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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

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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

For 2017, Sampsell Inc. computed its annual postretirement expense as \(240,900. Sampsell’s contribution to the plan during 2017 was \)180,000. Prepare Sampsell’s 2017 entry to record postretirement expense, assuming Sampsell has no OCI amounts.

Hawkins Corporation has the following balances at December 31, 2017. Projected benefit obligation $2,600,000 Plan assets at fair value 2,000,000 Accumulated OCI (PSC) 1,100,000 How should these balances be reported on Hawkins’ balance sheet at December 31, 2017?

Using the information in E20-2, prepare a pension worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording pension expense.

Keeton Company sponsors a defined benefit pension plan for its 600 employees. The company’s actuary provided the following information about the plan. January 1, December 31, 2017 2017 2018 Projected benefi t obligation \(2,800,000 \)3,650,000 \(4,195,000 Accumulated benefi t obligation 1,900,000 2,430,000 2,900,000 Plan assets (fair value and market-related asset value) 1,700,000 2,900,000 3,790,000 Accumulated net (gain) or loss (for purposes of the corridor calculation) –0– 198,000 (24,000) Discount rate (current settlement rate) 9% 8% Actual and expected asset return rate 10% 10% Contributions 1,030,000 600,000 The average remaining service life per employee is 10.5 years. The service cost component of net periodic pension expense for employee services rendered amounted to \)400,000 in 2017 and \(475,000 in 2018. The accumulated OCI (PSC) on January 1, 2017, was \)1,260,000. No benefits have been paid. Instructions (Round to the nearest dollar.)

(a) Compute the amount of accumulated OCI (PSC) to be amortized as a component of net periodic pension expense for each of the years 2017 and 2018.

(b) Prepare a schedule which reflects the amount of accumulated OCI (G/L) to be amortized as a component of pension expense for 2017 and 2018.

(c) Determine the total amount of pension expense to be recognized by Keeton Company in 2017 and 2018.

Ferreri Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2017. January 1, December 31, 2017 2017 Projected benefit obligation \(1,500,000 \)1,527,000 Market-related and fair value of plan assets 800,000 1,130,000 Accumulated benefit obligation 1,600,000 1,720,000 Accumulated OCI (G/L)—Net gain –0– (200,000) The service cost component of pension expense for employee services rendered in the current year amounted to \(77,000 and the amortization of prior service cost was \)120,000. The company’s actual funding (contributions) of the plan in 2017 amounted to \(250,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of \)1,200,000 on January 1, 2017. Assume no benefits paid in 2017. Instructions (a) Determine the amounts of the components of pension expense that should be recognized by the company in 2017. (b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2017. (c) Indicate the pension-related amounts that would be reported on the income statement and the balance sheet for Ferreri Company for the year 2017.

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