Question

Question 25 Blossom Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2017. January 1, 2017 December 31, 2017 Projected benefit obligation $1,488,000 $1,514,000 Market-related and fair value of plan assets 809,000 1,135,900 Accumulated benefit obligation 1,600,000 1,718,800 Accumulated OCI (G/L)—Net gain 0 (198,800 ) The service cost component of pension expense for employee services rendered in the current year amounted to $76,000 and the amortization of prior service cost was $118,800. The company’s actual funding (contributions) of the plan in 2017 amounted to $246,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,188,000 on January 1, 2017. Assume no benefits paid in 2017.

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).) Components of Pension Expense Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService Cost $ Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService Cost Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService Cost Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService Cost SHOW LIST OF ACCOUNTS

Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan 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.) Account Titles and Explanation Debit Credit (To record pension expense and employer’s contribution) SHOW LIST OF ACCOUNTS

Indicate the pension-related amounts that would be reported on the income statement and the balance sheet for Blossom Company for the year 2017. Blossom Company Income Statement (Partial) December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017 DividendsExpensesNet Income / (Loss)Retained Earnings – January 1, 2017Retained Earnings – December 31, 2017RevenuesTotal ExpensesTotal Revenues Amortization of PSC    Interest Expense    Pension Expense    Rent Expense    Service Cost $ Blossom Company Comprehensive Income Statement December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017 DividendsExpensesNet Income / (Loss)Retained Earnings – January 1, 2017Retained Earnings – December 31, 2017RevenuesTotal ExpensesTotal Revenues $XXXX Amortization of PSCComprehensive IncomeInterest ExpenseLiability GainPension ExpenseRent ExpenseService CostOther Comprehensive Income (Loss) Amortization of PSC    Comprehensive Income    Interest Expense    Liability Gain    Pension Expense    Rent Expense    Service Cost    Other Comprehensive Income (Loss) $ Amortization of PSC    Comprehensive Income    Interest Expense    Liability Gain    Pension Expense    Rent Expense    Service Cost    Other Comprehensive Income (Loss) Amortization of PSCComprehensive IncomeInterest ExpenseLiability GainPension ExpenseRent ExpenseService CostOther Comprehensive Income (Loss) $XXXX Blossom Company Balance Sheet (Partial) December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017 Current AssetsLiabilitiesIntangible AssetsProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Property, Plant and EquipmentTotal Stockholders' Equity Accounts PayableAccounts ReceivableAccumulated DepreciationAccumulated Other Comprehensive Income (G/L)Accumulated Other Comprehensive Loss (G/L)Accumulated Other Comprehensive Income (PSC)Accumulated Other Comprehensive Loss (PSC)Common StockPension LiabilityRetained Earnings $ Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity Accounts PayableAccounts ReceivableAccumulated DepreciationAccumulated Other Comprehensive Income (G/L)Accumulated Other Comprehensive Loss (G/L)Accumulated Other Comprehensive Income (PSC)Accumulated Other Comprehensive Loss (PSC)Common StockPension LiabilityRetained Earnings $ Accounts PayableAccounts ReceivableAccumulated DepreciationAccumulated Other Comprehensive Income (G/L)Accumulated Other Comprehensive Loss (G/L)Accumulated Other Comprehensive Income (PSC)Accumulated Other Comprehensive Loss (PSC)Common StockPension LiabilityRetained Earnings

Answer 1

(a)   Pension expense for 2017 composed of the following:

                Service cost.....................................................                       $ 76,000

                Interest on projected benefit obligation

                    (10% X $1,488,000)......................................                         148,800

                Expected return on plan assets

                    (10% X $809,000).........................................                          (80,900)

                Amortization of prior service cost...............                       118,800

                        Pension expense....................................                       $262,700

(b)   Pension Expense...................................................    262,700

        Pension Asset /Liability.........................................    300,900

                Cash..................................................................                         246,000

                Other Comprehensive Income (PSC).........                       118,800

                Other Comprehensive Income (G/L)...........                         198,800

                    (To record pension expense and

                     employer’s contribution)

(c)   Income Statement:

                Pension expense............................................                    $ 262,700

        Comprehensive Income Statement

                Net income.......................................................                    $       XXXX

                Other comprehensive income (loss)

                       Amortization of PSC................................ $118,800

                       Liability gain..............................................   198,800      317,600

        Comprehensive income........................................                     $     XXXX

        Balance Sheet:

                Liabilities

                        Pension liability.......................................                    $   378,100*

        Stockholders’ Equity

                Accumulated OCI (PSC)................................                    $1,069,200**

                Accumulated OCI (G/L)..................................                         198,800

*Projected benefit obligation, Dec. 31, 2017 $1,514,000

Plan assets, Dec. 31, 2017                               (1,135,900)

Pension liability                                                  $   378,100

**$1,188,000 – $118,800

	General Journal Entries                                                Memo Record
Items	Annual Pension Expense	Cash	OCI—Prior Service Cost	OCI— Gain/Loss	Pension Asset/Liability	Projected Benefit Obligation	Plan Assets
Balance, Jan. 1, 2017					679,000 Cr.	*1,488,000 Cr.	809,000 Dr.
Service cost	76,000 Dr.					76,000 Cr.
Interest cost*	148,800 Dr.					148,800 Cr.
Actual return**	80,900 Cr.						80,900 Dr.
Amortization of PSC	118,800 Dr.		118,800 Cr.
Liability gain				198,800 Cr.		198,800 Dr.
Contributions		246,000 Cr.					246,000 Dr.
Journal entry, for 2017	262,700 Dr.	246,000 Cr.	118,800 Cr.	198,800 Cr.	300,900 Dr.
Accumulated OCI, Dec. 31, 2016			1,188,000 Dr.	0
Balance, Dec. 31, 2017			1,069,200 Dr.	198,800 Cr.	378,100 Cr.	1,514,000 Cr.	1,135,900 Dr.

*$1,488,000 X 10%.

**Note: We show actual return on the worksheet to ensure that plan assets are properly reported. If expected and actual
returns differ, then an additional adjustment is made to compute the proper amount of pension expense.