1.
Pension expense: Pension expense is an expense to the employer paid as compensation after the completion of services performed by the employees.
Pension expense includes the following components:
- Service cost
- Interest cost
- Expected return on plan assets
- Amortization of prior service cost
- Amortization of net loss or net gain
Projected benefit obligation (PBO): This is the estimated present value of future retirement benefits, accumulated based on the future compensation levels.
To Determine: The amount of pension expense for 2018 and 2019.
1.
Explanation of Solution
Compute the pension expense.
Particulars | 2018 | 2019 |
Service Cost | $520 | $570 |
Interest cost | 220 | 256 |
Return on plan assets | (192) | (232.80) |
Amortization of Prior Service Cost | 40 | 40 |
Amortization of net gain | (5) | None |
Pension Expense | $583 | $633.20 |
Table (1)
Working Notes:
Compute the balance of PBO.
Table (2)
Compute the balance of Plan Assets.
Table (3)
Compute the Expected return on Plan Assets.
2018:
2019:
Compute the amortization prior cost.
Compute the Net Gain – AOCI.
2018:
Particulars | Amount in Thousands |
Net Gain – AOCI | $230 |
10% of $1,800 ($1,800 is Greater than $1,600) | (180) |
Amount to be Amortized | $50 |
Divided by Number of Years | ÷ 10 |
Amortization | $5 |
Table (4)
2019:
Particulars | Amount in Thousands |
Net Gain – AOCI at 1 – 1 - 2018 | $230 |
Loss in 2018 (Refer to Note 1) | (12) |
Amortization 2018 | (5) |
Net Gain _AOCI at 1 – 1 - 2019 | $213 |
10% of $2,560 ($2,560 is Greater than $1,940) | (256) |
Amount to be Amortized | None |
Table (5)
Compute the amount of loss.
2.
To Record: The pension expense entry for 2018 and 2019.
2.
Explanation of Solution
Record the following
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Pension Expense | 583 | |||
Plan Assets (Expected Return) | 192 | |||
Amortization of Net Gain– OCI (Current Amortization) | 5 | |||
Projected Benefit Obligation | 740 (5) | |||
Amortization of Prior Service Cost | 40 | |||
(To record the pension expense.) |
Table (6)
Working Note:
Compute the PBO.
Record the following journal entry for 2019:
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Pension Expense | 633.20 | |||
Plan Assets (Expected Return) | 232.80 | |||
Projected Benefit Obligation | 826 (6) | |||
Amortization of Prior Service Cost | 40 | |||
(To record the pension expense.) |
Table (7)
Working Note:
Compute the PBO.
3.
To Record: The gains and losses entry for 2018 and 2019 and new prior service cost.
3.
Explanation of Solution
Record gain or loss entry for 2018.
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Loss – OCI | 12 | |||
Plan Assets | 12 | |||
(To record the Loss.) |
Table (8)
Record prior service cost entry for 2018.
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Prior Service Cost - OCI | 400 | |||
PBO | 400 | |||
(To record the prior service cost.) |
Table (9)
Record gain or loss entry for 2019.
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Loss – OCI | 22.80 (7) | |||
Plan Assets | 22.80 | |||
(To record the loss.) |
Table (10)
Working Note:
Compute the amount of loss.
4.
To Record: The entry for cash contribution to plan assets and benefit payments to retirees for 2018 and 2019.
4.
Explanation of Solution
Record the funding entry for 2018.
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Plan assets | 540 | |||
Cash | 540 | |||
(To record the contributions made.) |
Table (11)
Record the funding entry for 2019.
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Plan assets | 590 | |||
Cash | 590 | |||
(To record the contributions made.) |
Table (12)
Record the payment entry for 2018.
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Projected Benefit Obligation | 380 | |||
Plan Assets | 380 | |||
(To record the contributions made.) |
Table (13)
Record the payment entry for 2019.
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Projected Benefit Obligation | 450 | |||
Plan Assets | 450 | |||
(To record the contributions made.) |
Table (14)
Want to see more full solutions like this?
