CHAPTER 20 - CHAPTER 20 Accounting for Pensions and...

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CHAPTER 20 Accounting for Pensions and Postretirement Benefits ASSIGNMENT CHARACTERISTICS TABLE Item Description Level of Difficulty Time (minutes) E20-2 Computation of pension expense. Simple 10–15 E20-3 Preparation of pension worksheet. Moderate 15–25 E20-6 Computation of actual return. Simple 10–15 E20-8 Application of the corridor approach. Moderate 20–25 E20-10 Pension worksheet. Moderate 20–25 E20-13 Computation of actual return, gains and losses, corridor test, and pension expense. Complex 35–45 E20-14 Worksheet for E20-13. Complex 40–50 *E20-22 Postretirement benefit expense computation. Simple 10–12 *E20-23 Postretirement benefit worksheet. Moderate 15–20 P20-1 2-year worksheet. Moderate 40–50
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EXERCISE 20-2 (10–15 minutes) Computation of pension expense: Service cost. ............................................................. $ 90,000 Interest cost ($700,000 X 10%). ............................... 70,000 Expected return on plan assets. ............................. (64,000) Prior service cost amortization. .............................. 10,000 Pension expense for 2010. ...................................... $106,000 EXERCISE 20-3 (15–25 minutes) BICKNER COMPANY Pension Worksheet—2010 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, 2010 700,000 Cr. 640,000 Dr. Service cost 90,000 Dr. 90,000 Cr. Interest cost* 70,000 Dr. 70,000 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 2010*** 106,000 Dr. 105,000 Cr. 10,000 Cr. Accumulated OCI, Dec. 31, 2009 150,000 Dr. Balance, Dec. 31, 2010 140,000 Dr. 820,000 Cr. 769,000 Dr. *$70,000 = $700,000 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. .................................................... 106,000 ***Pension Asset/Liability. ............................................ 9,000 Other Comprehensive Income (PSC). .................... 10,000 Cash……………………………………………. 105,000
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EXERCISE 20-6 (10–15 minutes) Computation of Actual Return on Plan Assets Fair value of plan assets at 12/31/10. ....................... $2,725,000 Fair value of plan assets at 1/1/10. ........................... 2,400,000 Increase in fair value of plan assets. ....................... 325,000 Deduct: Contributions to plan during 2010. ........... $280,000 Less benefits paid during 2010. ................ 350,000 (70,000 ) Actual return on plan assets for 2010. ..................... $ 395,000 EXERCISE 20-8 (20–25 minutes) Corridor and Minimum Loss Amortization Year Projected Benefit
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This note was uploaded on 10/02/2011 for the course ACCT 303 taught by Professor Dyker during the Spring '11 term at Benedictine IL.

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CHAPTER 20 - CHAPTER 20 Accounting for Pensions and...

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