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)
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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
840-10-25-6(e): Fees that are paid by the lessee to the owners of the special-purpose entity for structuring the lease transaction. Such fees shall be included as part of minimum lease payments (but shall not be included in the fair value of the leased property) for purposes of applying the 90 percent test in paragraph 840-10-25-1(d).
1) As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity. Is the accounting equation true in all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.
Generally accepted accounting principles allows the accounting profession to follow a recognized organization of objectives, to provide a structure for solving problems, to improve the understanding of financial statement and confidence in financial reporting, and to develop contrast among companies financial statements that can be generally accepted and universally practiced, “generally accepted” means that a reliable accounting organization has developed a standard of reporting that has been accepted because of the universal application (pg. 6, Kieso, Weygandt, & Warfield, 2007). There are four organizations that are evolved in the
Existing operating and upcoming operating leases on the other hand will be classified as operating leases. The lessee’s process of recognizing, measuring, and presenting expenses and payments have not drastically shifted from current GAAP. The difference between finance leases and operating leases still exists. However, the primary difference from existing GAAP and Topic 842 is that the statement of financial position will show the lease assets and matching lease liabilities resulting from operating leases. All leases will be disclosed on the balance sheet as a right-of use asset and matching lease liability irrespective of whether they are classified as financing or operating. This will include current leased building, lease fixtures, all equipment leases etc. if any.
In the accounting analysis part, we will discuss and analyse SUL’s accounting policy by identifying its key accounting policies, assessing the accounting flexibility, evaluating the accounting strategy, evaluating the quality of disclosure, identifying red flags and undoing accounting distortions to evaluate that if SUL’s financial statement is transparent and not misleading. Also, we will compare these elements to its competitors in order to give investors a clearer vision of its accounting quality.
The public is demanding for a higher level of transparency within operations of firms. Basically, companies are required to inform stakeholders regarding the operations of the business of its accountability to the social contract. Nike was caught in a big controversy of obscene wages paid to workers working in inhumane working conditions and therefore took actions in upgrading its operation’s transparency (Deegan, 2009). Now, Nike has a section in their financial report titled Sustainable Business and Innovation. Their focus will now be more seamlessly integrated across the company’s business strategies in developing a more sustainable approach which aims at providing greater returns to their business, communities, factory workers, consumers and also the planet (Nike, 2009).
To answer this question, first scale up both of the figures. The units increased by 20% from a base of 3000, so (1.2)(3000) = 3600 units were sold. The price at which they were sold was a 10% increase on a base of $50, so (1.1)(50) = $55. The total gross revenue therefore is (3600)($55) = $198,000. To calculate the net revenue, the 6% returns must be subtracted from the gross figure: (198,000)(.94) = $186,120
If there is a reduction in the benefit plan, there is a decrease in the defined benefit obligation. The amount if past service costs is calculated by an actuary, and add or deduct to the beginning balance of the obligation for calculation of interest cost for the year.
a. Calculate the firm’s net operating profit after taxes (NOPAT) for the year ended December 31, 2015, using Equation 4.1.
Companies report their financial activities in four basic financial statements under generally accepted accounting principles (GAAP). The four basic financial statements are as listed below:
Measure the short –term ability of an entity to pay its debt when they fall due and meet unexpected need for cash, important to bankers suppliers and other short-term creditors. 2.96: 1 means for every dollar of current liabilities, Bikes R US has 2.96 of current assets. Maybe indicate a high level of inventory and may have lots of account receivables.
From the large, multi-national corporation down to the corner beauty salon, every business transaction will have an effect on a company's financial position. The financial position of a company is measured by the following items:
Measurement of accounting elements is the most significant factors that entail the process of preparing financial statements. Accounting measurements presents the vital economic objectives for various accounting entities (Horngren, 2009). Fair value refers to a financial reporting approach operating under the accepted accounting principles (GAAP). This accounting method is also referred to as Mark-market accounting practice. In united Sates majority of the public and private companies uses fair value accounting approach to measure and report value chains of various business assets and liabilities calculated from the actual or the estimated current fair market prices (Barth, 2014). It is evident that any changes that occur in
GAAPS are not natural laws of physics or other sciences but instead are identified in response to the needs of users and others affected by accounting. They are man-made rules that depend for their authority upon their general acceptance by the accounting profession. (Pyle & Larson,1981).
The major accounting principles that guide accounting practices are endorsed on the Generally Accepted Accounting Principles (GAAP). This is an international guidelines that all the companies and organizations are expected to apply in their operations. These principles are further classified into assumption and constraints. The assumption principles include business entity, going concern, monetary unit and time period assumption principles (Hendrick, 2011). Other principles listed in the GAAP include historical cost, revenue recognition principle, and matching, and full disclose principles. On the other hand, constraints are also divided into objectivity principle, materiality principle, consistency principle, and conservatism principle (Weygandt J. J., 2012). Disney Company adhered to these concepts while preparing its financial reports to present fair information to the users is recommended in the International Financial Reporting Standards. This research work dwells on the analysis of the various principles and constraints with regards to Walt Disney Company.