BuyFindarrow_forward

Intermediate Accounting: Reporting...

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

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
103 views

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?

1.

To determine

Calculate the average remaining service life of Company J for 2019 and prepare a schedule to calculate the amortization of the prior service cost of Company J for 2019.

Explanation

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the average remaining service life of Company J for 2019 as follows:

Average remaining service year = Service years renderedNumber of employees=550 years (1)50 employees=11 years

Working note (1):

Calculate the total service years rendered.

Employee numbersExpected years of future serviceService years rendered
1-5210
6-10420
11-15630
16-20840
21-251050
26-301260
31-351470
36-401680
41-461890
46-5020100
Total service years rendered550

Table (1)

2.

To determine

Prepare a schedule to calculate the net gain or loss component of pension expense for Company J during 2019.

3.

To determine

Prepare a schedule to calculate the pension expense of Company J for 2019.

4.

To determine

Prepare necessary journal entries of Company J for 2019.

5.

To determine

Calculate the total accrued/prepaid pension cost of Company J at the end of the 2019, and explain whether it is considered as an asset or a liability.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is the primary purpose of a stock split?

Financial & Managerial Accounting

How can report writers decide what type of graphic to use in a report?

Essentials of Business Communication (MindTap Course List)

What is structured systems analysis?

Accounting Information Systems

What reinvestment rate assumptions are built into the NPV, IRR, and MIRR methods? Give an explanation for your ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)