Elton Co. has the following postretirement benefit plan balances on January 1, 2017. Accumulated postretirement benefi t obligation \(2,250,000 Fair value of plan assets 2,250,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2018, the company amends the plan so that prior service costs of \)175,000 are created. Other data related to the plan are: 2017 2018 Service costs \( 75,000 \) 85,000 Prior service costs amortization –0– 12,000 Contributions (funding) to the plan 45,000 35,000 Benefits paid 40,000 45,000 Actual return on plan assets 140,000 120,000 Expected rate of return on assets 8% 6% Instructions (a) Prepare a worksheet for the postretirement plan in 2017. (b) Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2017. (c) Prepare a worksheet for 2018 and any journal entries related to the postretirement plan as of December 31, 2018. (d) Indicate the postretirement-benefit–related amounts reported in the 2018 financial statements.

Particulars

Annual expense

Cash

OCI-Gain/Loss

Pension asset/liability

Annual Projected benefit obligation

Plan assets

Balance Jan 1, 2017

$2,250,000 Cr.

$2,250,000 Dr.

Service cost

$75,000 Dr.

$75,000 Cr.

Interest cost

$\left(\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{250}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{10}\mathbf{\%}\right)$

$225,000 Dr.

$225,000 Cr.

Actual return

$140,000 Cr.

$140,000 Dr.

Unexpected loss

$\left(\left(\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{250}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{8}\mathbf{\%}\right)\mathbf{-}\mathbf{\$}\mathbf{140}\mathbf{,}\mathbf{000}\right)$

$40,000 Cr.

$40,000 Dr.

Contributions

$45,000 Cr.

$45,000 Dr.

Benefits

$40,000 Dr.

$40,000 Cr.

Journal entry for 2017

$120,000 Dr.

$45,000 Cr.

$40,000 Dr.

$115,000 Cr.

Accumulated OCI Dec 31, 2017

0

Balance Dec 31, 2017

$40,000 Dr.

$115,000 Cr.

$2,510,000Cr.

$2,395,000 Dr.

Date

Particulars

Debit

Credit

2017

Other comprehensive income (gain/loss)

$40,000

Postretirement expense

$120,000

Cash

$45,000

Postretirement asset/liability

$115,000

(To record the pension expense)

Particulars

Annual expense

Cash

OCI-Prior service cost

OCI-Gain/Loss

Postretirement asset/liability

Annual Projected benefit obligation

Plan assets

Additional PSC Jan 1, 2018

$175,000 Dr

$175,000 Cr

Balance Jan 1, 2018

.

$2,685,000 Cr.

Service cost

$85,000 Dr.

$85,000 Cr.

Interest cost

$\left(\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{685}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{10}\mathbf{\%}\right)$

$268,500 Dr.

$268,500 Cr.

Actual return

$120,000 Cr.

$120,000 Dr.

Unexpected loss

$\left(\left(\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{395}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{6}\mathbf{\%}\right)\mathbf{-}\mathbf{\$}\mathbf{120}\mathbf{,}\mathbf{000}\right)$

$23,700 Cr.

$23,700 Dr.

Amortization of PSC

$12,000 Dr.

$12,000 Cr.

Contributions

$35,000 Cr.

$35,000 Dr.

Benefits

$45,000 Dr.

$45,000 Cr.

Journal entry for 2018

$221,800 Dr.

$35,000 Cr.

$163,000 Dr.

$23,700 Dr.

$373,500 Cr.

Accumulated OCI Dec 31, 2017

0

$40,000 Dr.

Balance Dec 31, 2018

$163,000 Dr.

$63,700Dr.

$488,500 Cr.

$2,993,500Cr.

$2,505,000 Dr.

Date

Particulars

Debit

Credit

2018

Other comprehensive income (gain/loss)

$23,700

Other comprehensive income (PSC)

$163,000

Postretirement expense

$221,800

Cash

$35,000

Postretirement asset/liability

$373,500

(To record the pension expense)

Particulars

Amount

Postretirement expense

$221,800

Particulars

Amount

Net Income

-

Other comprehensive loss

Asset gain

($23,700)

Plan amendment (PSC)

($175,000)

Prior service cost amortization

$12,000

($186,700)

Comprehensive Income

-

Liabilities

Amount

Postretirement liability

$488,500

Stockholder’s Equity

Accumulated other comprehensive loss (PSC)

$163,000

Accumulated other comprehensive loss (Gain/Loss)

$63,700