In: Accounting
The following information is provided to you from Elgin
Outboard
Motor Company and their pension administration firm:
Service Cost . . . . . . . . . . . . . . . . . . $81,650
Contribution to plan . . . . . . . . . . . . . . 162,300
Prior Service Cost Amortization. . . . . . . . . 3,600
Actual and Expected Return on Assets . . . . . . 88,650
Benefits Paid. . . . . . . . . . . . . . . . . .
48,000
Plan Assets, January 1, 2017 . . . . . . . . . . 877,445
Projected Benefit Obligation, January 1, 2017. . 897,000
Interest/Discount (settlement) rate. . . . . . . 7%
Accumulated OCI (PSC), January 1, 2017 . . . . . 36,000
Required
Complete the pension worksheet below for 2017, and prepare
the
necessary journal entry at December 31, 2017.
Ans- Pension Worksheet
Journal Entries | Memo Record | |||||||||||
Items | Annual Pension Expenses ($) | Cash ($) | OCI-Prior service cost ($) | Pension Asset/ Liability | Projected benefit obligation ($) | Plan Assets ($) | ||||||
Balance January 1,2017 | 19,555 | Cr. | 897,000 | Cr. | 877,445 | Dr. | ||||||
Prior Service Cost | 36,000 | Dr. | 36,000 | Cr. | ||||||||
Amortize Prior Service Cost | 3,600 | Dr. | 3,600 | Cr. | ||||||||
Annual Service Cost | 81,650 | Dr. | 81,650 | Cr. | ||||||||
Interest Cost ($897,000*7/100) | 62,790 | Dr. | 62,790 | Cr. | ||||||||
Actual Return | 88,650 | Cr. | 88,650 | Dr. | ||||||||
Unexpected loss | ||||||||||||
Contribution | 162,300 | Cr. | 162,300 | Dr. | ||||||||
Banefits paid | 48,000 | Dr. | 48,000 | Cr. | ||||||||
Journal entry for 2017 | 59,390 | Dr. | 162,300 | Cr. | 50,955 | Dr. | ||||||
Accumulated OCI- December 31,2016 | 32,400 | Dr. | ||||||||||
Ending Balance December 31,2017 | 31,400 | Dr. | 1,029,440 | Cr. | 1,080,395 | Dr. |
Journal entry:-
December 31,2017 | Pension Expenses A/c Dr. | $59,390 | |
OCI A/c Dr. | 32,400 | ||
Pension asset/ liability A/c Dr. | 31,400 | ||
Cash A/c | 162,300 | ||
Other Comprehensive Income Gain/Loss | 39,110 |