Chapter 20 - SOLUTIONS TO EXERCISES EXERCISE 20-1 (510...

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20-1 SOLUTIONS TO EXERCISES EXERCISE 20-1 (5–10 minutes) (a) Computation of pension expense: Service cost . ..................................................... $ 60,000 Interest cost ($500,000 X .10) . ......................... 50,000 Expected return on plan assets . ..................... (12,000) Prior service cost amortization . ...................... 8,000 Pension expense for 2010 . .............................. $106,000 (b) Pension Expense . .................................................... 106,000 Cash . ................................................................. 95,000 Pension Asset /Liability . .................................. 3,000 Other Comprehensive Income (PSC) . ............ 8,000 EXERCISE 20-2 (10–15 minutes) Computation of pension expense: Service cost . ............................................................. $ 90,000 Interest cost ($800,000 X 10%) . .............................. 80,000 Expected return on plan assets . ............................ (64,000) Prior service cost amortization . ............................. 10,000 Pension expense for 2011 . ...................................... $116,000
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20-14 EXERCISE 20-3 (15 25 minutes) Rebekah Company Pension Worksheet—2011 General Journal Entries Memo Record Items Annual Pension Expense Cash OCI Prior Service Cost Pension Asset/Liability Projected Benefit Obligation Plan Assets Balance, January 1, 2011 160,000 Cr. 800,000 Cr. 640,000 Dr. Service cost 90,000 Dr. 90,000 Cr. Interest cost* 80,000 Dr. 80,000 Cr. Actual return** 64,000 Cr. 64,000 Dr. Amortization of PSC 10,000 Dr. 10,000 Cr. Contributions 105,000 Cr. 105,000 Dr. Benefits 40,000 Dr. 40,000 Cr. Journal entry for 2011*** 116,000 Dr. 105,000 Cr. 10,000 Cr. 1,000 Cr. Accumulated OCI, Dec. 31, 2010 150,000 Dr. Balance, Dec. 31, 2011 140,000 Dr. 161,000 Cr. 930,000 Cr. 769,000 Dr. *$80,000 = $800,000 X 10%. **Note : We show actual return on the worksheet to ensure that plan assets are properly reported. If expected and actual return differ, then an additional adjustment is made to compute the proper amount of pension expense. ***Pension Expense . .................................................. 116,000 Other Comprehensive Income (PSC) . ......... 10,000 Cash . .............................................................. 105,000 Pension Asset/Liability . ............................... 1,000
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20-15 EXERCISE 20-4 (10 15 minutes) Trudy Borke Inc. Pension Worksheet—2011 General Journal Entries Memo Record Items Annual Pension Expense Cash Pension Asset / Liability Projected Benefit Obligation Plan Assets Balance, January 1, 2011 490,000 Cr. 490,000 Dr. Service cost 40,000 Dr. 40,000 Cr. Interest cost* 41,650 Dr. 41,650 Cr. Actual return** 49,700 Cr. 49,700 Dr. Contributions 30,000 Cr. 30,000 Dr. Benefits 33,400 Dr. 33,400 Cr. Journal entry, December 31 31,950 Dr. 30,000 Cr. 1,950 Cr. Balance, December 31, 2011 1,950 Cr. 538,250 Cr. 536,300 Dr. *$41,650 = $490,000 X .085. **Note : We show actual return on the worksheet to ensure that plan assets are properly reported. If expected and actual return differ, then an additional adjustment is made to compute the proper amount of pension expense.
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EXERCISE 20-8 (20–25 minutes) Corridor and Minimum Loss Amortization Year Projected Benefit Obligation (a) Plan Assets 10% Corridor Accumulated OCI (G/L) (a) Minimum Amortization of Loss 2009 $2,000,000 $1,900,000 $200,000 $ 0 $ 0 2010 2,400,000 2,500,000 250,000 280,000 3,000 (b) 2011 2,900,000 2,600,000 290,000 367,000 (c) 6,417 (d) 2012 3,600,000 3,000,000 360,000 370,583 (e) 882 (f) (a) As of the beginning of the year. (b) ($280,000 – $250,000) ÷ 10 years = $3,000 (c) $280,000 – $3,000 + $90,000 = $367,000 (d) ($367,000 – $290,000) ÷ 12 years = $6,417 (e) $367,000 – $6,417 + $10,000 = $370,583 (f) ($370,583 – $360,000) ÷ 12 years = $882
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EXERCISE 20-9 (25–35 minutes) (a) Note to financial statements disclosing components of 2011 pension expense: Note X : Net pension expense for 2011 is composed of the following components of pension cost: Service cost. .............................................................. $ 94,000 Interest cost . ............................................................. 253,000 Expected return on plan assets . ............................. (175,680) Prior service cost amortization . .............................. 45,000 Pension expense . .............................................. $216,320 (b) Comprehensive income, 2011 Amortization of prior service cost . ......................... $ (45,000) Actuarial loss . ........................................................... 45,680 Other comprehensive loss. ...................................... $ 680 Comprehensive income, 2011 Net income . ............................................................... $ 35,000 Other comprehensive loss . ..................................... 680 Comprehensive income . .......................................... $ 34,320
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EXERCISE 20-9 (25–35 minutes) (Continued) (c) Accumulated OCI at December 31, 2011 is $250,680; this amount is comprised of the following: PSC Gain/Loss Balance Jan. 1, 2011* $250,000 Dr. $ 0 Amortization of PSC 45,000 Cr. Actuarial loss 45,680 Dr.
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Chapter 20 - SOLUTIONS TO EXERCISES EXERCISE 20-1 (510...

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