...long-term notes payable, mortgages payable, pension liabilities, and lease liabilities (Kieso, Weygandt &Warfield). A corporation’s bylaws usually require approval by the board of directors and the stockholders before long-term debt arrangements can be made (Kieso, Weygandt &Warfield). A bond is basically a company’s promise to pay an amount of money at a specific maturity date, including periodic interest at a specified rate on the maturity or face value amount. The bond is valued at the present value of the expected future cash flows. Investors may be willing to pay a different rate the stated rate. This difference between the face value of the bonds and the present value set by the investors’ results in either a discount or premium (Kieso, Weygandt &Warfield). The accounting for notes is very similar to the accounting for bonds. Like a bond, a note is valued at the present value of its future interest and principal cash flows. The company amortizes any discount premium over the life of the note, just as it would the discount or premium on a bond (Kieso, Weygandt &Warfield). The most common form of long-term notes payable is a mortgage note payable. This is a promissory note secured by a mortgage that pledges title to property as security for the loan. In a mortgage notes payable, the borrower usually receives cash for the face amount of the mortgage note. The face amount of the note is the true liability, and no discount or premium is involved. A mortgage note payable...
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...Pension Questionnaire To make sure that you are offered the correct pension options, your employer and Civil Service Pensions (CSP) need to know about your pension history. Please answer the questions on the following pages. Your employer will use your answers to work out which of the CSP schemes you can join. Try to answer the questions as accurately as you can. Once you have completed this questionnaire return it as soon as possible and CSP will let you know what your pension choices will be. Make sure you add your National Insurance (NI) number at the top of each page. Section 1 | Your personal data | | | Your full name | | | | Your NI number | | | | Your date of birth | | | | Your start date | | | | Your NI number: | | Section 2 | Your pension information | Have you ever been a member of a public service pension scheme? Public services employers include the Civil Service, judiciary workers, teachers, members of the armed forces, fire and rescue services, the police, health service workers, and local government employees. You can find more information here: www.legislation.gov.uk/ukpga/2013/25/schedule/1Answer this question with details of your latest period of pension scheme membership. | | Which scheme? | At which employer? | | What date did you leave? | | Sections to complete | | | | | | | | | | | | | Civil Service pension arrangements | | | | | 3, 4, 5, 7 | | | | | | | | |...
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...Questions for students 1. Exhibits 1 and 2 report the income statements and excerpts from the notes to Marks and Spencer’s financial statements for the fiscal years ending between March 31, 2005 and March 31, 2009. Critically analyze M&S’s accounting choices. What choices may have helped the company to overstate its net profits between 2005 and 2009? 2. Exhibit 3 provides information about the liability that Marks and Spencer reclassified as equity. Do you agree with the decision to reclassify? What will be the effect of this decision on future financial statements? Case analysis Question 1 Exhibit 2 shows various note disclosures related to Marks and Spencer’s accounting choices for non-current assets, leases and pensions. Following is a discussion of some of the accounting methods that Marks and Spencer may or could have used to boost accounting performance during the past years. Depreciation of fixtures, fittings & equipment Marks and Spencer’s depreciation policy for fixture, fittings & equipment is to depreciate the assets to their residual values over a period of 3 to 25 years. Although it may be difficult to evaluate whether the company’s useful life estimates are reasonable without more detailed information, the analyst can evaluate trends in depreciation expenses as a percentage of assets’ initial cost. TABELA It appears that Marks & Spencer gradually reduced its depreciation expense (as a percent of average cost) from close to 8 percent in 2006...
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...Restructuring of Debt Data | Long-term debt consists of probable future sacrifices of economic benefits arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer. Long term debt is a way to finance and gain capital when the company cash flow is minimal. To name a few types of long term debt: bonds payable, notes payable, mortgages payable, pension liabilities, and lease liabilities. This assignment will define basic terms such as long-term debt, bonds, mortgage, and capital leases. In addition answer questions in reference to the ABC Company journal entries, postretirement and note disclosure. A bond arises from a contract known as a bond indenture. A bond is a form of a long term promissory note that is regulated under the federal securities law or state laws. Typically, a bond represents a promise to pay. Bonds are a unique way to raise capital for organizational needs. Bonds are accounted for in a similar to notes payable with the exception that bonds are normally issued to different lenders. These lenders, also known as investors, may sell their bonds to another investor prior to their maturity. There are several types of bonds, however, the more common forms of bonds are secured and unsecured bonds. Secured bonds are backed by the borrower’s collateral, thus meaning no tangible property or any other kind of product is attached to that debt. A well-known example of a secured bond is a...
