Concept explainers
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
To Compute: The amount of actual return on plan assets.
1.
Explanation of Solution
Calculate the amount of actual return.
Therefore, the amount of actual returns is$216,000.
2.
To Compute: The loss or gain on plan assets.
2.
Explanation of Solution
Compute the loss or gain on plan assets.
Working Note:
Compute the expected returns.
Therefore, the loss on plan assets is$24,000.
3.
To Compute: The Service Cost.
3.
Explanation of Solution
Compute the Service Cost.
Working Note:
Compute the interest cost.
Therefore, the service cost is$310,000.
4.
To Compute: The pension expense.
4.
Explanation of Solution
The following table shows pension expense.
Particulars | Amount ($) |
Service Cost | $310,000 (4) |
Interest cost | 161,000 (5) |
Return on plan assets | (240,000) (3) |
Amortization of Prior Service Cost - AOCI | 25,000 (6) |
Amortization of net gain | 6,000 (7) |
Pension Expense | $250,000 |
Table (1)
Working Note:
Compute the amount of Amortization of Prior Service Cost – AOCI:
Compute the Amortization of Net Gain –AOCI.
Amortization of Net Gain –AOCI: | |
Beginning Balance | $330,000 |
Less: | |
Ending Balance | (300,000) |
Loss on Plan Assets | (24,000) |
Net Gain – AOCI Amortization | $6,000 |
(7)
Table (2)
5.
To Compute: The average remaining service life of active employees.
5.
Explanation of Solution
Compute the average service period.
Working Note:
Calculate the amount to be amortized.
Average Remaining Service Life of Active Employees: | Amount ($) |
Net Gain, Beginning | 330,000 |
10% of $2,400,000 | 240,000 |
Amount to be Amortized | 90,000 |
(8)
Table (3)
Therefore, the average remaining service life of active employees is15 years.
Want to see more full solutions like this?
Chapter 17 Solutions
GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
- Exercise 17-10 (Algo) Determine pension expense [LO17-6, 17-7] Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2021, Abbott and Abbott recei following information: Projected Benefit Obligation Balance, January 1 ($ in millions) $125 Service cost Interest cost 22 Benefits paid 15 (8) Balance, December 31 $154 Plan Assets Balance, January 1 Actual return on plan assets Contributions 2021 Benefits paid $75 10 22 (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-A January 1, 2021. Required: 1. Determine Abbott and Abbott's pension expense for 2021. 2. Prepare the journal entries to record Abbott and Abbott's (a) pension expense, (b) funding, and (c) payment for 2021.arrow_forwardQuestion 9 Oriole Company provides the following information about its defined benefit pension plan for the year 2020. Service cost $91,700 Contribution to the plan 104,300 Prior service cost amortization 10,800 Actual and expected return on plan assets 65,300 Benefits paid 39,700 Plan assets at January 1, 2020 633,400 Projected benefit obligation at January 1, 2020 711,600 Accumulated OCI (PSC) at January 1, 2020 148,000 Interest/discount (settlement) rate 10 % General Journal Entries Memo Record Items AnnualPension Expense Cash OCIPrior Service Cost Pension Asset/Liability Projected BenefitObligation PlanAssets (b) The parts of this question must be completed in order. This part will be available when you complete the part above.arrow_forwardAnalyzing and Interpreting Pension DisclosuresAssume E.I. Du Pont De Nemours and Co.'s 10-K report has the following disclosures related to its retirement plans ($ millions). Pension Benefits ($ millions) 2010 2009 Change in benefit obligation Benefit obligation at beginning of year $ 22,849 $ 22,935 Service cost 383 388 Interest cost 1,228 1,192 Plan participants' contributions 13 9 Acturarial loss (gain) (728) (244) Benefits paid (1,544) (1,506) Amendments -- (1) Net effects of acquisitions/divestitures 5 76 Benefit obligation at end of year $ 22,206 $ 22,849 Change in plan assets Fair value of plan assets at beginning of year $ 22,389 $ 20,272 Actual gain on plan assets 1,903 3,306 Employer contributions 277 280 Plan participants' contributions 13 9 Benefits paid (1,544) (1,506) Net effects of acquisitions/divestitures -- 28 Fair value of plan assets at end of year $ 23,038 $ 22,389 Funded status U.S. plans with plan…arrow_forward
- Analyzing and Interpreting Pension DisclosuresAssume E.I. Du Pont De Nemours and Co.'s 10-K report has the following disclosures related to its retirement plans ($ millions). Pension Benefits ($ millions) 2010 2009 Change in benefit obligation Benefit obligation at beginning of year $ 22,849 $ 22,935 Service cost 383 388 Interest cost 1,228 1,192 Plan participants' contributions 13 9 Acturarial loss (gain) (728) (244) Benefits paid (1,544) (1,506) Amendments -- (1) Net effects of acquisitions/divestitures 5 76 Benefit obligation at end of year $ 22,206 $ 22,849 Change in plan assets Fair value of plan assets at beginning of year $ 22,249 $ 20,132 Actual gain on plan assets 1,927 3,306 Employer contributions 277 280 Plan participants' contributions 13 9 Benefits paid (1,544) (1,506) Net effects of acquisitions/divestitures -- 28 Fair…arrow_forwardExercise 17-5 (Algo) Determine pension plan assets [LO17-4] The following data relate to Ramesh Company's defined benefit pension plan: ($ in millions) $790 Plan assets