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.
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.
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.
Explanation of Solution
Compute the Service Cost.
Working Note:
Compute the interest cost.
Therefore, the service cost is$310,000.
4.
To Compute: The pension expense.
4.
Explanation of Solution
The following table shows pension expense.
Particulars | Amount ($) |
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 | $6,000 |
(7)
Table (2)
5.
To Compute: The average remaining service life of active employees.
5.
Explanation of Solution
Compute the average service period.
Working Note:
Calculate the amount to be amortized.
Average Remaining Service Life of Active Employees: | Amount ($) |
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 ACCOUNTING LL+CONNECT >BI<
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