Question

In: Accounting

You are the auditor of Crane Inc., the Canadian subsidiary of a public multinational engineering company...

You are the auditor of Crane Inc., the Canadian subsidiary of a public multinational engineering company that offers a defined benefit pension plan to its eligible employees. Employees are permitted to join the plan after two years of employment, and benefits vest immediately. You have received the following information from the fund trustee for the year ended December 31, 2020:

Discount rate 5%
Rate of compensation increase 4%
Defined Benefit Obligation
Defined benefit obligation at January 1, 2020 $11,263,680
Current service cost 409,380
Interest cost 563,184
Benefits paid 749,461
Actuarial loss, end of period 572,990
Plan Assets
Fair value of plan assets at January 1, 2020 9,160,080
Actual return on plan assets, net of expenses 1,074,040
Employer contributions 501,975
Employee contributions 79,172
Benefits paid 749,461


Other relevant information:

1. The net defined benefit liability on January 1, 2020, is $2,103,600.
2. Employee contributions to the plan are withheld as payroll deductions, and are remitted to the pension trustee along with the employer contributions.

Prepare a pension work sheet for the company. Assume IFRS is followed.

Prepare the employer’s journal entries to reflect the accounting for the pension plan for the year ended December 31, 2020.

Solutions

Expert Solution

1. Pension Expense $ 5,14,560.00

2

    


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