ACCT 110 Lecture Notes - Lecture 21: Santa Barbara City College, Fair Value, Comprehensive Income

ACCT 110 Lecture Notes - Lecture 21: Santa Barbara City College, Fair Value, Comprehensive Income

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ACCT 110 Lecture Notes - Lecture 22: Santa Barbara City College, Net Income, Income Statement

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Temporary revenue and expense accounts are closed to the account called income. Summary, which is used only at year end. The net result of the revenues and expenses is the net income or loss for the period and is then transferred to a shareholder"s equity account. For corporation this would be retained earnings. For oci items, this would go to accumulated other comprehensive income; these are closed directly to accumulated oci instead of through the income summary account. Can be either prepayments, accruals, or estimated items (including fair value estimates) Perpetual inventory systems have purchases and sales recorded directly to the. Bad debts, unrealized gains/losses on fair value-ni investments inventory account as they occur. Periodic inventory system uses a purchases account, the inventory throughout the period represents the beginning balance, and then inventory must be closed at the end of the period to reflect the ending amount and show the cogs.

Question 25

Blossom Company received the following selected information fromits pension plan trustee concerning the operation of the companyâsdefined benefit pension plan for the year ended December 31,2017.

	January 1, 2017	December 31, 2017
Projected benefit obligation	$1,488,000	$1,514,000
Market-related and fair value of plan assets	809,000	1,135,900
Accumulated benefit obligation	1,600,000	1,718,800
Accumulated OCI (G/L)âNet gain	0	(198,800	)

The service cost component of pension expense for employee servicesrendered in the current year amounted to $76,000 and theamortization of prior service cost was $118,800. The companyâsactual funding (contributions) of the plan in 2017 amounted to$246,000. The expected return on plan assets and the actual ratewere both 10%; the interest/discount (settlement) rate was 10%.Accumulated other comprehensive income (PSC) had a balance of$1,188,000 on January 1, 2017. Assume no benefits paid in 2017.

Determine the amounts of the components of pension expense thatshould be recognized by the company in 2017. (Enteramounts that reduce pension expense with either a negative signpreceding the number e.g. -45 or parenthesis e.g.(45).)

Components of Pension Expense
Actual Return on Plan AssetsAmortization of Prior ServiceCostBenefits PaidContributions to PlanExpected Return on PlanAssetsInterest on Projected Benefit ObligationService Cost		$
Actual Return on Plan AssetsAmortization of Prior ServiceCostBenefits PaidContributions to PlanExpected Return on PlanAssetsInterest on Projected Benefit ObligationService Cost
Actual Return on Plan AssetsAmortization of Prior ServiceCostBenefits PaidContributions to PlanExpected Return on PlanAssetsInterest on Projected Benefit ObligationService Cost
Actual Return on Plan AssetsAmortization of Prior ServiceCostBenefits PaidContributions to PlanExpected Return on PlanAssetsInterest on Projected Benefit ObligationService Cost

SHOW LIST OF ACCOUNTS

Prepare the journal entry to record pension expense and theemployerâs contribution to the pension plan in 2017.(Credit account titles are automatically indented whenamount is entered. Do not indent manually. If no entry is required,select "No Entry" for the account titles and enter 0 for theamounts.)

Account Titles and Explanation	Debit	Credit





(To record pension expense and employerâs contribution)

SHOW LIST OF ACCOUNTS

Indicate the pension-related amounts that would be reported onthe income statement and the balance sheet for Blossom Company forthe year 2017.

Blossom Company
Income Statement (Partial)

December 31, 2017For the Year Ended December 31, 2017For theQuarter Ended December 31, 2017

DividendsExpensesNet Income / (Loss)Retained Earnings â January1, 2017Retained Earnings â December 31, 2017RevenuesTotalExpensesTotal Revenues

Amortization of PSC InterestExpense PensionExpense RentExpense Service Cost

Blossom Company Comprehensive Income Statement December 31, 2017For the Year Ended December 31, 2017For theQuarter Ended December 31, 2017
DividendsExpensesNet Income / (Loss)Retained Earnings â January1, 2017Retained Earnings â December 31, 2017RevenuesTotalExpensesTotal Revenues		$XXXX
Amortization of PSCComprehensive IncomeInterest ExpenseLiabilityGainPension ExpenseRent ExpenseService CostOther ComprehensiveIncome (Loss)
Amortization of PSC ComprehensiveIncome InterestExpense LiabilityGain PensionExpense RentExpense ServiceCost Other Comprehensive Income (Loss)	$
Amortization of PSC ComprehensiveIncome InterestExpense LiabilityGain PensionExpense RentExpense ServiceCost Other Comprehensive Income (Loss)

Amortization of PSCComprehensive IncomeInterest ExpenseLiabilityGainPension ExpenseRent ExpenseService CostOther ComprehensiveIncome (Loss)		$XXXX

orchidturtle354

Glacier Products Inc. is a wholesaler of rock climbing gear. The company began operations on January 1, 2016. The following transactions relate to securities acquired by Glacier Products Inc., which has a fiscal year ending on December 31:

Record these transactions on page 10:

2016
Jan.	18	Purchased 9,000 shares of Malmo Inc. as an available-for-sale investment at $40 per share, including the brokerage commission.
July	22	A cash dividend of $3.00 per share was received on the Malmo stock.
Oct.	5	Sold 500 shares of Malmo Inc. stock at $58.00 per share, less a brokerage commission of $100.
Dec.	18	Received a regular cash dividend of $3.00 per share on Malmo Inc. stock.
	31	Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $36.00 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment.

