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ACC423 Week 5 E20-7 E22-19 P20-4 P22-6

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E20-7 The following defined pension data of Rydell Corp. apply to the year 2012.

Projected benefit obligation, 1/1/12 (before amendment)  560,000
Plan assets, 1/1/12  546,200
Pension liability  13,800
On January 1, 2012, Rydell Corp., through plan amendment, 
grants prior service benefits having a present value of  120,000
Settlement rate 9%
Service cost  58,000
Contributions (funding)  65,000
Actual (expected) return on plan assets  52,280
Benefits paid to retirees  40,000
Prior service cost amortization for 2012  17,000

Instructions
For 2010, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts

E22-19 A partial trial balance of Dickinson Corporation is as follows on December 31, 2012.

Dr.Cr.
Supplies  2,500
Salaries and Wages Payable  1,500
Interest Receivable  5,100
Prepaid Insurance  90,000
Unearned Rent  -  
Interest Payable  15,000

Additional adjusting data:
1. A physical count of supplies on hand on December 31, 2012, totaled $1,100.
2. Through oversight, the Salaries and Wages Payable account was not changed during 2012. Accrued
salaries and wages on December 31, 2012, amounted to $4,400.
3. The Interest Receivable account was also left unchanged during 2012. Accrued interest on investments amounts to $4,350 on December 31, 2012.
4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2012.
5. $24,000 was received on January 1, 2012, for the rent of a building for both 2012 and 2013. The entire amount was credited to Rent Revenue.
6. Depreciation for the year was erroneously recorded as $5,000 rather than the correct figure of
$50,000.
7. A further review of depreciation calculations of prior years revealed that depreciation of $7,200 was
not recorded. It was decided that this oversight should be corrected by a prior period adjustment.

Instructions
(a) Assuming that the books have not been closed, what are the adjusting entries necessary at December 31, 2012? (Ignore income tax considerations.)
(b) Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2012? (Ignore income tax considerations.)

P20-4 Gordon Company sponsors a defined benefit

pension plan. The following information related to the pension plan is available for 2012 and 2013.

20122013
Plan assets (fair value), December 31 $699,000$849,000
Projected benefit obligation, January 1 700,000800,000
Pension asset/liability, January 1 140000
Prior service cost, January 1 250,000240,000
Service cost 60,00090,000
Actual and expected return on plan assets 24,00030,000
Amortization of prior service cost 10,00012,000
Contributions (funding) 115,000120,000
Accumulated benefit obligation, December 31 500,000550,000
Interest/settlement rate 9%9%

Instructions
(a) Compute pension expense for 2012 and 2013.
(b) Prepare the journal entries to record the pension expense and the company’s funding of the pension
plan for both years.

P22-6  On December 31, 2012, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets.

1. Depreciable asset A was purchased January 2, 2009. It originally cost $540,000 and, for depreciation
purposes, the straight-line method was originally chosen. The asset was originally expected to be
useful for 10 years and have a zero salvage value. In 2012, the decision was made to change the depreciation method from straight-line to sum-of-the-years’ digits, and the estimates relating to useful
life and salvage value remained unchanged.

2. Depreciable asset B was purchased January 3, 2008. It originally cost $180,000 and, for depreciation
purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15
years and have a zero salvage value. In 2012, the decision was made to shorten the total life of this
asset to 9 years and to estimate the salvage value at $3,000.

3. Depreciable asset C was purchased January 5, 2008. The asset’s original cost was $160,000, and this
amount was entirely expensed in 2008. This particular asset has a 10-year useful life and no salvage
value. The straight-line method was chosen for depreciation purposes.

Additional data:
1. Income in 2012 before depreciation expense amounted to $400,000.
2. Depreciation expense on assets other than A, B, and C totaled $55,000 in 2012.
3. Income in 2011 was reported at $370,000.
4. Ignore all income tax effects.
5. 100,000 shares of common stock were outstanding in 2011 and 2012.

Instructions
(a) Prepare all necessary entries in 2012 to record these determinations.
(b) Prepare comparative retained earnings statements for Madrasa Inc. for 2011 and 2012. The company had retained earnings of $200,000 at December 31, 2010.

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