Chapter 20-exercises and problems

Chapter 20-exercises and problems - Exercises ' 1067...

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Unformatted text preview: Exercises ' 1067 EXERCISES 1320-1 (Pension Expense, Journal Entries) The following information is available for the pension plan of Kiley Company for the year 2010. Actual and expected return on plan assets $ 12,000 Benefits paid to retirees 40,000 Contributions (funding) 95,000 Interest/discount rate 10% Prior service cost amortization 8,000 Projected benefit obligation, January 1, 2010 500,000 Service cost 60,000 Instructions (a) Compute pension expense for the year 2010. (13) Prepare the journal entry to record pension expense and the employer‘s contribution to the pen~ / sion plan in 2010. (L0 war-2 (Computation of Pension Expense) Rebekah Company provides the following information 6) about its defined benefit pension plan for the year 2011. Servlce cost $ 90,000 Contribution to the plan _ _. 105,000 Prior service cost amortization ' 7 10,000 Actual and expected return on plan assets 64,000 Benefits paid 40,000 Plan assets at January 1, 2011 - 640,000 Projected benefit obligation at January 1, 2011 800,000 Accumulated 001 (P80) at January 1, 2011 150,000 , Interest/discount (settlement) rate 10% Instructions Compute the pension expense for the year 201]. (L0 M200 (Preparation of Pension Worksheet) .Using the information in E20-2 prepare a pension work- sheet inserting ]anuary 1, 2011, balances, showing December 31, 2011, balances, and the journal entry recording pension expense. (L0\5)/ 1320-4 (Basic Pension Worksheet) The following facts apply to the pension plan of Trudy Borke Inc. for the year 2011. Plan assets, January 1, 2011 $490,000 Projected benefit obligation, January 1, 2011 490.000 Settlement rate 8.5% Service cost 40,000 Contributions (funding) ‘ 30,000 Actual and expected return on plan assets 49,700 Benefits paid to retirees 33,400 Instructions Using the preceding data, compute pension expense for the year 2011. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2011 and the year-end balances in e related pension accounts. (L0 6) 20-5 (Application of Years-of-Service Method) Valente Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning ‘ of 2011 are as follows. Future Employee Years of Service Ed 3 Paul 4 Mary 6 Dave 6 Caroline 6 On January 1, 2011, the company amended its pension plan increasing its projected benefit obligation by $60,000. 1068 - Chapter 20 Accounting for Pensions and Postretirement Benefits Instructions _ Cd puts the amount of prior service cost amortization for the years 2011 through 2016 using the years- —service method setting up appropriate schedules. (L0 4) E20-6 (Computation of Actual Return) James Paul Importers provides the following pension plan information. 7 Fair value of pension plan assets, January 1, 2011 $2,300,000 Fair value of pension plan assets, December 31, 2011 2,725,000 Contributions to the plan In 2011 - 250.000 Benefits paid retirees in 2011 350,000 in tructions ‘ om the data above, compute the actual return on the plan assets for 2011. (Lo E20-7 (Basic Pension Worksheet) The following defined pension data of Doreen Corp. apply to the 5) year 2011. Projected benefit obligation, iii/11 (before amendment) $560,000 Plan assets, 1f1i'11 546,200 Pension liability 13,800 On January 1, 2011, Doreen Corp, through plan amendment, 5 _ k f/ grants prior service benefits having a present value of 100,000 (j/ ,/ Settlement rate 9% ‘ I r“ Service cost 58,000 / Contributions (funding) 55,000 Actual (expected) return on plan assets 52,280 // Benefits paid to retirees 40.000 Prior service cost amortization for 2011 17,000 Instructions ' . For 2011, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense nd'the year-end balances in the related pension accounts. ' (L0 ) E20-8 (Application of the Corridor Approach) Dougherty Corp. has beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets. Projected Plan Benefit Assets Obligation Value f 2009 $2,000,000 $1,900,000 , . 2010 2,400,000 2,500,000 ‘9 7i . 