{"id":8183,"date":"2021-10-15T04:55:33","date_gmt":"2021-10-15T04:55:33","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/sherrod-inc-reported-pretax-accounting-income-of-76-million-for\/"},"modified":"2021-10-15T04:55:33","modified_gmt":"2021-10-15T04:55:33","slug":"sherrod-inc-reported-pretax-accounting-income-of-76-million-for","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/sherrod-inc-reported-pretax-accounting-income-of-76-million-for\/","title":{"rendered":"Sherrod, inc. reported pretax accounting income of 76 million for"},"content":{"rendered":"
\n

P16-7 Multiple differences; calculate taxable income; balance sheet classification<\/strong><\/p>\n

Sherrod, Inc. reported pretax accounting income of 76 million for 2011. The following information relates to differences between pretax accounting income and taxable income:<\/p>\n

a. Income from installment sales of properties included in pretax accounting income in 2011 exceeded that reported for tax purposes by 3 million. The installment receivable account at year-end had a balance of 4 million (representing portions of 2010 and 2011 installment sales), expected to be collected equally in 2012 and 2013.<\/p>\n

b. Sherrod was assessed a penalty of 2 million by the Environmental Protection Agency for violation of a federal law in 2011. The fine is to be paid in equal amounts in 2011 and 2012.<\/p>\n

c. Sherrod rents its operating facilities but owns one asset acquired in 2010 at a cost of 80 million. Depreciation is reported by the straight-line method assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight- line depreciation the next two years ($ in millions).<\/p>\n

\u00a0<\/p>\n

Income Statement Tax Returns Differences<\/span><\/p>\n

2010 $20 $26 $(16)<\/p>\n

2011 20 35 (15)<\/p>\n

2012 20 12 8<\/p>\n

2013\u00a020<\/span>\u00a07<\/span>\u00a013<\/span><\/p>\n

$80 $80 $0<\/span><\/p>\n

d. Bad debt expense of 3 million is reported using the allowance method in 2011. For tax purposes the expense is deducted when accounts prove uncollectible (the direct write-off method): 2 million in 2011. At December 31, 2011, the allowance for uncollectible accounts was 2 million (after adjusting entries). The balance was 1 million at the end of 2010.<\/p>\n

e. In 2011, Sherrod accrued an expense and related liability for estimated paid future absences of 7 million relating to the company\u2019s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years (4 million in 2012; 3 million in 2013).<\/p>\n

f. During 2010, accounting income included an estimated loss of 2 million from having accrued a loss contingency. The loss is paid in 2011 at which time it is tax deductible.<\/p>\n

Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2011, were 1.2 million and 2.8 million, respectively. The enacted tax rate is 40% each year.<\/p>\n

Requred<\/strong>:<\/p>\n

1. Determine the amounts necessary to record income taxes for 2011 and prepare the appropriate journal entry.<\/p>\n

2. What is 2011 net income?<\/p>\n

3. Show how any deferred tax amounts should be classified and reported in the 2011 balance sheet.<\/p>\n

E 17-10 Determine pension expense<\/strong><\/p>\n

Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2011, Abbott and Abbott received the following information:<\/p>\n

($ in the millions)<\/p>\n

Projected Benefit Organization<\/strong><\/p>\n

Balance, January 1 $120<\/p>\n

Service Cost 20<\/p>\n

Interest Cost 12<\/p>\n

Benefits paid\u00a0(9)<\/span><\/p>\n

Balance, December 31\u00a0$143<\/span><\/p>\n

Plan Assets<\/strong><\/p>\n

Balance, January 1 $ 80<\/p>\n

Actual return on plan assets 9<\/p>\n

Contribution 2011 20<\/p>\n

Benefits paid\u00a0(9)<\/span><\/p>\n

Balance, December 31\u00a0$100<\/span><\/p>\n

The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss- AOCI on January 1, 2011.<\/p>\n

Required:<\/strong><\/p>\n

1. Determine Abbott and Abbott\u2019s pension expense for 2011.<\/p>\n

2. Prepare the journal entries record Abbott and Abbott\u2019s pension, funding, and payments for 2011.<\/p>\n

E 17-19 Record pension expense, funding, and gains and losses; determine account balances<\/strong><\/p>\n

Beale Management has noncontributory, defined benefit pension plan. On December 31, 2011 (the end of Beale\u2019s fiscal year), the following pension-related data were available.<\/p>\n

Projected Benefit Obligation ($ in millions)<\/span><\/p>\n

Balance, January 1, 2011 480<\/p>\n

Service Cost 82<\/p>\n

Interest cost, discount rate, 5% 24<\/p>\n

Gain due to changes in actuarial assumptions in 2011 (10)<\/p>\n

Pension benefits paid\u00a0(40)<\/span><\/p>\n

Balance, December 31, 2011\u00a0536<\/span><\/p>\n

Plan Assets<\/strong><\/p>\n

Balance, January 1, 2011 500<\/p>\n

Actual return on plan assets 40<\/p>\n

(Expected return on plan assets, 45)<\/p>\n

Pension benefits paid\u00a0(40)<\/span><\/p>\n

Balance, December 31. 2011\u00a0570<\/span><\/p>\n

January 1, 2011, balances:<\/strong><\/p>\n

Pension asset 20<\/p>\n

Prior service cost \u2013AOCI (amortization $8 per year) 48<\/p>\n

Net gain-AOCI (any amortization over 15 years) 80<\/p>\n

Required:<\/strong><\/p>\n

1. Prepare the 2011 journal entry to record pension expense.<\/p>\n

2. Prepare the journal entry (s) to record any 2011 gains and losses.<\/p>\n

3. Prepare the 2011 journal entries to record the contribution to plan assets, and benefit payments to retirees.<\/p>\n

4. Determine the balances at December 31, 2011, in PBO, plan assets, the net gain-AOCI and prior service cost-AOCI and show how the balances changed during 2011. (t-accounts may be useful).<\/p>\n

5. What amount will Beale report in its 2011 balance sheet as a net pension asset or net pension liability for the funded stat s of the plan?<\/p>\n

P 17-6 Determine the PBO; plan assets; pension expense; two years<\/strong><\/p>\n

Stanley-Morgan Industries adopted a defined benefit pension plan on April 12, 2011. The provisions of the plan were not made retroactive to prior years. A local bank, engaged as trustee for the plan assets, expects plan assets to earn a 10% rate of return. A consulting firm, engaged as actuary, recommends 6% as the appropriate discount rate. The service cost is 150,000 for 2011 and 200,000 for 2012. Year-end funding is 160,000 for 2011 and 170,000 for 2012. No assumptions or estimates were revised during 2011.<\/p>\n

Required:<\/strong><\/p>\n

Calculate each of the following amounts as of both December 31, 2011, and December 31, 2012.<\/p>\n

1. Projected benefit obligation<\/p>\n

2. Plan assets<\/p>\n

3. Pension expense<\/p>\n

4. Netpension asset or net pension liability<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

P16-7 Multiple differences; calculate taxable income; balance sheet classification Sherrod, Inc. reported pretax accounting income of 76 million for 2011. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2011 exceeded that reported for tax purposes by 3 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-8183","post","type-post","status-publish","format-standard","hentry","category-homework-help"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/8183","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=8183"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/8183\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=8183"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=8183"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=8183"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}