On January 1, 2011, Holbrook Company leased a building under a 3-year operating lease Answer

On January 1, 2011, Holbrook Company leased a building under a 3-year operating lease Answer

On January 1, 2011, Holbrook Company leased a building under a 3-year operating lease Answer

1) On January 1, 2011, Holbrook Company leased a building under a 3-year operating lease. The annual rental payments are $68,000 on January 1, 2011, the inception of the lease, and $50,000 January 1 of 2012 and 2013. Holbrook made structural modifications to the building costing $90,000 before occupying the building. The useful life of the building and the modifications is 30 years with no expected residual value. Prepare the appropriate journal entries for Holbrook Company for 2011. Holbrook’s fiscal year is the calendar year, and the company uses straight-line depreciation.

2) At the end of the preceding year, World Industries had a deferred tax asset of $17,500,000 attributable to its only temporary difference of $50,000,000 for estimated expenses. At the end of the year, the temporary difference is $45,000,000. At the beginning of the year there was no valuation account for the deferred tax asset. At year- end, World Industries now estimates that it’s more likely than not that one-third of the deferred tax asset will never be realized. Taxable income in $12,000,000 for the current year, and the tax rate is 30% for all years. Prepare journal entries to record World Indusrties’ income tax expense for the current year. Show well- labled supporting computations for each componet of the journal entries.

3) Vrable Corporation has a defined benefit pension plan. Two alternative possibilities for pension-related data for the current calender year are shown below:
Net loss (gain), Jan.1 (case 1) $240,000 (case 2) $(230,000)
Loss (gain) on plan assets (case 1) (8,000) (case 2) (6,000)
Loss (gain) on PBO (case 1) (17,000) (case 2) 12,000
ABO, Jan1 (case1) (1,900,000) (case 2) (1,500,000)
PBO, Jan1 (case 1) (2,500,000) (case 2) (1,700,000)
Plan Assets, Jan1 (case1 ) 2,100,000 (case2) 2,000,000
Average remaining service period of active employees (years) (case1) 10 (case2) 12
For each independent case, valculate amortization of the net loss or gain that should be included as a component of pension expense for the current year.

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On January 1, 2011, Holbrook Company leased a building under a 3-year