2011 2,900,000 2,600,000 2012 3,600,000 3,000,000 The average remaining service life per employee in 2009 and 2010 is 10 years and in 2011 and 2012 is 12 years. The net gain or loss that occurred during each year is as follows: 2009, $280,000 loss; 2010, $90,000 loss; 2011, $10,000 loss; and 2012, $25,000 gain. (In working the solution the gains and. losses must be ag~ gregated to arrive at year-end balances.) instructions Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule. (L0 9) E20-9 I (Disclosures: Pension Expense and Other Comprehensive Income) Mildred Enterprises pro- vides the following information relative to its defined benefit pension plan. Balances or Values at December 31, 2011 Projected benefit obligation $2,737,000 Accumulated benefit obligation 1,980,000 Fair value of plan assets 2,278,329 Accumulated 001 (P80) 205,000 . f - Accumulated OCl-w-Net loss (1/1/11 balance, —o—) 45,680 E "2k Pension liability 207,991 Other pension plan data: Service cost for 2011 $ 94,000 Prior service cost amortlzation for 2011 45,000 Actual return on plan assets In 2011 130,000 Expected return on plan assets In 2011 175,680 Interest on January 1, 2011, projected benefit obligation 253,000 Contributions to plan in 2011 92,329 Beneflts paid 140,000 Exercises Instructions (a) Prepare the note disclosing the components of pension expense for the year 2011. (b) Determine the amounts of other comprehensive income and comprehensive income for 2011. Net income for 2011 is $35,000. (c) Compute the amount of accumulated other comprehensive income reported at December 31, 2011. " (L0 5) 20-10 (Pension Worksheet) Buhl Corp. sponsors a defined benefit pension plan for its employees. On ' January 1, 2011, the following balances relate to this plan. Plan assets $480,000 " Projected benefit obligation 625,000 " Pension asseti'llablllty 145,000 / Accumulated OCI (P30) 100,000 we” As a result of the operation of the plan during 2011, the following additional data are provided by the actuary. Service cost for 2011 $90,000 .a Settlement rate, 9% Actual return on plan assets In 2011 57,000 r” Amortization of prior service cost 19,000 v“ Expected return on plan assets 52,000 / Unexpected loss from change in projected benefit obligation, due to change In actuarial predictions 76,000 M Contributions In 2011 99,000 V 1/. Benefits paid retirees in 2011 85,000 V, / Instructions (a) Using the data above, compute pension expense for Buhl Corp. for the year 2011 by preparing a _ pension worksheet. ' '(b) Prepare the journal entry for pension expense for 2011. l/x’" (L0 4, 1320-11 (Pension Expense, Journal Entries, Statement Presentation) Griseta Company sponsors a de- 5’ ) fined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2010 in which no benefits were paid. N 1. The actuarial present value of future benefits earned by employees for services rendered in 2010 amounted to $56,000. ' 2. The company’s funding policy requires a contribution to the pension trustee amounting to $145,000 for 2010. 3. As of January 1, 2010, the company had a projected benefit obligation of $1,000,000, an accumu- lated benefit obligation of $800,000, and a balance of $400,000 in accumulated OCI (PSC) of $400,000. The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The ac- tual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2010 and no benefits were paid. 4. Amortization of prior service cost was $40,000 in 2010. Amortization of net gain or loss was not required in 2010. Instructions (a) Determine the amounts of the components of pension expense that should be recognized by the company in 2010. (b) Prepare the journal entry or entries to record pension expense and the employer’s contribution to the pension trustee in 2010. (0) Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2010. (L 4, E20-12 (Pension Expense, Journal Entries, Statement Presentation) Nellie Altom Company received the following selected information from its pension plan trustee concerning the operation of the com— pany’s defined benefit pension plan for the year ended December 31, 2010. January 1, December 31, 2010 2010 Projected benelit obligation $2,000,000 $2,077,000 Market-related and fair value of plan assets 800,000 1,130,000 Accumulated benefit obligation 1,600,000 1,720,000 Accumulated OCI (GiL)-Net gain ~0- (200,000) The service cost component of pension expense for employee services rendered in the current year amounted to $77,000 and the amortization of prior service cost was $115,000. The company's actual funding - 1069 1070 - Chapter-20 Accounting for Pensions and Postretirement Benefits (contributions) of the plan in 2010 amounted to $250,000. The expected return on plan assets and the actual rate were both 10%; the interest/ discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,200,000 on January 1, 2010. Assume no benefits paid in 2010. Instructions '(a) Determine the amounts of the components of pension expense that should be recognized by the company in 2010. (b) Prepare the j0urnal entry to record pension expense and the employer’s contribution to the pen- sion plan in 2010. , (c) Indicate the pension—related amounts that would be reported on the income statement and the balance sheet for Nellie Altom Company for the year 2010. (L0 4. E20-13 (Computation of Actual Return, Gains and Losses, Corridor Test, and Pension Expense) Linda 6' Berstler Company sponsors a defined benefit pension plan. The corporation's actuary provides the fol- 8' 9 lowing information about the plan. January 1. December 31. 