Intermediate Accounting: Reporting and Analysis
2nd Edition
ISBN: 9781285453828
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 19, Problem 11E
To determine
Compute the amount of net gain or loss to be included in the 2016 pension expense of company L and indicate whether the computed amount is added or subtracted from pension expense.
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Hudson Company's actuary has provided the following information concerning the company's defined benefit pension plan at the end of 2016:
Fair value of plan assets (1/1/2016)
$350,000
Actual projected benefit obligation (1/1/2016)
360,000
Expected projected benefit obligation (1/1/2016)
424,000
Average remaining service life of employees
10 years
The difference between the actual and expected projected benefit obligation first occurred in 2015.
Compute the amount of the net gain or loss to include in Hudson's pension expense for 2016.
Frazier Refrigeration amended its defined benefit pension plan on December 31, 2016, to increase retirement benefits earned with each service year. The consulting actuary estimated the prior service cost incurred by making the amendment retroactive to prior years to be $110,000. Frazier’s 100 present employees are expected to retire at the rate of approximately 10 each year at the end of each of the next 10 years. Required: 1. Using the service method, calculate the amount of prior service cost to be amortized to pension expense in each of the next 10 years. 2. Using the straight-line method, calculate the amount of prior service cost to be amortized to pension expense in each of the next 10 years.
Mancuso Corporation amended its pension plan on January 1, 2017, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2017. Compute prior service cost amortization for 2017.
Chapter 19 Solutions
Intermediate Accounting: Reporting and Analysis
Ch. 19 - Prob. 1GICh. 19 - Prob. 2GICh. 19 - Prob. 3GICh. 19 - Prob. 4GICh. 19 - Prob. 5GICh. 19 - Prob. 6GICh. 19 - Prob. 7GICh. 19 - Prob. 8GICh. 19 - Prob. 9GICh. 19 - Prob. 10GI
Ch. 19 - Prob. 11GICh. 19 - Prob. 12GICh. 19 - Prob. 13GICh. 19 - Prob. 14GICh. 19 - Prob. 15GICh. 19 - Prob. 16GICh. 19 - Prob. 17GICh. 19 - Prob. 18GICh. 19 - Prob. 19GICh. 19 - Prob. 20GICh. 19 - Prob. 21GICh. 19 - Prob. 22GICh. 19 - Prob. 23GICh. 19 - The actuarial present value of all the benefits...Ch. 19 - Prob. 2MCCh. 19 - Prob. 3MCCh. 19 - Prob. 4MCCh. 19 - Prob. 5MCCh. 19 - Prob. 6MCCh. 19 - Which of the following is not a component of...Ch. 19 - Prob. 8MCCh. 19 - Prob. 9MCCh. 19 - Prob. 10MCCh. 19 - Prob. 1RECh. 19 - Prob. 2RECh. 19 - Pinecone Company has plan assets of 500,000 at the...Ch. 19 - Prob. 4RECh. 19 - Prob. 5RECh. 19 - Prob. 6RECh. 19 - Prob. 7RECh. 19 - Prob. 8RECh. 19 - Given the following information for Tyler Companys...Ch. 19 - At the beginning of Year 1, Cactus Company has...Ch. 19 - Prob. 11RECh. 19 - Prob. 1ECh. 19 - Prob. 2ECh. 19 - Prob. 3ECh. 19 - Prob. 4ECh. 19 - Prob. 5ECh. 19 - Prob. 6ECh. 19 - Prob. 7ECh. 19 - Prob. 8ECh. 19 - Prob. 9ECh. 19 - Prob. 10ECh. 19 - Prob. 11ECh. 19 - Prob. 12ECh. 19 - Prob. 13ECh. 19 - Prob. 14ECh. 19 - Prob. 15ECh. 19 - Prob. 16ECh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Prob. 5PCh. 19 - Prob. 6PCh. 19 - Prob. 7PCh. 19 - Prob. 8PCh. 19 - Prob. 9PCh. 19 - Prob. 10PCh. 19 - Prob. 11PCh. 19 - Prob. 12PCh. 19 - Prob. 1CCh. 19 - Prob. 2CCh. 19 - Prob. 3CCh. 19 - Prob. 4CCh. 19 - Prob. 5CCh. 19 - Prob. 6CCh. 19 - Prob. 7CCh. 19 - Prob. 8CCh. 19 - Prob. 10C
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- Frazier Refrigeration amended its defined benefit pension plan on December 31, 2018, to increase retirement benefits earned with each service year. The consulting actuary estimated the prior service cost incurred by making theamendment retroactive to prior years to be $110,000. Frazier’s 100 present employees are expected to retire at therate of approximately 10 each year at the end of each of the next 10 years.Required:1. Using the service method, calculate the amount of prior service cost to be amortized to pension expense ineach of the next 10 years.2. Using the straight-line method, calculate the amount of prior service cost to be amortized to pension expensein each of the next 10 years.arrow_forwardThe Donna Company adopted a defined benefit pension plan on January 1, 2016, and prior service credit was granted to employees. As of January 1, 2016, the prior service cost is $68,250. The unrecognized prior service cost is amortized by the straight-line method over the remaining 15-year service life of the company's active employees. Funding for the pension plan was $170,745 and $186,933 at December 31, 2016 and 2017, respectively. Annual service cost Discount (interest) rate Expected (and actual) return on plan assets 2016 $161,877 8% 10% 2017 $178,065 8% 10% Required: Prepare the journal entries to record net periodic pension expense and the funding as of December 31, 2016 and 2017. Show computations and round answers to the nearest dollar.arrow_forwardTAN Company has a defined benefit pension plan for its employees. The plan has been in existence for several years. During 2018, for the first time, TAN