Question

In: Accounting

Exercise 20-11 Splish Company sponsors a defined benefit pension plan for its employees. The following data...

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.

Solutions

Expert Solution

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

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