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Wolverine Company maintains a defined benefit pension with First Hartford Trust. Below are the balances reported...

Wolverine Company maintains a defined benefit pension with First Hartford Trust. Below are the balances reported by First Hartford on January 1, 2018.

Plan Benefit Obligation $720,000

Plan Asset $660,000

At the beginning of 2018, First Hartford informed Wolverine that its assumptions for the last five years have been off slightly, and they need to deposit an additional $210,000. Other matters for 2018 are:

The settlement rate is 10%

The current service cost is $80,000

Expected earnings are 8%

Actual earnings are $60,000

Prior service cost amortization is $25,000

First Hartford Trust paid retirement benefits of $35,000

Wolverine funded the plan $90,000

1. Prepare the pension worksheet for 2018.

2. Prepare the pension expense summary journal entry for 2018.

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Items Annual pension expense Cash AOCI-PSC OCI Gain Pension asset/liability Projected benefit obligation Plan assets
Amount Dr/cr Amount Dr/cr Amount Dr/cr Amount Dr/cr Amount Dr/cr Amount Dr/cr Amount Dr/cr
Balance Jan 1, 2018                    -   Dr                      -   Cr           60,000 Cr               720,000 Cr         660,000 Dr
Service cost           80,000 Dr           80,000 Cr                 80,000 Cr
Interest cost           72,000 Dr           72,000 Cr                 72,000 Cr
PSC amortisation           25,000 Dr      25,000.00 Cr
Return on plan assets           52,800 Cr                7,800 Dr           45,000 Dr            45,000 Dr
OCI Gain amortisation                    -   Cr                      -   Dr
New prior service cost                    -   Dr                   -   Dr Cr
Loss due to change in acturial assumptions           210,000 Dr               210,000 Cr
Contributions            90,000 Cr           90,000 Dr            90,000 Dr
Benefits paid                 35,000 Dr            35,000 Cr
Jounral for 2018         124,200 Dr            90,000 Cr            25,000 Cr           217,800 Dr           17,000 Cr               327,000 Cr         100,000 Dr
Opening balance Jan 1, 2018                    -   Dr                      -   Cr           60,000 Cr               720,000 Cr         660,000 Dr
Balance Dec 31, 2018            25,000 Cr           217,800 Dr           77,000 Cr            1,047,000 Cr         760,000 Dr
Pension expense 2018
Service cost           80,000
Interest cost           72,000
PSC amortisation           25,000
Return on plan assets          -52,800
Expense         124,200
Account Nature Statement Debit Credit
Pension expense Service cost Income statement           80,000                    -  
Pension expense Interest cost Income statement           72,000                    -  
Pension expense PSC amortisation Income statement           25,000                    -  
Pension expense Expected return on plan asset Income statement                    -             52,800
AOCI net gain Difference between actual return and expected return Other comprehensive income             7,800                    -  
Pension asset/liability Actual return Balancesheet           45,000
AOCI Prior service cost PSC amortisation Other comprehensive income           25,000
Pension asset/liability Pension expense Balancesheet         152,000
[Pension expense for the year recorded]
Account Debit Credit
Pension asset/liability                         90,000
Cash           90,000
[ Cash contributed to the pension fund]
Defined benefit liability                         35,000
Pension plan assets           35,000
[ Benefits paid during the year]

ekkarill92 answered 2 years ago
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