income tax expense-current portion?
(b) In its December 31, 2013 balance sheet, what amount should Hertz report as deferred income tax liability/asset?