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 International Financial Reporting Standards (IFRS) : IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports. Generally Accepted Accounting Principles (GAAP) : These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U. To explain : Whether the change in discount rate from 7% to 6% would cause a loss under GAAP

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Answer 1

Question

Chapter 17, Problem 17.18E

(1)

To determine

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

International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.

Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U.

To explain: Whether the change in discount rate from 7% to 6% would cause a loss under GAAP

(2)

To determine

To journalize: Loss on PBO, under GAAP

(3)

To determine

To journalize: Loss on PBO, under IFRS

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P20.5 (LO4) (Computation of Pension Expense, Journal Entries for 3 Years) Hiatt Toothpaste SA initiates a defined benefit pension plan for its 50 employees on January 1, 2019. The insurance company which administers the pension plan provided the following selected information for the years 2019, 2020, and 2021. For Year Ended December 31, 2019 2020 2021 Plan assets (fair value) €50,000 € 85,000 €180,000 Vested benefit obligation 45,000 165,000 292,000 Defined benefit obligation 60,000 200,000 324,000 Net (gain) loss –0– 78,900 5,800 Employer's funding contribution (made at end of year) 50,000 60,000 105,000 There were no balances as of January 1, 2019, when the plan was initiated. The actual return on plan assets was 10% over the 3-year period, but the discount (interest) rate was 13% in 2019, 11% in 2020, and 8% in 2021. The service cost component of net periodic pension expense amounted to the following: 2019, €60,000; 2020, €85,000; and 2021, €119,000. No…

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rr.17 Clark Industries has a defined benefit pension plan that specifies annual, year-end retirement benefits equal to: 1.3% × Service years × Final year’s salary Stanley Mills was hired by Clark at the beginning of 2005. Mills is expected to retire at the end of 2049 after 45 years of service. His retirement is expected to span 15 years. At the end of 2024, 20 years after being hired, his salary is $96,000. The company’s actuary projects Mills’s salary to be $430,000 at retirement. The actuary’s discount rate is 6%. For all requirements, round final answers to the nearest whole dollars. Do not round intermediate calculations. Use Excel, or a financial calculator. Required: Estimate the amount of Stanley Mills’s annual retirement payments for the 15 retirement years earned as of the end of 2024.

Answer 2

Question

Chapter 17, Problem 17.18E

(1)

To determine

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

International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.

Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U.

To explain: Whether the change in discount rate from 7% to 6% would cause a loss under GAAP

(2)

To determine

To journalize: Loss on PBO, under GAAP

(3)

To determine

To journalize: Loss on PBO, under IFRS

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Answer 3

Question

Chapter 17, Problem 17.18E

(1)

To determine

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

International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.

Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U.

To explain: Whether the change in discount rate from 7% to 6% would cause a loss under GAAP

(2)

To determine

To journalize: Loss on PBO, under GAAP

(3)

To determine

To journalize: Loss on PBO, under IFRS

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Answer 4

Question

Chapter 17, Problem 17.18E

(1)

To determine

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

International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.

Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U.

To explain: Whether the change in discount rate from 7% to 6% would cause a loss under GAAP

(2)

To determine

To journalize: Loss on PBO, under GAAP

(3)

To determine

To journalize: Loss on PBO, under IFRS

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Answer 5

Chapter 17, Problem 17.18E

(1)

To determine

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

International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.

Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U.

To explain: Whether the change in discount rate from 7% to 6% would cause a loss under GAAP

(2)

To determine

To journalize: Loss on PBO, under GAAP

(3)

To determine

To journalize: Loss on PBO, under IFRS

Answer 6

Chapter 17, Problem 17.18E

(1)

To determine

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

International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.

Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U.

To explain: Whether the change in discount rate from 7% to 6% would cause a loss under GAAP

Answer 7

Chapter 17, Problem 17.18E

(1)

To determine

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

International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.

Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles approved Financial Accounting Standards Board (FASB) for the implementation of financial information reporting in the Country U.

To explain: Whether the change in discount rate from 7% to 6% would cause a loss under GAAP

Answer 8

(2)

To determine

To journalize: Loss on PBO, under GAAP

Answer 9

(2)

To determine

To journalize: Loss on PBO, under GAAP

Answer 10

(3)

To determine

To journalize: Loss on PBO, under IFRS

Answer 11

(3)

To determine

To journalize: Loss on PBO, under IFRS

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 17 - Prob. 17.1Q Ch. 17 - Prob. 17.2Q Ch. 17 - Prob. 17.3Q Ch. 17 - What is the vested benefit obligation?Ch. 17 - Prob. 17.5Q Ch. 17 - Prob. 17.6Q Ch. 17 - Name three events that might change the balance of...Ch. 17 - Prob. 17.8Q Ch. 17 - Prob. 17.9Q Ch. 17 - Prob. 17.10Q

Solution Summary: The author explains that pension expense is an expense to the employer paid as compensation after the completion of services performed by the employees.

Concept explainers

To journalize: Loss on PBO, under GAAP

To journalize: Loss on PBO, under IFRS

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Chapter 17 Solutions