a. Explanation There are various expenses which are needed to be recognized which are mentioned below: 1. Service Cost: For the year ending 2018: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Pension Expense 38,880 Projected benefit obligation 38,880 (being service cost recorded) Table (1) For the year ending 2019: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Pension Expense 40,320 Pension benefit obligation 40,320 (being service cost recorded) Table (2) For the year ending 2020: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Pension Expense 41,760 Pension benefit obligation 41,760 (being service cost recorded) Table (3) Since, pension expense is cost incurred by the company, it is increased. Hence, pension account is debited. Since, pension benefit obligation is liability of the company, it is increased. Hence, pension benefit obligation account is credited. 2. Interest on PBO recognized: : For the year ending 2018: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Pension Expense 54,400 Pension benefit obligation 54,400 (being interest on PBO recognized) Table (4) For the year ending 2019: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Pension Expense 60,662 Pension benefit obligation 60,662 (being interest on PBO recognized) Table (5) For the year ending 2020: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Pension Expense 58,533 Pension benefit obligation 58,533 (being interest on PBO recognized) Table (6) Since, pension expense is cost incurred by the company, it is increased. Hence, pension account is debited. Since, pension benefit obligation is liability of the company, it is increased. Hence, pension benefit obligation account is credited. Computation of opening balance of PBO for year 2019: Particulars Amount ($) Opening balance 680,000 Add: Service cost 38,880 Add: Interest on PBO ( $ 680 , 000 × 8 % ) 54,400 Add: Prior service cost 10,000 Less: Actuarial gain 0 Less: Benefits paid during the year ( 25 , 000 ) Opening balance of PBO for year 2019 $758,280 Table (7) Computation of opening balance of PBO for year 2020: Particulars Amount ($) Opening balance 758,280 Add: Service cost 40,320 Add: Interest on PBO ( $ 758 , 280 × 8 % ) 60,662 Add: Prior service cost 0 Less: Actuarial gain ( 97 , 600 ) Less: Benefits paid during the year ( 30 , 000 ) Opening balance of PBO for year 2020 $731,662 Table (8) 3.Expected return on plan recognized: For the year ending 2018: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Plan assets 40,800 Pension expense 40,800 (being expected return on plan assets recognized) Table (9) For the year ending 2019: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Plan assets 43,980 Pension expense 43,980 (being expected return on plan assets recognized) Table (10) For the year ending 2020: Date Account Title and Explanation Post ref. Debit ($) Credit ($) Plan assets 46,830 Pension expense 46,830 (being expected return on plan assets recognized) Table (11) Since, plan assets are the asset for the company, it is increased. Hence, plan assets account is debited. Since, pension expense is cost incurred by the company, it is reduced. Hence, pension account is credited. Computation of opening balance of plan assets for year 2019: Particulars Amount ($) Opening balance 680,000 Add: Expected return on plan assets ( $ 680 , 000 × 8 % ) 40,800 Add: Contribution made during the year 36,000 Add: Unexpected return 1,200 Less: Benefits paid during the year ( 25 , 000 ) Opening balance of Plan Assets $733,000 Table (12) Computation of opening balance of plan assets for year 2020: Particulars Amount ($) Opening balance 733,000 Add: Expected return on plan assets ( $ 733 , 000 × 8 % ) 43,980 Add: Contribution made during the year 40,000 Less: Unexpected return ( 6 , 480 ) Less: Benefits paid during the year ( 30 , 000 ) Opening balance of Plan Assets $780,500 Table (13) 4 b. To determine To prepare: The worksheet that comprises the income statement and the balance sheet.

3rd Edition

ISBN: 9780136912644

Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella

Publisher: Pearson Education (US)

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Employee Benefits

In an organization employees are the most important resource and most important asset. They can lead an organization to the sky or can be the reason for unsuccessful of business. Therefore, it is very much important that employees of an organization shou…

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Chapter 19, Problem 19.12P

To determine

The value of compensation expense and pass the journal of it.

To determine

To prepare: The worksheet that comprises the income statement and the balance sheet.

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Chapter 19, Problem 19.11P

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The value of compensation expense and pass the journal of it.

Solution Summary: The author explains the various expenses that are needed to be recognized.

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The value of compensation expense and pass the journal of it.

To prepare: The worksheet that comprises the income statement and the balance sheet.

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