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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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On December 31, 2019, Palmer Company determined that the 2019 service cost on its defined benefit pension plan was $120, 000. At the beginning of 2019, rainier had pension plan assets of $520,000 and a projected benefit obligation of $600, 000. Its discount rate (and expected long-term rate of return on plan assets) for 2019 was 10%. There are no other components of Palmer’s pension expense; the company had an accrued/prepaid pension cost liability at the end of 2018.

Required:

  1. 1. Compute the amount of Palmer’s pension expense for 2019.
  2. 2. Prepare the journal entry to record Palmer’s 2019 pension expense if it funds the pension plan in the amount of (a) $128,000 and (b) $120,000.

1.

To determine

Calculate the amount of pension expense of Company P 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 amount of pension expense of Company P for 2019:

ParticularsAmounts in ($)
Service cost$120,000
Add: Interest cost (1)$60,000
Less: Expected return on plan assets (2)$52,000
Pension expense for 2019$128,000

Table (1)

Working note (1):

Calculate the interest cost...

2.

To determine

Prepare the necessary journal entries of Company P for 2019, if company P funds the pension plan in the amount of (a) $128,000, (b) 120,000.

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