FAR Simulations help!

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    Topic
  • #187421
    Anonymous
    Inactive

    Okay, I’m struggling mightily on this part as I have been only “comparable” once in five tries on the simulation portion. I usually get questions similar to this, so how would I answer them?

    1. What is the impact on liabilities and OCI?

    Service Cost?

    Interest Cost?

    PSC?

    Gains?

    Then another one that I have trouble with deals with depreciation methods, so an example would be like this one

    2. For the first two years company A used the DDB, but in year 3 switched to the SL method. What is the adjustment for year 3?

    In year 2 company A accidentally put the depreciation under the Repairs and Maintenance account, what is the adjustment for year 3?

    What kind of an accounting change is this?

    So these are two questions I get for the most part and they look easy, but apparently I’m not answering them correctly. Thanks!

Viewing 7 replies - 1 through 7 (of 7 total)
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  • #583967
    jstay
    Participant

    question 1:

    Service Cost- increase liability- No effect on OCI

    Dr: Net Pension Expense

    Cr:Pension Asset/Liability

    Interest Cost- Increase liability

    Dr: Net pension expense

    Cr: pension asset/ Liabilty

    —figured out by taking beginning PBO multiplied by discount rate.

    PSC- decrese oci–increase liability?

    DR: OCI

    cr: Pension asset/liabilty

    Dr: Deffered tax asset- oci

    Cr:Deferred tax benefit- oci

    Must be amortized to pension expense:

    Dr Net pension cost

    cr: oci

    Dr: deferred tax benefit obi

    Cr deferred tax benefit — i/s

    Pensions Gains: Increase oci

    Dr: pension benefit asset/liability

    cr: oci

    dr: Deferred tax expense-oci

    cr: DTL

    Amortized

    dr: oci

    cr: net period pension expense

    Deferred tax expense- i/s

    deferred tax expense-oci

    hope it helped

    #583968
    jstay
    Participant

    for the second one: i guess its a change in accounting principle–

    #583969
    Anonymous
    Inactive

    Thanks, helped big time but what journal entry would I use to make the adjustment for the 2nd question? I figured for the first part it would be change in accounting estimates and the journal entry would be simple:

    DR. Depreciation Expense

    CR. Accumulated Depreciation expense

    However, for the 2nd part I am having trouble. I think it would be correction of error since it was posted in the wrong account, right? But I don't know what journal entry to make for the adjustment.

    #583970
    jstay
    Participant

    glad i helped..umm not sure

    since it was original debited to repairs and maintenance, would we just credit that and debit deprecation expense?

    but yeah i think your right it is correction of error.

    also for the first one in the second problem..that is change in estimate and not principle? so it should be handled prospectively?

    #583971
    jpowell31
    Participant

    change in depreciation method is a change in principal unseparable from a change in estimate (i.e. it is both) – when this happens you treat is as a change in estimate so prospectively as jstay said. so you would just go forward DR/CR the same accounts just by a different (smaller) amount (if going from DDB to SL)

    -__-
    #583972
    jstay
    Participant

    okkkk thanks!!

    half hour more of cruising the Q2 far review and I'm calling it a night

    #583973
    Anonymous
    Inactive

    Jpowell31 and jstay, thanks again for your help.

    So for the second part, the entry would be:

    DR: Dep exp

    CR Repairs and Maintenance?

Viewing 7 replies - 1 through 7 (of 7 total)
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