Intermediate Accounting II

1) Interested E. Corp reported for year 20x3 $50,000 of interest expense, and the balance of Interest Payable had a net increase of $6,000 since 20x2. In addition, the balance in Discount on Bonds Payable had a net decrease of $4,000 since 20x2. When preparing the operating section of the 20x3 statement of cash flows how should those balance changes be treated? Under the INDIRECT method Under the DIRECT method A Add both changes to net income. Deduct both changes from interest expense. B Deduct both changes from net income. Add both changes to interest expense. C Add change in 1/P to net income, Deduct change in 1/P from interest expense, but deduct change in Discount from net income. but add change in Discount to interest expense. D Deduct change in 1/P from net income, Add change in 1/P to interest expense, but add change in Discount to net income. but deduct change in Discount from interest expense. $75,000 The following 2 questions are based on the following information: On January 1, 20x3 the fair value of the company's pension fund was $630,000 while its projected benefit obligation was $610,000. Following is a list of items pertaining to 20x3: Actual rate of return 12% Prior service costs from 20x2 unamortized Expected rate of return 8% Net gains from prior years unamortized $84,000 Discount rate 10% Actuarial gains $43,000 Current service costs $50,000 Average remaining years of service 5 No contributions were made towards the pension fund nor were benefits paid during 20x3