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Intermediate Accounting: Reporting...
Solutions
Intermediate Accounting: Reporting...
Various pension plan information of Kerem Company for 2019 and 2020 is as follows:
Required:
Next Level Fill in the blanks lettered (a) through (k). All the necessary information is listed. It is not necessary to calculate your answers in alphabetical order.
Calculate the missing amount from (a) through (k) and fill the given blanks.
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 missing amount from (a) through (k) and fill the given blanks as follows:
| Particulars | 2019 | 2020 |
| Service cost | $ 100,000 | $79,000 (i) |
| Interest cost on projected benefit obligation | $ 54,000 | $64,800 (g) |
| Discount rate | 9% | 9% |
| Amortization of prior service cost | $ 4,000 | $ 4,000 |
| Plan assets (fair value), 1/1 | $ 500,000 | $ 615,000 |
| Projected benefit obligation, 1/1 | $600,000 (a) | $ 720,000 |
| Expected long-term rate of return on plant assets | 10% (b) | 11% |
| Amortization of net loss | $800 (d) | $ 700 |
| Accrued pension cost (liability), 12/31 | $105,000 (f) | $95,800 (k) |
| Average service life of employees | 10 years | 10 years |
| Pension expense | $108,800 (e) | $ 110,850 |
| Cumulative net loss, 1/1 | $ 68,000 | $109,000 (j) |
| Expected return on plan assets | $ 50,000 | $67,650 (h) |
| Corridor | $60,000 (c) | $ 72,000 |
Table (1)
Note: Refer working notes for necessary calculations.
Working note (1):
Calculate the missing amount of (d) amortization net loss for 2019, (e) pension expense for 2019, (f) accrued pension cost for 2019, (i) beginning cumulative net loss for 2020, (j) service cost for 2020, and (k) accrued pension cost for 2020.
| Worksheet of Company K for 2019 and 2020 | ||||
| Item | 2019 | 2020 | ||
| Â Amount ($) | Â Amount ($) | |||
| Service cost | Â | 100,000 | (j) | 109,000 |
| Add: Interest cost on projected benefit obligation | Â | 54,000 | 64,800 | |
| Less: Expected return on plan asset | Â | (50,000) | (67,650) | |
| Add: Amortization of prior service cost | Â | 4,000 | 4,000 | |
| Add: Amortization of net loss | Â | 800 | 700 | |
| Pension expense | (e) | 108,800 | 110,850 | |
| Beginning cumulative net loss | Â | 68,000 | (i) | 79,000 |
| Less: Corridor | Â | (60,000) | (72,000) | |
| Excess net loss (A) | Â | 8,000 | 7,000 | |
| Average service life (in years) (B) | Â | 10 | 10 | |
| Amortization of net loss | (d) | 800 | 700 | |
| Ending projected benefit obligation | Â | 720,000 | 857,800 | |
| Less: Fair value of plan asset | Â | (615,000) | (762,000) | |
| Accrued pension cost (liability) | (f) | 105,000 | (k) | 95,800 |
Table (2)
Working note (2):
Calculate (a) the projected benefit obligation for 2019
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