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...CHAPTER 11 CURRENT LIABILITIES AND PAYROLL 1 EYE OPENERS 1. A discounted note payable has no stated interest rate, but provides interest by discounting the note proceeds. The discount, which is the difference between the proceeds and the face of the note, is the interest and is accounted for as such. 2. a. Income or withholding taxes, social security, and Medicare b. Employees Federal Income Tax Payable, Social Security Tax Payable, and Medicare Tax Payable 3. There is a ceiling on (c) the social security portion of the FICA tax and (d) the federal unemployment compensation tax. 4. The deductions from employees’ earnings are for amounts owed (liabilities) to others for such items as federal taxes, state and local income taxes, and contributions to pension plans. 5. Yes. Unemployment compensation taxes are paid by the employer on the first $7,000 of annual earnings for each employee. Therefore, hiring two employees, each earning $12,500 per year, would require the payment of twice the unemployment tax than if only one employee, earning $25,000, was hired. 6. 1. a 2. c 3. c 4. b 5. b 7. The use of special payroll checks relieves the treasurer or other executives of the task of signing a large number of regular checks each payday. Another advantage of this system is that reconciling the regular bank statement is simplified. The paid payroll checks are returned by the bank separately from regular checks and are accompanied by...
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...Intermediate Accounting II Chapter 20 Accounting for Pensions Overview of Employer's Accounting for Pension Plans Defined contribution plan - employer agrees to make a defined contribution to a pension plan plan participants receive whatever benefits have accumulated each year, employer records an expense an a related liability for the contribution Defined benefit plan - employer agrees to provide a benefit at retirement that is defines or fixed by formula employer accepts risk of meeting the obligation upon employee's retirement requires use of complex actuarial estimates Involves 2 accounting entities employer sponsor - reports pension expense on the income statement, and apension liability which is the sum of two accounts - accrued/prepaid pension cost and additional liability, and an intangible asset -deferred pension cost (if required) employee sponsor must also maintain these accounts on a memo basis -unrecognized prior service costs and unrecognized gains and losses pension plan - maintains these accounts: projected benefit obligation,accumulated benefit obligation (for reporting purposes only), vested benefits (for reporting purposes only) and plan assets Terminology Accumulated Benefit Obligation (ABO) - actuarial present value of benefits (vested or unvested) attributed by the pension benefit formula to employee services rendered before a specified date, and based on employee service...
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...indebtedness (such as maturity, interest rate, payment pattern, and amount). • Restrictions on deploying resources and pursuing business activities. • Ability and flexibility in pursuing further financing. • Obligations for working capital, debt to equity, and other financial figures. • Dilutive conversion features that liabilities are subject to. • Prohibitions on disbursements such as dividends. Obligations that arise from operating activities--examples are accounts payable, unearned revenue, advance payments, taxes payable, postretirement liabilities, and other accruals of operating expenses Operating Liabilities Obligations that arise from financing activities--examples are short- and long-term debt, bonds, notes, leases, and the current portion of long-term debt Financing Liabilities 3-6 3-7 Liabilities Classification Current (short-term) Liabilities Obligations whose settlement requires use of current assets or the incurrence of another current liability within one year or the...
