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Concept explainers
1.
Pension expense: Pension expense is an expense to the employer paid as compensation after the completion of services performed by the employees.
Pension expense includes the following components:
- Service cost
- Interest cost
- Expected return on plan assets
- Amortization of prior service cost
- Amortization of net loss or net gain
To Compute: The amount of actual return on plan assets.
1.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Calculate the amount of actual return.
Therefore, the amount of actual returns is$216,000.
2.
To Compute: The loss or gain on plan assets.
2.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Compute the loss or gain on plan assets.
Working Note:
Compute the expected returns.
Therefore, the loss on plan assets is$24,000.
3.
To Compute: The Service Cost.
3.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Compute the Service Cost.
Working Note:
Compute the interest cost.
Therefore, the service cost is$310,000.
4.
To Compute: The pension expense.
4.
![Check Mark](/static/check-mark.png)
Explanation of Solution
The following table shows pension expense.
Particulars | Amount ($) |
Service Cost | $310,000 (4) |
Interest cost | 161,000 (5) |
Return on plan assets | (240,000) (3) |
Amortization of Prior Service Cost - AOCI | 25,000 (6) |
Amortization of net gain | 6,000 (7) |
Pension Expense | $250,000 |
Table (1)
Working Note:
Compute the amount of Amortization of Prior Service Cost – AOCI:
Compute the Amortization of Net Gain –AOCI.
Amortization of Net Gain –AOCI: | |
Beginning Balance | $330,000 |
Less: | |
Ending Balance | (300,000) |
Loss on Plan Assets | (24,000) |
Net Gain – AOCI Amortization | $6,000 |
(7)
Table (2)
5.
To Compute: The average remaining service life of active employees.
5.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Compute the average service period.
Working Note:
Calculate the amount to be amortized.
Average Remaining Service Life of Active Employees: | Amount ($) |
Net Gain, Beginning | 330,000 |
10% of $2,400,000 | 240,000 |
Amount to be Amortized | 90,000 |
(8)
Table (3)
Therefore, the average remaining service life of active employees is15 years.
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Chapter 17 Solutions
INTERMEDIATE ACCTG W/CONNECT HARDCOVER
- Question 21 Sage Company provides the following selected information related to its defined benefit pension plan for 2020. Pension asset/liability (January 1) $25,600 Cr. Accumulated benefit obligation (December 31) 400,600 Actual and expected return on plan assets 10,400 Contributions (funding) in 2020 148,800 Fair value of plan assets (December 31) 796,000 Settlement rate 10 % Projected benefit obligation (January 1) 698,500 Service cost 79,600 (b) New attempt is in progress. Some of the new entries may impact the last attempt grading. Your answer is partially correct. Indicate the pension-related amounts that would be reported in the company’s income statement and balance sheet for 2020. Sage CompanyIncome Statement (Partial)…arrow_forward4) Exercise 17-16 (Static) Determine and record pension expense and gains and losses; funding and retiree benefits [LO17-6, 17-7] Actuary and trustee reports indicate the following changes in the PBO and plan assets of Douglas-Roberts Industries during 2021: Prior service cost at Jan. 1, 2021, from plan amendment at the beginning of 2018 (amortization: $4 million per year) $ 28 million Net loss—AOCI at Jan. 1, 2021 (previous losses exceeded previous gains) $ 80 million Average remaining service life of the active employee group 10 years Actuary's discount rate 7 % ($ in millions) Plan PBO Assets Beginning of 2021 $ 600 Beginning of 2021 $ 400 Service cost 80 Return on plan assets, 8% (10% expected) 32 Interest cost, 7% 42 Loss (gain) on PBO (14 ) Cash contributions 90 Less: Retiree benefits (38 ) Less: Retiree benefits (38 ) End of 2021 $ 670…arrow_forward6. New Corporation amends its pension plan on 1/1/20. The following information is available: 1/1/20 before amendment 1/1/20 after amendment Accumulated benefit obligation P 950,000 P1,425,000 Projected benefit obligation 1,300,000 1,900,000 The past service cost as a result of this amendment is Group of answer choices P475,000 P600,000 P125,000 P950,000arrow_forward
- Question 20 ## Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,520 $1,930 Accumulated benefit obligation 1,930 2,700 Projected benefit obligation 2,510 3,360 Plan assets (fair value) 1,730 2,670 Settlement rate and expected rate of return 10% Pension asset/liability 780 ? Service cost for the year 2020 400 Contributions (funding in 2020) 690 Benefits paid in 2020 200 (a3) Indicate the pension amounts reported in the balance sheet. Bonita Company’sBalance Sheet (Partial) $…arrow_forwardQuestion 20 Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,520 $1,930 Accumulated benefit obligation 1,930 2,700 Projected benefit obligation 2,510 3,360 Plan assets (fair value) 1,730 2,670 Settlement rate and expected rate of return 10% Pension asset/liability 780 ? Service cost for the year 2020 400 Contributions (funding in 2020) 690 Benefits paid in 2020 200 (a2) Partially correct answer icon Your answer is partially correct. Prepare the journal entries at December 31, 2020, to record pension expense and related pension transactions. