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					1
    B - that would be a definded benefit plan, not defined contribution.
2
    A - PBO is used for service cost (not B - based on projected not current
    salaries, C - has nothing to do with funding requirements, D - opposite of A)
3
  C - PSC is amortized in the current and future years using either the average
  service life or service years methods.
4 A - Curtailments are immediately recognized.
5 C - change in current and future periods is prospective method - used for
  estimate changes.
6 C - this is a change in reporting entity, no JE, restate prior years.
7 B - all the others are cash inflows or outflows or both.
8 C - the direct method is the preferred method for this reason, A&B are not
  correct.
Service Cost                    360,000
Interest Cost                   480,000   !0% x beg PBO of 4,800,000
Expected Return on assets      (378,000) 9% x beg mrv of 4,200,000
Amortization of PSC              60,000
Total Pension Expense           522,000


No gain/loss amortization needed.


2 points each for the service cost and psc amortization
3 points each for interest and expected return
Service Cost                          60,000
Interest Cost                         50,000     !0% x beg PBO of 500,000
Expected Return on assets            (12,000)
Amortization of PSC                     8,000
Total Pension Expense                106,000


No gain/loss amortization needed.
6 points
1 points each for the service, expected return and psc amortization
3 points each for interest

Pension Expense                      106,000
  Pension Liability                                     3,000
  Other SE - PSC (or OCI - PSC)                         8,000
  Cash                                                 95,000

 8 points
 1 each for the pension expense and cash lines
 3 each for the psc and liability lines, if liability missed altogether, take off 4 but nothing for liability bein
off 4 but nothing for liability being off (unless it doesn't balance).
Year     Beginning G/L Corridor         Excess           years         Amort
2,003              -     140,000                  -               10               0
2,004        (440,000)   164,000              276,000             10        (27,600)
2,005         (16,400)   196,000                  -               10            -

the years is 10, 2000 service years/200 employees is an average of 10 years
Corridor is 10% of the larger of beginning PBO or MRV of assets each year.

So all we do is amortize a 27,600 loss in 2004.

Count off 4 if they use the ending numbers rather than beginning numbers,
also count off 4 if they use the g/l as balance rather than change for the year.

2 points for using the right corridor amounts in all the years (pbo vs mrv)
1 point for getting the right number of years
1 point for getting the right direction on the amortization

People can make all sorts of weird combinations of errors so feel free to
shift the allocation depending on what seems right/wrong.
new g/loss   ending g/l
   (440,000)   (440,000)
    396,000     (16,400)
   (660,000)   (676,400)
Deleted problem 12 but forgot to renumber.
Key to this one is that part one is an error that requires a correcting journal entry
and restatements.
Both 2 and 3 are now considered changes in estimates that require prospective
treatment, no journal entry required and no restatement. Both have been
correctly applied reading the problem so nothing is needed for them.

a)
First determine the entries that should have been done
                 1/1/2006
Equipment                                        196,000
  Cash                                                            196,000

             12/31/2006
Depreciation Expense                                30,000                    (196,000-16,000)/6
 Accumulated Deprecation                                            30,000

Retained Earnings                                   30,000
  Depreciation Expense                                              30,000

             12/31/2007
Depreciation Expense                                30,000
 Accumulated Deprecation                                            30,000

Retained Earnings                                   30,000
  Depreciation Expense                                              30,000

             12/31/2008
Depreciation Expense                                30,000
 Accumulated Deprecation                                            30,000

Retained Earnings                                   30,000
  Depreciation Expense                                              30,000


What Was done
                1/1/2006
Expense                                            196,000
  Cash                                                            196,000
             12/31/2006
Retained Earnings                                  196,000
  Expense                                                         196,000


Affected Accounts           have               should have
Cash                               (196,000)     (196,000)
Equipment                               -         196,000
Accumulated Depr                                  (90,000)
Retained Earnings                   196,000        90,000
Correcting Entry is:
Equipment                                        196,000
  Accumulated Depreciation                                       90,000
  Retained Earnings                                             106,000