at fair value, January 1 Expected return on plan assets Actual return on plan assets 79 63 Contributions to the pension fund (end of year) 138 Amortization of net loss 16 Pension benefits paid (end of year) Pension expense 24 110 Required: Determine the amount of pension plan assets at fair value on December 31. (Enter your answers in millions. Amounts to be dec should be indicated with a minus sign.)arrow_forward1. Compute 2022 net periodic pension expense. The 2022 records of MPS Company provided the following data related to its noncontributory, defined benefit pension plan (amounts in PO00s): a. Accumulated benefit obligation (report of actuary) Beginning balance P3,000 Service cost 1,200 Interest cost 240 Pension benefits paid Ending balance (400) P4,040 Discount rate used by actuary, 8% b. Plan assets at fair value (report of trustee): Beginning balance Actual return on plan assets Contributions P2,400 168 1,016 (400) Pension benefits paid Ending balance Р3,192 Expected long-term rate of return of plan assets, 7% c. January 1, 2022, balance of unrecognized prior service cost, gains and losses, and transaction cost, zero.arrow_forward
- Question 11 The following data are for the pension plan for the employees of Cullumber Company. 1/1/20 12/31/20 12/31/21 Accumulated benefit obligation $ 5400000 $ 5410000 $ 6850000 Projected benefit obligation 5560000 5770000 7530000 Plan assets (at fair value) 4600000 6230000 6780000 AOCL – net loss 0 975000 1000000 Settlement rate (for year) 9% 10% Expected rate of return (for year) 9% 8% Cullumber’s contribution was $861000 in 2021 and benefits paid were $751000. Cullumber estimates that the average remaining service life is 15 years.The actual return on plan assets in 2021 was $550000. $360000. $440000. $430000.arrow_forwardExercise 17-5 (Algo) Determine pension plan assets [LO17-4] The following data relate to Ramesh Company's defined benefit pension plan: ($ in millions) $790 Plan assets at fair value, January 1 Expected return on plan assets Actual return on plan assets Contributions to the pension fund (end of year) Amortization of net loss Pension benefits paid (end of year) Pension expense 79 63 138 16 24 110 Required: Determine the amount of pension plan assets at fair value on December 31. (Enter your answers in millions. Amounts to be c should be indicated with a minus sign.) Answer is complete but not entirely correct. Pension Plan Assets 790 Beginning of the year Aarrow_forwardQuestion 20 Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,520 $1,930 Accumulated benefit obligation 1,930 2,700 Projected benefit obligation 2,510 3,360 Plan assets (fair value) 1,730 2,670 Settlement rate and expected rate of return 10% Pension asset/liability 780 ? Service cost for the year 2020 400 Contributions (funding in 2020) 690 Benefits paid in 2020 200 (a2) Prepare the journal entries at December 31, 2020, to record pension expense and related pension transactions. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020…arrow_forward
- Question 20 Bonita Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, 2020 December 31, 2020 Vested benefit obligation $1,520 $1,930 Accumulated benefit obligation 1,930 2,700 Projected benefit obligation 2,510 3,360 Plan assets (fair value) 1,730 2,670 Settlement rate and expected rate of return 10% Pension asset/liability 780 ? Service cost for the year 2020 400 Contributions (funding in 2020) 690 Benefits paid in 2020 200 (a2) Partially correct answer icon Your answer is partially correct. Prepare the journal entries at December 31, 2020, to record pension expense and related pension transactions. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)…arrow_forwardProblem 17-6 (Algo) Determine the PBO; plan assets; pension expense; two years (LO17-3, 17-4, 17-6] Stanley-Morgan Industries adopted a defined benefit pension plan on April 12, 2021. The provisions of the plan were not made retroactive to prior years. A local bank, engaged as trustee for the plan assets, expects plan assets to earn a 10% rate of return. The actual return was also 10% in 2021 and 2022.* A consulting firm, engaged as actuary, recommends 5% as the appropriate discount rate. The service cost is $140,000 for 2021 and $220,000 for 2022. Year-end funding is $150,000 for 2021 and $160,000 for 2022. No assumptions or estimates were revised during 2021. * We assume the estimated return was based on the actual return on similar investments at the inception of the plan and that, since the estimate didn't change, that also was the actual rate in 2022. Required: Calculate each of the following amounts as of both December 31, 2021, and December 31, 2022: (Enter your answers in…arrow_forward3 continue b... The following information is available for the pension plan of Vaughn Company for the year 2020. Actual and expected return on plan assets $ 14,700 Benefits paid to retirees 40,800 Contributions (funding) 81,100 Interest/discount rate 10 % Prior service cost amortization 7,600 Projected benefit obligation, January 1, 2020 458,000 Service cost 63,900 Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2020. (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 0 for the amounts.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount…arrow_forward