experienced a difference between its expected and actual projected benefit obligation. This resulted in a cumulative “experience” loss of $29,000 at the end of 2018, which it recorded and which did not change during 2019. TAN amortizes any excess loss by the straight-line method over the average remaining service life of its active participating employees. It has developed the following schedule concerning these 40 employees: Employee Numbers Expected Years of Future Service Employee Numbers Expected Years of Future Service 1–5 3 21–25 15 6–10 6 26–30 18 11–15 9 31–35 21 16–20 12 36–40 24 TAN makes its contribution to the pension plan at the end of each year. However, it has not always funded the entire pension expense in a given year. As a result, it had an accrued…arrow_forward
- Jablonski Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances related to this plan. Check the below image for more details for this problem. Instructions(a) Compute pension expense for Jablonski Corp. for the year 2017 by preparing a pension worksheet that shows the journal entry for pension expense.(b) Indicate the pension amounts reported in the financial statements.arrow_forward(Pension Expense, Journal Entries, Statement Presentation) Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2017 in which no benefits were paid.1. The actuarial present value of future benefits earned by employees for services rendered in 2017 amounted to $56,000.2. The company’s funding policy requires a contribution to the pension trustee amounting to $145,000 for 2017.3. As of January 1, 2017, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was9%. No gains or losses occurred in 2017 and no benefits were paid.4. Amortization of prior service cost was $50,000 in 2017. Amortization of net gain or loss was not…arrow_forward(Pension Expense, Journal Entries, Statement Presentation) Ferreri Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension planfor the year ended December 31, 2017. Check below image for information. The service cost component of pension expense for employee services rendered in the current year amounted to $77,000 and the amortization of prior service cost was $120,000. The company’s actual funding (contributions) of the plan in 2017 amounted to $250,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,200,000 on January 1, 2017. Assume no benefits paid in 2017.Instructions(a) Determine the amounts of the components of pension expense that should be recognized by the company in 2017.(b) Prepare the journal entry to record pension expense and the employer’s…arrow_forward
- Naomi Company has 200 employees who are expected to receive benefits under the company's defined benefit pension plan. The average number of service years per employee is 10 years. The actuary for the company's pension plan calculated the following net gains and losses: For the year ended December 31 (Gain) or Loss 2019 2020 2021 ($350,000) 470,000 (750,000) Prior to 2019, there was no unrecognized net gain or loss. Information about the company's projected benefit obligation and market-related asset values follows: As of January 1 2019 Projected benefit obligation $2,300,000 2020 $2,450,000 2021 $2,840,000 Market-related asset values 2,150,000 2,520,000 2,600,000 Required: Based on the above information, prepare a schedule which reflects the amount of unrecognized net gain or loss to be amortized by the company as a component of pension expense for the years 2019, 2020, and 2021, using the corridor approach.arrow_forwardOn January 1, 2016, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,290,000 on that date (which it did not fund). Baznik has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2016: Employee Expected Years of Future Service A 1 B 4 D E F 6 Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik's pension expense, in addition to the amortization of the prior service cost for 2016 and 2017: 2016 2017 Service cost $386,800 $410,683 Interest cost on projected benefit obligation 116,800 174,737 Expected return on plan assets 93,000 Baznik contributed $799,800 and $759,200 to the…arrow_forward(Computation of Prior Service Cost Amortization, Pension Expense, Journal Entries, and Net Gain or Loss) Aykroyd Inc. has sponsored noncontributory, defined benefit pension plan for its employees since 1994. Prior to 2017, cumulative net pension expense recognized equaled cumulative contributions to the plan. Other relevant information about the pension plan on January 1, 2017, is as follows.1. The company has 200 employees. All these employees are expected to receive benefits under the plan. The average remaining service life per employee is 12 years.2. The projected benefit obligation amounted to $5,000,000 and the fair value of pension plan assets was $3,000,000. The market-related asset value was also $3,000,000. Unrecognized prior service cost was $2,000,000. On December 31, 2017, the projected benefit obligation and the accumulated benefit obligation were $4,850,000 and $4,025,000, respectively. The fair value of the pension plan assets amounted to $4,100,000 at the end of the…arrow_forward
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