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Chapter 20: Q8IFRS (page 1192)

Question: The following defined pension data of Doreen Corp. apply to the year 2017.

Defined benefit obligation, 1/1/17 (before amendment) $560,000

Plan assets, 1/1/17 546,200

Pension asset/liability 13,800 Cr.

On January 1, 2017, Doreen Corp., through plan amendment,

grants past service benefits having a present value of 120,000

Discount rate 9%

Service cost 58,000

Contributions (funding) 65,000

Actual return on plan assets 49,158

Benefits paid to retirees 40,000

Instructions

For 2017, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

Short Answer

Expert verified

Answer

The total projected benefit is$759,200.

Step by step solution

01

Meaning of Assets

In accounting, the term asset indicates a business entity's resources to generate revenues and accomplish its targets. Assets are reported in the positional statement and bifurcated intocurrent and non-current assets.

02

Preparation of worksheet

Items

Annual pension expense

Cash

OCI-prior service cost

Pension asset liability

Projected benefit

Plan assets

Opening balance

13,800

560,000

546,200

Prior service cost

120,000

120,000

New balance, Jan. 1, 2017

680,000

546,200

Service cost

58,000

58,000

Interest cost

61,200

61,200

Actual return

49,158

49,158

Contribution

65,000

65,000

Benefits

40,000

40,000

Journal entry, December 31

70,042

65,000

103,000

121,920

Accumulated OCI, December 31, 2016

Balance on December 31, 2017

103,000

135,720

759,200

620,358

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Most popular questions from this chapter

Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2017 in which no benefits were paid. 1. The actuarial present value of future benefits earned by employees for services rendered in 2017 amounted to \(56,000. 2. The company’s funding policy requires a contribution to the pension trustee amounting to \)145,000 for 2017. 3. As of January 1, 2017, the company had a projected benefit obligation of \(900,000, an accumulated benefit obligation of \)800,000, and a debit balance of \(400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to \)600,000 at the beginning of the year. The actual and expected return on plan assets was \(54,000. The settlement rate was 9%. No gains or losses occurred in 2017 and no benefits were paid. 4. Amortization of prior service cost was \)50,000 in 2017. Amortization of net gain or loss was not required in 2017. Instructions (a) Determine the amounts of the components of pension expense that should be recognized by the company in 2017. (b) Prepare the journal entry or entries to record pension expense and the employer’s contribution to the pension trustee in 2017. (c) Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2017.

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.

How does an “asset gain or loss” develop in pension accounting? How does a “liability gain or loss” develop in pension accounting?

Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2017 and 2018. 2017 2018 Projected benefi t obligation, January 1 \(600,000 Plan assets (fair value and market-related value), January 1 410,000 Pension asset/liability, January 1 190,000 Cr. Prior service cost, January 1 160,000 Service cost 40,000 \) 59,000 Settlement rate 10% 10% Expected rate of return 10% 10% Actual return on plan assets 36,000 61,000 Amortization of prior service cost 70,000 50,000 Annual contributions 97,000 81,000 Benefits paid retirees 31,500 54,000 Increase in projected benefi t obligation due to changes in actuarial assumptions 87,000 –0– Accumulated benefi t obligation at December 31 721,800 789,000 Average service life of all employees 20 years Vested benefi t obligation at December 31 464,000 Instructions (a) Prepare a pension worksheet presenting both years 2017 and 2018 and accompanying computations and amortization of the loss (2018) using the corridor approach. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. (c) For 2018, indicate the pension amounts reported in the financial statements.

For Warren Corporation, year-end plan assets were \(2,000,000. At the beginning of the year, plan assets were \)1,780,000. During the year, contributions to the pension fund were \(120,000, and benefits paid were \)200,000. Compute Warren’s actual return on plan assets.
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