Record these transactions on page 11:

2017
Jan.	25	Purchased an influential interest in Helsi Co. for $800,000 by purchasing 75,000 shares directly from the estate of the founder of Helsi. There are 250,000 shares of Helsi Co. stock outstanding.
July	16	Received a cash dividend of $3.00 per share on Malmo Inc. stock.
Dec.	16	Received a cash dividend of $3.00 per share plus an extra dividend of $0.20 per share on Malmo Inc. stock.
	31	Received $38,000 of cash dividends on Helsi Co. stock. Helsi Co. reported net income of $170,000 in 2017. Glacier Products Inc. uses the equity method of accounting for its investment in Helsi Co.
	31	Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $44 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the increase in fair value from $36 to $44 per share.

	Required:
A.	Journalize the entries to record the preceding transactions. Be sure to enter the year as part of the date for the first entry on each page. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries.
B.	Prepare the investment-related asset and stockholdersâ equity balance sheet presentation for Glacier Products Inc. on December 31, 2017, assuming the Retained Earnings balance on December 31, 2017, is $700,000. Refer to the Chart of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. âLessâ or âPlusâ will automatically appear if it is required. For those boxes in which you must enter subtractive or negative numbers use a minus sign.

CHART OF ACCOUNTS

Glacier Products Inc.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
120	Accounts Receivable
121	Allowance for Doubtful Accounts
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
161	Investments-Malmo Inc.
163	Investment in Helsi Co. Stock
165	Valuation Allowance for Trading Investments
166	Valuation Allowance for Available-for-Sale Investments
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
231	Interest Payable
241	Salaries Payable
251	Sales Tax Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess of Par-Common Stock
321	Preferred Stock
322	Paid-In Capital in Excess of Par-Preferred Stock
331	Treasury Stock
332	Paid-In Capital from Sale of Treasury Stock
340	Retained Earnings
350	Unrealized Gain (Loss) on Available-for-Sale Investments
351	Cash Dividends
352	Stock Dividends
390	Income Summary

	REVENUE
410	Sales
611	Interest Revenue
612	Dividend Revenue
621	Income of Helsi Co.
631	Gain on Sale of Investments
641	Unrealized Gain on Trading Investments

	EXPENSES
511	Cost of Merchandise Sold
512	Bad Debt Expense
515	Credit Card Expense
516	Cash Short and Over
520	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Repairs Expense
534	Selling Expenses
535	Rent Expense
536	Insurance Expense
537	Office Supplies Expense
538	Store Supplies Expense
561	Depreciation Expense-Store Equipment
562	Depreciation Expense-Office Equipment
590	Miscellaneous Expense
710	Interest Expense
721	Loss of Helsi Co.
731	Loss on Sale of Investments
741	Unrealized Loss on Trading Investments

Amount Descriptions
Available-for-sale investments (at cost)
Available-for-sale investments (at fair value)
Net income
Net loss
Other comprehensive income (loss)
Other income (loss)
Trading investments (at cost)
Trading investments (at fair value)

Journalize the entries to record these transactions. Be sure to enter the year as part of the date for the first entry on each page. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries.

PAGE 10PAGE 11

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11

Prepare the investment-related asset and stockholdersâ equity balance sheet presentation for Glacier Products Inc. on December 31, 2017, assuming the Retained Earnings balance on December 31, 2017, is $700,000. Refer to the Chart of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. âLessâ or âPlusâ will automatically appear if it is required. For those boxes in which you must enter subtractive or negative numbers use a minus sign.

GLACIER PRODUCTS, INC.

Balance Sheet (selected items)

December 31, 2017

1	Current assets:
2
3
4
5
6	Investments:
7
8
9	Stockholdersâ equity:
10
11

greenseal56

Blossom Company
Balance Sheet (Partial)

December 31, 2017For the Year Ended December 31, 2017For theQuarter Ended December 31, 2017

Current AssetsLiabilitiesIntangible AssetsProperty, Plant andEquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotalCurrent LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotalLiabilities and Stockholders' EquityTotal Property, Plant andEquipmentTotal Stockholders' Equity

Accounts PayableAccounts ReceivableAccumulatedDepreciationAccumulated Other Comprehensive Income (G/L)AccumulatedOther Comprehensive Loss (G/L)Accumulated Other ComprehensiveIncome (PSC)Accumulated Other Comprehensive Loss (PSC)CommonStockPension LiabilityRetained Earnings

Current AssetsCurrent LiabilitiesIntangible AssetsLong-termInvestmentsLong-term LiabilitiesProperty, Plant andEquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotalCurrent LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotalLiabilities and Stockholders' EquityTotal Long-termInvestmentsTotal Long-term LiabilitiesTotal Property, Plant andEquipmentTotal Stockholders' Equity

Accounts PayableAccounts ReceivableAccumulatedDepreciationAccumulated Other Comprehensive Income (G/L)AccumulatedOther Comprehensive Loss (G/L)Accumulated Other ComprehensiveIncome (PSC)Accumulated Other Comprehensive Loss (PSC)CommonStockPension LiabilityRetained Earnings

Accounts PayableAccounts ReceivableAccumulatedDepreciationAccumulated Other Comprehensive Income (G/L)AccumulatedOther Comprehensive Loss (G/L)Accumulated Other ComprehensiveIncome (PSC)Accumulated Other Comprehensive Loss (PSC)CommonStockPension LiabilityRetained Earnings