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Chapter 20: E20-19 (page 1168)

Kreter Co. provides the following information about its postretirement benefit plan for the year 2017. Service cost $ 45,000 Contribution to the plan 10,000 Actual and expected return on plan assets 11,000 Benefits paid 20,000 Plan assets at January 1, 2017 110,000 Accumulated postretirement benefit obligation at January 1, 2017 330,000 Discount rate 8% Instructions Compute the postretirement benefit expense for 2017

Short Answer

Expert verified

Postretirement benefit expense is used when an organizationestimates the pension cost during a financial year.It strictly depends upon the type ofpension plantaken from the organization.

Step by step solution

01

Given the following amounts:

Particulars

Amount

Service cost

$45,000

Contribution

$10,000

Actual and expected return on plan assets

$11,000

Benefits

$20,000

Plan assets at Jan 1, 2017

$110,000

Accumulated postretirement benefit

$330,000

Discount rate

8%

02

Computation of postretirement benefit expense for the year 2017.

Particulars

Amount

Service cost

$45,000

Add: Interest on liability$330,000×8%

$26,400

Less: Actual and expected return on plan assets

$11,000

Postretirement benefit expense in 2017.

$60,400

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Most popular questions from this chapter

Jackson Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2016, with the following beginning balances: plan assets \(200,000; projected benefit obligation \)250,000. Other data relating to 3 years’ operation of the plan are as follows.

2016 2017 2018 Annual service cost \(16,000 \) 19,000 $ 26,000 Settlement rate and expected rate of return 10% 10% 10% Actual return on plan assets 18,000 22,000 24,000 Annual funding (contributions) 16,000 40,000 48,000 Benefits paid 14,000 16,400 21,000 Prior service cost (plan amended, 1/1/17) 160,000 Amortization of prior service cost 54,400 41,600 Change in actuarial assumptions establishes a December 31, 2018, projected benefi t obligation of: 520,000

Instructions (a) Prepare a pension worksheet presenting all 3 years’ pension balances and activities. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. (c) Indicate the pension-related amounts reported in the financial statements for 2018.

At the end of the current year, Kennedy Co. has a defined benefit obligation of \(335,000 and pension plan assets with a fair value of \)245,000. The amount of the vested benefits for the plan is \(225,000. Kennedy has an actuarial gain of \)8,300. What account and amount(s) related to its pension plan will be reported on the company’s statement of financial position? (a) Pension Liability and \(74,300. (b) Pension Liability and \)90,000. (c) Pension Asset and \(233,300. (d) Pension Asset and \)110,000.

Differentiate between “accounting for the employer” and “accounting for the pension fund.”

Describe the accounting for actuarial gains and losses.

Question: What is meant by “past service cost”? When is past service cost recognized as pension expense?
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