On January 1, 2020, Blue Company has the following defined benefit pension plan balances.Projected benefit obligation $4,506,000Fair value of plan assets 4,220,000The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends its pension agreement so that prior service costs of $508,000 are created. Other data related to the pension plan are as follows. 2020 2021Service cost $152,000 $179,000 Prior service cost amortization 0 91,000 Contributions (funding) to the plan 237,000 281,000 Benefits paid 202,000 284,000 Actual return on plan assets 253,200 262,000 Expected rate of return on assets 6% 8% (b)For 2021, prepare the journal entry to record pension-related amounts. (Credit account titles are automatically indented whenamount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)Account Titles and ExplanationDebitCredit General Journal EntriesAnnual Pension ExpenseMemo RecordPension Asset/ Liability(286.000)Projected Benefit Obligation(4,506,000)(152,000)(450,600)ItemsCashOCI - Prior Service CostOCI - Gain/LossPlan AssetsBalance, Jan. 1(a) Service cost(b) Interest cost(c) Actual return(d) Contributions(e) BenefitsJournal entry, 12/31Accum OCI, 12/31Balance, Dec. 31(f) Additional PSCJan. 1(g) Service cost(h) Interest cost(i) Actual return(i) Unexpected loss(k) Amortization of PSC(1) Contributions(m) BenefitsJournal entry, 12/31Accum OCI, 12/31Balance, Dec. 31Interest Cost = $4,506,000*10% Settlement rate = $450,600Interest cost = $5,414,600 10% settlement rate = $541,460Unexpected loss = ($4,508,200*8% expected return on assets) - $262,000 actual return on plan assets $98,6564,220,000152,000450,600(253,200)253.200237,000(202,000)-237,000202,000349,400-237,000(112.400)(398,400)(4,906,600)(508,000)(5,414,600)(179,000)(541,460)4,508,200508.000179,000541,460(262,000)(98,656)91,000262,00098,656(91,000)-281,000281,000284,000(284,000)450,804-281.000417.00098,656(685.460)417,00098.656(1,083,860)(5,851,060)4,767,200

Journal entry refers to recording or posting of the transactions of the business into the books of…

Answered: 152,000 450,600 (253,200) -237,000 2/31…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, 2020, Blue Company has the following defined benefit pension plan balances.

Projected benefit obligation		$4,506,000
Fair value of plan assets		4,220,000

The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends its pension agreement so that prior service costs of $508,000 are created. Other data related to the pension plan are as follows.

	2020		2021
Service cost	$152,000			$179,000
Prior service cost amortization	0			91,000
Contributions (funding) to the plan	237,000			281,000
Benefits paid	202,000			284,000
Actual return on plan assets	253,200			262,000
Expected rate of return on assets	6	%		8	%

(b)
For 2021, prepare the journal entry to record pension-related amounts. (Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Account Titles and Explanation
Debit
Credit

General Journal Entries
Annual Pension Expense
Memo Record
Pension Asset/ Liability
(286.000)
Projected Benefit Obligation
(4,506,000)
(152,000)
(450,600)
Items
Cash
OCI - Prior Service Cost
OCI - Gain/Loss
Plan Assets
Balance, Jan. 1
(a) Service cost
(b) Interest cost
(c) Actual return
(d) Contributions
(e) Benefits
Journal entry, 12/31
Accum OCI, 12/31
Balance, Dec. 31
(f) Additional PSC
Jan. 1
(g) Service cost
(h) Interest cost
(i) Actual return
(i) Unexpected loss
(k) Amortization of PSC
(1) Contributions
(m) Benefits
Journal entry, 12/31
Accum OCI, 12/31
Balance, Dec. 31
Interest Cost = $4,506,000*10% Settlement rate = $450,600
Interest cost = $5,414,600 10% settlement rate = $541,460
Unexpected loss = ($4,508,200*8% expected return on assets) - $262,000 actual return on plan assets $98,656
4,220,000
152,000
450,600
(253,200)
253.200
237,000
(202,000)
-237,000
202,000
349,400
-237,000
(112.400)
(398,400)
(4,906,600)
(508,000)
(5,414,600)
(179,000)
(541,460)
4,508,200
508.000
179,000
541,460
(262,000)
(98,656)
91,000
262,000
98,656
(91,000)
-281,000
281,000
284,000
(284,000)
450,804
-281.000
417.000
98,656
(685.460)
417,000
98.656
(1,083,860)
(5,851,060)
4,767,200

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