On January 1 of the current reporting year, Coda Company’s projected benefit obligation was $30 million. During the year, pension benefits paid by the trustee were $4 million. Service cost was $10 million. Pension plan assets earned $5 million as expected. At the end of the year, there was no net gain or loss and no prior service cost. The actuary’s discount rate was 10%.
Determine the amount of the projected benefit obligation at December 31.
Several years ago, Western Electric Corp. purchased equipment for $20,000,000. Western uses straight-line depreciation for financial reporting and MACRS for tax purposes. At December 31, 2012, the carrying value of the equipment was $18,000,000 and its tax basis was $15,000,000. At December 31, 2013, the carrying value of the equipment was $16,000,000 and the tax basis was $11,000,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $25,000,000. A tax rate of 35% applies to all years.
Prepare one journal entry to record Western’s income tax expense for the current year. Show well-labeled computations for the income tax payable and the change in the deferred tax account.