Actuary and trustee reports indicate the following changes in the PBO and plan assets
of Reeves Uniforms during 2016:
Required:
1> Determine Reeves’ pension expense for 2016 and prepare the appropriate journal
entries to record the expense as well as the cash contribution to plan assets.
2> Determine the new gains and/or losses in 2016 and prepare the appropriate journal
entry to record them.
3> Prepare a pension spreadsheet to assist you in determining end of 2016 balances in
the PBO, plan assets, prior service cost, the net loss-AOCI, and the pension
liability-AOCI.
On January 1, 2016, Wildcat Company purchased $93,000 of 10% bonds at face value.
The bonds are to be held to maturity. The bonds pay interest semiannually on January 1
and July 1.
Required:
•
Prepare the appropriate journal entry to record the acquisition of the bonds.
•
Record the first two interest payments (ignore year-end accruals).
Chen Inc. accepted a two-year noninterest-bearing note for $605,000 on January 1,
2016. The note was accepted as payment for merchandise with a fair value of $500,000.
The effective interest rate is 10%. What is the correct entry to record the note
The following selected transactions relate to contingencies of Bowe-Whitney Inc.
Bowe-Whitney’s fiscal year ends on December 31, 2016, and financial statements are
published in March 2017.
1> Bowe-Whitney is involved in a lawsuit resulting from a dispute with a customer
over a 2016 transaction. At December 31, attorneys advised that it was probable that
Bowe-Whitney would lose $3 million in an unfavorable outcome. On February 12,
2017, judgment was rendered against Bowe-Whitney in the amount of $14 million plus
interest, a total of $15.2 million. Bowe-Whitney does not plan to appeal the judgment.
2> Since August of 2016, Bowe-Whitney has been involved in labor disputes at two of
its facilities. Negotiations between the company and the unions have not produced a
settlement and, since January 2016, strikes have been ongoing at these facilities. It is
virtually certain that material costs will be incurred but the amount of resultant costs
cannot be adequately predicted.
3> Bowe-Whitney is the defendant in a lawsuit filed in January 2017 in which Access
Company seeks $10 million as an adjustment to the purchase price related to the sale of
Bowe-Whitney’s hardwood division in 2016. The lawsuit alleges that Bowe-Whitney
misrepresented the division’s assets and liabilities. Legal counsel advises that it is
reasonably possible that Bowe-Whitney could lose $5 million, but that it’s extremely
unlikely it could lose the $10 million asked for.
4> At March 1, 2017, the EPA is in the process of investigating the possibility of
environmental violations at one of Bowe-Whitney’s sites, but has not proposed a
penalty assessment. 5> Management feels an assessment is reasonably possible, and if
an assessment is made, a settlement of up to $33 million is probable.
Required:
Prepare journal entries that should be recorded as a result of each of the above
contingencies.
The current asset section of Seifert & Seifert, CPAs’ balance sheet consists of cash,
accounts receivable, investments, and prepaid expenses. The 2016 balance sheet
reported the following: cash, $110,000; investments, $22,000; prepaid expenses,
$18,000; noncurrent assets, $422,000; and shareholders’ equity, $350,000. The current
ratio at the end of the year was 1.6 and the debt to equity ratio was .8. Required:
Determine the following 2016 amounts and ratios:
1> Current liabilities.
2> Long-term liabilities.
3> Accounts receivable.
4> The acid-test ratio.
Below is a list of accounts in no particular order. Assume that all accounts have normal
balances. Required: In column A, indicate whether a debit will:
1> Increase the account balance, or
2> Decrease the account balance. In column B, classify each account according to the
following scheme. For contra accounts, indicate the classification of the account to
which it relates.
1>A current asset in the balance sheet.
2>A noncurrent asset in the balance sheet.
3>A current liability in the balance sheet.
4>A long-term liability in the balance sheet.
5>A permanent equity account in the balance sheet.
6>A revenue account in the income statement.
7>An expense account shown in the income statement.
8> Account does not appear in either the balance sheet or the income statement.
Supplies expense
Partial balance sheets for ABC Company and additional information are provided
below.
Additional information for 2016:
July 1: Issued 8,000 shares of common stock for cash.
July 1: Purchased new equipment for cash.
December 31: Paid cash dividends of $20,000.
Required:
Prepare the financing activities section of the statement of cash flows for 2016.