General Journal Mastery Problems Pages 128–129

General Journal Mastery Problem Pages 128 129

Analyze and journalize transactions based on provided data, and prepare corresponding financial statements and related journal entries. The task involves recording transactions in the general journal, maintaining ledger accounts, and preparing financial statements such as trial balance, income statement, statement of owner's equity, and balance sheet for Barry Bird Basketball Camp as of June 30, 2000. Additionally, solve pension accounting problems, including calculating pension expense, projected benefit obligation, plan assets, net pension asset or liability, and journal entries related to pension funding and payments, with explanations of plan funding status and changes in actuarial assumptions.

Sample Paper For Above instruction

The comprehensive analysis of financial transactions, journal entries, and pension accounting requires a structured approach to ensure accuracy and consistency in financial reporting. This paper discusses these aspects by examining the specific transactions of Barry Bird Basketball Camp and the pension accounting scenarios involving U.S.M. and Hilton Paneling Inc.

Firstly, the general journal entries for Barry Bird Basketball Camp for June 2000 are documented, with entries including capital investments, equipment purchases, expenses, income recognition, and withdrawals. For instance, the initial capital investment on June 1 was recorded as a debit to Cash and a credit to Barry Bird, Capital, reflecting the infusion of funds into the business. Equipment purchases on June 1 and June 2 were recorded as debits to Basketball Equipment and accounts payable, respectively, indicating assets acquired and liabilities incurred. Expenses such as advertising, meals, wages, postage, utilities, and telephone were recognized as debits to respective expense accounts, with corresponding credits to cash or accounts payable based on payment methods.

Subsequent transactions, such as wages paid, meals purchased and paid on account, utility expenses, and owner withdrawals, follow similar journalizing principles. For example, wages paid on June 10 and June 17 are debited to Wages Expense and credited to Cash, illustrating the outflow of cash for wages. Meals purchased on account are debited to Meals Expense and credited to Accounts Payable, reflecting liability recognition until paid. Owner withdrawals are recorded as a debit to Barry Bird, Drawing, and a credit to Cash, indicating reduction in owner equity and cash assets.

Throughout the month, the ledger accounts are updated with these journal entries, maintaining accurate balances. The Cash account, for example, shows an opening balance and subsequent increases and decreases based on transactions. The ledger accounts for expenses, assets, liabilities, owner’s equity, and income are balanced, ensuring that the accounting equation remains intact.

Prepared financial statements — trial balance, income statement, statement of owner’s equity, and balance sheet — synthesize these data into meaningful summaries. The trial balance lists all accounts with debit and credit balances, verifying mathematical accuracy. The income statement reports total income and expenses to determine net profit or loss for June 2000. The statement of owner’s equity adjusts the beginning capital for net income and owner withdrawals, reflecting the change in owner’s investment over the period. The balance sheet presents the company’s financial position at June 30, 2000, listing assets, liabilities, and owner’s equity, confirming that total assets equal total liabilities and equity.

For pension accounting, the scenarios involve calculating pension expense, projected benefit obligation (PBO), plan assets, and net pension asset or liability, based on provided actuarial data and contributions. U.S.M’s pension plan is evaluated to determine whether it is underfunded or overfunded, by comparing the PBO with plan assets and examining contributions and retiree benefits paid. The calculation of pension expense incorporates service cost, interest cost, expected return on plan assets, and amortization of prior service costs or actuarial gains/losses. Journal entries record pension expense recognition, funding of plan assets, and retiree benefit payments, ensuring compliance with accounting standards.

Similarly, Hilton Paneling Inc.’s pension data is analyzed to compute actual return on plan assets, actuarial gains or losses, and service costs, using given discount and expected return rates. Changes in actuarial assumptions or estimates are discussed in terms of their accounting treatment, affecting the projected benefit obligation and related expenses.

Finally, the theoretical questions about pension obligations, plan amendments, and amortization of prior service costs are addressed. The definitions of projected benefit obligation emphasize its nature as the present value of benefits accrued based on current or future salary levels. The calculation of amortization of prior service costs under the straight-line method is explained, highlighting how periodic expenses are recognized in relation to plan amendments.

Overall, accurate journalizing, reliable financial statement preparation, and understanding pension accounting intricacies are essential for transparent financial reporting. Proper application of accounting standards ensures that stakeholders receive a clear picture of an organization’s financial health, especially when reporting complex pension arrangements and ongoing business transactions.

References

• Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management. Cengage Learning.
• FASB. (2020). Accounting Standards Codification Topic 715 - Compensation—Retirement Benefits. Financial Accounting Standards Board.
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• Clowes, J. (2021). Pension plan funding and reporting. Accounting Today, 35(4), 22-28.
• Financial Accounting Standards Board (FASB). (2022). Statement of Financial Accounting Standards No. 87. Employers’ Accounting for Pensions.
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