CH 20 - E20-7 Solution

CH 20 - E20-7 Solution - IN-CLASS PENSION ACCOUNTING...

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Unformatted text preview: IN-CLASS PENSION ACCOUNTING EXAMPLE FACTS: Service cost Interest rate on PBO Expected return of pension trust assets Actual return of pension fund assets Prior service cost Actuarial liability increase Employer contribution made at year end Benefits paid at year end Average remaining service life 2007 2008 2009 400,000 10% 11% 0 200,000 420,000 10% 11% 81,000 432,000 10% 11% 170,520 500,000 685,000 20,000 20 700,000 20,000 20 675,000 20 Requirement: Record the effects of the above facts in the accounts of the company and also show how the pension plan's balance sheet is affected. The textbook refers to this as a "pension worksheet." IN-CLASS PENSION ACCOUNTING EXAMPLE SOLUTION TO E-20 GENERAL JOURNAL ENTRIES OF COMPANY Accumulated other Annual comprehensive income Pension Pension PS Actuarial asset/ expense Cash costs gain/loss liability Beginning balances Plamn amendment at BOY Adjusted BOY balances Service cost Interest cost Expected return Amortize PSC Contribution to plan Benefit payments Change for year Ending balances - - 58,000 61,200 (52,280) 17,000 - (17,000) (65,000) 83,920 (65,000) Journal entries: DR AOCI -PSC CR Pension liability DR Pension expense CR AOCI - Prio service cost CR Pension liability 120,000 120,000 103,000 103,000 - (13,800) (120,000) (133,800) (58,000) (61,200) 52,280 65,000 (121,920) (135,720) 120,000 (120,000) 83,920 (17,000) (66,920) DR Pension liability CR Cash 65,000 (65,000) OR as one large entry DR Pension expense DR AOCI -PSC CR Pension liability CR Cash 83,920 103,000 (121,920) (65,000) MEMO RECORD Plan assets 546,200 546,200 Pension Benefit Obligation (560,000) (120,000) (680,000) (58,000) (61,200) 52,280 65,000 (40,000) 77,280 623,480 40,000 (199,200) (759,200) ...
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This note was uploaded on 07/17/2011 for the course ACC 306 taught by Professor Rogero during the Summer '11 term at University of Dayton.

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CH 20 - E20-7 Solution - IN-CLASS PENSION ACCOUNTING...

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