Question
In: Accounting
Answer questions 5-8 from the following information. Beginning PBO: $3,800,00 Contributions: $290,000 Beginning Plan Assets: $3,100,000...
Answer questions 5-8 from the following information.
Beginning PBO: $3,800,00
Contributions: $290,000
Beginning Plan Assets: $3,100,000
Benefits Paid: $410,000
Amendment-January 1: $450,000
Actual Return: $170,000
Service Cost: $180,000
Amortization PSC: $?
Discount Rate: 6%
Expected Rate of Return: 8%
Beginning PSC: $540,000
Actuarial Loss: $4,400
Beginning Net Gain: $470,000
Average Work Years: 18
5. Compute the ending balance of the projected benefit obligation (PBO).
6. Compute the ending balance of the plan assets.
7. Compute the ending balance of the unrecognized prior service cost (PSC).
8. Compute the ending balance of the unrecognized gain or loss.
Solutions
Expert Solution
| Items | Annual pension expense | Cash | AOCI-PSC | OCI Gain | Pension asset/liability | Projected benefit obligation | Plan assets | |||||||
| Amount | Dr/cr | Amount | Dr/cr | Amount | Dr/cr | Amount | Dr/cr | Amount | Dr/cr | Amount | Dr/cr | Amount | Dr/cr | |
| Balance Jan 1, 2020 | 540,000 | Dr | 470,000 | Cr | 300,000 | Dr | 2,800,000 | Cr | 3,100,000 | Dr | ||||
| Service cost | 180,000 | Dr | 180,000 | Cr | 180,000 | Cr | ||||||||
| Interest cost | 168,000 | Dr | 168,000 | Cr | 168,000 | Cr | ||||||||
| PSC amortisation | 30,000 | Dr | 30,000 | Cr | ||||||||||
| Return on plan assets | 248,000 | Cr | 78,000 | Dr | 170,000 | Dr | 170,000 | Dr | ||||||
| OCI Gain amortisation | 8,889 | Cr | 8,889 | Dr | ||||||||||
| New prior service cost | 450,000 | Dr | 450,000 | Cr | 450,000 | Cr | ||||||||
| Loss due to change in acturial assumptions | 4,400 | Dr | 4,400 | Cr | ||||||||||
| Contributions | 290,000 | Cr | 290,000 | Dr | 290,000 | Dr | ||||||||
| Benefits paid | 410,000 | Dr | 410,000 | Cr | ||||||||||
| Jounral for 2020 | 121,111 | Dr | 290,000 | Cr | 420,000 | Dr | 91,289 | Dr | 338,000 | Cr | 392,400 | Cr | 50,000 | Dr |
| Opening balance Jan 1, 2020 | 540,000 | Dr | 470,000 | Cr | 300,000 | Dr | 2,800,000 | Cr | 3,100,000 | Dr | ||||
| Balance Dec 31, 2020 | 960,000 | Dr | 378,711 | Cr | 38,000 | Cr | 3,192,400 | Cr | 3,150,000 | Dr |
5. Ending balance of the projected benefit obligation (PBO) : $3,192,400
6. Ending balance of the plan assets: $3,150,000
7. Ending balance of the unrecognized prior service cost (PSC): $960,000
8. Ending balance of the unrecognized gain or loss: $378,711
Below is OCI gain amortization calculation for the year:
| Corridor amortisation | ||
| Ref | Particulars | Amount |
| A | Opening OCI gain/ loss | $ 470,000.00 |
| Less: 10% of higher of plan assets or PBO | ||
| Opening balance: | ||
| Plan assets | $ 3,100,000.00 | |
| PBO | $ 2,800,000.00 | |
| B | higher of above | $ 3,100,000.00 |
| C | 10% of B | $ 310,000.00 |
| D= A-C | Amount subject to amortisation | $ 160,000.00 |
| E | Amortisation period | $ 18.00 |
| F= D/E | Amortisation amount | $ 8,888.89 |
PSC amortization for year = beginning balance/ service period = $540,000/18 = $30,000
Expected return on plan assets = $3,100,000 X 8% = $248,000
Interest cost = $2,800,000 X 6% = $168,000
Please rate.
ekkarill92 answered 2 years agoRelated Solutions
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