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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

What is the role of an actuary relative to pension plans? What are actuarial assumptions?

Kreter Co. provides the following information about its postretirement benefit plan for the year 2017. Service cost $ 45,000 Contribution to the plan 10,000 Actual and expected return on plan assets 11,000 Benefits paid 20,000 Plan assets at January 1, 2017 110,000 Accumulated postretirement benefit obligation at January 1, 2017 330,000 Discount rate 8% Instructions Compute the postretirement benefit expense for 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.

Davis Corporation is a medium-sized manufacturer of paperboard containers and boxes. The corporation sponsors a noncontributory, defined benefit pension plan that covers its 250 employees. Sid Cole has recently been hired as president of Davis Corporation. While reviewing last year’s financial statements with Carol Dilbeck, controller, Cole expressed confusion about several of the items in the footnote to the financial statements relating to the pension plan. In part, the footnote reads as follows. Note J. The company has a defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and the employee’s compensation during the last four years of employment. The company’s funding policy is to contribute annually the maximum amount allowed under the federal tax code. Contributions are intended to provide for benefi ts expected to be earned in the future as well as those earned to date. The net periodic pension expense on Davis Corporation’s comparative income statement was \(72,000 in 2017 and \)57,680 in 2016. The following are selected figures from the plan’s funded status and amounts recognized in the Davis Corporation’s Statement of Financial Position at December 31, 2017 (\(000 omitted). Actuarial present value of benefi t obligations: Accumulated benefi t obligation (including vested benefi ts of \)636) \( (870) Projected benefi t obligation \)(1,200) Plan assets at fair value 1,050 Projected benefi t obligation in excess of plan assets $ (150) Given that Davis Corporation’s work force has been stable for the last 6 years, Cole could not understand the increase in the net periodic pension expense. Dilbeck explained that the net periodic pension expense consists of several elements, some of which may increase or decrease the net expense. Instructions (a) The determination of the net periodic pension expense is a function of five elements. List and briefly describe each of the elements. (b) Describe the major difference and the major similarity between the accumulated benefit obligation and the projected benefit obligation. (c) (1) Explain why pension gains and losses are not recognized on the income statement in the period in which they arise. (2) Briefly describe how pension gains and losses are recognized.

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.

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