Question

Rico Corporation initiated a defined benefit pension plan on January 1, 2020. The plan does not provide any retroactive benefits for existing employees. The pension funding payment is made to the trustee on December 31 of each year. The following information is available for 2020 and 2021.

	2020	2021
Service cost	$75,000	$82,500
Funding payment (contribution)	85,000	92,500
Interest on projected benefit obligation		7,500
Actual and expected return on plan assets		9,000

• Financial Statement Presentation and Entries
• Pension Worksheet

a. In its December 31, 2020, balance sheet, Rico should report what amount of net pension asset/liability?

Balance Sheet
December 31, 2020
Noncurrent assets
Net pension asset	Answer
Noncurrent liabilities
Net pension liability	Answer

b. In its December 31, 2021, balance sheet, Rico should report what amount of net pension asset/liability?

Balance Sheet
December 31, 2021
Noncurrent assets
Net pension asset	Answer
Noncurrent liabilities
Net pension liability	Answer

c. Prepare the journal entries to record pension expense and plan funding for 2021.

• Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order.

Date	Account Name	Dr.	Cr.
Dec. 31, 2021		Answer	Answer
		Answer	Answer
		Answer	Answer
	To record pension expense
Dec. 31, 2021		Answer	Answer
		Answer	Answer
	To record plan funding

d. Create a worksheet to summarize the pension data at the end of 2021.

	Reported Net in Financial Statements		Reported on Balance Sheet		Reported in Income Statement
	Plan Assets	PBO	Net Pension Asset/Liability	Cash Outflow	Pension Expense
Balance, January 1, 2021	Answer	Answer	Answer
Service cost	Answer	Answer	Answer	Answer	Answer
Interest cost	Answer	Answer	Answer	Answer	Answer
Expected return on plan assets	Answer	Answer	Answer	Answer	Answer
Contributions to fund	Answer	Answer	Answer	Answer	Answer
Balance, December 31, 2021	Answer	Answer	Answer		Answer

Answer 1

Solution:-