Question
In: Accounting
Company A's pension plan had the following balances on January 1, 2012 Balances, Jan. 1, 2010...
Company A's pension plan had the following balances on January 1, 2012
Balances, Jan. 1, 2010
plan assets -$120,000
pension assets/liabilities-($22,000)
projected benefit obligation-($142,000)
accumulated OCI
(PSC)- $42,000
(G/L)- $18,000
In 2012, Company A adjusted the actuarial assumptions of the plan, which increase the projected benefit obligation by $44,000. Service costs, and additional information regardingg the plan are summarized below.
Pension Plan
service cost- 28,400
amortization of prior service cost-0
amended prior service costs-(80,000)
actual return on plan assets-40,000
contributions-82,000
benefits paid-64,200
Company A's expected return on plan assets is 10%, while their interest and settlement rate is 8%. The average remaining service life of Comapny A's employees was 8 years.
Instructions
1. Prepare a schedule to calculate amortization of the gain, or loss on other omprehensive income, if any using the corridor method.
2. Prepare a pension plan worksheet for 2012.
3. Prepare the journal entry to record pension plan expense in 2012.
***Please show all work and calculations for everything***
Thanks :)
Solutions
Expert Solution
Requirement 1
Amortisation of loss on OCI using Corridor method
| Corridor Amortization | $475 | ($18,000-$142,000*10%)/8 |
Requirement 2
| Company A | ||||||||||||||
| Pension Worksheet 2012 | ||||||||||||||
| Items | General Journal Entries | Memo Record Entries | ||||||||||||
| Annual Pension Expense | Cash | OCI-Prior Service Cost | OCI-Gain/Loss | Pension Asset/ Liability |
Projected Benefit Obligations | Plan Assets | ||||||||
| Balance, Jan 1, 2012 | $22,000 | Cr | $1,42,000 | Cr | $1,20,000 | Dr | ||||||||
| Service Cost | $28,400 | Dr | $28,400 | Cr | ||||||||||
| InterestCost | $11,360 | Dr | $11,360 | Cr | ||||||||||
| Actual Return | $40,000 | Cr | $40,000 | Dr | ||||||||||
| Unexpected Loss | $28,000 | Dr | $28,000 | Cr | ||||||||||
| Amortization of PSC | $0 | Dr | $0 | Cr | ||||||||||
| Amortization of Loss | $475 | Dr | $475 | Cr | ||||||||||
| Contribution | $82,000 | Cr | $82,000 | Dr | ||||||||||
| Benefits Paid | $64,200 | Dr | $64,200 | Cr | ||||||||||
| Increse in prior service cost | 38000 | Dr | $38,000 | Cr | ||||||||||
| Increase in liabilities | $44,000 | Dr | $44,000 | Cr | ||||||||||
| Journal Entries for 2017 | $28,235 | Dr | $82,000 | Cr | $38,000 | Dr | $15,525 | Dr | $240 | Dr | ||||
| Accumulated OCI, Dec 31, 2011 | $42,000 | Dr | $18,000 | Dr | ||||||||||
| Balance, Dec 31, 2017 | $80,000 | Dr | $33,525 | Cr | $21,760 | Cr | $1,99,560 | Cr | $1,77,800 | Dr | ||||
| Expected Return | $12,000 | ($120,000*10%) |
Requirement 3
| Date | Particulars | Debit | Credit |
| 31/12/12 | Pension Expenses | $28,235 | |
| Plan Assets | $40,000 | ||
| To Projected benefit obligations | $39,760 | ||
| To OCI Gain/Loss | $28,475 | ||
| (being pension expenses for the year 2012 recorded) |
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