Question
In: Accounting
Jackson Company has the following information for the company's defined-benefit pension plan for the year ended...
Jackson Company has the following information for the company's defined-benefit pension plan for the year ended December 31, 2021:
January 1, 2021 December 31, 2021
Projected benefit obligation $5,000,000 $5,510,000
Fair value of plan assets 2,500,000 3,200,000
Accumulated OCI (PSC) 1,080,000 600,000
Service cost for 2021 is $360,000 and amortization of prior service cost is $480,000. The company's funding of the plan in 2021 amounted to $1,050,000. Benefit payments for the year totaled $600,000, The expected return on plan assets and the settlement rate were both 10%. In the company’s pension worksheet,
Select one:
A) Accumulated OCI (PSC) woud be increased by $480,000.
B) PBO would be decreased and Plan Assets would be increased by the $1,050,000 funding.
C)Both PBO and Plan Assets would be decreased by benefits paid of $600,000.
D) Cash would be decreased by benefits paid of $600,000
Cash would be decreased by benefits paid of $600,000.
Solutions
Expert Solution
Option (C) is correct.
| Pension Worksheet 2021 | ||||||||
| Items | Annual Pension Expense | Cash | OCI-Prior Service Cost | OCI-Gain/(Loss) | Pension Asset/liability | Projected benefit obligation | Plan Asset | |
| Balance, Jan 1,2021 | $ - | $ - | $ 1,080,000 | $ - | $ (2,500,000) | $ (5,000,000) | $ 2,500,000 | |
| Past Service Cost created | $ - | $ - | $ - | $ - | $ - | $ - | $ - | |
| Service Cost | $ 360,000 | $ - | $ - | $ - | $ (360,000) | $ - | ||
| Interest Cost | $ 500,000 | $ - | $ - | $ - | $ (500,000) | $ - | ||
| Actual return | $ (250,000) | $ - | $ - | $ - | $ - | $ 250,000 | ||
| Unexpected gain/ loss | $ - | $ - | $ - | $ - | $ - | $ - | ||
| Amortisation of PSC | $ 480,000 | $ - | $ (480,000) | $ - | $ - | $ - | ||
| Amortisation of OCI-Gain/loss | $ - | $ - | $ - | $ - | $ - | $ - | ||
| Liability (increases)/decreases | $ - | $ - | $ (250,000) | $ - | $ (250,000) | |||
| Contributions | $ - | $ (1,050,000) | $ - | $ - | $ - | $ 1,050,000 | ||
| Benefits | $ - | $ - | $ - | $ - | $ 600,000 | $ (600,000) | ||
| $ - | $ - | $ - | $ - | $ - | $ - | |||
| Journal entry for 2021 | $ 1,090,000 | $ (1,050,000) | $ (480,000) | $ (250,000) | $ 190,000 | $ (510,000) | $ 700,000 | |
| Accumulated OCI dec 31, 2020 | $ - | $ - | $ 1,080,000 | $ - | $ - | $ - | $ - | |
| Balance, December 31, 2021 | $ - | $ - | $ 600,000 | $ (250,000) | $ (2,310,000) | $ (5,510,000) | $ 3,200,000 | |
| · Please do upvote if you found the answer useful. | $ - | |||||||
| · Feel free reach in the comment section in case of any clarification or queries. |
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