11) To determine whether a pension plan is over-funded or under-funded, a company must compare the:
A) fair market value of the pension plan assets to the projected benefit obligation.
B) cost of the pension plan assets to the accumulated benefit obligation.
C) accumulated benefit obligation to the plan's anticipated obligations.
D) fair market value of the pension plan assets to the accumulated benefit obligation.
12) A company has pension plan assets with a fair value of $9 million. The accumulated benefit obligation for pensions is $10 million and the projected benefit obligation for pensions is $15 million. What pension liability is reported on the balance sheet?
A) $1 million
B) $6 million
C) $10 million
D) $15 million
13) On January 1, 2015, Maranto Company signed a lease agreement that requires monthly payments of $1,000 at the beginning of every month for two years. Maranto Company paid $1,000 on January 1, 2015. This is an operating lease. What journal entry is required by Maranto Company on January 1, 2015?
A) debit Leased Asset $1,000 and credit Lease Obligation $1,000
B) debit Lease Expense $1,000 and credit Lease Obligation $1,000
C) debit Rent Expense $1,000 and credit Rent Payable $1,000
D) debit Rent Expense $1,000 and credit Cash $1,000
14) On January 1, 2015, Ferguson Company signed a lease agreement that requires monthly payments of $1,000 at the beginning of every month for two years. Ferguson Company paid $1,000 on January 1, 2015. This is a capital lease. The present value of the lease payments is $19,000. What journal entry is required by Ferguson Company on January 1, 2015?
A) debit Leased Asset $1,000 and credit Lease Obligation $1,000
B) debit Rent Expense $1,000 and credit Cash $1,000
C) debit Leased Asset $19,000, credit Cash $1,000 and credit Lease Obligation $18,000
D) debit Leased Asset $18,000 and credit Lease Obligation $18,000
15) An airline has the following data about an airplane:
Annual lease cost $10,000,000
Lease term: 20 years
Useful life of airplane: 25 years
Fair market value of leased asset: $85 million
Present value of lease payments: $75 million
Bargain purchase option: None
Transfer to lessor at end of lease? Yes
Is this a capital or operating lease and why?
A) This is an operating lease. It fails all the capital lease tests.
B) This is a capital lease because the substance of the transaction is a capital lease.
C) This is a capital lease because it meets at least one of the four tests.
D) This is a capital lease because the leased asset costs over $1 million.
16) An airline has the following data about an airplane:
Annual lease cost $10,000,000
Lease term: 10 years
Useful life of airplane: 25 years
Fair market value of leased asset: $85 million
Present value of lease payments: $80 million
Bargain purchase option: None
Transfer to lessor at end of lease? Yes
Is this a capital or operating lease and why?
A) This is an operating lease. It fails all of the capital lease tests.
B) This is a capital lease because the substance of the transaction is a capital lease.
C) This is a capital lease because it meets at least one of the four tests.
D) This is a capital lease because the leased asset costs over $1 million.