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Chapter 20: E20-2 (page 1163)

Veldre Company provides the following information about its defined benefit pension plan for the year 2017. Service cost $ 90,000 Contribution to the plan 105,000 Prior service cost amortization 10,000 Actual and expected return on plan assets 64,000 Benefits paid 40,000 Plan assets at January 1, 2017 640,000 Projected benefi t obligation at January 1, 2017 700,000 Accumulated OCI (PSC) at January 1, 2017 150,000 Interest/discount (settlement) rate 10% Instructions Compute the pension expense for the year 2017.

Short Answer

Expert verified

Pension expense is an expenditure that an organization bears for its employees that will help them manage its expense after attainingthe retirement age.It is considered a post-retirement benefit.

Step by step solution

01

Given the amounts as:

Particulars

Amount

Service cost

$90,000

Contribution

$105,000

Prior service cost amortization

$10,000

Actual and expected return on plan assets

$64,000

Benefits paid

$40,000

Plan assets as on January 1, 2017

$640,000

Projected benefit obligation at January 1, 2017

$700,000

Accumulated OCI

$150,000

Interest rate

10%

02

Computation of pension expense for the year 2017.

Particulars

Amount

Service cost

$90,000

Add: Interest cost$700,000×10%

$70,000

Less: Expected return on plan assets

$64,000

Add: Prior service cost amortization

$10,000

Pension Expense for 2017

$106,000

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Most popular questions from this chapter

Name three approaches to measuring benefit obligations from a pension plan and explain how they differ.

Determine the meaning of the following terms. (a) Contributory plan. (b) Vested benefits. (c) Retroactive benefits. (d) Years-of-service method.

Question: Kramer Co. has prepared the following pension worksheet. Unfortunately, several entries in the worksheet are not decipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for 2017.

Instructions (a) Determine the missing amounts in the 2017 pension worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2017 pension expense for Kramer Co. (c) Determine the following for Kramer for 2017: (1) settlement rate used to measure the interest on the liability and (2) expected return on plan assets.

Hanson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances related to this plan. Plan assets (market-related value) \(520,000 Projected benefi t obligation 700,000 Pension asset/liability 180,000 Cr. Prior service cost 81,000 Net gain or loss (debit) 91,000 As a result of the operation of the plan during 2017, the actuary provided the following additional data for 2017. Service cost \)108,000 Settlement rate, 9%; expected return rate, 10% Actual return on plan assets 48,000 Amortization of prior service cost 25,000 Contributions 133,000 Benefits paid retirees 85,000 Average remaining service life of active employees 10 years

Instructions Using the preceding data, compute pension expense for Hanson Corp. for the year 2017 by preparing a pension worksheet that shows the journal entry for pension expense. Use the market-related asset value to compute the expected return and for corridor amortization.

The following information is available for the pension plan of Radcliffe Company for the year 2017. Actual and expected return on plan assets $ 15,000 Benefits paid to retirees 40,000 Contributions (funding) 90,000 Interest/discount rate 10% Prior service cost amortization 8,000 Projected benefit obligation, January 1, 2017 500,000 Service cost 60,000 Instructions (a) Compute pension expense for the year 2017. (b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2017.
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