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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: 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: 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?

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 19, Problem 10P
Textbook Problem

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:

Chapter 19, Problem 10P, Jay Company has had a defined benefit pension plan for several years. At the beginning of 2019, Jay , example  1

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:

Chapter 19, Problem 10P, Jay Company has had a defined benefit pension plan for several years. At the beginning of 2019, Jay , example  2

Required:

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

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Chapter 19 Solutions

Intermediate Accounting: Reporting And Analysis
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