Basic Accounting Principles

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Name: __________________________ Date: _____________

Use the following to answer questions 1-3:

The following data are for the pension plan for the employees of Lockett Company.

1/1/14
12/31/14
12/31/15
Accumulated benefit obligation
$2,500,000
$2,600,000
$3,400,000
Projected benefit obligation
2,700,000
2,800,000
3,700,000
Plan assets (at fair value)
2,300,000
3,000,000
3,300,000
AOCL – net loss
-0-
480,000
500,000
Settlement rate (for year)

10%
9%
Expected rate of return (for year)

8%
7%
Lockett's contribution was $420,000 in 2015 and benefits paid were $375,000. Lockett estimates that the average remaining service life is 15 years.

1.
The actual return on plan assets in 2015 was
A)
$300,000.
B)
$255,000.
C)
$200,000.
D)
…show more content…
Fair value of the land at time of the sale was $40,000. The lease is a 10-year, noncancelable lease. Gage uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Gage at termination of the lease. A partial amortization schedule for this lease is as follows:

Payments Interest
Amortization
Balance
Jan. 2, 2014

$400,000.00
Dec. 31, 2014
$65,098.13
$40,000.00
$25,098.13
374,901.87
Dec. 31, 2015
65,098.13
37,490.19
27,607.94
347,293.93
Dec. 31, 2016
65,098.13
34,729.39
30,368.74
316,925.19

13.
From the viewpoint of the lessor, what type of lease is involved above?
A)
Sales-type lease
B)
Sale-leaseback
C)
Direct-financing lease
D)
Operating lease

14.
What is the discount rate implicit in the amortization schedule presented above?
A)
12%
B)
10%
C)
8%
D)
6%

15.
The total lease-related expenses recognized by the lessee during 2015 is which of the following? (Rounded to the nearest dollar.)
A)
$64,000
B)
$65,098
C)
$73,490
D)
$61,490

16.
What is the amount of the lessee's liability to the lessor after the December 31, 2016 payment? (Rounded to the nearest dollar.)
A)
$400,000
B)
$374,902
C)
$347,294
D)
$316,925

17.
The total lease-related income
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