Using Your Judgment 20-4 (Part Level Submission) (a1) PENCOMP, INC. Income State

Question

Using Your Judgment 20-4 (Part Level Submission)

(a1)

PENCOMP, INC.
Income Statement
for the year ended Dec. 31, 2015

Using Your Judgment 20-4 (Part Level Submission)

PENCOMP's balance sheet at December 31, 2014, is as follows.
PENCOMP, INC.
BALANCE SHEET
AS OF DECEMBER 31, 2014 Assets Liabilities Cash $438 Notes payable $1,000 Inventory 1,800 Pension liability 344 Total current assets 2,238 Total liabilities 1,344 Plant and equipment 2,000 Stockholders’ equity Accumulated depreciation (240 ) Common stock 2,000 1,760 Retained earnings 896 Total assets $3,998 Accumulated other comprehensive income (242 ) Total stockholders' equity 2,654 Total liabilities and stockholders’ equity $3,998 Additional information concerning PENCOMP’s defined benefit pension plan is as follows. Projected benefit obligation at 12/31/14 $820.5 Plan assets (fair value) at 12/31/14 476.5 Unamortized past service cost at 12/31/14 150.0 Amortization of past service cost during 2015 15.0 Service cost for 2015 42.0 Discount rate 10 % Expected rate of return on plan assets in 2015 12 % Actual return on plan assets in 2015 10.4 Contributions to pension fund in 2015 70.0 Benefits paid during 2015 40.0 Unamortized net loss due to changes in actuarial assumptions
and deferred net losses on plan assets at 12/31/14 92.0 Expected remaining service life of employees 15.0 Average period to vesting of prior service costs 10.0 Other information about PENCOMP is as follows. Salary expense, all paid with cash during 2015 $700.0 Sales, all for cash 3,000.0 Purchases, all for cash 2,000.0 Inventory at 12/31/15 1,800.0
Property originally cost $2,000 and is depreciated on a straight-line basis over 25 years with no residual value.
Interest on the note payable is 10% annually and is paid in cash on 12/31 of each year.
Dividends declared and paid are $200 in 2015.

Explanation / Answer

Details Amount Sales        3,000.00 Cost of Goods Sold=Purchases+opeining inventory-Closing Inventory        2,000.00 Gross Profit        1,000.00 Operating Expense Salary            700.00 Pension cost              88.05 Depreciation=2000/25              80.00            868.05 Operating Profit            131.95 Interest Expense =1000*.10            100.00 Net Income              31.95 Work Sheet Details Details 2015 PBO Opening Balance A            820.50 Add: Prior Srvice Cost B                     -   Add: Interest A+B*.10              82.05 Less: Payment Of Benefit(Assumed to be at the end of Year) -40 Add: Current Service Cost              42.00 Closing Balance            904.55 Plan Assets FV of Opening Assets A            476.50 Less Benefit             -40.00 Add: Contributions              70.00 Add: Actual Return              10.40 Closing Balance            516.90 AOCI -Past service Cost Opening Balance            150.00 Add: Past Service Cost                     -   Less: Amortisation of Past service cost              15.00 Closing Balance            135.00 Difference Between Actual Return and Expected return and other Actuarial gain(Loss) Opening Balance              92.00 Loss(Gain) On Actual Return 10.4-92*.12                 0.64 Less: Amortisation 92.64/15                 6.18 Computation Of Pension Cost Current Service Cost              42.00 Amortisation of Past Service Cost              15.00 Total Service Cost              57.00 net loss due to changes in actuarial assumptions and deferred net losses on plan assets                 6.18 Interest Cost              82.05 Expected Return on Plan Assets             -57.18 Net Interest Cost              24.87 Net Pension Cost              88.05

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