Question
In: Accounting
BEST CO sponsors a defined benefit pension plan for its employees. On January 1, 2010, the...
BEST CO sponsors a defined benefit pension plan for its employees.
On January 1, 2010, the following balances relate to this plan.
GHS Plan assets 480,000
Defined benefit obligation 625,000
Pension asset/liability 45,000
Unrecognized past service cost 100,000
As a result of the operation of the plan during 2010, the following additional data are provided by the actuary. Service cost for 2010 is 90,000
Discount rate, 9%
Actual return on plan assets in 2010 is 57,000
Amortization of past service cost 19,000
Expected return on plan assets 52,000
Unexpected loss from change in defined benefit obligation, due to change in actuarial predictions 76,000
Contributions in 2010 is 99,000
Benefits paid retirees in 2010 is 85,000
Instructions
(a) Using the data above, compute pension expense for BEST Co. for the year 2010 by preparing a pension worksheet that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
(b) At December 31, 2010, prepare a schedule reconciling the funded status of the plan with the pension amount reported on the statement of financial position.
Solutions
Expert Solution
| Sollution (a) Pension worksheet | ||||||||||||||
| BEST CO | ||||||||||||||
| Pension Worksheet-2010 | ||||||||||||||
| General Journal Entries | Memo Record | |||||||||||||
| Items | Annual Pension Expense | Cash | OCI-Prior Service Cost | OCI-Gain/Loss | Pension Asset/ Liability | Projected Benefit Obligation | Plan Assets | |||||||
| Balance, Jan.1, 2010 | Dr. | Cr. | $145,000.00 | Cr. | $625,000.00 | Cr. | $480,000.00 | Dr. | ||||||
| Service cost | $90,000.00 | Dr. | $90,000.00 | Cr. | ||||||||||
| Interest cost (625000*9%) | $56,250.00 | Dr. | $56,250.00 | Cr. | ||||||||||
| Actual return | $57,000.00 | Cr. | $57,000.00 | Dr. | ||||||||||
| Unexpected Gain on assets(note-1) | $5,000.00 | Dr. | $5,000.00 | Cr. | ||||||||||
| Amortization of PSC | $19,000.00 | Dr. | $19,000.00 | Cr. | ||||||||||
| Contributions | $99,000.00 | Cr. | $99,000.00 | Dr. | ||||||||||
| Benefits | $85,000.00 | Dr. | $85,000.00 | Cr. | ||||||||||
| Liabilty increase | $76,000.00 | Dr | $76,000.00 | Cr. | ||||||||||
| Journal entry for 2010 | $113,250.00 | Dr. | $99,000.00 | Cr. | $19,000.00 | Cr. | $71,000.00 | Dr | $66,250.00 | Cr. | ||||
| Accumulated OCI, Dec 31, 2009 | $100,000.00 | Dr. | $0.00 | Cr. | ||||||||||
| Balance, Dec 31, 2010 | $81,000.00 | Dr. | $71,000.00 | Dr | $211,250.00 | Cr. | $762,250.00 | Cr. | $551,000.00 | Dr. | ||||
| Journal entry | ||||||||||||||
| Account Titles and Explanation | Debit | Credit | ||||||||||||
| Pension Expense | $113,250.00 | |||||||||||||
| OCI-GAIN/LOSS | $71,000.00 | |||||||||||||
| Cash | $99,000.00 | |||||||||||||
| OCI-PSC | $19,000.00 | |||||||||||||
| Pension Asset/ Liability | $66,250.00 | |||||||||||||
| Pension Asset/ Liability | ||||||||||||||
| (To record pension expense) | ||||||||||||||
| Note:-1 |
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625,000 Pension asset/liability 45,000 Unrecognized past service
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