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Chapter 20: Question 2BE (page 1162)

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.

Short Answer

Expert verified

Plan Assets are those categories of assets an organization holds for its employee’s retirement benefits. These assets are usually procured for pension benefitsgiven to the employees.

Step by step solution

01

Given are the amounts:

Particulars

Amount

Ending plan assets

$2,000,000

Beginning plan assets

$1,780,000

Contributions

$120,000

Benefits paid

$200,000

02

Calculation of Warren’s actual return on plan assets

Actualreturnonplanassets=(Endingplanassets-Beginningplanassets)-(Contributions-Benefitspaid)=($2,000,000-$1,780,000)-($120,000-$200,000)=($220,000+$80,000)=$300,000

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Most popular questions from this chapter

Ferreri Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2017. January 1, December 31, 2017 2017 Projected benefit obligation \(1,500,000 \)1,527,000 Market-related and fair value of plan assets 800,000 1,130,000 Accumulated benefit obligation 1,600,000 1,720,000 Accumulated OCI (G/L)—Net gain –0– (200,000) The service cost component of pension expense for employee services rendered in the current year amounted to \(77,000 and the amortization of prior service cost was \)120,000. The company’s actual funding (contributions) of the plan in 2017 amounted to \(250,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of \)1,200,000 on January 1, 2017. Assume no benefits paid 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 to record pension expense and the employer’s contribution to the pension plan in 2017. (c) Indicate the pension-related amounts that would be reported on the income statement and the balance sheet for Ferreri Company for the year 2017.

Question: What is service cost, and what is the basis of its measurement?

The following items appear on Brueggen Company’s financial statements. 1. Under the caption Assets: Pension asset/liability. 2. Under the caption Liabilities: Pension asset/liability. 3. Under the caption Stockholders’ Equity: Prior service cost as a component of Accumulated Other Comprehensive Income. 4. On the income statement: Pension expense. Instructions Explain the significance of each of the items above on corporate financial statements. (Note: All items set forth above are not necessarily to be found on the statements of a single company.)

For 2017, Carson Majors Inc. had pension expense of \(77 million and contributed \)55 million to the pension fund. Which of the following is the journal entry that Carson Majors would make to record pension expense and funding? (a) Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 55,000,000 (b) Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 99,000,000 (c) Pension Expense 55,000,000 Pension Asset/Liability 22,000,000 Cash 77,000,000 (d) Pension Expense 22,000,000 Pension Asset/Liability 55,000,000 Cash 77,000,000

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.
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