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Chapter 20: Question 20Q (page 1161)

At the end of the current year, Pociek Co. has prior service cost of $9,150,000. Where should the prior service cost be reported on the balance sheet?

Short Answer

Expert verified

The duration of the service length is used to ascertain the defined benefit amount, known as credited service. This service varies for each employee.

Step by step solution

01

Given the information as

The prior service cost of Pociek Co. is $9,150,000.

02

The reporting of the amount:

The prior service cost will be reported under the head of other comprehensive income (PSC) with the amount of $9,150,000 in the balance sheet of Pociek Co.

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Most popular questions from this chapter

Towson Company has experienced tough competition for its talented workforce, leading it to enhance the pension benefits provided to employees. As a result, Towson amended its pension plan on January 1, 2017, and granted past service costs of \(250,000. Current service cost for 2017 is \)52,000. Interest expense is \(18,000, and interest revenue is \)5,000. Actual return on assets in 2017 is \(3,000. What is Towson’s pension expense for 2017? (a) \)65,000. (c) \(317,000. (b) \)302,000. (d) $315,000.

Hollenbeck Foods Inc. sponsors a postretirement medical and dental benefit plan for its employees. The following balances relate to this plan on January 1, 2017. Plan assets \(200,000 Expected postretirement benefit obligation 820,000 Accumulated postretirement benefit obligation 200,000 No prior service costs or OCI balances exist. As a result of the plan’s operation during 2017, the following additional data are provided by the actuary. Service cost is \)70,000 Discount rate is 10% Contributions to plan are \(65,000 Expected return on plan assets is \)10,000 Actual return on plan assets is \(15,000 Benefi ts paid to employees are \)44,000 Average remaining service to full eligibility: 20 years Instructions (a) Using the preceding data, compute the net periodic postretirement benefit cost for 2017 by preparing a worksheet that shows the journal entry for postretirement expense and the year-end balances in the related postretirement benefit memo accounts. (Assume that contributions and benefits are paid at the end of the year.) (b) Prepare any journal entries related to the postretirement plan for 2017 and indicate the postretirement amounts reported in the financial statements for 2017.

What is the meaning of “corridor amortization”?

Differentiate between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.

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.)
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