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...HW No. 5 Answer the following questions from the textbook: E6 - 35 Estimating Useful Life and Percent Used Up The property and equipment footnotes from the Deere & Company balance sheet follows The property and Depreciation A summary of property and equipment at October 31 follows: Property and Equipment (millions) | Useful Lives (years) | 2010 | 2009 | Land | | $113 | $1,166 | Buildings and building equipment | 23 | 2,226 | 2,144 | Machinery and equipment | 11 | 3,972 | 3,826 | Dies, patterns, tool, etc. | 7 | 1,105 | 1,081 | All other | 5 | 685 | 672 | Construction in process | | 478 | 362 | Total at cost | | 8,579 | 8,501 | Less accumulated depression | | 4,856 | 4,744 | Total | | $3,723 | $3,457 | Property and equipment is stated at cost less accumulated depreciation. Total property and equipment additions in 2010, 2009 and 2008 were $802 million, $798 million and $1,147 million and depreciation was $540 million, $513 million and $467 million, respectively. a. Compute the estimated useful life of Deere’s depreciable assets at year-end 2010. (Hint: Exclude land and construction in process.) How does this estimate compare with the useful lives reported in Deere’s footnote disclosure? b. Estimate the percent used up of Deere’s depreciable assets at year-end 2010. How do you interpret this figure? E6 – 37 Computing and Assessing Plant Asset Impairment On July 1, Zeibart Company purchases equipment for $225,000. The equipment has an...
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...CHAPTER 20 Accounting for Pensions and Postretirement Benefits SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 20-1 Service cost $ 333,000,000 Interest on PBO 712,000,000 Return on plan assets (566,000,000) Amortization of prior service cost 13,000,000 Amortization of net loss 145,000,000 Pension expense $ 637,000,000 BRIEF EXERCISE 20-2 Ending plan assets $ 2,000,000 Beginning plan assets 1,780,000 Increase in plan assets 220,000 Deduct: Contributions $120,000 Less: Benefits paid 200,000 (80,000) Actual return on plan assets $ 300,000 BRIEF EXERCISE 20-3 BEATY COMPANY | |General Journal Entries |Memo Record | | | | | |Projected Benefit | | | |Pension Expense | |Pension |Obligation |Plan Assets | |Items | |Cash |Asset /Liability | | | |1/1/12 | | | |280,000 Cr. |280,000 Dr. | |Service cost |27,500 Dr. | |...
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...3D Bicycle Company | Notes to Consolidated Financial Statements | | | Luz M. Aponte | 12/19/2012 | | Summary of Significant Accounting Policies Note 1 Nature of Operations: The 3D Bicycle Company is a retailer parts and services for bicycles. We are focused on bringing the customer the best value on bicycles by providing the lowest price on our parts and services. Our parts and services are sold all over all the states in United States and Puerto Rico. Currently we have two stores in all the fifty-states across the nation and one in Puerto Rico. Use of Estimates Our financial statements are prepared to meet all the requirements in accordance with the Generally Accepted Accounting Principles in the United States (U.S. GAAP). One of the requirements is to make estimates and assumption that affect the amounts reported in the Consolidated Financial Statements. All the estimates are taken in consideration from the accounting department best knowledge for active assets and actions of the company in the future. The accounting department estimates for pensions, postemployment benefits, valuation to get intangible assets, consumer and trade promotion accruals, deferred tax assets. Property, Plant, and Equipment All property, plant, and equipment are stated at cost and depreciated over their useful live. All depreciation expenses incurred are derived using the straight line method. We do not depreciate the land. The company estimates the useful live...
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...Jennifer Diaz ACG6175 Harnischfeger Corp: Case Study 2 1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements. As stated in Note 2 of its financial statements, the accounting changes Harnischfeger made in 1984 are those of net sales of the products that were purchased from Kobe Steel which were then sold by Harnischfeger which added on to the net sales of the company. Harnischfeger included financial statements of certain foreign subsidiaries. Its effect would result in sales which totaled to $28.0 million in 1984. In addition, because Harnischfeger would go on to changed its method of depreciation to a more accelerated version, which would be a straight line method, their net income for 1984 went up by $11.0 million. Furthermore, the company went on to increase and change the depreciation life on US plant, and residual value on machinery, which in essence resulted their equipment increase in net income by $3.2 million in 1984. 2. What is the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years? The effect Harnischfeger experiences by using the depreciation accounting method change resulted an income increase by $11.0 million. Because of this method change, the company’s net income in 1984 summed up to $15.2 million. As a result of changed their accounting depreciation method, it will affect its profits in future...
