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ACC423 Final Exam Part 3

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Question 21
Lahey Corp. has three defined benefit pension plans as follows.
Pension Assets Projected Benefit
(at Fair Value) Obligation
Plan X $600,000 $500,000
Plan Y 900,000 720,000
Plan Z 550,000 700,000
How will Lahey report these multiple plans in its financial statements?

Question 22
For 2012, Sampsell Inc. computed its annual postretirement expense as $240,900. Sampsell’s
contribution to the plan during 2012 was $180,000. Prepare Sampsell’s 2012 entry to record postretirement expense.

Question 23
Wertz Construction Company decided at the beginning of 2012 to change from the completed contract
method to the percentage-of-completion method for financial reporting purposes. The company
will continue to use the completed-contract method for tax purposes. For years prior to 2012, pretax
income under the two methods was as follows: percentage-of-completion $120,000, and completed contract $80,000. The tax rate is 35%. Prepare Wertz’s 2012 journal entry to record the change in accounting principle.

Question 24
In 2012, Bailey Corporation discovered that equipment purchased on January 1, 2010, for $50,000
was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage
value. The effective tax rate is 30%. Prepare Bailey’s 2012 journal entry to correct the error.

Question 25
At January 1, 2012, Beidler Company reported retained earnings of $2,000,000. In 2012, Beidler
discovered that 2011 depreciation expense was understated by $400,000. In 2012, net income was $900,000 and dividends declared were $250,000. The tax rate is 40%. Prepare a 2012 retained earnings statement for Beidler Company.

Question 26
Simmons Corporation owns stock of Armstrong, Inc. Prior to 2012, the investment was accounted
for using the equity method. In early 2012, Simmons sold part of its investment in Armstrong, and began using the fair value method. In 2012, Armstrong earned net income of $80,000 and paid dividends of $95,000. Prepare Simmons’s entries related to Armstrong’s net income and dividends, assuming Simmons now owns 10% of Armstrong’s stock.

Question 27
Manno Corporation has the following information available concerning its postretirement benefit
plan for 2012.

Service cost  40,000
Interest cost  47,400
Actual and expected return  26,900
Compute Manno’s 2012 postretirement expense.

Question 28
Ravonette Corporation issued 300 shares of $10 par value common stock and 100 shares of $50 par
value preferred stock for a lump sum of $13,500. The common stock has a market price of $20 per share, and the preferred stock has a market price of $90 per share. Prepare the journal entry to record the issuance.

Question 29
Garfield Company purchased, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of
Chester Corporation for $74,086, which provides an 11% return. Prepare Garfield’s journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used.

Question 30
Clydesdale Corporation has a cumulative temporary difference related to depreciation of $580,000
at December 31, 2012. This difference will reverse as follows: 2013, $42,000; 2014, $244,000; and 2015, $294,000. Enacted tax rates are 34% for 2013 and 2014, and 40% for 2015. Compute the amount Clydesdale should report as a deferred tax liability at December 31, 2012.

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