Question

Novak Co. has the following defined benefit pension plan balances on January 1, 2020.

Projected benefit obligation 4555000

Fair value of plan assets 4555000

The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends its pension agreement so that prior service costs of $599,000 are created. Other data related to the pension plan are:

	2020	2021
Service cost	149,000	170,000
Prior service cost amortization	0	91,000
Contributions (funding) to the plan	201,000	183,000
Benefits paid	220,000	278,000
Actual return on plan assets	251,000	353,000
Expected rate of return on	6%	8%

Prepare a pension worksheet for the pension plan in 2020. (Enter all amounts as positive.)

Answer 1

		Novak Co.
General Journal Entries					Memo Record
	Annual Pension Expense	Cash	OCI-Gain/loss	Pension Assets/liability	Projected benefit obligation	Plan Assets
Balance 1/1/2020				$                         -	$         -45,55,000.00	$ 45,55,000.00
Service Cost(given)	$            1,49,000.00				$            -1,49,000.00
Interest Cost($4555000*10%)	$            4,55,500.00				$            -4,55,500.00
Actual Return($4555000*10%)	$          -4,55,500.00					$     4,55,500.00
Contributions(given)		$   -2,01,000.00				$     2,01,000.00
Benefits(given)					$             2,20,000.00	$   -2,20,000.00
Assets loss(*)			$   2,04,500.00			$   -2,04,500.00
Journal entry in 2020	$            1,49,000.00	$   -2,01,000.00	$   2,04,500.00	$    -1,52,500.00	$         -49,39,500.00	$ 47,87,000.00
Accumulated OCI December 31st,2020			$                      -
Balance Dec 31st,2020			$   2,04,500.00	$    -1,52,500.00	$         -49,39,500.00	$ 47,87,000.00
Addition to Prior service cost amortization(given)	$            5,99,000.00				$            -5,99,000.00
Balance jan 1,2021					$         -55,38,500.00
Positive figures=(DR)
Negative figures=(CR)
Pension assets/liability=(45550000-45550000)	0
Assets Loss(*)	($455500-$251000)
Journal Entry -2020
General,Journal	Debit	Credit
Other comprehensive income-(G/L)	$            2,04,500.00
Pension Expense	$            1,49,000.00
To Cash		$     2,01,000.00
To Pension Assets/Liability		$     1,52,500.00