Question
In: Accounting
The Royal Corp has a defined benefit pension plan. As of January 1, 2019, the company...
The Royal Corp has a defined benefit pension plan. As of January 1, 2019, the company had a Projected Benefit Obligation (PBO) of $80 million and Plan Assets of $75 million. The beginning balance of Prior Service Cost – AOCI is $2.5 million and the Net Gain – AOCI beginning balance is $1.2 million (2019 amortization: $.14 million).
The following data relates to the plan for the company’s current fiscal year, ended December 31, 2019.
$’s in millions Actual Return on Assets $6.2 Amortization of
Prior Service Cost .7
Service Cost 3.2
Benefits Paid to Retirees 4.1 Contribution 3.8
Prior service cost amortization .7
Expected Rate of Return 7.0% Discount Rate 5.5%
REQUIRED: Complete the pension worksheet (provided in the Excel file) for the current fiscal year, 2019.
Please show computations if possible & be clear, Thank you!
Solutions
Expert Solution
| Pension Worksheet 2019 | |||||||
| Items | Annual Pension Expense | Cash | OCI-Prior Service Cost | OCI-Gain/(Loss) | Pension Asset/liability | Projected benefit obligation | Plan Asset |
| Balance, Jan 1,2019 | $ - | $ - | $ 2.50 | $ 1.20 | $ (5.00) | $ (80.00) | $ 75.00 |
| Past Service Cost created | $ - | $ - | $ - | $ - | $ - | $ - | $ - |
| Service Cost | $ 3.20 | $ - | $ - | $ - | $ - | $ (3.20) | $ - |
| Interest Cost | $ 4.40 | $ - | $ - | $ - | $ - | $ (4.40) | $ - |
| Actual return | $ (6.20) | $ - | $ - | $ - | $ - | $ - | $ 6.20 |
| Unexpected gain | $ 0.95 | $ - | $ - | $ 0.95 | $ - | $ - | $ - |
| Amortisation of PSC | $ 0.70 | $ - | $ (0.70) | $ - | $ - | $ - | |
| Amortisation of Gain | $ (0.14) | $ - | $ (0.14) | ||||
| Liability (increases)/decreases | $ - | $ - | $ - | $ - | $ - | $ - | |
| Contributions | $ - | $ (3.80) | $ - | $ - | $ - | $ - | $ 3.80 |
| Benefits | $ - | $ - | $ - | $ - | $ - | $ 4.10 | $ (4.10) |
| $ - | $ - | $ - | $ - | $ - | $ - | $ - | |
| Journal entry for 2019 | $ 2.91 | $ (3.80) | $ (0.70) | $ 0.81 | $ 2.40 | $ (3.50) | $ 5.90 |
| Accumulated OCI dec 31, 2018 | $ - | $ - | $ 2.50 | $ 1.20 | $ - | $ - | $ - |
| Balance, December 31, 2019 | $ - | $ - | $ 1.80 | $ 2.01 | $ (2.60) | $ (83.50) | $ 80.90 |
| Net Pension Expense for 2019 | $ 2.91 | ||||||
| Actual return - Expected return | Gain/(loss) | ||||||
| Journal entry 31-12-2019 | $ 6.20 | $ 5.25 | $ 0.95 | ||||
| Account title & explaination | Debit | Credit | 7% | ||||
| Pension Expense | $ 2.91 | ||||||
| Net Pension Asset/liability | $ 2.40 | ||||||
| OCI(Gain/loss) | $ 0.81 | ||||||
| OCI(PSC) | $ 0.70 | ||||||
| Cash | $ 3.80 | ||||||
| (Being pension expense and remeasurement loss recorded) | |||||||
| · Please do upvote if you found the answer useful. | |||||||
| · Feel free to reach in the comment section in case of any clarification or queries. | |||||||
ekkarill92 answered 2 years agoRelated Solutions
The Royal Corp has a defined benefit pension plan. As of January 1, 2019, the company...
The Royal Corp has a defined benefit pension plan. As of January
1, 2019, the company had a Projected Benefit Obligation (PBO) of
$80 million and Plan Assets of $75 million. The beginning balance
of Prior Service Cost – AOCI is $2.5 million and the Net Gain –
AOCI beginning balance is $1.2 million (2019 amortization: $.14
million).
The following data relates to the plan for the company’s current
fiscal year, ended December 31, 2019.
$’s in millions Actual Return...
On January 1, 2019, Parkway Company adopted a defined benefit pension plan. At that time, Parkway...
On January 1, 2019, Parkway Company adopted a defined benefit
pension plan. At that time, Parkway awarded retroactive benefits to
its employees, resulting in a prior service cost of $2,180,000 on
that date (which it did not fund). Parkway decided to amortize this
cost by the straight-line method over the 16-year average remaining
service life of its active participating employees. Parkway’s
actuary and funding agency have also provided the following
additional information for 2019 and 2020:
2019
2020
Service cost...
