Answered: Requirements: A) Determine the surplus…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter19: Accounting For Post Retirement Benefits

Section: Chapter Questions

Problem 6E

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Some years ago, Junior Ltd established a defined benefit pension plan for its employees. The company has since introduced a defined contribution plan, which all new staff join when commencing employment with Junior Ltd. Although the defined benefit plan is now closed to new recruits, the fund continues to provide for employees who have been with the company for a long time. The following actuarial report has been received for the defined benefit plan: Present value of the defined benefit obligation 31 December 2017 : 20,000,000 Past service cost : 2,000,000 Net interest : ? Current service cost :800,000 Benefits paid : 2,100,000 Actuarial loss on DBO : 100,000 Present value of the defined benefit obligation 31 December 2018 : 23,000,000 Fair value of plan assets at 31 December 2017 :19,000,000 Return on plan assets : ?Contributions paid to the plan during the year :1,000,000 Benefits paid by the plan during the year : 2,100,000 Fair value of plan assets at 31 December 31, 2018 : 20,130,000 Additional information (a) All contributions received by the plan were paid by Junior Ltd. Employees make no contributions. (b) The interest rate used to measure the present value of the defined benefit obligation was 10% at 31 December 2017 and 31 December 2018. (c) The asset ceiling was nil at 31 December 2017 and 31 December 2018. SHOW ALL WORKINGS Requirements: A) Determine the surplus or deficit of Junior Ltd's defined benefit plan at 31 December 2018. (B) Prepare a pension worksheet for the period ended December 31 2018 (C) Prepare the journal entries to account for the defined benefit pension plan in the books of Junior Ltd for the year ended December 31 2018

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