Chapter 17 Solutions
GEN COMBO INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
- Current Attempt in Progress The actuary for the pension plan of Bridgeport Inc. calculated the following net gains and losses. Incurred during the Year 2020 2021 2022 2023 As of January 1, Other information about the company's pension obligation and plan assets is as follows. 2020 2021 2022 2023 2020 2021 2022 2023 Projected Benefit Obligation Save for Later (Gain) or Loss $298,100 478,900 $ (210,400) (288,600) Year Minimum Amortization of (Gain) Loss $ Bridgeport Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total service-years for all participating employees is 4,800. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2020. The market- related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization. $ Compute the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense…arrow_forwardA partial pension worksheet for Sunland Corporation is shown below. Items Balance, Jan. 1, 2025 (a) Service Cost (b) Interest Cost (c) Actual Return (d) Contributions (e) Benefits Journal Entry for 2025 Balance, Dec. 31, 2025 Annual Pension Expense The service cost for 2025 is ?? General Journal Entries $69000 dr 28000 dr 29000 cr Sunland Corporation Pension Worksheet Cash $69000 cr ?? Pension Asset/ Liability $- ?? Memo Record Projected Benefit Obligation $128000 cr $128000 dr ?? Plan Assets ??arrow_forwardPension Question (30 marks)Sophia Consultants Inc. has had a defined benefit pension plan since January 1, 2018.The following represents beginning balances as at January 1, 2022:Plan Asset $1,155,300; Defined Benefit Obligation $1,275,000; Net Pension Liability $119,700Additional Information is as follows for 2022:Current Service cost is $186,000 for 2022Company Funding/Contribution is $200,000 for 2022. Funding is made on December 31 of each year.Actual return on assets is $55,900 for 2022.There is an increase in obligation for $29,000 due to changes in Actuarial assumptions at Dec 31, 2022.There are payments made equal to $80,000 per year to retired employees in 2022 (payments to retireesare made at the end of the year on December 31).Past service cost of $85,900 from plan amendment dated December 31, 2022: liability is increasedbecause benefits were increased on a retroactive basis.For 2022, the assumed interest rate is 6%. Assume IFRS.Required:1. Determine Defined Benefit…arrow_forward
- Information regarding the defined benefit pension plan of Neo Products included the following for 2024 ($ in millions):Plan assets, January 1$ 210Plan assets, December 31315 Return on plan assets30Employer contributions to the pension plan (end of year)126What amount of retiree benefits was paid at the end of 2024? Multiple Choice$51 million$21 million$72 million$105 millionarrow_forwardThe following information isavailable for the pension plan of Radcliffe Company for the year 2019.Interest revenue on plan assets $ 15,000Benefits paid to retirees 40,000Contributions (funding) 90,000Discount (interest) rate 10%Defined benefit obligation, January 1, 2019 500,000Service cost 60,000Instructionsa. Compute pension expense for the year 2019.b. Prepare the journal entry to record pension expense and the employer'scontribution to the pension plan in 2019.arrow_forwardPension Question Sophia Consultants Inc. has had a defined benefit pension plan since January 1, 2018. The following represents beginning balances as at January 1, 2022: Plan Asset $1,155,300; Defined Benefit Obligation $1,275,000; Net Pension Liability $119,700 Additional Information is as follows for 2022: Current Service cost is $186,000 for 2022 Company Funding/Contribution is $200,000 for 2022. Funding is made on December 31 of each year. Actual return on assets is $55,900 for 2022. There is an increase in obligation for $29,000 due to changes in Actuarial assumptions at Dec 31, 2022. There are payments made equal to $80,000 per year to retired employees in 2022 (payments to retirees are made at the end of the year on December 31). Past service cost of $85,900 from plan amendment dated December 31, 2022: liability is increased because benefits were increased on a retroactive basis. For 2022, the assumed interest rate is 6%. Assume IFRS. Required: 1. Determine Defined Benefit…arrow_forward
