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# OGJ schedule using corridor approach; THQ depreciation

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Problem 1:

The MUX Company provides a defined benefit pension plan for its employees. Data related to the plan follows.

Balances as of December 31, 2015:
Pension liability \$42,000
Plan assets 1,663,200
Projected benefit obligation 1,705,000
Unrecognized prior service cost -0-

Activity during 2016:
Actual (expected) return on plan assets \$122,700
Benefits paid to plan beneficiaries 121,800
Contributions (funding) 210,000
Prior service cost amortization 50,400
Service cost 189,000

The Company's actuary has determined that the appropriate settlement rate is 8%.

On January 1, 2016, The Company adopted an amendment to the plan which resulted in the grant of prior service benefits with a present value of \$302,000.

Instructions:

Prepare a pension worksheet for 2016 showing the journal entries for pension expense and the year-end balances in the pension related accounts.
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Problem 2:

The OGJ Company provides a defined benefit pension plan for its employees. Selected information related to the pension plan follows.

Year Projected Benefit Obligation, January 1
(present value) Plan Assets,
January 1
(fair market value) Liability Gains/(Losses)
during year Average Remaining Service Life (years)

2012 \$810,000 \$793,000 (\$113,000) 17
2013 1,010,000 1,061,000 (40,000) 16
2014 1,220,000 1,098,000 (6,000) 17
2015 1,458,000 1,239,000 30,000 18
2016 1,377,000 1,446,000 39,000 16

The OGJ Company ends its fiscal year on December 31.

As of December 31, 2011 there were no cumulative unrecognized liability gains or losses.

Instructions:

Using the corridor approach, prepare a schedule in good form computing the minimum amount of net gain or loss that must be amortized and charged to pension expense for each of the five years.

Note: For this problem, you may round to whole dollars.
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Problem 3:

The THQ Company acquired a new administrative and garage building on January 1, 2005. The building cost \$3,900,000 and is expected to have a useful life of 39 years. At the end of its useful life, it is expected to have a salvage value of \$780,000.

The Company acquired 20 new delivery trucks on January 1, 2009 for a total cost of \$900,000. The company's experience indicates that trucks are operated for an average of 7 years and are worth about 15% of their original cost at the end of that time.

The Company uses the 150% declining balance depreciation method for the building and the straight-line depreciation method for the trucks.

In 2011, The Company changed its method of depreciation for the building to the straight line method. In addition, due to improved maintenance methods, it revised its estimate of the trucks' useful lives to a total of 8 years and decreased the estimated salvage value of the trucks to 11% of the original cost.

The Company ends its fiscal year on December 31.

Instructions:

Prepare the journal entries necessary to record depreciation expense for 2011.

Note: For this problem, you may round to whole dollars.

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Problem 4:

The ICG Company has prepared the following partial trial balance as of December 31, 2013.

Debit Credit

Assets:
Cash \$53,000
Accounts Receivable 43,000
Interest Receivable 16,000
Inventory 111,000
Supplies 10,000
Prepaid Insurance 174,000
Prepaid Rent 186,840

Liabilities:
Accounts Payable \$48,000
Accrued Salaries and Wages 10,000
Unearned Revenue 81,000
Interest Payable 185,000
Taxes Payable 187,000

1. In recording depreciation expense for the year, the bookkeeper erroneously recorded \$21,000 rather than the correct amount of \$12,000.

2. I researching the above error, it was discovered that depreciation expense for the year 2012, also in the amount of \$12,000, had not been recorded at all. Assume that the omission is material.

3. The Interest Receivable account remained unchanged during 2013. Accrued interest as of December 31, 2013 amounted to \$10,600.

4. Insurance contracts in effect costing \$278,000 for 12-months coverage have remaining lives as of December 31, 2013 of 6 months.

5. Supplies on hand on December 31, 2013 amounted to \$2,500.

6. As of December 31, 2013, customers have prepaid for delivery services in the amount of \$34,000.

7. An analysis of wages and salaries indicates that, as of December 31, 2013, a total of \$3,200 should be in the Accrued Salaries and Wages account.

8. On July 1, 2012, \$186,840 of rent was paid for the rental of a factory building. The payment was for the period August 1, 2012 through the end of July, 2015. The entire amount was debited to Prepaid Rent and the balance in that account has not been changed since the payment was made.

9. The ICG Company ends it fiscal year on December 31.

Instructions:

Ignore income tax.

a) Prepare the adjusting journal entries necessary as of December 31, 2013 assuming that the books have not yet been closed.

b) Prepare the adjusting journal entries necessary as of December 31, 2013, assuming that the books have been closed.

For this problem you may round to whole dollars.