Johnson Brothers Co. has a non-contributory qualified profit sharing plan with 310 employees in total, 180 who are nonexcludable (40 HC, 140 NHC). The plan covers 72 NHC and 29 HC. The NHC receive an average of 4.5% benefit and the HC receive 6.5%. Which of the following statements is (are) correct?
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Johnson Brothers Co. has a non-contributory qualified profit sharing plan with 310 employees in total, 180 who are nonexcludable (40 HC, 140 NHC). The plan covers 72 NHC and 29 HC. The NHC receive an average of 4.5% benefit and the HC receive 6.5%. Which of the following statements is (are) correct?
- The Johnson Brothers Co. plan meets the ratio percentage test.
- The Johnson Brothers Co. plan fails the average benefits test.
- The plan must and does meet the Actual Deferral Percentage (ADP) test
1 only
2 only
1 and 2
1, 2, and 3
2 and 3
Step by step
Solved in 2 steps
- Upward and Onward, Inc., a § 501(c)(3) organization that provides training programs for welfare recipients, reports the following income and expenses from the sale of products associated with the training program. Gross income from sales $425,000 Cost of goods sold 106,000 Advertising and selling expenses 26,000 Administrative expenses 112,500 Calculate Upward and Onward's UBIT under the following two assumptions. Assume a tax rate of 21%. If an amount is zero, enter "0". If the sale of the training program products is not substantially related to Upward and Onward's exempt purpose, then Upward and Onward's UBIT is $QJX. Co funded defined benefit plan for its employees. On 1 January 2005, the fair value of the plan assets was $310,000 and the present value of the obligation was $200,000. It was recorded that the past service cost of $1,400 was the results of changes introduced during the year ended 31 December 2005. During the year of 2005, the entity had contributed $85,000 to the scheme. The current service cost was $25,000 and the payment to its retired employees during the year amounted to $35,000. The entity uses a discount rate of 18% and expects its return on the plan assets to be 10%. Calculate the defined benefit costs that should be recognised in the statement of profit or loss for the year ended 31 December 2005.Assume a 30 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company’s income tax expense. Comment on the conflict of interest between the company president as determined in Requirement c and the owners of the company as indicated in Requirement d. Describe an incentive compensation plan that would avoid a conflict of interest between the president and the owners.
- QUESTION 3 (a) Explain the following: O The difference between a defined benefit plan and a defined contribution plan. (i) “Current service cost" and "Contributions paid". (b) Moore operates a defined benefit scheme for its employecs but has yet to record anything for the current year except to expense the cash contributions which were $18 million. The opening position was a net liability of $45 million which is included in the non-current liabilities of Moore in its draft financial statements. Current service costs for the year were $15 million and interest rates on good quality corporate bonds fell from 8% at the start of the year to 6% by 31 March 20X8. In addition, a payment of $9 million was made out of the cash of the pension scheme in relation to employees who left the scheme. The reduction in the pension scheme liability as a result of the curtailment was $12 million. The actuary has assessed that the scheme is in deficit by $51 million as at 31 March 20X8. Required Calculate…A private not-for-profit health care entity provides its patients with services that would normally be charged at $1 million. However, it estimates a $200,000 reduction because of contractual adjustments. It expects another $100,000 reduction because of bad debts. Finally, the organization does not expect to collect $400,000 because this amount is deemed to be charity care. Which of the following is correct? Choose the correct.a. Patient service revenues = $1 million; net patient service revenues = $300,000.b. Patient service revenues = $1 million; net patient service revenues = $400,000. c. Patient service revenues = $600,000; net patient service revenues = $300,000.d. Patient service revenues = $600,000, net patient service evenuess = $400,000.At the beginning of the current year Paolo Co reported fair value of plan assets at P7,000,000 and projected benefit obligation at P8,500,000. During the year the entity determined that the current service cost was P1.200,000 and the discount rate is 10% The actual return on plan assets was P800,000 during the yearThe entity provided the following information during the year related to the defined benefit plan: Contribution to the 1, 000 Benefits paid to retirees P1,750,000 Decrease in projected benefit obligation due to change in actuarial assumptions - P300,000 REQUIRED 1. Employee benefit expense Total remeasurement ? 2. Projected Benefit Obligation at year end ? 3. Prepaid /accrued benefit cost for the year ?
