76. The corridor for 2018 was $600,000. The amount of AOCI-net loss amortized in 2018 was
a. $66,666.
b. $64,000.
c. $28,000.
d. $24,000.
On January 1, 2018, Newlin Co. has the following balances:
Projected benefit obligation $3,500,000
Fair value of plan assets 3,000,000
The settlement rate is 10%. Other data related to the pension plan for 2018 are:
Service cost $300,000
Amortization of prior service costs due to increase in benefits 100,000
Contributions 500,000
Benefits paid 225,000
Actual return on plan assets 395,000
Amortization of net gain 30,000
77. The balance of the projected benefit obligation at December 31, 2018 is
a. $4,150,000.
b. $3,925,000.
c. $3,900,000.
d. $3,850,000.
On January 1, 2018, Newlin Co. has the following balances:
Projected benefit obligation $3,500,000
Fair value of plan assets 3,000,000
The settlement rate is 10%. Other data related to the pension plan for 2018 are:
Service cost $300,000
Amortization of prior service costs due to increase in benefits 100,000
Contributions 500,000
Benefits paid 225,000
Actual return on plan assets 395,000
Amortization of net gain 30,000
78. The fair value of plan assets at December 31, 2018 is
a. $3,895,000.
b. $3,500,000.
c. $3,670,000.
d. $3,440,000.
79. Rathke, Inc. has a defined-benefit pension plan covering its 50 employees. Rathke agrees to amend its pension benefits. As a result, the projected benefit obligation increased by $2,700,000. Rathke determined that all its employees are expected to receive benefits under the plan over the next 5 years. In addition, 20% are expected to retire or quit each year. Assuming that Rathke uses the years-of-service method of amortization for prior service cost, the amount reported as amortization of prior service cost in year one after the amendment is
a. $540,000.
b. $900,000.
c. $270,000.
d. $720,000.
The following information relates to the pension plan for the employees of Turner Co.:
1/1/17 12/31/17 12/31/18
Accum. benefit obligation $9,240,000 $9,660,000 $12,600,000
Projected benefit obligation 9,765,000 10,458,000 14,007,000
Fair value of plan assets 8,925,000 10,920,000 12,054,000
AOCI – net (gain) or loss -0- (1,512,000) (1,680,000)
Settlement rate (for year) 11% 11%
Expected rate of return (for year) 8% 7%
Turner estimates that the average remaining service life is 16 years. Turner's contribution was $1,323,000 in 2018 and benefits paid were $987,000.
80. The interest cost for 2018 is
a. $941,220.
b. $1,062,600.
c. $1,150,380.
d. $1,540,770.
The following information relates to the pension plan for the employees of Turner Co.:
1/1/17 12/31/17 12/31/18
Accum. benefit obligation $9,240,000 $9,660,000 $12,600,000
Projected benefit obligation 9,765,000 10,458,000 14,007,000
Fair value of plan assets 8,925,000 10,920,000 12,054,000
AOCI – net (gain) or loss -0- (1,512,000) (1,680,000)
Settlement rate (for year) 11% 11%
Expected rate of return (for year) 8% 7%
Turner estimates that the average remaining service life is 16 years. Turner's contribution was $1,323,000 in 2018 and benefits paid were $987,000.
81. The actual return on plan assets in 2018 is
a. $714,000.
b. $798,000.
c. $1,029,000.
d. $1,134,000.
The following information relates to the pension plan for the employees of Turner Co.:
1/1/17 12/31/17 12/31/18
Accum. benefit obligation $9,240,000 $9,660,000 $12,600,000
Projected benefit obligation 9,765,000 10,458,000 14,007,000
Fair value of plan assets 8,925,000 10,920,000 12,054,000
AOCI – net (gain) or loss -0- (1,512,000) (1,680,000)
Settlement rate (for year) 11% 11%
Expected rate of return (for year) 8% 7%
Turner estimates that the average remaining service life is 16 years. Turner's contribution was $1,323,000 in 2018 and benefits paid were $987,000.
82. The unexpected gain or loss on plan assets in 2018 is
a. $68,880 loss.
b. $39,480 gain.
c. $33,600 gain.
d. $375,480 gain.
