Which circle one of the two methods of treatment operating or capital would

# Which circle one of the two methods of treatment

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3.Which (circle one) of the two methods of treatment (operating or capital) would give rise to: (4 points)(a)A higher net income in the first year? (b)A higher debt/equity ratio? (c)A higher return on assets (ROA) ratio? (d)Higher total expenses recordedover the life of the lease?
Question 4Gloriais employed by Geers Company. Geers adopts a pension plan on December 31, 2010. the time of adoption Gloria has been working for Geers for exactly 10 years and is 9 years from retirement (i.e. Gloria will retire on December 31,2019). Gloria’s salarywhen the plan is started is \$100,000, and is expected to increase 3% each year until retirement. In calculating her benefits, Gloria will be given credit for the 10 years that she hasalready worked for Geers. Any Prior Service Cost is amortized straight-lineover Gloria’s 9 year remaining service period.Geer’spension formula is:(1%)(Final Salary)(Years Worked)Theappropriate discount rate is10%. Gloria will start receiving retirement checks one year after she retires and is expected to live for 15 years after retirement. Geersinvested \$38,000 in plan assets on December 31, 2010 and an additional \$8,000 on December 31, 2011. Geers expects theplan assets to earn 11% and theydid actually earn 11% in 2011.1. What is Gloria’s expected salaryatretirement?(1point)2. Determine Geers’ Projected Benefit Obligation (PBO) on December 31, 2010. (Note:thisamount reflects Prior Service Cost for the plan.) (3 points)3. Determine Geers’ Projected Benefit Obligation (PBO) on December 31, 2011. (3 points) At
4. Compute Geers’ 2011 servicecost.(2points)5. Compute Geers’ 2011 interestcost.(1point)6. Compute Geers’ 2011 pension expense. (4 points)7. What is the funding status of the plan onDecember 31, 2011and how is this reflected inthe financial statements? (3 points)

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