Question

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.

Short answer

A pension account is the type of account maintained by an individual which is used after retirement. Periodically a certain amount istransferred to this accountto benefit the person after retirement.

Step-by-step solution

Given the following amounts:

Particulars	Amount
Projected benefit obligation on 1/1/17	$560,000
Plan assets on 1/1/17	$546,200
Pension liability	$13,800
Settlement rate	9%
Prior service benefits	$120,000
Service cost	$58,000
Contributions	$65,000
Actual return on plan assets	$52,280
Benefits paid to retirees	$40,000
Prior service cost amortization	$17,000

Computation of Pension worksheet for Rydell Corp for 2017

Rydell Corp
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 Dec 31, 2016			0	$13,800 Cr.		$560,000 Cr.	$546,200 Dr.
Prior Service cost			$120,000 Dr.			$120,000 Cr.
Balance Jan 1, 2017						$680,000 Cr.	$546,200 Dr.
Service cost	$58,000 Dr.					$58,000 Cr.
Interest cost $\left(\mathbf{\$}\mathbf{680}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{9}\mathbf{\%}\right)$	$61,200 Dr.					$61,200 Cr.
Actual return	$52,280 Cr.						$52,280 Dr.
Amortization of PSC	$17,000 Dr.		$17,000 Cr.
Contributions		$65,000 Cr.					$65,0000 Dr.
Benefits						$40,000 Dr.	$40,000 Cr.
Journal entry for 2017	$83,920 Dr.	$65,000 Cr.	$103,000 Dr.	$121,920Cr.
Accumulated OCI Dec 31, 2016			0.
Balance Dec 31, 2017			$103,000 Dr.	$135,720 Cr.		$759,200 Cr.	$623,480 Dr.