I will be in an advanced financial accounting class this quarter, but it's been a year since I have taken my last accounting class and I need help being shown how to organize the information into journal/adjusting/closing entries, t-accounts, so I can put those figures into financial statements. The area I have the most problem with is pensions. This is a general review problem. Its has a lot of information and, like I said, I don't know where to start. Even if I can get help on some of the individual problems would be great. Please help! You have been hired by Dillard to prepare adjusting entries and financial statements for 2009. Previously Rinky Dink Accounting had been performing such tasks. The following information was gathered through examination of the books of Dillard Company and through discussions with its employees. You are to prepare the income statement, statement of stockholders equity, statement of cash flows, balance sheet; all in proper form You have the option of preparing a statement of comprehensive income or to incorporate that into the statement of stockholders equity. Refer to your intermediate accounting textbook for form questions. Ignore tax effects. As support to your financial statements, provide in good order your adjusting/correcting entries with detailed computations and your closing entries. The trial balance at 12/31/10 before you work your magic and the balance sheet at 12/31/09 is Trial Balance 12/31/2010 Cash 1463 Investments 530 Accounts Receivable 350 Allowance for Doubtful Accts 5 Inventory 600 Land 807 Building 800 Equipment 570 Accumulated Depreciation 300 Goodwill 408 Investment in Timberside Corporation 900 Pension Asset 2000 Prepaid Pension 170 Accounts Payable 400 Bonds Payable 5325 Pension Liability 2200 Common stock 370 Retained Earnings 450 Treasury stock 70 Cash Dividends 50 Stock Dividends 40 Sales 1850 Sales Returns & Allowances 125 Dividend Revenue 85 Cost of Goods Sold 1022 Salaries Expense 300 Interest Expense 400 Depreciation Expense 130 Lease Expense 100 Gain on Sale of Pink Panther 200 OCI: Pension 200 Warranty Expense 10 Trademark 100 Loss on sale of equipment 30 11180 11180 Balance Sheet 12/31/2009 Cash 1919 Accounts Receivable 350 Allowance for Doubtful Accounts 35 315 Inventory 500 Investment in Timberside Corporation 900 Land 807 Building 800 Equipment 650 Accumulated Depreciation -250 1200 Goodwill 408 Pension Asset 2000 Trademark 150 Total Assets 8199 Accounts Payable 324 Bonds Payable 5325 Pension Liability 2200 Common stock 100 Retained earnings net of treasury stock of $75 450 OCI: Pensions -200 8199 The investments account at 12/31/10 contains stocks that were all purchased during 2010. In discussions with the CFO, you determine that they were made to invest excess cash. The company expects that they will need the cash within the next year. Here is information that you gather regarding that portfolio: Company Initial Investment Cost Market Value at 12/31/10 DAG $400 $375 GLS 50 55 HRG 80 78 You also discuss with the CFO the Investment in Timberside Corporation. You discover that this Investment was first made 2 years ago on 1/1/09 and that the investment cost was $900. The investment in 30% of the voting stock of Timberside was made in order to be able to have representation on its board since Timberside is a key supplier of the inventory that Dillard sells. Dillard wants to have a say in the quality control and other decisions that Timberside makes. You dig around and realize that the $900 investment cost was exactly equal to 30% of the book value of equity of Timberside on 1/1/09. You also determine that Dillard has been recording dividend revenue when it receives payment. During 2009, Dillard received $30 in dividends and in 2010 $40. Timberside has reported income during 2009 and 2010 of $300 and $330 respectively. 1. You also discover that the Pink Panther Product Line was sold on 6/30/10. This did not result in any decline in plant and equipment, however, the Pink Panther trademark was a part of the sale. You also are able to determine that sales related to TD for 2010 were $350, CGS was $300, Salaries Expense was $20. 2. You discover that the company entered into an agreement with AG to lease equipment from AG for 9 years. The agreement, structured as an annuity due, dated 1/1/08 required 10 payments, the first due on 1/1/08 and then annually on 12/31 of each year (including 12/31/08). The payments are $100 each. The normal life of the equipment is 1 years. There was guaranteed residual value of $125 related to the lease. 3. The bond payable was sold on 1/1/08 for $5,325. The bond maturity value is $5,000 and the coupon rate is 8% payable semi-annually on July 1 and December 31. The original maturity term was 10 years. 4. Dillard recorded its contribution into its pension plan as Prepaid Pension this year and has made no other entries related to the pension this year. In examining last years financials you note the following in the footnotes. Projected Pension Benefit Obligation ($2,200) Plan Assets 2,000 Unfunded Pension (200) Unamortized Prior service cost 200 Prepaid pension 0 In discussions with the actuary you determine the following: 2010 service cost is $185, The discount rate used to compute the PBO is 8% At 12/31/09, 8 years remained related to the prior service cost. The company assumes an expected return on its pension assets of 9%. Funding is always on 12/31 of each year. The plan asset value at the end of 2010 after the funding was $2,570 Assume that the pension expense was properly recorded in 2009. 5. The company uses the percentage of accounts receivable method and historically does not collect 10% of its ending accounts receivable. 6. 7. The company has been recording warranty expense as it has been paid. The company first warranted its products, 3 years ago, beginning 1/1/08. Warranty costs paid by year are listed below: Year Warranty costs paid 2008 $4 2009 $6 2010 $10 After exploring the timing of sales during the year and what seems like the company will pay given experience, you compute the following warranty liabilities at each year end. Original Sale year Est. liab. at 12/31/08 Est. liab. at 12/31/09 Est. liab. at 12/31/10 2008 $3 $1 0 2009 7 2 2010 7 8. In 2010, you discover that an equipment costing $100 on 7/1/08 which actually had zero salvage value and a 5 year life has been depreciated assuming a 5 year life, but $20 salvage value. 2010 depreciation has been recorded. 9. Additional information: Dillard purchased equipment for $200 cash this year. This transaction was properly recorded. 10. You discover that the ending inventory for 2008, 2009 and 2010 were all wrong. This is first detected by you this year. Inventory on 12/31/08 was understated by $500, on 12/31/09 understated by $125 and on 12/31/10 overstated by $50. These appear to be independent errors. 11. Dillards CFO tells you that the annualized effective rate on the bond is a reasonable incremental borrowing rate for Dillard. 12. Dillard wants you to as best as possible use the theoretically best approaches to accounting for its transactions as well as GAAP