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 1 year agoRelated Solutions
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