Question

On January 1, 2020, Harrington Company has the following defined benefit pension plan balances.

Projected benefit obligation		$4,500,000
Fair value of plan assets		4,200,000

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 $500,000 are created. Other data related to the pension plan are as follows.

		2020			2021
Service cost		$150,000			$180,000
Prior service cost amortization		0			90,000
Contributions (funding) to the plan		240,000			285,000
Benefits paid		200,000			280,000
Actual return on plan assets		252,000			260,000
Expected rate of return on assets		6	%		8	%

Prepare a pension worksheet for the pension plan for 2020 and 2021.

Answer 1

Answer:

Harrington Company Pension Worksheet - 2020 and 2021

	General Journal Entries	Memo Records
Items	Annual Pension Expense	Cash	OCI- Prior Service Cost	OCI-Gain/Loss	Pension Asset/Liability	Projected Benefit Obligation	Plan Asset
Balance Jan 1 2020					$300,000	$4,500,000	$4,200,000
(a)service Cost	$150,000					$150,000
(b)Interest Cost (4,500,000×10%)	$450,000					$450,000
(c)Actual Return	$252,000						$252,000
(d)Contribution		$240,000					$240,000
(e)Benefits						$200,000	$200,000
Journal Entry 12/31/2021	$348,000	$240,000			$108,000	$4,900,000	$4,492,000
Accum OCI, 12/31/2019
Balance Dec.31.2021					$408,000	$4,900,000	$4,492,000
(f)Additional PSC Jan1,2022			$500,000			$500,000
(g)ServiceCost	$180,000					$180,000
(h)Interest Cost (5,400,000×10%)	$540,000					$540,000
(I) Actual Return	$260,000						$260,000
(j)Unexpected Loss (4,492,000×.08)-$260,000	$99,360			$99,360
(k)Amortization of PSC	$90,000		$90,000
(l)Contribution		$285,000					$285,000
(m)Benefits						$280,000	$280,000
Journal Entry12/31/2022	$450,640	$285,000	$410,000	$99,360	$675,000
Acc.COL 12/31/2021
Balance Dec.31.2022			$410,000	$99,360	$1,083,000	$5,840,000	$4,757,000