PROBLEMS
P20-1 (L01,2,3,4) EXCEL (2-Year Worksheet) On January 1, 2017, Harrington Company has the following defined benefit pension plan balances.
Projected benefit obligation $4,500,000
Fair value of plan assets 4,200,000
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 $500,000 are created. Other data related to the pension plan are as follows...
Instructions
(a) Prepare a pension worksheet for the pension plan for 2017 and 2018.
(b) For 2018, prepare the journal entry to record pension-related amounts.
P20-2 (LO1,2,3,4,5) GROUPWORK (3-Year Worksheet, Journal Entries, and Reporting) Jackson Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2016, with the following beginning balances: plan assets $200,000; projected benefit obligation $250,000. Other data relating to 3 years’ operation of the plan are as follows...
Instructions
(a) Prepare a pension worksheet presenting all 3 years’ pension balances and activities.
(b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year.
(c) Indicate the pension-related amounts reported in the financial statements for 2018.
P20-3 (LO1,2,3,4,5) (Pension Expense, Journal Entries, Amortization of Loss) Gottschalk Company sponsors a defined benefit plan for its 100 employees. On January 1, 2017, the company’s actuary provided the following information...
Instructions
(a) Determine the components of pension expense that the company would recognize in 2017. (With only one year involved, you need not prepare a worksheet.)
(b) Prepare the journal entry to record the pension expense and the company’s funding of the pension plan in 2017.
(c) Compute the amount of the 2017 increase/decrease in gains or losses and the amount to be amortized in 2017 and 2018.
(d) Indicate the pension amounts reported in the financial statement as of December 31, 2017.
P20-4 (L01,2,3,4) EXCEL (Pension Expense, Journal Entries for 2 Years) Gordon Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2017 and 2018...
Instructions
(a) Compute pension expense for 2017 and 2018.
(b) Prepare the journal entries to record the pension expense and the company’s funding of the pension plan for both years.
P20-5 (LO2,3,4) (Computation of Pension Expense, Amortization of Net Gain or Loss–Corridor Approach, Journal
Entries for 3 Years) Hiatt Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2017. The insurance company which administers the pension plan provided the following selected information for the years 2017, 2018, and 2019.
There were no balances as of January 1, 2017, when the plan was initiated. The actual and expected return on plan assets was 10% over the 3-year period, but the settlement rate used to discount the company’s pension obligation was 13% in 2017, 11% in 2018, and 8% in 2019. The service cost component of net periodic pension expense amounted to the following: 2017, $60,000; 2018, $85,000; and 2019, $119,000. The average remaining service life per employee is 12 years. No benefits were paid in 2017, $30,000 of benefits were paid in 2018, and $18,500 of benefits were paid in 2019 (all benefits paid at end of year).
Instructions
(Round to the nearest dollar.)
(a) Calculate the amount of net periodic pension expense that the company would recognize in 2017, 2018, and 2019.
(b) Prepare the journal entries to record net periodic pension expense, employer’s funding contribution, and related pension amounts for the years 2017, 2018, and 2019.
P20-6 (LO3,4) GROUPWORK (Computation of Prior Service Cost Amortization, Pension Expense, Journal Entries, and Net Gain or Loss) Aykroyd Inc. has sponsored a noncontributory, defined benefit pension plan for its employees since 1994. Prior to 2017, cumulative net pension expense recognized equaled cumulative contributions to the plan. Other relevant information about the pension plan on January 1, 2017, is as follows.
1. The company has 200 employees. All these employees are expected to receive benefits under the plan. The average remaining service life per employee is 12 years.
2. The projected benefit obligation amounted to $5,000,000 and the fair value of pension plan assets was $3,000,000. The market-related asset value was also $3,000,000. Unrecognized prior service cost was $2,000,000.
On December 31, 2017, the projected benefit obligation and the accumulated benefit obligation were $4,850,000 and $4,025,000, respectively. The fair value of the pension plan assets amounted to $4,100,000 at the end of the year. A 10% settlement rate and a 10% expected asset return rate were used in the actuarial present value computations in the pension plan. The present value of benefits attributed by the pension benefit formula to employee service in 2017 amounted to $200,000. The employer’s contribution to the plan assets amounted to $775,000 in 2017. This problem assumes no payment of pension benefits.
Instructions
(Round all amounts to the nearest dollar.)
(a) Prepare a schedule, based on the average remaining life per employee, showing the prior service cost that would be amortized as a component of pension expense for 2017, 2018, and 2019.
(b) Compute pension expense for the year 2017.
(c) Compute the amount of the 2017 increase/decrease in net gains or losses and the amount to be amortized in 2017 and 2018.
(d) Prepare the journal entries required to report the accounting for the company’s pension plan for 2017.
P20-7 (LO2,3,4) (Pension Worksheet) Hanson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances related to this plan...
Instructions
Using the preceding data, compute pension expense for Hanson Corp. for the year 2017 by preparing a pension worksheet that shows the journal entry for pension expense. Use the market-related asset value to compute the expected return and for corridor amortization.
P20-8 (LO1,2,3,4,5) GROUPWORK (Comprehensive 2-Year Worksheet) 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…
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.
P20-9 (LO1,2,3,4,5) GROUPWORK (Comprehensive 2-Year Worksheet) Hobbs Co. has the following defined benefit pension plan balances on January 1, 2017…
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.
P20-10 (LO1,2,3,4) (Pension Worksheet—Missing Amounts) Kramer Co. has prepared the following pension 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 pension worksheet, indicating whether the amounts are debits or credits.
(b) Prepare the journal entry to record 2017 pension expense for Kramer Co.
(c) Determine the following for Kramer for 2017: (1) settlement rate used to measure the interest on the liability and (2) expected return on plan assets.
P20-11 (LO1,2,3,4,5) (Pension Worksheet) The following data relate to the operation of Kramer Co.’s pension plan in 2018. The pension worksheet for 2017 is provided in P20-10...
Instructions
(a) Prepare a pension worksheet for 2018 and accompanying computations and amortization of the loss, if any, in 2018 using the corridor approach.
(b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31.
(c) Indicate the pension amounts reported in the financial statements.
P20-12 (LO1,2,3,4,5) (Pension Worksheet) Larson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2018, the following balances related to this plan...
Instructions
(a) Compute pension expense for Larson Corp. for the year 2018 by preparing a pension worksheet that shows the journal entry for pension expense.
(b) Indicate the pension amounts reported in the financial statements.
*P 20-13 (LO6,7) GROUPWORK (Postretirement Benefit Worksheet) Hollenbeck Foods Inc. sponsors a postretirement medical and dental benefit plan for its employees. The following balances relate to this plan on January 1, 2017...
Instructions
(a) Using the preceding data, compute the net periodic postretirement benefit cost for 2017 by preparing a worksheet that shows the journal entry for postretirement expense and the year-end balances in the related postretirement benefit memo accounts. (Assume that contributions and benefits are paid at the end of the year.)
(b) Prepare any journal entries related to the postretirement plan for 2017 and indicate the postretirement amounts reported in the financial statements for 2017.
*P 20-14 (LO6,7) (Postretirement Benefit Worksheet—2 Years) Elton Co. has the following postretirement benefit plan balances on January 1, 2017...
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.