2011 Vested benelit obligation $1.500 $1.900 4"” Accumulated benefit obligation 1,900 2.730 0;, Projected benefit obligation 2.800 3.645 -' Plan assets (falr value) 1.700 ,r 2.620 f / Settlement rate and expected rate 01 return 10% Pension asset/liability 1,100 ? Service cost for the year 2011 400 Contributions (funding in 2011) 800 ’ Benefits pald in 2011 200 / Instructions (a) Compute the actual return on the plan assets in 2011. (b) Compute the amount of the other comprehensive income (G/ L) as of December 31, 2011. (As- ‘ sume the January 1, 2011, balance was zero.) ‘ , (c) Compute the amount of net gain or loss amortization for 2011 (corridor approach). ((1) Compute pension expense for 2011. E2044 (Worksheet for 1320-13) Using the information in E20-13 about Linda Berstler Company’s de- fined benefit pension plan, prepare a 2011 pension worksheet with supplementary schedules of compu- tations. Prepare the journal entries at December 31, 2011, to record pension expense and related pension @’ transactions. Also, indicate the pension amounts reported in the balance sheet. (L O 4)=‘ - E2045 (Pension Expense, Journal Entries) Walker Company provides the following selected infor— - . ,-_rnation related to its defined benefit pension plan for 2010. Pension assetl'liability (January 1) $ 25.000 Cr. Accumulated benefit obligatlon (December 31) 400.000 Actual and expected return on plan assets 15,000 Contributions (funding) in 2010 150,000 V/vf Fair value of plan assets (December 31) 800.000 » Settlement rate 10% / Projected benefit obligation (January 1) 700.000 Servlce cost 90.000 Instructions (a) Compute pension expense and prepare the journal entry to record pension expense and the em- ployer’s contribution to the pension plan in 2010. (b) Indicate the pension-related amounts that would be reported in the company’s income statement and balance sheet for 2010. (L0 8 E20-16 (Amortization of Accumulated 0C1 (GIL), Corridor Approach, Pension Expense Computation) The actuary for the pension plan of Joyce Bush Inc. calculated the following net gains and losses. Incurred during the Year (Gain) or Loss 2010 $300,000 2011 480.000 2012 (210,000) 2013 (200,000) Exercises - 1071 Other information about the company's pension obligation and plan assets is as follows. Projected Benefit Plan Assets As of January 1, Obligation _(market—relatad asset value) 2010 $4,000,000 $2,400,000 2011 4,520,000 2,200,000 2012 4,980,000 2,600,000 2013 4,250,000 3,040,000 Joyce Bush Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total service-years for all participating employees is 5,600. The beginning balance of accumu—' lated OCI (G/L) is zero on January 1, 2010. 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 com- ponent of net periodic pension expense for each of the years 2010, 2011, 2012, and 2013. Apply the "cor— ridor" approach in determining the amount to be amortized each year. L0 8) 1320-17 (Amortization of Accumulated OCI Balances) Lowell Company sponsors a defined benefit pension plan for its 600 employees. The company’s actuary provided the following information about the plan. / / - 6.1; January 1, December 31, 3X 7 2010 x 2010 I 2011 x Projected benetit obligation '~ $2,800,000 4 $3,650,000 ’ $4,400,000 ’ Accumulated beneiit obligation 1,900,000 " 2,430,000 2,900,000 Plan assets (fair value and market related asset value) 1,700,000 ’ 2,900,000 / 2.100.000 w Accumulated net (gain) or lose (tor purposes . '_ of the corridor calculation) «0— .2 101,000 4" (24,000) r Discount rate (current settlement rate) 11% , 8% Actual and expected asset return rate 10% 10% The average remaining service life per employee is 10.5 years. The service cost component of net periodic pension expense for employee services rendered amounted to $400,000 in 2010 and $475,000 in 2011. The accumulated OCI (PSC) on January 1, 2010, was $1,155,000. No benefits have been paid. instructions (Round to the nearest dollar) / (a) Compute the amount of accumulated OCI (PSC) to be amortized as a component of net periodic pension expense for each of the years 2010 and 2011. '/ (b) Prepare a schedule which reflects the amount of accumulated OCI (G/ L) to be amortized as a component of pension expense for 2010 and 2011. / (c) Determine the total amount of pension expense to be recognized by Lowell Company in 2010 and 2011. L0 5, 1320-18 (Pension Worksheet—Missing Amounts) The accounting staff of Henin Inc. has prepared the 3) following pension worksheet. Unfortunately, several entries in the worksheet are not de‘cipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks re- lated to the pension plan for 2011. 