Question

On January 1, 2019, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,200,000 on that date (which it did not fund). Baznik has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2019:

Employee	Expected Years of Future Service
A	1
B	3
C	4
D	5
E	5
F	6

Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik’s pension expense, in addition to the amortization of the prior service cost for 2019 and 2020:

	2019	2020
Service cost	$397,300	$567,423
Interest cost on projected benefit obligation	104,100	150,337
Expected return on plan assets	—	90,300

Baznik contributed $772,700 and $875,300 to the pension fund at the end of 2019 and 2020, respectively.

Required:

1.	Next Level Prepare a set of schedules for Baznik to determine (a) the amortization fraction for each year and (b) the amortization of the prior service cost.
2.	Next Level Prepare all the journal entries related to Baznik’s pension plan for 2019 and 2020.

CHART OF ACCOUNTSBaznik CompanyGeneral Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
251	Accrued/Prepaid Pension Cost
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings
916	Other Comprehensive Income: Prior Service Cost

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
522	Pension Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

1a. Prepare a set of schedules for the Baznik Company to determine the amortization fraction for each year.

Additional Instruction

BAZNIK COMPANY

Amortization Fractions

2019 - 2024

1	Employee	Expected Years of Future Service	Number of Service Years Rendered 2019	Number of Service Years Rendered 2020	Number of Service Years Rendered 2021	Number of Service Years Rendered 2022	Number of Service Years Rendered 2023	Number of Service Years Rendered 2024
2	A
3	B
4	C
5	D
6	E
7	F
8	Total
9	Amortization fraction

1b. Prepare a set of schedules for the Baznik Company to determine the amortization of the prior service cost. Use the unrounded decimal to determine the amount of the expense.

Additional Instruction

BAZNIK COMPANY

Prior Service Cost Amortization

2019 - 2024

1	Year	Total Prior Service Cost	Amortization Fraction	Amortization to Increase Pension Expense	Remaining Prior Service Cost
2	2019
3	2020
4	2021
5	2022
6	2023
7	2024

2. Prepare the entries to record the prior service cost on January 1, 2019, and the pension expense and amortization of prior service costs on December 31, 2019 and 2020.

General Journal Instructions

PAGE 2019PAGE 2020

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7

Answer 1