Jennifer Corp.'s defined benefit pension plan had an amendment as of January 1, 2019, that retroactively included benefits of $1,500,000. The remaining service life of the employees impacted by this change is 10 years. Jennifer uses the straight-line method to amortize the prior service cost. As of January 1, 2019, Jennifer had the following information related to its pension plan, including adjustments for the plan amendment: Accrued/prepaid pension cost (credit) $3,790,000 Projected benefit obligation 5,200,000 Accumulated other comprehensive income (debit) 1,500,000 Fair value of plan assets 1,410,000 Interest (discount) rate 10% Expected rate of return on plan assets 12% The actuary reported service cost of $600,000 in both 2019 and 2020. Annual payments to retirees totaled $90,000. The trustee of the plan assets reported the actual rate of return to be 11% in 2019. Jennifer's annual year-end contribution to the plan equals the current year's service cost less actual return on plan assets plus interest growth of the projected benefit obligation and amortization of prior service costs and/or gains and losses as calculated for pension expense. e. Compute the December 31, 2019 balance in Plan Assets. f. Prepare the adjusting journal entry to record the plan's adjustment to other comprehensive income at December 31, 2019. g. Is Jennifer's plan overfunded or underfunded, and by how much, as of December 31, 2019?
Jennifer Corp.'s defined benefit pension plan had an amendment as of January 1, 2019, that retroactively included benefits of $1,500,000. The remaining service life of the employees impacted by this change is 10 years. Jennifer uses the straight-line method to amortize the prior service cost. As of January 1, 2019, Jennifer had the following information related to its pension plan, including adjustments for the plan amendment: Accrued/prepaid pension cost (credit) $3,790,000 Projected benefit obligation 5,200,000 Accumulated other comprehensive income (debit) 1,500,000 Fair value of plan assets 1,410,000 Interest (discount) rate 10% Expected rate of return on plan assets 12% The actuary reported service cost of $600,000 in both 2019 and 2020. Annual payments to retirees totaled $90,000. The trustee of the plan assets reported the actual rate of return to be 11% in 2019. Jennifer's annual year-end contribution to the plan equals the current year's service cost less actual return on plan assets plus interest growth of the projected benefit obligation and amortization of prior service costs and/or gains and losses as calculated for pension expense. e. Compute the December 31, 2019 balance in Plan Assets. f. Prepare the adjusting journal entry to record the plan's adjustment to other comprehensive income at December 31, 2019. g. Is Jennifer's plan overfunded or underfunded, and by how much, as of December 31, 2019?
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 4E
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Question
Jennifer Corp.'s defined benefit pension plan had an amendment as of January 1, 2019, that retroactively included benefits of $1,500,000. The remaining service life of the employees impacted by this change is 10 years. Jennifer uses the straight-line method to amortize the prior service cost.
As of January 1, 2019, Jennifer had the following information related to its pension plan, including adjustments for the plan amendment:
| Accrued/prepaid pension cost (credit) | $3,790,000 |
| Projected benefit obligation | 5,200,000 |
| Accumulated other comprehensive income (debit) | 1,500,000 |
| Fair value of plan assets | 1,410,000 |
| Interest (discount) rate | 10% |
| Expected rate of return on plan assets | 12% |
The actuary reported service cost of $600,000 in both 2019 and 2020. Annual payments to retirees totaled $90,000. The trustee of the plan assets reported the actual rate of return to be 11% in 2019.
Jennifer's annual year-end contribution to the plan equals the current year's service cost less actual return on plan assets plus interest growth of the projected benefit obligation and amortization of prior service costs and/or gains and losses as calculated for pension expense.
| e. | Compute the December 31, 2019 balance in Plan Assets. |
| f. | Prepare the |
| g. | Is Jennifer's plan overfunded or underfunded, and by how much, as of December 31, 2019? |
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