The following information relates to the pension plan for the employees of Turner Co.:
1/1/17 12/31/17 12/31/18
Accum. benefit obligation $9,240,000 $9,660,000 $12,600,000
Projected benefit obligation 9,765,000 10,458,000 14,007,000
Fair value of plan assets 8,925,000 10,920,000 12,054,000
AOCI – net (gain) or loss -0- (1,512,000) (1,680,000)
Settlement rate (for year) 11% 11%
Expected rate of return (for year) 8% 7%
Turner estimates that the average remaining service life is 16 years. Turner's contribution was $1,323,000 in 2018 and benefits paid were $987,000.
83. The corridor for 2018 is
a. $1,083,600.
b. $1,092,000.
c. $1,186,500.
d. $1,400,700.
The following information relates to the pension plan for the employees of Turner Co.:
1/1/17 12/31/17 12/31/18
Accum. benefit obligation $9,240,000 $9,660,000 $12,600,000
Projected benefit obligation 9,765,000 10,458,000 14,007,000
Fair value of plan assets 8,925,000 10,920,000 12,054,000
AOCI – net (gain) or loss -0- (1,512,000) (1,680,000)
Settlement rate (for year) 11% 11%
Expected rate of return (for year) 8% 7%
Turner estimates that the average remaining service life is 16 years. Turner's contribution was $1,323,000 in 2018 and benefits paid were $987,000.
84. The amount of AOCI (net gain) amortized in 2018 is
a. $26,775.
b. $26,250.
c. $20,344.
d. $17,457.
85. Presented below is information related to Decker Manufacturing Company as of December 31, 2018:
Projected benefit obligation $1,700,000
Accumulated OCI -net gain 600,000
Accumulated OCI (PSC) 810,000
The amount for the prior service cost is related to an increase in benefits. The fair value of the pension plan assets is $1,200,000.
The pension asset / liability reported on the balance sheet at December 31, 2018 is
a. Pension liability of $500,000
b. Pension liability of $1,200,000
c. Pension liability of $1,700,000
d. Pension liability of $2,510,000
Foster Corporation received the following report from its actuary at the end of the year:
December 31, 2017 December 31, 2018
Projected benefit obligation $4,000,000 $4,400,000
Accumulated benefit obligation 2,600,000 2,960,000
Fair value of pension plan assets 2,760,000 2,880,000
86. The amount reported as the pension liability at December 31, 2017 is
a. $ -0-.
b. $160,000.
c. $1,240,000.
d. $1,400,000.
Foster Corporation received the following report from its actuary at the end of the year:
December 31, 2017 December 31, 2018
Projected benefit obligation $4,000,000 $4,400,000
Accumulated benefit obligation 2,600,000 2,960,000
Fair value of pension plan assets 2,760,000 2,880,000
87. The amount reported as the pension liability at December 31, 2018 is
a. $4,400,000
b. $2,960,000
c. $1,440,000
d. $1,520,000
The following information relates to Jackson, Inc.:
For the Year Ended December 31,
2017 2018
Plan assets (at fair value) $2,040,000 $2,736,000
Pension expense 855,000 675,000
Projected benefit obligation 2,430,000 2,901,000
Annual contribution to plan 900,000 675,000
Accumulated OCI (PSC) 720,000 630,000
88. The amount reported as the liability for pensions on the December 31, 2017 balance sheet is
a. $ -0-.
b. $45,000.
c. $390,000.
d. $345,000.
The following information relates to Jackson, Inc.:
For the Year Ended December 31,
2017 2018
Plan assets (at fair value) $2,040,000 $2,736,000
Pension expense 855,000 675,000
Projected benefit obligation 2,430,000 2,901,000
Annual contribution to plan 900,000 675,000
Accumulated OCI (PSC) 720,000 630,000
89. The amount reported as the liability for pensions on the December 31, 2018 balance sheet is
a. $ -0-.
b. $165,000.
c. $2,901,000.
d. $630,000.
90. Presented below is information related to Noble Inc. as of December 31, 2018.
Accumulated OCI (G/L) $ 120,000
Projected benefit obligation 4,870,000
Accumulated benefit obligation 4,560,000
Vested benefits 2,160,000
Plan assets (at fair value) 4,472,000
Accumulated OCI (PSC) -0-
The amount reported as the pension liability on Noble's balance sheet at December 31, 2018 is
a. $ -0-.
b. $88,000.
c. $310,000.
d. $398,000.
91. Rossi Company has a defined-benefit plan. At the end of 2018, it has determined the following information related to its pension plan:
Projected benefit obligation $1,460,000
Accumulated benefit obligation 1,320,000
Fair value of pension plan assets 1,220,000
The amount of pension liability that is reported in Rossi's balance sheet at the end of 2018 is
a. $300,000.
b. $240,000.
c. $140,000.
d. $100,000.
