Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2020 and 2021. 2020 2021 Projected benefit obligation, January 1 $600,000 Plan assets (fair value and market-related value), January 1 410,000 Pension asset/liability, January 1 190,000 Cr. Prior service cost, January 1 160,000 Service cost 40,000 $ 59,000 Settlement rate 10% 10% Expected rate of return 10% 10% Actual return on plan assets 36,000 61,000 Amortization of prior service cost 70,000 50,000 Annual contributions 97,000 81,000 Benefits paid retirees 31,500 54,000 Increase in projected benefit obligation due to changes in actuarial assumptions 87,000 -0- Accumulated benefit obligation at December 31 721,800 789,000 Average service life of all employees 20 years Vested benefit obligation at December 31 464,000 Instructions Prepare a pension worksheet presenting both years 2020 and 2021 and accompanying computations and amortization of the loss (2021) using the corridor approach. Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. For 2021, indicate the pension amounts reported in the financial statements.
Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2020 and 2021. 2020 2021 Projected benefit obligation, January 1 $600,000 Plan assets (fair value and market-related value), January 1 410,000 Pension asset/liability, January 1 190,000 Cr. Prior service cost, January 1 160,000 Service cost 40,000 $ 59,000 Settlement rate 10% 10% Expected rate of return 10% 10% Actual return on plan assets 36,000 61,000 Amortization of prior service cost 70,000 50,000 Annual contributions 97,000 81,000 Benefits paid retirees 31,500 54,000 Increase in projected benefit obligation due to changes in actuarial assumptions 87,000 -0- Accumulated benefit obligation at December 31 721,800 789,000 Average service life of all employees 20 years Vested benefit obligation at December 31 464,000 Instructions Prepare a pension worksheet presenting both years 2020 and 2021 and accompanying computations and amortization of the loss (2021) using the corridor approach. Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. For 2021, indicate the pension amounts reported in the financial statements.
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 6E
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Question
Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2020 and 2021.
| 2020 | 2021 | |||
| Projected benefit obligation, January 1 | $600,000 | |||
| Plan assets (fair value and market-related value), January 1 | 410,000 | |||
| Pension asset/liability, January 1 | 190,000 | Cr. | ||
| Prior service cost, January 1 | 160,000 | |||
| Service cost | 40,000 | $ 59,000 | ||
| Settlement rate | 10% | 10% | ||
| Expected |
10% | 10% | ||
| Actual return on plan assets | 36,000 | 61,000 | ||
| Amortization of prior service cost | 70,000 | 50,000 | ||
| Annual contributions | 97,000 | 81,000 | ||
| Benefits paid retirees | 31,500 | 54,000 | ||
| Increase in projected benefit obligation due to changes in actuarial assumptions |
87,000 | -0- | ||
| Accumulated benefit obligation at December 31 | 721,800 | 789,000 | ||
| Average service life of all employees | 20 years | |||
| Vested benefit obligation at December 31 | 464,000 |
Instructions
- Prepare a pension worksheet presenting both years 2020 and 2021 and accompanying computations and amortization of the loss (2021) using the corridor approach.
- Prepare the
journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. - For 2021, indicate the pension amounts reported in the financial statements.
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