Jay Company has had a defined benefit pension plan for several years. At the beginning of 2019, Jay amended the plan; this amendment provided for increased benefits to employees based on services rendered in prior periods. The prior service cost related to this amendment totaled $88,000. As a result, the projected benefit obligation increased. Jay decided not to fund the increased obligation at the time of the amendment, but rather to increase its periodic year-end contributions to the pension plan. The following information for 2019 has been provided by Jay’s actuary and funding agency and obtained from a review of its accounting records: Projected benefit obligation (12/31) $808,090 Service cost 183,000 Discount rate 9% Cumulative net loss (1/1) 64,500 Company contribution to pension plan (12/31) 200,000 Projected benefit obligation (1/1)* 513,000 Plan assets, fair value (12/31) 698,000 Accrued pension cost (liability) (1/1) 33,000* Expected (and actual) return on plan assets 48,000 Plan assets, fair value (1/1) 480,000 Retirement benefits paid 30,000 *Before the increase of $88,000 due to the prior service cost from the amendment Jay decided to amortize the prior service cost and any excess cumulative net loss by the straight-line method over the average remaining service life of the participating employees. It has developed the following schedule concerning these 50 employees: Employee Expected Years Employee Expected Years Numbers of Future Service* Numbers of Future Service* 1–5 2 26–30 12 6–10 4 31–35 14 11–15 6 36–40 16 16–20 8 41–45 18 21–25 10 46–50 20 *Per employee Required: 1. Compute the average remaining service life and prepare a schedule to determine the amortization of the prior service cost of Jay for 2019. 2. Prepare a schedule to compute the net gain or loss component of pension expense for 2019. 3. Prepare a schedule to compute the pension expense for 2019. 4. Prepare all the journal entries related to Jay’s pension plan for 2019. 5. What is Jay’s total accrued/prepaid pension cost at the end of 2019? Is it an asset or liability?

Jay Company has had a defined benefit pension plan for several years. At the beginning of 2019, Jay amended the plan; this amendment provided for increased benefits to employees based on services rendered in prior periods. The prior service cost related to this amendment totaled $88,000. As a result, the projected benefit obligation increased. Jay decided not to fund the increased obligation at the time of the amendment, but rather to increase its periodic year-end contributions to the pension plan. The following information for 2019 has been provided by Jay’s actuary and funding agency and obtained from a review of its accounting records: Projected benefit obligation (12/31) $808,090 Service cost 183,000 Discount rate 9% Cumulative net loss (1/1) 64,500 Company contribution to pension plan (12/31) 200,000 Projected benefit obligation (1/1)* 513,000 Plan assets, fair value (12/31) 698,000 Accrued pension cost (liability) (1/1) 33,000* Expected (and actual) return on plan assets 48,000 Plan assets, fair value (1/1) 480,000 Retirement benefits paid 30,000 Before the increase of $88,000 due to the prior service cost from the amendment Jay decided to amortize the prior service cost and any excess cumulative net loss by the straight-line method over the average remaining service life of the participating employees. It has developed the following schedule concerning these 50 employees: Employee Expected Years Employee Expected Years Numbers of Future Service Numbers of Future Service* 1–5 2 26–30 12 6–10 4 31–35 14 11–15 6 36–40 16 16–20 8 41–45 18 21–25 10 46–50 20 *Per employee Required: 1. Compute the average remaining service life and prepare a schedule to determine the amortization of the prior service cost of Jay for 2019. 2. Prepare a schedule to compute the net gain or loss component of pension expense for 2019. 3. Prepare a schedule to compute the pension expense for 2019. 4. Prepare all the journal entries related to Jay’s pension plan for 2019. 5. What is Jay’s total accrued/prepaid pension cost at the end of 2019? Is it an asset or liability?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter19: Accounting For Post Retirement Benefits

Section: Chapter Questions

Problem 10P

See similar textbooks

Related questions

Question

The following information for 2019 has been provided by Jay’s actuary and funding agency and obtained from a review of its accounting records:

Projected benefit obligation (12/31)	$808,090
Service cost	183,000
Discount rate	9%
Cumulative net loss (1/1)	64,500
Company contribution to pension plan (12/31)	200,000
Projected benefit obligation (1/1)*	513,000
Plan assets, fair value (12/31)	698,000
Accrued pension cost (liability) (1/1)	33,000*
Expected (and actual) return on plan assets	48,000
Plan assets, fair value (1/1)	480,000
Retirement benefits paid	30,000

*Before the increase of $88,000 due to the prior service cost from the amendment

Jay decided to amortize the prior service cost and any excess cumulative net loss by the straight-line method over the average remaining service life of the participating employees. It has developed the following schedule concerning these 50 employees:

Employee	Expected Years	Employee	Expected Years
Numbers	of Future Service*	Numbers	of Future Service*
1–5	2	26–30	12
6–10	4	31–35	14
11–15	6	36–40	16
16–20	8	41–45	18
21–25	10	46–50	20

*Per employee

Required:

1.	Compute the average remaining service life and prepare a schedule to determine the amortization of the prior service cost of Jay for 2019.
2.	Prepare a schedule to compute the net gain or loss component of pension expense for 2019.
3.	Prepare a schedule to compute the pension expense for 2019.
4.	Prepare all the journal entries related to Jay’s pension plan for 2019.
5.	What is Jay’s total accrued/prepaid pension cost at the end of 2019? Is it an asset or liability?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Recommended textbooks for you

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning