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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.

Short Answer

Expert verified

A pension Worksheet is the kind of pension statement which includes all of the organization's necessary information related to the defined benefit pension plans. This worksheet recordsthe pension expense entries in the journal book.

Step by step solution

01

Computation of Pension Worksheet as of January 1, 2017.

Veldre Company
Pension Worksheet for the year 2017
General Journal Entries
Memo Record

Particulars

Annual pension expense

Cash

OCI prior service cost

Pension asset/liability

Projected benefit obligation

Plan Assets

Balance Jan 1, 2017

$60,000 Cr.

$700,000 Cr.

$640,000 Dr.

Service cost

$90,000 Dr.

$90,000 Cr.

Interest cost

$700,000ร—10%

$70,000 Dr.

$70,000 Cr.

Actual return

$64,000 Cr.

$64,000 Dr.

Amortization of PSC

$10,000 Dr.

$10,000 Cr.

Contributions

$105,000 Cr.

$105,0000 Dr.

Benefits

$40,000 Dr.

$40,000 Cr.

Journal entry for 2017

$106,000 Dr.

$105,000 Cr.

$10,000 Cr.

$9,000 Dr.

Accumulated OCI Dec 31, 2016

$150,000 Dr.

Balance Dec 31, 2017

$140,000 Dr.

$1,000 Cr.

$820,000 Cr.

$769,000 Dr.

02

Journal entry for recording the transaction of pension expense for the year 2017.

Veldre Company
Journal Entry

Date

Particulars

Debit

Credit

2017

Pension Expense

$106,000

Pension Asset/Liability

$9,000

Other comprehensive income

$10,000

Cash

$105,000

(To record the pension expense)

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Most popular questions from this chapter

The following facts apply to the pension plan of Boudreau Inc. for the year 2017. Plan assets, January 1, 2017 $490,000 Projected benefi t obligation, January 1, 2017 490,000 Settlement rate 8% Service cost 40,000 Contributions (funding) 25,000 Actual and expected return on plan assets 49,700 Benefi ts paid to retirees 33,400 Instructions Using the preceding data, compute pension expense for the year 2017. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2017 and the year-end balances in the related pension accounts.

For 2017, Sampsell Inc. computed its annual postretirement expense as 240,900.Sampsellโ€ฒscontributiontotheplanduring2017was180,000. Prepare Sampsellโ€™s 2017 entry to record postretirement expense, assuming Sampsell has no OCI amounts.

Many business organizations have been concerned with providing for the retirement of employees since the late 1800s. Increase in this concern resulted in the establishment of private pension plans in most large companies and in many medium- and small-sized ones. The substantial growth of these plans, both in numbers of employees covered and in amounts of retirement benefits, has increased the significance of pension costs in relation to the financial position, results of operations, and cash flows of many companies. In examining the costs of pension plans, a CPA encounters certain terms. The components of pension costs that the terms represent must be dealt with appropriately if generally accepted accounting principles are to be reflected in the financial statements of entities with pension plans.

Instructions

(a) Define a private pension plan. How does a contributory pension plan differ from a noncontributory plan?

(b) Differentiate between โ€œaccounting for the employerโ€ and โ€œaccounting for the pension fund.โ€

(c) Explain the terms โ€œfundedโ€ and โ€œpension liabilityโ€ as they relate to: (1) The pension fund. (2) The employer.

(d) (1) Discuss the theoretical justification for accrual recognition of pension costs. (2) Discuss the relative objectivity of the measurement process of accrual versus cash (pay-as-you-go) accounting for annual pension costs.

(e) Distinguish among the following as they relate to pension plans. (1) Service cost. (2) Prior service costs. (3) Vested benefits.

Erickson Company sponsors a defined benefit pension plan. The corporationโ€™s actuary provides the following information about the plan. January 1, December 31, 2017 2017 Vested benefit obligation 1,5001,900 Accumulated benefit obligation 1,900 2,730 Projected benefit obligation 2,500 3,300 Plan assets (fair value) 1,700 2,620 Settlement rate and expected rate of return 10% Pension asset/liability 800 ? Service cost for the year 2017 400 Contributions (funding in 2017) 700 Benefits paid in 2017 200 Instructions (a) Compute the actual return on the plan assets in 2017. (b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.) (c) Compute the amount of net gain or loss amortization for 2017 (corridor approach). (d) Compute pension expense for 2017.

The following defined pension data of Rydell Corp. apply to the year 2017. Projected benefit obligation, 1/1/17 (before amendment) $560,000 Plan assets, 1/1/17 546,200 Pension liability 13,800 On January 1, 2017, Rydell Corp., through plan amendment, grants prior service benefi ts having a present value of 120,000 Settlement rate 9% Service cost 58,000 Contributions (funding) 65,000 Actual (expected) return on plan assets 52,280 Benefits paid to retirees 40,000 Prior service cost amortization for 2017 17,000 Instructions For 2017, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

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