On January 1, 2019, Baznik Company adopted a defined benefit pension plan. At that time, Baznik...
On January 1, 2019, Baznik Company adopted a defined benefit
pension plan. At that time, Baznik awarded retroactive benefits to
certain employees. These retroactive benefits resulted in a prior
service cost of $1,200,000 on that date (which it did not fund).
Baznik has six participating employees who are expected to receive
the retroactive benefits. Following is a schedule that identifies
the participating employees and their expected years of future
service as of January 1, 2019:
Employee
Expected Years of Future...
Blue Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2019, with...
Blue Company adopts acceptable accounting for its defined
benefit pension plan on January 1, 2019, with the following
beginning balances: plan assets $203,100; projected benefit
obligation $252,000. Other data relating to 3 years’ operation of
the plan are as follows.
2019
2020
2021
Annual service cost
$15,800
$19,000
$26,200
Settlement rate and expected rate
of return
10
%
10
%
10
%
Actual return on plan assets
18,200
22,280
23,600
Annual funding (contributions)
15,800
39,400
47,600
Benefits paid
14,300
16,400...
On January 1, 2019, a company's defined benefit pension plan had a projected benefit obligation (PBO)...
On January 1, 2019, a company's defined benefit pension plan had
a projected benefit obligation (PBO) of $380,000. The fair value of
its pension plan assets on January 1 was $350,000. During 2019, the
company contributed $50,000 to the pension plan and paid pension
benefits to retirees in the amount of $70,000. The settlement rate
for the pension plan for 2019 was 12%. Service cost for the year
was estimated to be $109,000. The expected rate of return on
pension...
Teal Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2020, the...
Teal Corp. sponsors a defined benefit pension plan for its
employees. On January 1, 2020, the following balances relate to
this plan.
Plan assets
$489,900
Projected benefit obligation
616,700
Pension asset/liability
126,800
Accumulated OCI (PSC)
95,600
Dr.
As a result of the operation of the plan during 2020, the following
additional data are provided by the actuary.
Service cost
$86,900
Settlement rate, 9%
Actual return on plan assets
57,100
Amortization of prior service cost
19,500
Expected return on plan assets...
Teal Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2020, the...
Teal Corp. sponsors a defined benefit pension plan for its
employees. On January 1, 2020, the following balances relate to
this plan.
Plan assets
$489,900
Projected benefit obligation
616,700
Pension asset/liability
126,800
Accumulated OCI (PSC)
95,600
Dr.
As a result of the operation of the plan during 2020, the following
additional data are provided by the actuary.
Service cost
$86,900
Settlement rate, 9%
Actual return on plan assets
57,100
Amortization of prior service cost
19,500
Expected return on plan assets...
Flint Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2020, the...
Flint Corp. sponsors a defined benefit pension plan for its
employees. On January 1, 2020, the following balances relate to
this plan.
Plan assets
$470,900
Projected benefit obligation
609,900
Pension asset/liability
139,000
Accumulated OCI (PSC)
99,800
Dr.
As a result of the operation of the plan during 2020, the following
additional data are provided by the actuary.
Service cost
$93,800
Settlement rate, 10%
Actual return on plan assets
54,500
Amortization of prior service cost
19,800
Expected return on plan assets...
Bridgeport Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2020, the...
Bridgeport Corp. sponsors a defined benefit pension plan for its
employees. On January 1, 2020, the following balances related to
this plan.
Plan assets (market-related value)
$536,000
Projected benefit obligation
652,000
Pension asset/liability
116,000
Cr.
Prior service cost
86,000
Net gain or loss (debit)
99,000
As a result of the operation of the plan during 2020, the actuary
provided the following additional data for 2020.
Service cost
$124,000
Settlement rate, 9%; expected return rate, 10%
Actual return on plan assets...
Cullumber Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2021, the...
Cullumber Corp. sponsors a defined benefit pension plan for its
employees. On January 1, 2021, the following balances related to
this plan.
Plan assets (market-related value)
$270,400
Projected benefit obligation
342,400
Pension asset/liability
72,000
Cr.
Prior service cost
89,500
OCI—Loss
38,400
As a result of the operation of the plan during 2021, the actuary
provided the following additional data for 2021.
Service cost
$44,200
Actual return on plan assets
27,600
Amortization of prior service cost
11,900
Contributions
64,400
Benefits paid...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Why do we compare means instead of individual scores? for comparing average SAT test scores across...
- NPV Your division is considering two projects with the following cash flows (in millions): 0...
- The equivalent synchronous impedance of a 25kVA, 400V three-phase Y-connected synchronous generator is 0.05 + j1.6...
- You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You...
- In two or three sentences, explain how you have seen the concept of grit work in...
- You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella Co.,...
- Parallel Arrays This question is in MindTap Cengage Summary In this lab, you use what you...
ADVERTISEMENT