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Chapter 20: E20-22 (page 1168)

Englehart Co. provides the following information about its postretirement benefit plan for the year 2017. Service cost $ 90,000 Prior service cost amortization 3,000 Contribution to the plan 56,000 Actual and expected return on plan assets 62,000 Benefits paid 40,000 Plan assets at January 1, 2017 710,000 Accumulated postretirement benefit obligation at January 1, 2017 760,000 Accumulated OCI (PSC) at January 1, 2017 100,000 Dr. Discount rate 9% Instructions Compute the postretirement benefit expense for 2017.

Short Answer

Expert verified

Retirement is a term used when anemployee reaches a certain age(as prescribed by the government) and is no longer eligible for employment.Pension is paid to these employees to manage theirexpenses.

Step by step solution

01

Given the following amounts:

Particulars

Amount

Service cost

$90,000

Prior service cost amortization

$3,000

Contribution

$56,000

Actual and expected return on plan assets

$62,000

Benefits

$40,000

Plan assets Jan 1, 2017

$710,000

Accumulated postretirement benefit obligation

$760,000

Accumulated OCI

$100,000

Discount rate

9%

02

Computation of postretirement benefit expense for the year 2017.

Particulars

Amount

Service cost

$90,000

Add: Interest on accumulated postretirement benefit obligation

$68,400

Less: Expected return on plan assets

$62,000

Add: Amortization of prior service cost

$3,000

Postretirement Expense in 2017

$99,400

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Most popular questions from this chapter

What are “liability gains and losses,” and how are they accounted for?

At December 31, 2017, Besler Corporation had a projected benefit obligation of \(560,000, plan assets of \)322,000, and prior service cost of $127,000 in accumulated other comprehensive income. Determine the pension asset/liability at December 31, 2017.

Taveras Enterprises provides the following information relative to its defined benefit pension plan. Balances or Values at December 31, 2017 Projected benefit obligation \(2,737,000 Accumulated benefit obligation 1,980,000 Fair value of plan assets 2,278,329 Accumulated OCI (PSC) 210,000 Accumulated OCI—Net loss (1/1/17 balance, –0–) 45,680 Pension liability 458,671 Other pension plan data for 2017: Service cost 94,000 Prior service cost amortization 42,000 Actual return on plan assets 130,000 Expected return on plan assets 175,680 Interest on January 1, 2017, projected benefi t obligation 253,000 Contributions to plan 93,329 Benefi ts paid 140,000

Instructions (a) Prepare the note disclosing the components of pension expense for the year 2017. (b) Determine the amounts of other comprehensive income and comprehensive income for 2017. Net income for 2017 is \)35,000. (c) Compute the amount of accumulated other comprehensive income reported at December 31, 2017.

Boey Company reported net income of \(25,000 in 2018. It had the following amounts related to its pension plan in 2018: Actuarial liability gain \)10,000; Unexpected asset loss $14,000; Accumulated other comprehensive income (G/L) (beginning balance), zero. Determine for 2018 (a) Boey’s other comprehensive income, and (b) comprehensive income.

The actuary for the pension plan of Gustafson Inc. calculated the following net gains and losses. Incurred during the Year (Gain) or Loss 2017 \(300,000 2018 480,000 2019 (210,000) 2020 (290,000) Other information about the company’s pension obligation and plan assets is as follows. Projected Benefit Plan Assets As of January 1, Obligation (market-related asset value) 2017 \)4,000,000 $2,400,000 2018 4,520,000 2,200,000 2019 5,000,000 2,600,000 2020 4,240,000 3,040,000 Gustafson Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total serviceyears for all participating employees is 5,600. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2017. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization.

Instructions (Round to the nearest dollar.) Prepare a schedule which reflects the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense for each of the years 2017, 2018, 2019, and 2020. Apply the “corridor” approach in determining the amount to be amortized each year.
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