Jen-King Company’s board of directors approved and communicated an employee severance plan in response to a decline in demand for the company’s products. The plan called for the elimination of 150 headquarters positions by providing a severance equal to 5% of the annual salary multiplied by the number of years of service. The average annual salary of the eliminated positions is $60,000. The average tenure of terminated employees is eight years. The plan was communicated to employees on November 1, 2007. Actual termination notices will be distributed over the period between December 1, 2007, and April 1, 2008. On December 15, 2007, 40 employees received a lay-off notice and were terminated with severance.
a. Provide the journal entry for the restructuring charge on November 1, 2007. b. Provide the entry for the severance payment on December 15, 2007, assuming that the actual tenure and salary of terminated employees were consistent with the overall average. c. Provide the balance sheet and note disclosures on December 31, 2007.
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