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Chapter 20: E20-3 (page 1163)

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

$700,000×10%

$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 items appear on Brueggen Company’s financial statements. 1. Under the caption Assets: Pension asset/liability. 2. Under the caption Liabilities: Pension asset/liability. 3. Under the caption Stockholders’ Equity: Prior service cost as a component of Accumulated Other Comprehensive Income. 4. On the income statement: Pension expense. Instructions Explain the significance of each of the items above on corporate financial statements. (Note: All items set forth above are not necessarily to be found on the statements of a single company.)

Kenseth Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets. Projected Plan Benefit Assets Obligation Value 2016 \(2,000,000 \)1,900,000 2017 2,400,000 2,500,000 2018 2,950,000 2,600,000 2019 3,600,000 3,000,000 The average remaining service life per employee in 2016 and 2017 is 10 years and in 2018 and 2019 is 12 years. The net gain or loss that occurred during each year is as follows: 2016, \(280,000 loss; 2017, \)90,000 loss; 2018, \(11,000 loss; and 2019, \)25,000 gain. (In working the solution, the gains and losses must be aggregated to arrive at year-end balances.) Instructions Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.

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.)

(a) Prepare a schedule, based on the average remaining life per employee, showing the prior service cost that would be amortized as a component of pension expense for 2017, 2018, and 2019.

(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

At January 1, 2017, Hennein Company had plan assets of \(280,000 and a projected benefit obligation of the same amount. During 2017, service cost was \)27,500, the settlement rate was 10%, actual and expected return on plan assets were \(25,000, contributions were \)20,000, and benefits paid were $17,500. Prepare a pension worksheet for Hennein Company for 2017.

The following information is available for the pension plan of Radcliffe Company for the year 2017. Actual and expected return on plan assets $ 15,000 Benefits paid to retirees 40,000 Contributions (funding) 90,000 Interest/discount rate 10% Prior service cost amortization 8,000 Projected benefit obligation, January 1, 2017 500,000 Service cost 60,000 Instructions (a) Compute pension expense for the year 2017. (b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2017.
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