92. Presented below is pension information related to Waters Company as of December 31, 2018:
Accumulated benefit obligation $3,600,000
Projected benefit obligation 4,200,000
Plan assets (at fair value) 4,500,000
Accumulated OCI (G / L) 120,000
The amount to be reported as Pension Asset / Liability as of December 31, 2018 is
a. Pension Liability of $600,000.
b. Pension Asset of $900,000.
c. Pension Liability of $300,000.
d. Pension Asset of $300,000.
On January 1, 2018, Parks Co. has the following balances:
Projected benefit obligation $5,600,000
Fair value of plan assets 5,000,000
The settlement rate is 10%. Other data related to the pension plan for 2018 are:
Service cost $320,000
Amortization of prior service costs 72,000
Contributions 360,000
Benefits paid 335,000
Actual return on plan assets 352,000
Amortization of net gain 24,000
93. The balance of the projected benefit obligation at December 31, 2018 is
a. $5,992,000.
b. $6,128,000.
c. $6,480,000.
d. $6,145,000.
On January 1, 2018, Parks Co. has the following balances:
Projected benefit obligation $5,600,000
Fair value of plan assets 5,000,000
The settlement rate is 10%. Other data related to the pension plan for 2018 are:
Service cost $320,000
Amortization of prior service costs 72,000
Contributions 360,000
Benefits paid 335,000
Actual return on plan assets 352,000
Amortization of net gain 24,000
94. The fair value of plan assets at December 31, 2018 is
a. $4,673,000.
b. $3,674,000.
c. $5,377,000.
d. $5,712,000.
95. Huggins Company has the following information at December 31, 2018 related to its pension plan:
Projected benefit obligation $5,000,000
Accumulated benefit obligation 4,000,000
Plan assets (fair value) 5,440,000
Accumulated OCI (PSC) 375,000
The amount of pension asset / liability Huggins Company would recognize at December 31, 2018 is
a. Pension liability of $375,000.
b. Pension asset of $1,440,000.
c. Pension liability of $1,000,000.
d. Pension asset of $440,000.
96. The following pension plan information is for Farr Company at December 31, 2018.
Projected benefit obligation $9,000,000
Accumulated benefit obligation 7,950,000
Plan assets (at fair value) 6,520,000
Accumulated OCI (PSC) 540,000
Pension expense for 2018 3,000,000
Contribution for 2018 2,400,000
The amount to be reported as the liability for pensions on the December 31, 2018 balance sheet is
a. $2,480,000.
b. $2,030,000.
c. $1,650,000.
d. $1,430,000.
*97. The following facts relate to the Patton Co. postretirement benefits plan for 2018:
Service cost $240,000
Discount rate 9%
APBO, January 1, 2018 $1,500,000
EPBO, January 1, 2018 $2,000,000
Benefit payments to employees $115,000
The amount of postretirement expense for 2018 is
a. $240,000.
b. $375,000.
c. $420,000.
d. $490,000.
*98. The following facts relate to the postretirement benefits plan of Keller, Inc. for 2018:
Service cost $780,000
Discount rate 8%
APBO, January 1, 2018 $4,000,000
EPBO, January 1, 2018 $4,800,000
Average remaining service to full eligibility 20 years
Average remaining service to expected retirement 25 years
The amount of postretirement expense for 2018 is
a. $1,100,000.
b. $1,260,000.
c. $1,300,000.
d. $1,164,000.
*99. The following facts relate to the Gamble Co. postretirement benefits plan for 2018:
Service cost $236,000
Discount rate 10%
EPBO, January 1, 2018 $1,095,000
APBO, January 1, 2018 $900,000
Actual return on plan assets in 2018 $31,500
Expected return on plan assets in 2018 $24,000
The amount of postretirement expense for 2018 is
a. $294,500.
b. $302,000.
c. $321,500.
d. $326,000.
MULTIPLE CHOICE—CPA Adapted
100. The following information pertains to Hopson Co.'s pension plan:
Actuarial estimate of projected benefit obligation at 1/1/18 $82,000
Assumed discount rate 10%
Service costs for 2018 $23,000
Pension benefits paid during 2018 $15,000
If no change in actuarial estimates occurred during 2018, Hopson's projected benefit obligation at December 31, 2018 was
a. $90,200.
b. $90,000.
c. $113,200.
d. $98,200.
