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Chapter 20: E20-23 (page 1168)

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

Expert verified

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

Question: Kramer Co. 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 Kramer Co. (c) Determine the following for Kramer for 2017: (1) settlement rate used to measure the interest on the liability and (2) expected return on plan assets.

The following data relate to the operation of Kramer Co.’s pension plan in 2018. The pension worksheet for 2017 is provided in P20-10. Service cost $59,000 Actual return on plan assets 32,000 Amortization of prior service cost 28,000 Annual contributions 51,000 Benefits paid retirees 27,000 Average service life of all employees 25 years For 2018, Kramer will use the same assumptions as 2017 for the expected rate of returns on plan assets. The settlement rate for 2018 is 10%. Instructions (a) Prepare a pension worksheet for 2018 and accompanying computations and amortization of the loss, if any, in 2018 using the corridor approach. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31. (c) Indicate the pension amounts reported in the financial statements.

Taveras Enterprises provides the following information relative to its defined benefit pension plan. Balances or Values at December 31, 2017 Projected benefit obligation \(2,737,000 Accumulated benefit obligation 1,980,000 Fair value of plan assets 2,278,329 Accumulated OCI (PSC) 210,000 Accumulated OCI—Net loss (1/1/17 balance, –0–) 45,680 Pension liability 458,671 Other pension plan data for 2017: Service cost 94,000 Prior service cost amortization 42,000 Actual return on plan assets 130,000 Expected return on plan assets 175,680 Interest on January 1, 2017, projected benefi t obligation 253,000 Contributions to plan 93,329 Benefi ts paid 140,000

Instructions (a) Prepare the note disclosing the components of pension expense for the year 2017. (b) Determine the amounts of other comprehensive income and comprehensive income for 2017. Net income for 2017 is \)35,000. (c) Compute the amount of accumulated other comprehensive income reported at December 31, 2017.

Veldre Company provides the following information about its defined benefit pension plan for the year 2017. Service cost $ 90,000 Contribution to the plan 105,000 Prior service cost amortization 10,000 Actual and expected return on plan assets 64,000 Benefits paid 40,000 Plan assets at January 1, 2017 640,000 Projected benefi t obligation at January 1, 2017 700,000 Accumulated OCI (PSC) at January 1, 2017 150,000 Interest/discount (settlement) rate 10% Instructions Compute the pension expense for the year 2017.

Elton Co. has the following postretirement benefit plan balances on January 1, 2017. Accumulated postretirement benefi t obligation \(2,250,000 Fair value of plan assets 2,250,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2018, the company amends the plan so that prior service costs of \)175,000 are created. Other data related to the plan are: 2017 2018 Service costs \( 75,000 \) 85,000 Prior service costs amortization –0– 12,000 Contributions (funding) to the plan 45,000 35,000 Benefits paid 40,000 45,000 Actual return on plan assets 140,000 120,000 Expected rate of return on assets 8% 6% Instructions (a) Prepare a worksheet for the postretirement plan in 2017. (b) Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2017. (c) Prepare a worksheet for 2018 and any journal entries related to the postretirement plan as of December 31, 2018. (d) Indicate the postretirement-benefit–related amounts reported in the 2018 financial statements.
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