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Using the information in E20-22, prepare a worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording postretirement benefit expense

Short Answer

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Retirement can be classified into two categories, i.e.,voluntary and non-voluntary retirement. All of the service employeesare eligible for retirement.

Step by step solution

01

Pension worksheet at January 1, 2017

Englehart Co
Postretirement benefit worksheet
General journal entries
Memo record

Particulars

Annual postretirement expense

Cash

OCI-Prior service cost

Postretirement asset/liability

Annual projected benefit obligation

Plan assets

Balance Jan 1, 2017

$50,000 Cr.

$760,000 Cr.

$710,000 Dr.

Service cost

$90,000 Dr.

$90,000 Cr.

Interest cost

$760,000×9%

$68,400 Dr.

$68,400 Cr.

Actual return

$62,000 Cr.

$62,000 Dr

Contributions

$56,000 Cr.

$56,000 Dr.

Benefits

$40,000 Dr.

$40,000 Cr.

Amortization of PSC

$3,000 Dr.

$3,000 Cr.

Journal entry for 2017

$99,400 Dr.

$56,000 Cr.

$3,000 Cr.

$40,400 Cr.

Accumulated OCI 2016

$100,000 Dr.

Balance Dec 31, 2017

$97,000 Dr.

$90,400 Cr.

$878,400 Cr.

$788,000 Dr.

02

Journal entry to record the postretirement benefit expense for the year 2017.

Englehart Co
Journal Entry

Date

Particulars

Debit

Credit

2017

Postretirement expense

$99,400

Postretirement asset/liability

$40,400

Cash

$56,000

Prior service cost-OCI

$3,000

(To record the postretirement expense)


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Most popular questions from this chapter

Given the following items and amounts, compute the actual return on plan assets: fair value of plan assets at the beginning of the period \(9,500,000; benefits paid during the period \)1,400,000; contributions made during the period \(1,000,000; and fair value of the plan assets at the end of the period \)10,150,000.

Aykroyd Inc. has sponsored a noncontributory, defined benefit pension plan for its employees since 1994. Prior to 2017, cumulative net pension expense recognized equaled cumulative contributions to the plan. Other relevant information about the pension plan on January 1, 2017, is as follows. 1. The company has 200 employees. All these employees are expected to receive benefits under the plan. The average remaining service life per employee is 12 years. 2. The projected benefit obligation amounted to \(5,000,000 and the fair value of pension plan assets was \)3,000,000. The market-related asset value was also \(3,000,000. Unrecognized prior service cost was \)2,000,000. On December 31, 2017, the projected benefit obligation and the accumulated benefit obligation were \(4,850,000 and \)4,025,000, respectively. The fair value of the pension plan assets amounted to \(4,100,000 at the end of the year. A 10% settlement rate and a 10% expected asset return rate were used in the actuarial present value computations in the pension plan. The present value of benefits attributed by the pension benefit formula to employee service in 2017 amounted to \)200,000. The employer’s contribution to the plan assets amounted to $775,000 in 2017. This problem assumes no payment of pension benefits. Instructions (Round all amounts to the nearest dollar.)

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(b) Compute pension expense for the year 2017.

(c) Compute the amount of the 2017 increase/decrease in net gains or losses and the amount to be amortized in 2017 and 2018.

(d) Prepare the journal entries required to report the accounting for the company’s pension plan for 2017

Mancuso Corporation amended its pension plan on January 1, 2017, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2017. Compute prior service cost amortization for 2017.

What is a private pension plan? How does a contributory pension plan differ from a noncontributory plan?

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