Question
In: Accounting
On January 1, 2020, Ivanhoe Company has the following defined benefit pension plan balances. Projected benefit...
On January 1, 2020, Ivanhoe Company has the following defined benefit pension plan balances.
| Projected benefit obligation | $4,420,000 | |
| Fair value of plan assets | 4,260,000 |
The interest (settlement) rate applicable to the plan is 10%. On
January 1, 2021, the company amends its pension agreement so that
prior service costs of $506,000 are created. Other data related to
the pension plan are as follows.
|
2020 |
2021 |
|||||
|---|---|---|---|---|---|---|
|
Service cost |
$151,000 | $176,000 | ||||
|
Prior service cost amortization |
0 | 92,000 | ||||
|
Contributions (funding) to the plan |
238,000 | 288,000 | ||||
|
Benefits paid |
198,000 | 278,000 | ||||
|
Actual return on plan assets |
255,600 | 259,000 | ||||
|
Expected rate of return on assets |
6 | % | 8 | % | ||
1.Prepare a pension worksheet for the pension plan for 2020 and 2021. (Enter all amounts as positive.)
2. For 2021, prepare the journal entry to record pension-related amounts
Solutions
Expert Solution
1. Ivanhoe Company Pension Worksheet - 2020 and 2021
| General Journal Entries | Memo Records | ||||||
| items | Annual Pension Expense | Cash | OCI-Prior Service Cost | OCI Gain/ Loss | Pension Assets/Liabilities | Projected Benefit Obligation | Plan Assets |
| Balance Jan.01.2020 | $160,000 | $4,420,000 | $4,260,000 | ||||
| (a)Service Cost | $151,000 | $151,000 | |||||
| (b)Interest Cost(10%) | $442,000 | $442,000 | |||||
| (c)Actual Return | $255,600 | $255,600 | |||||
| (d)Contributions | $238,000 | $238,000 | |||||
| (e)Benefits | $198,000 | $198,000 | |||||
| Journal Entry 12/31/2020 | $337,400 | $238,000 | $99,400 | $4,815,000 | $4,555,600 | ||
| Accum.OCI 12/31/2019 | |||||||
| Bal.Dec.31.2020 | $259,400 | $4,815,000 | $4,555,600 | ||||
| (f)Additional PSC | $506,000 | $506,000 | |||||
| Jan 1.2021 | $5,321,000 | ||||||
| (g) Service Cost | $176,000 | $176,000 | |||||
| (i)Interest Cost(10%) | $532,100 | $532,100 | |||||
| (i)Actual Return | $259,000 | $259,000 | |||||
| (j) Unexpected Loss | $105,448 | $105,448 | |||||
| (k)Amortization of PSC | $92,000 | $92,000 | |||||
| (l)Contributions | $288,000 | $288,000 | |||||
| (m)Benefits | $278,000 | $278,000 | |||||
| Journal Entry 12/31/2021 | $435,652 | $288,000 | $414,000 | $105,448 | $667,100 | ||
| Acc.OCI 12/31/2020 | |||||||
| Balance Dec.31.2020 | $414,000 | $105,448 | $926,500 | $5,751,100 | $4,824,600 |
b). Journal Entry
| No | Account Title and Explanation | Debit | Credit |
| 1 | Pension Expense | $435,652 | |
| OCI - PSC | $414,000 | ||
| Unexpected Loss/ Gain | $105,448 | ||
| Cash | $288,000 | ||
| Pension Assets /Liability | $667,100 |
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