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Chapter 20: Question 3BE (page 1162)

At January 1, 2017, Hennein Company had plan assets of \(280,000 and a projected benefit obligation of the same amount. During 2017, service cost was \)27,500, the settlement rate was 10%, actual and expected return on plan assets were \(25,000, contributions were \)20,000, and benefits paid were $17,500. Prepare a pension worksheet for Hennein Company for 2017.

Short Answer

Expert verified

A pension worksheet is the type of statement prepaid by the organizations to estimate the amounts of pension expense, cash, pension assets or pension liability, plan assets, and projected benefit obligation.

Step by step solution

01

Given are the amounts:

Particulars

Amount

Plan Assets

$280,000

Projected benefit obligation

$280,000

Service cost

$27,500

Settlement rate

10%

Actual and expected return on plan assets

$25,000

Contributions

$20,000

Benefits paid

$17,500

02

Pension Worksheet for Hennein Company as of 2017.

Particulars

Pension Expense

Cash

Pension assets/liability

Projected benefit obligation

Plan assets

1/1/2017

$280,000 Cr.

$280,000 Dr.

Service cost

$27,500 Dr.

$27,500 Cr.

Interest cost

$28,000 Dr.

$28,000 Cr.

Actual return

$25,000 Cr.

$25,000 Dr.

Contributions

$20,000 Cr.

$20,000 Dr.

Benefits

$17,500 Dr.

$17,500 Cr.

Journal Entry

12/31/2017

$30,500 Dr.

$20,000 Cr.

$10,500 Cr.

$318,000 Cr.

$307,500 Dr.

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Most popular questions from this chapter

The actuary for the pension plan of Gustafson Inc. calculated the following net gains and losses. Incurred during the Year (Gain) or Loss 2017 \(300,000 2018 480,000 2019 (210,000) 2020 (290,000) Other information about the company’s pension obligation and plan assets is as follows. Projected Benefit Plan Assets As of January 1, Obligation (market-related asset value) 2017 \)4,000,000 $2,400,000 2018 4,520,000 2,200,000 2019 5,000,000 2,600,000 2020 4,240,000 3,040,000 Gustafson Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total serviceyears for all participating employees is 5,600. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2017. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization.

Instructions (Round to the nearest dollar.) Prepare a schedule which reflects the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense for each of the years 2017, 2018, 2019, and 2020. Apply the “corridor” approach in determining the amount to be amortized each year.

Using the information in E20-22, prepare a worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording postretirement benefit expense

Erickson Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, December 31, 2017 2017 Vested benefit obligation \(1,500 \)1,900 Accumulated benefit obligation 1,900 2,730 Projected benefit obligation 2,500 3,300 Plan assets (fair value) 1,700 2,620 Settlement rate and expected rate of return 10% Pension asset/liability 800 ? Service cost for the year 2017 400 Contributions (funding in 2017) 700 Benefits paid in 2017 200 Instructions (a) Compute the actual return on the plan assets in 2017. (b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.) (c) Compute the amount of net gain or loss amortization for 2017 (corridor approach). (d) Compute pension expense for 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.

Identify the five components that comprise pension expense. Briefly explain the nature of each component.
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