Question

Problem #2 The accountant for Martin Compnay has developed the following information for the company's defined-benefit pension plan for 2021: Service Cost $1,000,000 Actual Return on plan assets 500,000 Annual contributions to the plan 1,840,000 Amortization of PSC 250,000 Benefits paid to retirees 120,000 Settlement rate 10% Expected Rate of Return on plan assets 8% The accumulated PBO at December 31, 2021, amounted to $6,500,000

a) Using the above information for Martin Company, complete the Pension Worksheet for 2021. Indicate (credit) entries by parentheses. Calculated amounts should be supported.

b) Prepare the journal entry to reflect the accounting for the company's pension plan for the year ending Decmeber 31, 2021. Martin Company Pension Worksheet - 2021 Annual OCI Pension Pension Gain/ Asset/

   Expense   Cash   PSC   Loss   Liability   PBO   Plan Assets
Bal 12/31/20           1,250,000       ?   -8,000,000   5,500,000
Service Cost                          
Interest Cost                          
Actual Return                          
Unexpected                           
gain/loss                          
Amortizaton of PSC                          
Contributions                          
Benefits                          
Gain/Loss amortization                          
Journal Entry                          
For 2021                          
Balance, 12/31/2021                          

Answer 1

Working as follows:

	General Jouranl Entries				Memo Entries
Particulars	Annual Pension Expense	Cash	OCI/PSC	Gains/Loss	Pension Asset/Liability	Projected Benefit Obligation	Plan Assets
Balance Dec. 31, 2021					($1,250,000)	($800,000)	$5,500,000
Service cost	$1,000,000					($1,000,000)
Interest cost [$8000000*10%]	$800,000					($800,000)
Actual return	($500,000)						$500,000
Unexpected gain or loss	$60,000			($60,000)
Amortization of PSC	$250,000		($250,000)
Contributions		($1,840,000)					$1,840,000
Benefits Gains/Loss amortization						$120,000	($120,000)
Journal entry for 2021	$1,610,000		($250,000)	($60,000)	$315,000
Balance Dec. 31, 2021		($1,840,000)			($935,000)	($2,480,000)	$7,720,000

________________________________________________________________

Plan assets	$5,500,000
×
Expected rate on plan asset	8%
Expected return	$440,000
Less: Actual Return	($500,000)
Unexpected Gain	($60,000)

____________________________________________________

b)

Prepare journal entry as follows:

Date	Account Titles	Debit	Credit
Dec. 31, 2021	Pension Expense	$1,610,000
	Pension laibility [b/f]	$315,000
	OCI-Gain		$60,000
	Cash		$1,840,000
	OCI-PSC		$25,000