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Riley Company promises to pay Janet Anderson or her estate $150,000 per year for the next 10 years, even if she leaves the compa

Jlenok [28]

Answer:

The Answer is explanatory so it is given as under:

Explanation:

Part 1. At the start of the year:

The part of the salary includes $150,000 per year for the next 10 years and this must be recorded as an deferred compensation liability. All we have to do is to calculate the present value of the annual salary payments.

Present Value = Annual Payment * Annuity factor

And for Annuity factor we will use 5% rate of interest.

So

Annuity Factor = (1 - (1-r)^n) / r

Here

r = 5%

n = 10 years

Which means

Annuity Factor = (1 - (1 + 5%)^10) / 5% = 7.722

Hence

Present value = $150,000 * 7.722 = $1,158,260

So the journal entry would be as under:

Dr Deferred Compensation expense $1,158,260

Cr Deferred Compensation Liability $1,158,260

Part 2. At the end of the Year 1:

At the first year end, the annual payment of $1,158,260 will be discounted back by using the following formula:

Discounted Back Amount = Annual Amount * (1- (1+r)^n)

Remember for the first year n is 10, for second n is 9 and so on.

Discounted Back Amount = 150,000 x (1 - 0.614) = $57,913

Dr Deferred Compensation Expense $57,913

Cr Deferred Compensation Liability $57,913

Part 3. And when the first payment of the salary is made, the journal entry would be:

Dr Deferred compensation Liability $ 150,000

Cr Cash Account $150,000

Likewise we will till the year 10 and will record the part 2 and part 3 until at the end of the year 10, the whole of the deferred tax liability is reduced to zero.

The life insurance policy payments can not be offset against the deferred compensation liability because it will be accounted for as a different transaction and hence must not be treated as Riley desires.

So the Cash surrender value will be treated as an asset and annual increase in this asset would be treated as an income.

5 0

3 years ago

Mar. 17 Received $275 from Shawn McNeely and wrote off the remainder owed of $1,000 as uncollectible.

kogti [31]

Answer: Please see the required journals below:

Mar. 17:

Debit Allowance for doubtful accounts $1,000

Credit Accounts receivable $1,000

July 29:

Debit Cash $1,000

Credit Bad debt recovery (income statement) $1,000

Explanation: On March 17, when $275 was received from Shawn and the remaining balance of $1,000 was written off, the allowance for doubtful accounts has to be debited since the company adopts the allowance method of accounting for uncollectible receivables. Note that the allowance account would have the required buffer to take care of this debit. Similarly, when the recovery was made, cash would be debited then the credit would default to income statement.

3 0

3 years ago

On June 1, Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated usefu

Alex_Xolod [135]

Answer:

It is $30,000(C)

Explanation:

Depreciable cost = $90,000

Using straight-line method,

Annual depreciation = $90,000/3

= $30,000.

Hence, depreciation expense at the final year of service is $30,000

We cannot make use of entire cost of equipment of $120,000 because it seemed the company wanted to sell its scrap value for $30,000. Hence, this has been used to reduced it cost to $90,000 which is a depreciable cost .

7 0

3 years ago

The actions of associates in supporting diversity are more important than the actions of managers because associates establish t

Bogdan [553]

Answer:

False

Explanation:

The climate of the organization refers to the work environment that is perceived by the employees. A positive environment improves employee satisfaction and because of that managers try to maintain this. They can asses the climate in their work groups and make changes in management practices that can affect the working climate. Because of that, the statement that says that the actions of associates in supporting diversity are more important than the actions of managers because associates establish the working climate of the organization is false because the managers as the leaders can improve or not the climate of the organization with their decisions.

7 0

3 years ago

A marginal external cost of a product is equal to

Lyrx [107]

Answer:

the answer is D hope that helps you out

4 0

3 years ago