101. Interest cost included in pension expense recognized for a period by an employer sponsoring a defined-benefit pension plan represents the
a. shortage between the expected and actual returns on plan assets.
b. increase in the projected benefit obligation due to the passage of time.
c. increase in the fair value of plan assets due to the passage of time.
d. amortization of the discount on accumulated OCI (PSC).
102. Logan Corp., a company whose stock is publicly traded, provides a noncontributory defined-benefit pension plan for its employees. The company's actuary has provided the following information for the year ended December 31, 2018:
Projected benefit obligation $730,000
Accumulated benefit obligation 545,000
Fair value of plan assets 860,000
Service cost 240,000
Interest on projected benefit obligation 24,000
Amortization of prior service cost 60,000
Expected and actual return on plan assets 82,500
The market-related asset value equals the fair value of plan assets. No contributions have been made for 2018 pension cost. In its December 31, 2018 balance sheet, Logan should report a pension asset / liability of
a. Pension liability of $730,000
b. Pension asset of $860,000
c. Pension asset of $130,000
d. Pension liability of $545,000
103. Seigel Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Seigel should report a pension asset / liability equal to the
a. accumulated benefit obligation.
b. projected benefit obligation.
c. accumulated benefit obligation.
d. funded status relative to the projected benefit obligation.
104. Ohlman, Inc. maintains a defined-benefit pension plan for its employees. As of December 31, 2018, the market value of the plan assets is less than the accumulated benefit obligation. The projected benefit obligation exceeds the accumulated benefit obligation. In its balance sheet as of December 31, 2018, Ohlman should report a liability in the amount of the
a. excess of the projected benefit obligation over the fair value of the plan assets.
b. excess of the accumulated benefit obligation over the fair value of the plan assets.
c. projected benefit obligation.
d. accumulated benefit obligation.
105. At December 31, 2018, the following information was provided by the Vargas Corp. pension plan administrator:
Fair value of plan assets $5,400,000
Accumulated benefit obligation 6,700,000
Projected benefit obligation 8,900,000
What is the amount of the pension liability that should be shown on Vargas' December 31, 2018 balance sheet?
a. $8,900,000
b. $3,500,000
c. $2,200,000
d. $1,300,000
BRIEF EXERCISES
BE. 20-106—Pension accounting terminology.
Briefly explain the following terms:
(a) Service cost
(b) Interest cost
(c) Prior service cost
(d) Vested benefits
BE. 20-107—Pension assets.
Discuss the following ideas related to pension assets:
(a) Market-related asset value.
(b) Actual return on plan assets.
(c) Expected return on plan assets.
(d) Unexpected gains and losses on plan assets.
BE. 20-108—Measuring and recording pension expense.
Kessler, Inc. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31, 2018:
January 1, 2018 December 31, 2018
Projected benefit obligation $2,500,000 $2,850,000
Fair value of plan assets 1,250,000 1,600,000
Accumulated benefit obligation 1,930,000 2,620,000
Accumulated OCI – (PSC) 540,000 300,000
The service cost component for 2018 is $180,000 and the amortization of prior service cost is $240,000. The company's actual funding of the plan in 2018 amounted to $525,000. The expected return on plan assets and the settlement rate were both 8%.
Instructions
(a) Determine the pension expense to be reported in 2018.
(b) Prepare the journal entry to record pension expense and the employers' contribution to the pension plan in 2018.
BE. 20-109—Measuring and recording pension expense.
Presented below is information related to Jones Department Stores, Inc. pension plan for 2018.
Accumulated benefit obligation (at year-end) $600,000
Service cost 590,000
Funding contribution for 2018 510,000
Settlement rate used in actuarial computation 10%
Expected return on plan assets 9%
Amortization of PSC (due to benefit increase) 100,000
Amortization of net gains 48,000
Projected benefit obligation (at beginning of period) 470,000
Fair value of plan assets (at beginning of period) 360,000
Instructions
(a) Compute the amount of pension expense to be reported for 2018. (Show computations.)
(b) Prepare the journal entry to record pension expense and the employer's contribution for 2018.
BE. 20-110— Recording pension asset / liability.
Miles Co. had the following selected balances at December 31, 2018:
Projected benefit obligation $4,950,000
Accumulated benefit obligation 4,550,000
Fair value of plan assets 4,340,000
Accumulated OCI (PSC) 170,000
Instructions
Calculate the pension asset / liability to be recorded at December 31, 2018.