- A private not-for-profit health care entity provides its patients with services that would normally be charged at $1 million. However, it estimates a $200,000 reduction because of contractual adjustments. It expects another $100,000 reduction because of bad debts. Finally, the organization does not expect to collect $400,000 because this amount is deemed to be charity care. Which of the following is correct? Patient service revenues = $1 million; net patient service revenues = $300,000. Patient service revenues = $1 million; net patient service revenues = $400,000. Patient service revenues = $600,000; net patient service revenues = $300,000. Patient service revenues = $600,000, net patient service revenues = $400,000.Lucky 11 Corporation established a defined benefit plan for its employees and provided the following information: Fair value of plan assets as ofJanuary 1 was P5,500,000 and December 31 P6,300,000, Projected benefit obligation as of January 1 was P6,000,000 and December 31 P6,800,000.Current and past service cost were P700,000 and P550,000, respectively. Contributions to the plan during the year was P900,000 while benefitspaid during the year was P450,000. The expected rate of return on plan assets was 10%, the weighted average rate of return for plan assets was9.5%, the discount rate for plan assets was 8%. 1. What is the employee benefit expense for the current year?2. How much is the actuarial gain/loss on return on plan assets?3. What is the prepaid/accrued balance of the pension at yearend?4. How much is the defined benefit cost?Required: For each of the following independent income-sharing agreements, prepare anincome distribution schedule.a. Salaries are P15,000 to East, P20,000 to North, and P18,000 to West. East receives abonus of 5 percent of net income after deducting his bonus. Interest is 10 percent of endingcapital balances. Any remainder is divided by East, North, and West in a 3:3:4 ratio. Netincome was P78,960.b. Interest is 10 percent of weighted average capital balances. Salaries are P24,000to East, P21,000 to North, and P25,000 to West. North receives a bonus of 10 percent of netincome after deducting the bonus and his salary. Any remainder is divided equally. Net incomewas P68,080.c. West receives a bonus of 20 percent of net income after deducting the bonus and thesalaries. Salaries are P21,000 to East, P18,000 to North, and P15,000 to West. Interest is 10percent of beginning capital balances. Any remainder is divided by East, North, and West inan 8:7:5 ratio. Net income was P92,940.
- At the beginning of the current year, the memorandum records of Anne Company's defined benefit plan showed the following: Fair value of plan assets P 7,500,000 Defined benefit obligation (11,000,000) Prepaid(accrued) defined benefit exp. (P3.500,000) The entity determined that its current service cost was P1,000,000 and the interest cost is 10%. The expected return on plan assets was 12% but the actual return during the year was 8%. Other related information at the end of the year: Contribution to the plan P1,200,000 Benefits paid to retirees 1,500,000 Decrease in defined benefit obligation due to changes in actuarial 200,000 assumptions The defined benefit obligation at the end of the current year is O P10,500,000 P11,800,000 O P11,600,000 O P11,400,000At the beginning of the current year, the memorandum records of Anne Company's defined benefit plan showed the following: Fair value of plan assets P 7,500,000 Defined benefit obligation (11,000,000) Prepaid(accrued) defined benefit exp. (P3.500,000) The entity determined that its current service cost was P1,000,000 and the interest cost is 10%. The expected return on plan assets was 12% but the actual return during the year was 8%. Other related information at the end of the year: Contribution to the plan P1,200,000 Benefits paid to retirees 1,500,000 Decrease in defined benefit obligation due to changes in actuarial 200,000 assumptions The fair value of plan assets at the end of the current year is O P8,700,000 O P7,800,000 O P8,250.000 O P7,950,000At the beginning of the current year, the memorandum records of Anne Company’s defined benefit plan showed the following: Fair value of plan assets P 7,500,000 Defined benefit obligation (11,000,000) Prepaid(accrued) defined benefit exp. (P3,500,000) The entity determined that its current service cost was P1,000,000 and the interest cost is 10%. The expected return on plan assets was 12% but the actual return during the year was 8%. Other related information at the end of the year: Contribution to the plan P1,200,000 Benefits paid to retirees 1,500,000 Decrease in defined benefit obligation due to changes in actuarial assumptions 200,000 Calculate the net amount that the entity would recognize in OCI for the year in accordance with the revised PAS 19 A P200,000 loss B P50,000 gain C P50,000 loss D P200,000 gain