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)…arrow_forwardQuestion 20 Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,520 $1,930 Accumulated benefit obligation 1,930 2,700 Projected benefit obligation 2,510 3,360 Plan assets (fair value) 1,730 2,670 Settlement rate and expected rate of return 10% Pension asset/liability 780 ? Service cost for the year 2020 400 Contributions (funding in 2020) 690 Benefits paid in 2020 200 (a2) Prepare the journal entries at December 31, 2020, to record pension expense and related pension transactions. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020…arrow_forward
- Question 20### Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,520 $1,930 Accumulated benefit obligation 1,930 2,700 Projected benefit obligation 2,510 3,360 Plan assets (fair value) 1,730 2,670 Settlement rate and expected rate of return 10% Pension asset/liability 780 ? Service cost for the year 2020 400 Contributions (funding in 2020) 690 Benefits paid in 2020 200 (a3) New attempt is in progress. Some of the new entries may impact the last attempt grading. Your answer is partially correct. Indicate the pension amounts reported in the balance sheet. Bonita Company’sBalance Sheet (Partial)…arrow_forward3 continue b... The following information is available for the pension plan of Vaughn Company for the year 2020. Actual and expected return on plan assets $ 14,700 Benefits paid to retirees 40,800 Contributions (funding) 81,100 Interest/discount rate 10 % Prior service cost amortization 7,600 Projected benefit obligation, January 1, 2020 458,000 Service cost 63,900 Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount…arrow_forwardQuestion 17 Swifty Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2020 in which no benefits were paid. 1. The actuarial present value of future benefits earned by employees for services rendered in 2020 amounted to $55,500. 2. The company’s funding policy requires a contribution to the pension trustee amounting to $144,729 for 2020. 3. As of January 1, 2020, the company had a projected benefit obligation of $908,100, an accumulated benefit obligation of $802,100, and a debit balance of $400,100 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $601,200 at the beginning of the year. The actual and expected return on plan assets was $54,100. The settlement rate was 9%. No gains or losses occurred in 2020 and no benefits were paid. 4. Amortization of prior service cost was $50,500 in 2020. Amortization of net gain or loss was not required in 2020. (c)…arrow_forward
- Testbank Exercise 112 The following information is for the pension plan for the employees of Oriole, Inc. 12/31/20 12/31/21 Accumulated benefit obligation $2,740,000 $3,700,000 Projected benefit obligation 3,040,000 3,940,000 Fair value of plan assets 3,070,000 3,570,000 AOCI - Net (gain) or loss (365,000) (420,000) Settlement rate 7% 7% Expected rate of return 6% 5% Oriole estimates that the average remaining service life is 15 years. Oriole's contribution was $472,000 in 2021 and benefits paid were $230,000. Calculate the interest cost for 2021. Interest cost for 2021 $ LINK TO TEXT Calculate the actual return on plan assets in 2021. Actual return on plan assets for 2021 $ LINK TO TEXT Calculate the unexpected gain…arrow_forwardQuestion 16## Buffalo Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2020, the following balances relate to this plan. Plan assets $463,200 Projected benefit obligation 578,200 Pension asset/liability 115,000 Accumulated OCI (PSC) 100,100 Dr. As a result of the operation of the plan during 2020, the following additional data are provided by the actuary. Service cost $86,600 Settlement rate, 8% Actual return on plan assets 53,200 Amortization of prior service cost 18,000 Expected return on plan assets 50,200 Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions 79,600 Contributions 99,600 Benefits paid retirees 85,100 Also please help me answer part B. (b) Prepare the journal entry for pension expense for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is…arrow_forwardQuestion 16 Buffalo Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2020, the following balances relate to this plan. Plan assets $463,200 Projected benefit obligation 578,200 Pension asset/liability 115,000 Accumulated OCI (PSC) 100,100 Dr. As a result of the operation of the plan during 2020, the following additional data are provided by the actuary. Service cost $86,600 Settlement rate, 8% Actual return on plan assets 53,200 Amortization of prior service cost 18,000 Expected return on plan assets 50,200 Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions 79,600 Contributions 99,600 Benefits paid retirees 85,100 Prepare the journal entry for pension expense for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and…arrow_forward
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