1072 - Chapter 20 Accounting for Pensions and Postretirement Benefits [I {I -< H»; Memo Record Prolected Banetll Obligation ' Instructions (a) Determine the missing amounts in the 2011 pension worksheet, indicating whether the amounts are debits or credits. - (b) Prepare the journal entry to record 2011 pension expense for Henin Inc. (c) The accounting staff has heard of a pension accounting procedure called "corridor amortization.” Is Henin required to record any amounts for corridor amortization in (1) 2011? In (2) 2012? Explain. (L0 10, *E20-19 (Postretirement Benefit Expense Computation) " Ankiel Co. provides the following information 11) about its postretirement benefit plan for the year 2010. Service cost $ 45.000 Contribution to the plan 10.000 Actual and expected return on plan assets 12.000 Benefits paid ' 20,000 Plan assets at January 1. 2010 ' 110.000 Accumulated postretirernent benefit obligation at January 1, 2010. ‘ 430.000 Discount rate 8% Instructions Compute the postretirement benefit expense for 2010. (L0 10. *E20-20 (Poet-retirement Benefit Worksheet) Using the information in 0320-19, prepare a worksheet in- “) sorting January 1, 2010, balances, and showing December 31, 2010, balances. Prepare the journal entry recording postretirement benefit expense. (L0 10. *E20—21 (Postretirement Benefit Expense Computation) Chance Inc. provides the following information 11) related to its postretirement benefits for the year 2012. Accumulated postretlrement benelit obligation at January 1. 2012 $810,000 Actual and expected return on plan assets 34.000 Prior service cost amortization , 21.000 Discount rate 10% Service cost 88.000 Instructions . Compute postretirement benefit expense for 2012. Exercises - 1073 (L0 10. *E20-22 (Postretirement Benefit Expense Computation) Marvelous Marvin Co. provides the following 11) information about its postretirement benefit plan for the year 2011. Service cost $ 90,000 Prior servlce cost amortlzallon 3,000 Contrlbution to the plan 16,000 Actual and expected return on plan assets 62,000 Benefits pald 40,000 Plan assets at January 1, 2011 710.000 Accumulated postretirement benelit obllgatlon at January 1. 2011 810,000 Accumulated OCI (PSC) at January 1. 2011 100,000 Dr. Discount rate 9% Instructions Compute the postretirement benefit expense for 2011. (L0 10, *E20-23 (Postretirement Benefit Worksheet) Using the information in *E20-22 prepare a worksheet in- 11) serting January 1, 2011, balances, showing December 31, 2011, balances, and the journal entry recording postretirement benefit expense. (L0 10, *E20-24 (Postretirement Benefit Worksheet—Missing Amounts) The accounting staff of Hewitt Inc. 11) has prepared the following postretirement benefit worksheet. Unfortunately, several entries in the work- sheet are not decipherable. The company has asked your assistance in completing the worksheet and com- pleting the accounting tasks related to the pension plan for 2010. . APBD Plan Assets "1513—0—0“ “m Instructions (a) Determine the missing amounts in the 2010 pension worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2010 pension expense for Hewitt Inc. (c) What discount rate is Hewitt using in accounting for the interest on its other postretirement ben- efit plan? Explain. 1074 - Chapter 20 Accounting for Pensions and Postretirement Benefits 20-1 (2-Year Worksheet) On January 1, 2011, Diana Peter Company has the following defined bene- fit pension plan balances. (L0 Prciected benefit obligation $4,200,000 Fair value of plan assets 4,200,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2012, 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. 2011 2012 Service costs $150,000 $180,000 Prior service costs amortization —0— 90.000 Contributions (funding) to the plan 140,000 185,000 Benefits paid 200,000 280,000 Actual return on plan assets 252,000 260,000 Expected rate of return on assets 6% 8% Instructions (a) Prepare a pension worksheet for the pension plan for 2011 and 2012. (b) For 2012, prepare the journal entry to record pension-related amounts. {L0 5. P 0-2 (3-Year Worksheet, Journal Entries, and Reporting) Katie Day Company adopts acceptable ac— ounting for its defined benefit pension plan on January 1, 2011, with the following beginning balances: plan assets $200,000; projected benefit obligation $200,000. Other data relating to 3 years’ operation of the plan are as follows. 