ch20 - SOLUTIONS TO B EXERCISES E20-1B(510 minutes(a...

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SOLUTIONS TO B EXERCISES E20-1B (5–10 minutes) (a ) Computation of pension expense: Service cost $250,00 0 Interest cost ($2,600,000 X 0.08) 208,000 Actual (expected) return on plan assets (65,000) Unrecognized prior service cost amortization 40,000 Pension expense for 2007 $433,00 0 (b) Pension Expense .............................................................. 433,000 Cash ............................................................................. 230,000 Prepaid/Accrued Pension Cost ........................... 203,000 E20-2B (10–15 minutes) Computation of pension expense: Service cost $210,00 0 Interest cost ($1,800,000 X 0.09) 162,000 Actual (and expected) return on plan assets (123,000 ) Unrecognized prior service cost amortization 35,000 Pension expense for 2007 $284,00 0 McCaw CompanyPension Worksheet—2007 General Journal Entries Memo Record AnnualPrepaid/ProjectedUnrecognized PensionAccruedBenefitPlanPriorExpense Cash Cost Obligation Assets Service Cost Balance, January 1, 2007 35,000 Cr. 1,800,000 Cr. 1,440,000 Dr. 325,000 Dr. (a) Service cost 210,000 Dr. 210,000 Cr. (b) Interest cost 162,000 Dr. 162,000 Cr. (c) Actual return 123,000 Cr. 123,000 Dr. (d) Amortization of PSC 35,000 Dr. 35,000 Cr. (e) Contributions 263,000 Cr. 263,000 Dr. (f) Benefits ______ 220,000 Dr. 220,000 Cr. Journal entry 284,000 Dr. 263,000 Cr. 21,000 Cr. Balance, December 31, 2007 56,000 Cr. 1,952,000 Cr. 1,606,000 Dr. 290,000 Dr.
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(b) $80,000 = $800,000 X 10%. Reconciliation Schedule Projected benefit obligation $(1,952,000)Plan assets at fair value 1,606,000 Funded status (346,000) Unrecognized prior service cost 290,000 Prepaid/accrued pension cost $ (56,000) I-Pass Corporation Pension Worksheet—2007 General Journal Entries Memo Record AnnualPrepaid/ProjectedPensionAccruedBenefitPlanItems Expense Cash Cost Obligation Assets Balance, January 1, 2007 950,000 Cr. 950,000 Dr. (a) Service cost 75,000 Dr. 75,000 Cr. (b) Interest cost 57,000 Dr. 57,000 Cr. (c) Actual return 40,600 Cr. 40,600 Dr. (d) Contributions 10,000 Cr. 10,000 Dr. (e) Benefits 42,200 Dr. 42,200 Cr. Journal entry, December 31 91,400 Dr. 10,000 Cr. 81,400 Cr. Balance, December 31, 2007 81,400 Cr. 1,039,800 Cr. 958,400 Dr. (b) $57,000 = $950,000 X .06 E20-5B (15–25 minutes) Computation of Service-Years Year Jane John Jimmy Jenny Jerry Total 200711111 5 20081 111 4 20091 111 4 20101 11 3 20111 1 2 20121 1 2 61 3 6420 Cost per service-year: $210,000 ÷ 20 = $10,500 Computation of Annual Prior Service Cost Amortization Total Cost Per Annual Year Service-Years Service-Year Amortization 2007 5 $10,500 $ 52,500 2008 4 10,500 42,000
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2009 4 10,500 42,000 2010 3 10,500 31,500 2011 2 10,500 21,000 2012 2 10,500 21,000 $210,000 E20-6B (10–15 minutes) Computation of Actual Return on Plan Assets Fair value of plan assets at December 31, 2007 $1,460,000 Fair value of plan assets at January 1, 2007 1,250,000 Increase in fair value of plan assets 210,000 Deduct: Contributions to plan during 2007 $160,000 Less: Benefits paid during 2007 206,000 (46,000 ) Actual return on plan assets for 2007 $ 256,000 Eagle Homes Corporation Pension Worksheet—2007 General Journal Entries Memo Record AnnualPrepaid/ProjectedUnrecognizedPensionAccruedBenefitPlanPriorItems Expense Cash Cost Obligation Assets Service Cost Balance, January 1, 2007 59,400 Cr. 1,255,000 Cr. 1,195,600 Dr. (a) Prior service cost 200,000 Cr. 200,000 Dr.New balance, January 1, 2007 59,400 Cr. 1,455,000 Cr. 1,195,600 Dr. 200,000 Dr. (b) Service cost 69,000 Dr. 69,000 Cr. (c) Interest cost 87,300 Dr. 87,300 Cr. (d) Actual return 43,610 Cr. 43,610 Dr. (e) Amortization of PSC 25,000 Dr. 25,000 Cr. (f) Contributions 85,000 Cr. 85,000 Dr. (g) Benefits 52,000 Dr. 52,000 Cr.Journal entry, December 31 137,690 Dr. 85,000 Cr. 52,690 Cr. Balance, December 31, 2007 112,090 Cr. 1,559,300 Cr. 1,272,210 Dr. 175,000 Dr.
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