Question

QUESTION: I need help with the adjusting entries for Milestone 2. Can anyone help me with the calculations and adjusting entries?

CRT Selection Pane - D. 0 Before Opt : After: 8pt Paragraph : Arrange GENERAL In preparation of the annual audit, make calculations and prepare appropriate adjusting entries and post to the trial balance workbook CAPITAL LEASES Calculate capital lease obligations Prepare appropriate adjusting entries PENSION PAYOUTS Calculate pension liability Calculate health insurance liability ADJUSTING ENTRIES Prepare adjusting entries for capital lease obligations AND Prepare adjusting entries for pension payouts FINANCIAL INFORMATION FOR THIS MILESTONE Postretirement Benefits Peyton Approved has revised its postretirement plan. It will now provide health insurance to retired employees. Management has requested that you report the short and long term financial implications of this. • The company is currently employing 60, and actuaries estimate that the company has a pension liability of $107,041.70 - The estimated cost of retired employees' health insurance is $43,718.91. • Prepare adjusting entries for the pension liability and the health insurance liability Leases • Six ovens were rented on December 31, with $20,000 charged to rent expense. The lease runs for 6 years with an implicit interest rate of 5%. At the end of the 6 years, Peyton will own them. Make any necessary adjusting entries.

Answer 1

capital lease solution-

monthly lease rental- 20000

lease period - 6 yrs

interest rate- 5% pa

lease rental at the beginning of each year -

pv of lease rental-

= 20000+ 20000* present value @ 5% for 5 years

= 20000+ 20000* 4.3295

= 106590

calculation of interest

years pv of LR Interest lease rental principal

1 106590 nil 20000 20000

2 86590 4330 20000    15670

3 70920 3546 20000 16454

4 54466 2723 20000 17277

5 37189 1860 20000 18140

6 19049 951 20000 19049

journal entries

dec 31-

Gross assets A/c - DR 106590

To Lease Liability A/c 106590

Lease Rental Expenses A/c - dr 20000

To Bank A/c- 20000

interest is charged from the second year onwards as given above in the table.

journal entries for pension liabilility

pension expenses A/c Dr- 107041.70

To Deffered Pension Liability A/c- 107041.70

Profit and Loss A/c- dr 107041.70

To pension expenses 107041.70

health expenses A/c- dr 43718.91

To deffered pension liability A/c- 43718.91

profit and loss A/c- dr 43718.91

to health Expenses A/c- 43718.91