4 points for this part

Also need to record this years depreciation
Depreciation Expense                               30,000
  Accumulated Deprecation                                         30,000
1 point for this part
okay if they combine the two

Count off 4 if they try to use the parts 2 and 3 in the adjustments below (2 each)

b)                                                                          not needed
                                      2,009        2,008          2,007           2,006
Income as given                     480,000      450,000        360,000
Take out expense error                                                         196,000
Add Depreciation Exp                (30,000)      (30,000)       (30,000)      (30,000)

Corrected Income                    450,000      420,000        330,000

3 points for this part 1 for each year

c)
2 points for this one
if 2007 beginning retained earnings was 1,260,000 we need to restate it for the
correction amounts before 2007. Using the 2006 income changes above we get.

As stated                         1,260,000
Add back expense error              196,000
Subtract out depr to date           (30,000)
Corrected balance                 1,426,000

d)
2 points for this one
Now the adjustment is the same as the journal entry for correction

As stated                         1,800,000
Add back expense error              196,000
Subtract out depr to date           (90,000)
Corrected balance                 1,906,000
96,000-16,000)/6
Naley Company
Statement of Cash Flows
For the Year Ended December 31, 2008
Increase (Decrease) in Cash

Cash flows from operating activities
      Net income                                                    $66,000 3 points
      Adjust. to reconcile net income to net cash provided
           by operating activities:
                  Depreciation expense                $22,000                2   points
                  Loss on Sale of Assets                 4,000               1   point
                  Increase in accounts receivable      -30,000               1   point
                  Increase in inventory                -50,000               1   point
                  Decrease in prepaid expenses         30,000                1   point
                  Increase in accounts payable          26,000               1   point
                  Decrease in accrued liabilities      -12,000       -10,000 1   point

Net cash provided by operating activities                             56,000

Cash flows from investing activities
      Purchase of buildings                                          -40,000 2 points
      Sale of Equipment                                                4,000 1 point

Net cash used by investing activities                                -36,000

Cash flows from financing activities
      Mortgage Borrowing                                              60,000 1 point
      Payoff of Notes                                                -80,000 1 point
      Payment of cash dividends                                      -20,000 1 point

Net cash provided by financing activities                            -40,000

Net increase (decrease) in cash                                    ($20,000)
Cash, January 1, 2004                                                 70,000
Cash, December 31, 2004                                             $50,000

Significant non cash: Land purchased with stock 100,000                        1 points


Take off points if the item is missing, or if included in the wrong section.
If they are out of balance and say nothing about it, take off 5 points in addition to the
errors made (don't go negative though). Same if reconciliation is missing.
Net income comes from the increase in RE of 46,000, but 20,000 was taken out
for dividends so NI must have been 66,000
Loss on Asset sale comes from given of asset sold had bv of 8,000 and sold for 4,000
Equipment sold had a cost of 10,000 and bv of 8,000 so it had acc depr of 2,000
The sale would have brought acc depr from 16,000 to 14,000, thus 22,000 of
depreciation expense was recorded to get to the ending balane of 36,000
Equipment purchase - sale of asset brought equipment from 150,000 to 140,000
so to get to ending balance we bought 40,000.
Donnelly
Statement of Cash Flows (Partial)
(Direct Method)

Cash flows from operating activities
     Cash received from customers ($1980000-42000)                   $1,938,000
     Cash paid to suppliers (-1089000+30000-15000)      ($1,074,000)
                                                        -567,000
     Operating expenses paid (-690000+75000+21000+9000+18000)        -1,641,000
     Net cash provided by operating activities                       $297,000

     1 point for each of the individual parts
     2 in receipts
     3 in payment to suppliers
     5 in operating expenses

     5 off if out of balance and no comment

				
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