Question

The accounting staff of Usher Inc. has prepared the following pension worksheet. Unfortunately, several entries in the worksheet are not decipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for 2017.

Instructions (a) Determine the missing amounts in the 2017 pension worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2017 pension expense for Usher Inc. (c) The accounting staff has heard of a pension accounting procedure called “corridor amortization.” Is Usher required to record any amounts for corridor amortization in (1) 2017? In (2) 2018? Explain.

Short answer

Journal entry is considered the first step in an accounting process that every organization uses forrecording their daily business transactionsin a summarized manner.

Step-by-step solution

(a) Determination of the missing amounts in the 2017 pension worksheet, indicating whether the amounts are debits or credits.

Usher Inc
Pension Worksheet
General Journal Entries						Memo Record
Particulars	Annual pension expense	Cash	Prior service cost-OCI	OCI- Gain/Loss	Pension asset/liability	Projected benefit obligation	Plan assets
Balance Jan 1, 2017					$1,100 Cr.	$2.800 Cr.	$1,800 Dr.
Service cost	$500 Dr.					$500 Cr.
Interest cost	$280 Dr.					$280 Cr.
Actual return	$220 Cr.						$220 Dr.
Unexpected gain	$150 Dr.			$150 Cr.
Amortization of PSC	$55 Dr.		$55 Cr.
Contributions		$800 Cr.					$800 Dr.
Benefits						$200 Dr.	$200 Cr.
Liability increase				$365 Dr.		$365 Cr.
Journal entry	$765 Dr.	$800 Cr.	$55 Cr.	$215 Dr.	$125 Cr.
Accumulated OCI Dec 31, 2016			$1,100 Dr.	0
Balance Dec 31, 2017			$1,045 Dr.	$215 Dr.	$1,225 Cr.	$3,745 Cr.	$2,520 Dr.

(b) Preparation of the journal entry to record 2017 pension expense for Usher Inc

Usher Inc.
Journal Entry
Date	Particulars	Debit	Credit
2017	Pension Expense	$765
	Other comprehensive income	$215
	Pension asset/liability		$125
	Cash		$800
	Other comprehensive income		$55
	(To record the pension expense)

(c) Computation of corridor amounts for the years 2017 and 2018:

(1) In 2017, Usher Inc will have no amortization gain or loss because, at the beginning of the financial year of 2017, no gain/loss were recorded. Therefore, for 2017 the amortization gains or loss for Usher Inc will be $0.

(2) In 2018, the amount of projected benefit obligation was $3,745. Therefore, the amount of the corridor will be $374.50 $\left(\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{745}\mathbf{\times }\mathbf{10}\mathbf{\%}\right)$. On the other hand, the other comprehensive income reflects a balance of ($215). The amount of other comprehensive income is less than the amount of corridor. Therefore, there will be no amortization of gain/loss in 2018.