1. Pension Plan Entries

Yuri Co. operates a chain of gift shops. The company maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Whims Funds, by the fifteenth of the month following the end of each quarter. Assume that the pension cost is $113,000 for the quarter ended December 31.

a. Journalize the entry to record the accrued pension liability on December 31.

Dec. 31

Journalize the entry to record the accrued pension liability payment to the funding agent on January 15.

Jan. 15

b. The pension plan where a company pays the employee a fixed annual amount based on a formula is a

2. Accrued Product Warranty

Fosters Manufacturing Co. warrants its products for one year. The estimated product warranty is 4% of sales. Assume that sales were $428,000 for January. On February 7, a customer received warranty repairs requiring $290 of parts and $80 of labor.

a. Journalize the adjusting entry required at January 31, the end of the first month of the current fiscal year, to record the accrued product warranty. If an amount box does not require an entry, leave it blank.

b. Journalize the entry to record the warranty work provided in February. If an amount box does not require an entry, leave it blank.

3. Contingent Liabilities

Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $360,000. The company is contesting the fine. In addition, an employee is seeking $580,000 in damages related to the spill. Lastly, a homeowner has sued the company for $230,000. The homeowner lives 30 miles from the plant, but believes that the incident has reduced the home's resale value by $230,000.

Ayers legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel indicates that an out-of-court settlement of $250,000 has recently been reached with the employee. The final papers will be signed next week. Counsel believes that the homeowner's case is much weaker and will be decided in favor of Ayers. Other litigation related to the spill is possible, but the damage amounts are uncertain.

a. Journalize the contingent liabilities associated with the hazardous materials spill. Use the account "Damage Awards and Fines" to recognize the expense for the period. If an amount box does not require an entry, leave it blank.

b. The company experienced a hazardous materials spill at one of its plants during the previous period. This spill has resulted in a number of lawsuits to which the company is a party. The Environmental Protection Agency (EPA) has fined the company $_______, which the company is contesting in court. Although the company _______ admit fault, legal counsel believes that the fine payment is _______In addition, an employee has sued the company. A $ out-of-court settlement has been reached with the employee. The EPA fine and out-of-court settlement have been recognized as for the period. There is one other outstanding lawsuit related to this incident. Counsel believe that the lawsuit has merit. Other lawsuits and unknown liabilities may arise from this incident.

4.

The following items were selected from among the transactions completed by Sherwood Co. during the current year:

Mar.	1	Purchased merchandise on account from Kirkwood Co., $390,000, terms n/30.
	31	Issued a 30-day, 10% note for $390,000 to Kirkwood Co., on account.
Apr.	30	Paid Kirkwood Co. the amount owed on the note of March 31.
Jun.	1	Borrowed $156,000 from Triple Creek Bank, issuing a 45-day, 8% note.
Jul.	1	Purchased tools by issuing a $216,000, 60-day note to Poulin Co., which discounted the note at the rate of 6%.
	16	Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 6.5% note for $156,000. (Journalize both the debit and credit to the notes payable account.)
Aug.	15	Paid Triple Creek Bank the amount due on the note of July 16.
	30	Paid Poulin Co. the amount due on the note of July 1.
Dec.	1	Purchased equipment from Greenwood Co. for $500,000, paying $150,000 cash and issuing a series of ten 8% notes for $35,000 each, coming due at 30-day intervals.
	22	Settled a product liability lawsuit with a customer for $310,000, payable in January. Accrued the loss in a litigation claims payable account.
	31	Paid the amount due to Greenwood Co. on the first note in the series issued on December 1.

Required:

1.

Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Round your answers to the nearest dollar.

2.

Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles):

	a. Product warranty cost, $25,500.
	b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.