In: Accounting
Exercise 20-11
Splish Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2017 in which no benefits were paid.
1. | The actuarial present value of future benefits earned by employees for services rendered in 2017 amounted to $56,100. | |
2. | The company’s funding policy requires a contribution to the pension trustee amounting to $136,572 for 2017. | |
3. | As of January 1, 2017, the company had a projected benefit obligation of $903,400, an accumulated benefit obligation of $799,600, and a debit balance of $401,800 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $602,500 at the beginning of the year. The actual and expected return on plan assets was $54,400. The settlement rate was 8%. No gains or losses occurred in 2017 and no benefits were paid. | |
4. |
Amortization of prior service cost was $49,700 in 2017. Amortization of net gain or loss was not required in 2017. |
1. Determine the amounts of the components of pension expense
that should be recognized by the company in 2017.
(Enter amounts that reduce pension expense with either
a negative sign preceding the number e.g. -45 or parenthesis e.g.
(45).)
2. Prepare the journal entry or entries to record pension expense
and the employer’s contribution to the pension trustee in 2017.
(Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required,
select "No entry" for the account titles and enter 0 for the
amounts.)
3. Indicate the pension-related amounts that would be reported on
the income statement and the balance sheet for Splish Company for
the year 2017.
1 | Components of Pension Expense | ||
Service Cost | 56,100 | ||
Interest on Projected Benefit
Obligation 903,400*8% |
72272 | ||
Expected Return on Plan Assets | -54,400 | ||
Amortization of Prior Service Cost | 49,700 | ||
Pension Expense | 123,672 | ||
Account Titles and Explanation | Debit | Credit | |
Pension Expense | 123,672 | ||
Pension Asset/Liability | 62,600 | ||
Cash | 136,572 | ||
Other Comprehensive Income (PSC) | 49,700 | ||
Income statement (Partial) For the year ended December 31,2017 |
|||
Expenses | |||
Pension Expense | 123,672 | ||
Comprehensive Income Statement For the year ended December 31,2017 |
|||
Net Income / (Loss) | xxx | ||
Other Comprehensive Income | |||
Amortization of PSC | 49,700 | ||
Comprehensive Income | xxx | ||
Balance Sheet (Partial) December 31, 2017 |
|||
Long-term Liabilities | |||
Pension Liability (Projected benefit obligation-Plan assets)= (903,400+56,100+72272)-(602,500+54,400+136572) |
238300 | ||
Stockholders' Equity | |||
Accumulated Other Comprehensive Income
(PSC) 401,800-49700 |
352100 |