Problem 1 ( 25 % )

Hugo Boss leases sewing equipment from Armani Leasing Company under
the following lease term.

- The lease term is 10 years, non cancelable, and requires equal rental
payments of $22,250 due at the beginning of each year starting January 1,
2007

- The equipment has fair value and cost at inception of the lease (January 1,
2007 ) of $185,078 and estimated economic life of 10 years,a nd residual
value (which is guaranteed

- The lease containts no renewable options, and the equipment reverts to

Armani upon termination of the lease

- Hugo Boss incremental borrowinnng rate is 9% per year. The implicit rate
is also 9%.

- Hugo Boss’s depreciates similar equipment that it owns on straight line

basis

- The sewing equipment are specific, and Hugo Boss could use it without
material modification

- Collectibility of the payments is reasonably predictable, and there are no

important uncertainties surrounding the octs yet to be incurred by the
lessor

Required :

1. Evaluate the criteria fo the classification of the lease and determine how
the lesse and lessor should account for the lesse transaction refers to
PSAK 30
(revision).(5%)

2. Would the classification be different for the lesse and lessor if we use the
criteria based on FASB No. 13?(4%)

3. Based on your answer in question 1, prepare the journal entries for the
lesse and lessor at January 1, 2007 and December 31,2007. Insert the
lesse amortization schedule for the lessor for two years.(10%)

4. What would have been the amount capitalizes by lesse upon the inception
of the lease if :
 a. The residual value of $20,000 had been guaranteed by a third party,
not the lsse ?

b. The residual value of $20,000 had not been guaranteed at all(1.5%)

5. On the lessor, what would be the amount recorded as the net investment
(lease receivable) at the inception of the lease, assuming :

a. The residual value of $20,000 had not been guaranteed by a third

party, not the lesse?(1.5%)

b. The residual value of $20,000 had not been guaranteed at all.(1.5%)

Problem 2 (25%)

Please answer all of the following questions:

a. The determination of net periodic pension expense is a function of five

elements. List and briefly each of the elements.

b. Describe the major difference and the major similarity beteen the
accumulated benefit obligation and projected benefit obligation.

c. 1. Explain why pension gains and losses are not recognized on the income
statement in the period in which they arise. 2. Briefly describe how
pension gains and losses recognized

d. Ubder what condition must company recognize an additional minimum

liability

Problem 3(25 %)

The following are financial information of PT. Terbuka Jaya for the year
ended Decemebr 31, 2007

PT TERBUKA JAYA

INCOME STATEMNET

FOR THE YEAR ENDED DECEMBER 31, 2007

(In thousand Rupiah )

 Sales 5,800,000

COGS (3,740,000)

Gross Margin 2,060,000

Operating Expenses

Selling Expenses 396,000

Admistrative expenses 783,5000

Depreciation expenses 202,5000

Total Operating Expenses (1,382,000)

Income from Operations (678,000)

Other Revenues/Expenses

Gain on Sale of Land 40,000

Gain on Sale of Short-Term Investment 20,000

Dividend Revenues 12,000

Interest expenses (258,750) (186,750)

Income before tax 491,250

Income tax expenses (197,000)

Net Income 294,250

Dividen to Common Stockholders (121,500)

To Retained Earnings 172,750

PT TERBUKA JAYA

COMPARATIVE BALANCE SHEETS

AS OF DECEMBER 31, 2007 AND 2006

(In thousand Rupiahs)

2007 2006

Cash 75,000 20,000

 Account Receivable 87,750 64,750

Short Term Investment 100,000 150,000

Inventory 210,000 175,000

Prepaid Rent 15,000 60,000

Prepaid Insurance 10,500 4,500

Office Suplies 5,000 3,750

Land 625,000 875,000

Building 1,750,000 1,750,000

Accumulated.Depre-Building (525,000) (437,500)

Equipment 2,625,000 2,000,000

Accumulated.Depre-Equipment (650,000) (560,000)

Patent 225,000 250,000

Total Assets 4,553,000 4,335,000

PT TERBUKA JAYA

COMPARATIVE BALANCE SHEETS

AS OF DECEMBER 31, 2007 AND 2006

(In thousand Rupiah)

2007 2006

Accounts Payable 135,000 160,000

Taxes Payable 25,000 20,000

Wages Payable 25,000 15,000

 Short Term Notes Payable 50,000 50,000

Long Term Note Payable 300,000 350,000

Bonds Payable 2,000,000 2,000,000

Premium on bonds payable 101,515 129,265

Common Stock 1,200,000 1,100,000

Paid-in –capital in excess of par 100,000 87,500

Retained Earnings 616,485 443,735

Total Liabilities and Equities 4,553,000 4,335,000

Required

1. Prepare a statement of cash flows for PT.Terbuka Jaya using the direct
method in calculating cash flow from operation. Assume that the short
term investments are avaible-for-sale securities.

Problem 4

On January 1, 2003 ABC Company purchased a building and machinery that have
the following useful lives, savages value , and costs
-. Bulidings, 25 years estimated useful life, $ 4,000,000 cost, $ 400,00 salvage,
value

-. Machinery, 10 year estimated value useful life, $ 500,000 cost, no salvage

value

The building has been depreciated under the straight line method through 2007.
In 2208. The company decided to switch to the double-declining balance
methods of depreciation for the to change the total useful life of the machinery
to 8 years, with a salvage value of $ 25,000, at the end of time. The machinery is
depreciated the straight line method.

During 2008, ABC co changed from the completed contarct method to

percentage of-completion method for accounting purposes but not for tax
purposes. Gross profit figures under both methods for the past three years
appear below :

Completed Contract Percentage of completion

2006 $950,000 $1,600,000

2007 $1,250,000 $1,900,000

2008 $1,400,000 $2,100,000

Total : 3,600,000 Total : $5,600,000

Instructions

a. Prepare the journal entry necessary to record the depreciation expense on

building in 2008

b. Compute the expense on the machinery for 2008

c. * If ABC Co. debited and expense account and credited cash on the date of
acquisition of machine, an these error was nown on December 31, 2005
after closing, what would the journal entry needed to correct this error ?
Will your answer be different if the error was found before closing ?

d. Compute the affect of the changed retained earnings balance from the
completed-contarct method to the percentage of-completion method to
retained earnings statements at the beginning of 2008. ( Assume the
income tax rate is 40 % for all years. )

Problem V ( 15 % )
PT ABC is established in the beginning of the year 2007 and the currently is
preparing its financial reports as Decemebr 31, 2007. PT ABC needs tour
assistance to calculate the tax expense, tax payable and deferred tax expense
that should be reported. Information available for you is as follow

- PT ABC report loss of Rp. 200 Million

- Fixed Asstes are purchased in January 2007 at cost of $ 1 Billion. These

assets will be appreciated for 4 years without no any salvage value, using
Double-Declining Balance Balance method. For tax purpose, the assets are
depreciated for 5 yeaers using Staright Line method.

- Based on estimate, PT ABC recognized bad debt expense OF Rp. 20

million. Expense recognized for tax purpose is actual account receivable
write-off of Rp. 5 Million

- Some leased assets are capitalized and depreciated along their economic
life. Total depreciation expense for leased asstes in 2007 is Rp. 100
Million. Lease payments during the year, which is recognized as lease
expense for tax purposes is Rp 150 million.

- Donation expense of Rp. 15 Million is not deductable for tax purposes.

- Tax Rate is 30 %

Required :

-. Calculate the Tax Income for the year 2007

-. Calculate the Tax Payable for the year 2007

-. Claculate the current Tax Expense for year 2007

-. Calculate the defend Tax Expense for year 2007