2011 2012 2013 Annual service cost “ $16,000 $ 19,000 $ 26,000 Settlement rate and expected rate of return 10% 10% 10% Actual return on plan assets 17,000 21,900 24,000 Annual funding (contributions) 16,000 40,000 48,000 Benefits paid 14,000 16,400 21,000 Prior service cost (plan amended, 111/12) . 160,000 Amortization of prior service cost 7 . 54,400 41,600 Change in actuarial assumptions establishes _ , -,a December 31. 2013, projected benefit obligation of: 520,000 Instructions . (a) 7 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 2013. (L0 6, P20-3 (Pension Expense, Journal Entries, Amortization of Loss) Paul Dobson Company sponsors a 7, 8, defined benefit plan for its 100 employees. On January 1, 2010, the company's actuary provided the 9) following information. Accumulated other comprehensive loss (PSC) $150,000 Pension plan assets (fair value and market-related asset value) 200,000 Accumulated benelit obligation 260.000 Projected benefit obligation 350.000 The average remaining service period for the participating employees is 10.5 years. All employees are expected to receive benefits under the plan. On December 31, 2010, the actuary calculated that the pres- ent value of future benefits earned for employee services rendered in the current year amounted to $52,000; the projected benefit obligation was $452,000; fair value of pension assets was $276,000; the ac- cumulated benefit obligation amounted to $365,000. The expected return on plan assets and the discount rate on the projected benefit obligation were both 10%. The actual return on plan assets is $11,000. The Problems company’s current year’s contribution to the pension plan amounted to $65,000. No benefits were paid during the year. Instructions (Round to the nearest dollar) (a) Determine the components of pension expense that the company would recognize in 2010. (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 pen- sion plan in 2010. (c) Compute the amount of the 2010 increase/ decrease in gains or losses and the amount to be amor- tized in 2010 and 2011. ' (d) Indicate the pension amounts reported in the financial statement as of December 31, 2010. P20-4 (Pension Expense, Journal Entries for 2 Years) Mantle Company sponsors a defined benefit pen- sion plan. The following information related to the pension plan is available for 2010 and 2011. 2010 fl Plan assets (lair value), December 31 $694,000 $844,000 Projected beneiit obligation, January 1 600,000 700.000 Pension a‘ssetlitability, January 1 40,000 Cr. ? Prior service cost, January 1 250,000 240,000 Service cost 60,000 90,000 Actual and expected return on plan assets 24,000 30,000 Amortization oi prior service cost ' 10,000 12,000 Contributions (funding) 110,000 120,000 Accumulated benefit obligation, December 31 500,000 550,000 interest/settlement rate 9% 9% instructious (a) Compute pension expense for 2010 and 2011. _ (b) Prepare the journal entries to record the pension expense and the company's funding of the pen- ‘sion plan for both years. P20-5 {Computation of Pension Expense, Amortization of Net Gain or Loss-Corridor Approach, Journal Entries for 3 Years) Dubel Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2010. The insurance company which administers the pension plan provided the following selected information for the years 2010, 2011, and 2012. For Year Ended December 31. 2010 2011 2012 Plan assets (fair value) $50,000 ' $ 85.000 $170,000 Accumulated benefit obligation 45,000 165,000 292,000 Projected benefit obligation 55,000 200,000 324,000 Net (gain) loss (for purposes of corridor calculation) -—0—- 83,950 86,121 Employer's funding contribution (made at end of year) 50,000 60,000 95,000 There were no balances as of January 1, 2010, when the plan was initiated. The actual and expected re— turn on plan assets was 10% over the 3-year period but the settlement rate used to discount the com- pany’s pension obligation was 13% in 2010, 11% in 2011, and 8% in 2012. The service cost component of net periodic pension expense amounted to the following: 2010, $55,000; 2011, $85,000; and 2012, $119,000. The average remaining service life per employee is 12 years. No benefits were paid in 2010, $30,000 of benefits were paid in 2011, and $18,500 of benefits were paid in 2012 (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 2010, 2011, and 2012. (b) Prepare the journal entries to record net periodic pension expense, employer’s funding contribu- tion, and related pension amounts for the years 2010, 2011, and 2012. - 1075 ...
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Chapter 20-exercises and problems - Exercises ' 1067...

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