ACCT 557 - MIDTERM
1.
(TCO B) Define temporary differences, future taxable amounts, and future
deductible amounts.
(Points : 10)
Temporary Differences are the differences between the book income and taxable
income. Revenue and/or expensed Items are recognized in one period for taxes
and another for the books.
Future Taxable amounts are amounts that increases taxable income for future
years and creates a deferred tax liability recording.
Future deductible amounts decreases taxable income in future years creates a
recording of deferred tax asset.
2.
(TCO C) Measuring and recording pension expense.
Presented below is information related to the pension plan of Zimmer Inc. for the
year 2011.
(1) The service cost related to pension expense is $240,000 using the projected
benefits approach.
(2) The projected benefit obligation and the accumulated benefit obligation at the
beginning of the year are $300,000 and $280,000, respectively. The expected
return on plan assets is 9% and the settlement rate is 10%.
(3) The accumulated OCI – prior service cost at the beginning of the year is
$140,000. The company has a workforce of 200 employees, and all are expected
to receive benefits under the plan. The total number of serviceyears is 1,000 and
the serviceyears attributable to 2011 is 200. The company has decided to use
the yearsofservice method of amortization for these costs.
(4) At the beginning of the period, fair value of pension plan assets, $280,000.
The company had an Accumulated OCI (loss) at the beginning of the period of
$90,000. Any amortization of unrecognized net loss is recognized on a
straightline basis over the average remaining servicelife of the employees.
(5) The contribution made to the pension fund in 2011 was $231,000.
Instructions
(a) Determine the pension expense to be reported on the income statement for ...