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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 19, Problem 7P
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Intermediate Accounting: Reporting...

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

Solutions

Chapter
Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 22GI
Problem 23GI
Problem 1MC
Problem 2MC
Problem 3MC
Problem 4MC
Problem 5MC
Problem 6MC
Problem 7MC
Problem 8MC
Problem 9MC
Problem 10MC
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 12P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 9C
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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In Fisk Company’s negotiations with its employees’ union on January 1, 2019, the company agreed to an amendment that increased the employee benefits based tin services rendered in prior periods. This resulted in an $80,000 prior service cost that increased the projected benefit obligation of the company. Hue to financial constraints, Fisk decided not to fund the total increase in its pension obligation at that time.

Prior to 2019, it had been Fisk’s policy to fund only some of its pension expense each year so that the fair value of the plan assets at the end of the year was less than the year-end projected benefit obligation. As a result, Fisk reported an accrued/prepaid pension cost liability of $40,000 on its December 31, 2018, balance sheet.

Fisk appropriately amortized the prior service cost over a 10-year service life as a component of pension expense in 2019 and 2020. The resulting pension and other information for 2019 and 2020 are as follows:

Chapter 19, Problem 7P, In Fisk Companys negotiations with its employees union on January 1, 2019, the company agreed to an

Required:

  1. 1. Prepare all the journal entries related to Fisk’s pension plan for 2019.
  2. 2. List the amounts of any accounts related to Fisk’s pension plan to be reported on the company’s December 31, 2019, balance sheet. Indicate in what sections they would be reported.
  3. 3. Prepare all the journal entries related to Fisk’s pension plan for 2020.
  4. 4. List the amounts of any accounts related to Fisk’s pension plan to be reported on the company’s December 31, 2020, balance sheet. Indicate in what sections they would be reported.

1.

To determine

Prepare necessary journal entries of Company F 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.

Prepare journal entry to record the beginning liability for prior service cost for 2019:

DateAccounts Title and ExplanationPost Ref.Debit ($)Credit ($)
January 1, 2019Other comprehensive income: Prior service cost 80,000 
 Accrued/prepaid pension cost  80,000
 (To record the beginning liability for prior service cost for 2019)   

Table (1)

  • Other comprehensive income: Prior service cost is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the other comprehensive income: Prior service cost account with $80,000.
  • Accrued/prepaid pension cost is a liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $80,000.

Prepare journal entry to record the pension expense for 2019:

In this case, Company F has underfunded the pension contribution by $12,000($137,000−$125,000), hence credit the accrued/prepaid pension cost account by $12,000.

DateAccounts Title and ExplanationPost Ref.Debit ($)Credit ($)
December 31,2019Pension expense 137,000 
 Cash  125,000
 Accrued/prepaid pension cost  12,000
 (To record the underfunded pension expense of $12,000)   

Table (2)

  • Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $668,214.
  • Cash is an asset account and it is decreased. Therefore, credit the cash account with $660,000.
  • Accrued/prepaid pension cost is liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $8,214

2.

To determine

List the amounts that are to be reported on the balance sheet of company F as of December 31, 2019 and also indicate the sections under which it would be reported.

3.

To determine

Prepare necessary journal entries of Company F for 2020.

4.

To determine

List the amounts that are to be reported on the balance sheet of company F as of December 31, 2020 and also indicate the sections under which it would be reported.

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Ch-19 P-11GICh-19 P-12GICh-19 P-13GICh-19 P-14GICh-19 P-15GICh-19 P-16GICh-19 P-17GICh-19 P-18GICh-19 P-19GICh-19 P-20GICh-19 P-21GICh-19 P-22GICh-19 P-23GICh-19 P-1MCCh-19 P-2MCCh-19 P-3MCCh-19 P-4MCCh-19 P-5MCCh-19 P-6MCCh-19 P-7MCCh-19 P-8MCCh-19 P-9MCCh-19 P-10MCCh-19 P-1RECh-19 P-2RECh-19 P-3RECh-19 P-4RECh-19 P-5RECh-19 P-6RECh-19 P-7RECh-19 P-8RECh-19 P-9RECh-19 P-10RECh-19 P-11RECh-19 P-1ECh-19 P-2ECh-19 P-3ECh-19 P-4ECh-19 P-5ECh-19 P-6ECh-19 P-7ECh-19 P-8ECh-19 P-9ECh-19 P-10ECh-19 P-11ECh-19 P-12ECh-19 P-13ECh-19 P-14ECh-19 P-15ECh-19 P-16ECh-19 P-1PCh-19 P-2PCh-19 P-3PCh-19 P-4PCh-19 P-5PCh-19 P-6PCh-19 P-7PCh-19 P-8PCh-19 P-9PCh-19 P-10PCh-19 P-11PCh-19 P-12PCh-19 P-1CCh-19 P-2CCh-19 P-3CCh-19 P-4CCh-19 P-5CCh-19 P-6CCh-19 P-7CCh-19 P-9C

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