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Chapter 20: Q12Q. (page 1161)
Explain the difference between service cost and prior service cost.
Service cost and prior service cost are considered thevariable of pension expense that affects its amount. These are used while preparing the pension worksheet of an organization.
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Using the information in E20-2, prepare a pension worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording pension expense.
Norton Co. had the following amounts related to its pension plan in 2017. Actuarial liability loss for 2017 \(28,000 Unexpected asset gain for 2017 18,000 Accumulated other comprehensive income (G/L) (beginning balance) 7,000 Cr. Determine for 2017 (a) Norton’s other comprehensive income (loss) and (b) comprehensive income. Net income for 2017 is \)26,000; no amortization of gain or loss is necessary in 2017.
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.
The accounting staff of Holder Inc. has prepared the following postretirement benefit 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 postretirement worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2017 postretirement expense for Holder Inc. (c) What discount rate is Holder using in accounting for the interest on its other postretirement benefit plan? Explain
Question: What is service cost, and what is the basis of its measurement?
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