Question

Answer the below questions (show details)

Walker Equipment, Inc. offers a defined-benefit pension plan for employees with at least five years of service, with the following pertinent information for 2017:

Walker Equipment, Inc. had pension plan assets (PPA) of $287,000 at the start of 2017. The end of year statement from the asset manager had assets at $323,000.

Walker Equipment, Inc. had a projected benefit obligation (PBO) of $360,000 at the start of 2017. One of your company’s actuaries has let you know that the ending 2017 PBO should be $393,000.

Current changes to the PBO has generated a gain on PBO of $3,100.

The actual return on plan assets wasn’t listed in the PPA statement, but the expected PPA growth was 4%.

The actuary estimated the service cost for 2016 at $29,000.

The average remaining service life for covered employees at the end of 2017 is estimated at 26 years.

The usual cost of financing for Walker Equipment, Inc. is 2%.

Walker Equipment, Inc. contributed $36,000 to the plan in 2017.

Walker Equipment, Inc. had an unamortized net loss of prior actuarial adjustments of $42,500 in AOCI at the start of 2017.

Walker Equipment, Inc. made a retroactive increase to plan benefits (increasing the salary formula percentages) at the start of 1999 for which the actuary estimated a prior service cost of $232,600. Walker Equipment, Inc. had never before made a retroactive change to the plan, and the unamortized PSC balance in AOCI as of the end of 2016 (start of 2017) was $32,500. No additional retroactive changes were made in 2017.

Walker Equipment, Inc. paid retirees something during 2017 but the records have gone missing.

Respond to each requirement below and be sure to show and label your work.

Reconcile the calculation of the ending PBO balance for 2017.

Compute the ending PPA balance for 2017.

Compute the 2017 Pension Expense for Walker Equipment, Inc.

Prepare the journal entry needed to record the pension plan expense.

Prepare the journal entry to record contributions made to the pension plan assets.

Prepare the journal entry to record benefits paid to the retirees.

Based on your work, what will be listed in the asset and/or liability section of Walker Equipment’s 2017 Balance Sheet?

Answer 1

	Pension Worksheet
	Walker equipment Inc.
	Pension worksheet - 2017
		General Journal Entries					Memo Record
	Items	Annual Pension Expense	Cash	OCI: Prior Service Cost	OCI:(Gains)/Losses	Pension Asset/(Liability)	Projected Benefit Obligation	Plan Assets
	Balance January 1,2017					($73,000)	($360,000)	$287,000
	Additional Prior service cost			$232,600			($232,600)
	(a)Service Cost	$29,000					($29,000)
	(b)Interest Cost	$7,200					($7,200)
	( c )Expected /actual return	($11,480)						$11,480
	(d)Unexpected loss
	(e)Contributions		($36,000)					$36,000
	(f)Benefit paid to retirees						$100	($100)
	(g)Gain due to change in acturial assumption				($3,100)		$3,100
	(h)Amortization of prior perid cost
	(i)Prior service cost
	Journal entry for 2018	$24,720	($36,000)	$232,600	($3,100)	($218,220)
	Accumulated OCI, 1/1/2017			$32,500	$42,500
	Balance, December 31, 2017			$265,100	$39,400	($291,220)	($625,600)	$334,380
1	Reconcile the ending PBO balance for 2017
	Opening Balance	$360,000
	Add: Service Cost	$29,000
	Interest cost	$7,200
	Less: Benefit paid	$100
	Gain due to change in acturial assumption	$3,100
	Closing Balance	$393,000
	Add: Prior service cost	$232,600
	Closing balance	$625,600
2	Compute the ending PPA Balance
	Opening Balance	$287,000
	Add: Contribution	$36,000
	Less: Benefit paid	($100)
	Closing balance	$322,900
	Add: Expected returns	$11,480
	Closing balance	$334,380
	It is assumed expected and actual returns are same
3	2017 Pension Expense
	Service cost	$29,000
	Interest cost	$7,200
	Less: Expected returns	$11,480
	Pension expense	$24,720
4	Journal Entry
	Pension Expense	$24,720
	Prior period cost	$232,600
	Cash		$36,000
	AOCI-Gain		$3,100
	Pension liability		$218,220
	Pension Benefit obligation	$100
	Plan Asset		$100
5	In the 2017 Walker Equipment's Inc. Balance sheet,
	Pension liability for $291220 will be listed