- BANTRY Company reported the following in its 2021 annual report with respect to retirement benefit obligations (i.e., Pension Obligations) Interest Revenue on Plan Assets Service Cost Interest on Defined Benefit Obligations QUESTION ONE: MCQ 3 What is BANTRY Company's Pension Expense for 2021? A. $100,000 B. $700,000 C. $300,000 D. $500,000 E. None of these answers $600,000 $300,000 $400,000 THE FOLLOWING INFORMATION RELATES TO MCQ 4 QUESTION ONE: MCQ 4 Suppose KINSALE Company had Pension Plan Assets on 1 January 2021 of $4,000,000 and Pension Plan Assets on 31 December 2021 of $6,000,000. Assume that the 2021 Contributions to the Pension Fund were $3,400,000 while the Benefits Paid from the Pension Fund were $4,600,000. What was KINSALE Company's return on Plan Assets for 2021? A. $2,700,000 B. $2,900,000 C. $3,100,000 D. $3,200,000 E. None of these answersarrow_forwardExercise 17-10 (Algo) Determine pension expense [LO17-6, 17-7] Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2021, Abbott and Abbott received the following information: Projected Benefit Obligation Balance, January 1 Service cost ($ in millions) $125 22 Interest cost 15 Benefits paid (8) Balance, December 31 $154 Plan Assets Balance, January 1 Actual return on plan assets $75 10 Contributions 2021 22 Benefits paid |(8) Balance, December 31 $99 The expected long-term rate of return on plan assets was 12%. There was no prior service cost and a negligible net loss-AOCI on January 1, 2021. Required: 1. Determine Abbott and Abbott's pension expense for 2021. 2 Prenare the iournal entries to record Abbott ancd Abbott's a) pension expense (6) fundina and (c) pavment for 2021arrow_forwardAnalyzing and Interpreting Pension Disclosures E.I. Du Pont De Nemours and Co.'s 10-K report has the following disclosures related to its retirement plans ($ millions). Obligations and Funded Status December 31 ($ millions) Change in benefit obligation Pension Benefits 2012 2011 Benefit obligation at beginning of year $27,083 $23,924 Service cost 277 249 1,165 1,253 24 21 Interest cost Plan participants' contributions Acturarial loss Benefits paid Amendments Net effects of acquisitions/divestitures Benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Actual gain on plan assets Employer contributions Plan participants' contributions Benefits paid 2,245 3,062 (1,593) (1,610) (22) 2 182 $29,179 $27,083 $ 17,794 $18,403 2,326 471 848 341 24 21 (1,593) (1,610) Net effects of acquisitions/divestitures 168 Fair value of plan assets at end of year $19,399 $17,794 Funded status U.S. plans with plan assets $(6,625) $892 Non-U.S. plans with plan…arrow_forward
- Information regarding the defined-benefit pension plan of Lopez Products included the following for 2024 ($ in millions): December 31: Projected benefit obligation (PBO) Accumulated benefit obligation (ABO) Plan assets Pension expense $ 85 75 50 8 No contributions were made to the pension plan assets during 2024. At December 31, 2024, what amount should Lopez report as its net pension liability? Multiple Choice О $27 million $10 millionarrow_forwardItems Balance, Jan. 1, 2025 (a) Service Cost (b) Interest Cost (c) Actual Return (d) Contributions (e) Benefits Journal Entry for 2025 Balance, Dec. 31, 2025 The service cost for 2025 is O $115000. O $6000. O $37000. O $38000. Annual Pension Expense ?? dr 15000 dr General Journal Entries 16000 cr $37000 Pharoah Corporation Pension Worksheet Cash $37000 cr ?? Show Transcribed Text Pension Asset/ Liability ?? Memo Record Projected Benefit Obligation $115000 cr $115000 dr ?? Plan Assets ??arrow_forwardAmortizing Pension Gain/Loss On June 1, 2018, West Corporation established a defined benefit pension plan for its employees. The following information was available in 2020: Balance Jan. 1, 2020 Projected Benefit Obligation $5,075,000 Cr. Plan Assets 5,250,000 Dr. Accumulated OCI—Pension Gain/Loss 892,500 Cr. For 2021, compute the amortization of the account, Accumulated OCI—Pension Gain/Loss, assuming that the company uses the corridor approach in determining the minimum amortization to recognize. Assume that the average remaining service life of employees is 10 years.Note: Do not use a negative sign with your answer. Amortization of Pension Gain/Lossarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning