Hobbs Co. has the following defined benefit pension plan balances on January 1, 2017. Projected benefit obligation \(4,600,000 Fair value of plan assets 4,600,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2018, the company amends its pension agreement so that prior service costs of \)600,000 are created. Other data related to the pension plan are: 2017 2018 Service cost \(150,000 \)170,000 Prior service cost amortization –0– 90,000 Contributions (funding) to the plan 200,000 184,658 Benefits paid 220,000 280,000 Actual return on plan assets 252,000 350,000 Expected rate of return on assets 6% 8% Instructions (a) Prepare a pension worksheet for the pension plan in 2017. (b) Prepare any journal entries related to the pension plan that would be needed at December 31, 2017. (c) Prepare a pension worksheet for 2018 and any journal entries related to the pension plan as of December 31, 2018. (d) Indicate the pension-related amounts reported in the 2018 financial statements.

Particulars

Annual pension expense

Cash

OCI-Gain/Loss

Pension asset/liability

Projected benefit obligation

Plan assets

Balance Jan 1, 2017

$4,600,000 Cr.

$4,600,000 Dr.

Service cost

$150,000 Dr.

$150,000 Cr.

Interest cost

$\left(\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{600}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{10}\mathbf{\%}\right)$

$460,000 Dr.

$460,000 Cr.

Actual return

$252,000 Cr.

$252,000 Dr.

Unexpected loss

$\left(\left(\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{600}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{6}\mathbf{\%}\right)\mathbf{-}\mathbf{\$}\mathbf{252}\mathbf{,}\mathbf{000}\right)$

$24,000 Cr.

$24,000 Dr.

Contributions

$200,000 Cr.

$200,000 Dr.

Benefits

$220,000 Dr.

$220,000 Cr.

Journal entry for 2017

$334,000 Dr.

$200,000 Cr.

$24,000 Dr.

$158,000 Cr.

Accumulated OCI Dec 31, 2017

0

Balance Dec 31, 2017

$24,000 Dr.

$158,000 Cr.

$4,990,000 Cr.

$4,832,000 Dr.

Date

Particulars

Debit

Credit

2017

Other comprehensive income (gain/loss)

$24,000

Pension expense

$334,000

Cash

$200,000

Pension asset/liability

$158,000

(To record the pension expense)

Particulars

Annual pension expense

Cash

OCI-Prior service cost

OCI-Gain/Loss

Pension asset/liability

Projected benefit obligation

Plan assets

Additional PSC Jan 1,2018

$600,000 Dr

$600,000 Cr

Balance Jan 1, 2018

.

$5,590,000 Cr.

Service cost

$170,000 Dr.

$170,000 Cr.

Interest cost

$\left(\left(\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{990}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{600}\mathbf{,}\mathbf{000}\right)\mathbf{\times }\mathbf{10}\mathbf{\%}\right)$

$559,000 Dr.

$559,000 Cr.

Actual return

$350,000 Cr.

$350,000 Dr.

Unexpected loss

$\left(\left(\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{832}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{8}\mathbf{\%}\right)\mathbf{-}\mathbf{\$}\mathbf{350}\mathbf{,}\mathbf{000}\right)$

$36,560 Cr.

$36,560 Dr.

Amortization of PSC

$90,000 Cr.

Contributions

$184,658 Cr.

$184,658 Dr.

Benefits

$280,000 Dr.

$280,000 Cr.

Journal entry for 2018

$432,440 Dr.

$184,658 Cr.

$510,000 Dr.

$36,560 Dr.

$794,342 Cr.

Accumulated OCI Dec 31, 2017

0

$24,000 Dr.

Balance Dec 31, 2018

$510,000 Dr.

$60,560 Dr.

$952,342 Cr.

$6,039,000Cr.

$5,086,658 Dr.

Date

Particulars

Debit

Credit

2018

Other comprehensive income (gain/loss)

$36,560

Other comprehensive income (PSC)

$510,000

Pension expense

$432,440

Cash

$184,658

Pension asset/liability

$794,342

(To record the pension expense)

Particulars

Amount

Pension expense

$432,440

Liabilities

Amount

Pension liability

$952,342

Stockholder’s Equity

Accumulated other comprehensive loss (PSC)

$510,000

Accumulated other comprehensive loss (Gain/Loss)

$60,560