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...Note: Sentences beginning with a * are using material or quotes from the text or Investopedia.com 1. Companies present four related financial statements and their accompanying footnotes: * The Balance Sheet: * Is a financial statement that summarizes a company's financial condition at a specific point in time, * Follows the formula Assets = Liabilities + Shareholder’s Equity, which makes sense because the company must pay for the resources it owns (assets) by either borrowing money (liabilities) or through the combo of money received from the sale of stock and money retained in the company from net income (shareholder’s equity). * The Income Statement: * Is a financial statement that measures a company's financial performance over a specific period of time, * Is divided into 2 sections: The operating section shows information about the company’s revenues and expenses that occurred due to their regular business operations (Apple selling an Ipad). The non-operating section shows the revenues and expenses as well as the gains and losses that were not tied to the company’s regular business operations (Apple selling a factory), * Is summarized by calculating net income or net loss, which indicates the profitability of the company. If the company has more (fewer) revenues than expenses for the period, it will have a net income (loss). * The Statement of Cash Flows: * Is necessary since companies tend to use the accrual accounting method (recognizing events...
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...underlying economic activity and is concise, well-written, error-free, and within requirements. (4 points) | Response demonstrates some evidence of having read the article and reflected on the underlying economic activity and is adequately written, contains one error, and within requirements. (3 points) | Superficial response demonstrates no evidence of having read the article or reflection and is poorly written, with numerous errors, and does not meet the requirements. (0 – 2 points) | Directions Read the “Harnischfeger Corp” case study and answer the following questions. Submit your completed assignment no later than the last day of Week 2. 1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements. The company calculated depreciation with a straight-line method as opposed to its principally accelerated methods for its US operating plants. The major accounting change was that the company used a cumulative amount based on all the assets depreciated by the old method. By retroactively combining the cumulative total, net...
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...Accounting SUBJECT: Reporting of Pension Plan in acquisition of Company ABC DATE: June 11, 2013 In the acquisition of Company ABC, many factors must be considered, including the acquisition of the company’s pension plans and the addition of two segments. After careful analysis, the two operating segments have caused a loss to the company and must be eliminated. This memo will outline the reporting procedures for the pension plans and the necessary steps that must be taken to eliminate the segments. Defined Contribution Plan One of the most frequently encountered and widely used pension plans is the defined benefit plan. Under this plan, the employer is required to contribute a pre-determined amount of the employee’s salary to this pension plan. The amount of benefits paid out at the onset of retirement are not guaranteed and “are determined by the return earned on the invested pension funds during the investment period” (Schroeder, Clark, & Cathey, 2011). Employees also have the option of designating where their funds are invested, whether it be in stocks or in fixed-income securities. The defined contribution plan has become popular among employers due to no risk on behalf of the employer and the ease of reporting. Variations of the plan include: thrift plans, savings plans, 401(k) plans, profit-sharing plans, and incentive savings plans. Because of its simplicity in reporting, the defined contribution plan periodic pension expense is equal to the amount...
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... DATE: January 29, 2015 SUBJECT: Required Reporting for Pensions and Other Postretirement Plans Several issues have to be considered in the wake of the firm’s recent acquisition of a new company. First, the acquired company has two different pension plans whose reporting requirements are unfamiliar to the firm. Second, the acquired company has two segments that do not fit the firm’s requirements, and should be targeted for closure. This memo describes the reporting requirements of pension plans, namely, defined contribution plans, defined benefit plans and Other Postretirement Plans or OPEBs. In addition, this memo describes how to close an unwanted segment. A defined contribution plan sets forth a certain amount that the employer is to contribute to the plan each period. In the other hand, defined benefit plans specify the amount of pension to be paid out to plan recipients in the future (Cathey, Clark & Schroeder, 2011). The fixed monthly income to be paid to the employee is calculated using a pre-determined formula that usually takes into account the employee’s years of service, annual salary, and in some instances, age (Ruppel, 2010). Both pension plans guarantee the employee will receive monetary compensations, either directly or indirectly, from the employer at retirement. The financial reporting of defined contribution plans is straightforward. The employer only records the pension expense that equals the cash contribution to the employee. For instance...
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