Question

Exercise 20-09 (Part Level Submission) Sheffield Enterprises provides the following information relative to its defined benefit pension plan.

Balances or Values at December 31, 2020

Projected benefit obligation $2,726,200

Accumulated benefit obligation 1,996,100

Fair value of plan assets 2,263,000

Accumulated OCI (PSC) 210,000

Accumulated OCI—Net loss (1/1/20 balance, 0) 45,900

Pension liability 463,200

Other pension plan data for 2020: Service cost $94,200

Prior service cost amortization 42,100

Actual return on plan assets 130,000

Expected return on plan assets 175,900

Interest on January 1, 2020, projected benefit obligation 250,700

Contributions to plan 92,300 Benefits paid 139,800

(c)

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Compute the amount of accumulated other comprehensive income reported at December 31, 2020. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Accumulated other comprehensive income (loss)

$

Answer 1

First lets calculated the Pension cost:

Service Cost = 94,200

Prior Service cost amortisation = 42,100

Actual return on Plan assets = (130,000)

Deferred gain (loss) = (45,900)

(Actual Return - Expected Return)

(130,000 - 175,900)

Interest cost = 250,700

Pension Cost = 211,100

The funded status of the pension plan at year end balance sheet = Ending projected benefit obligation (PBO) - ending fair value (FV) of plan assets. If FV of plan assets > PBO, it indicates that the pension plan is over-funded resulting in a pension asset. If PBO > FV of plan assets, it indicates that the pension plan is under-funded resulting in a pension liability. Sheffields pension plan, the PBO > FV of plan assets, a liability of $2,726,200- $2,263,000 = $463,200 has to be recorded. While the pension cost for 2020 of $211,100 increases PBO, the contributions of 2020 of $92,300 increases FV of plan assets. The increase in the pension liability due to this year's pension cost and pension contribution = $211,100- $92,300 = $118,800. The remaining increase in liability of $92,300 (i.e. $211,100 - $118,800) would be attributable to other factors like amortization of prior service cost, etc that would hit the other comprehensive income (OCI). Of the total liability of $211,100, $118,800 would be an expense in the income statement and the remaining $92,300 would be an expense in the OCI.