Question

The Jayson Company has had a defined benefit pension plan for several years. At the end of 2016, Jayson had the following balances related to the plan:

           Projected benefit obligation                                                                            $980,000

           Unrecognized prior service cost (remainder to be amortized over 10 years)             72,000

           Unrecognized net loss                                                                                        128,000

           Plan assets (at fair value)                                                                                   725,000

           Pension liability                                                                                                255,000

On 1/1/17, Jayson amended the plan to provide an increased amount of pension benefits; the prior service cost resulting from this amendment was $60,000. At 1/1/17, the average remaining service life of employees expected to receive benefits was 10 years.

The following information relates to the year 2017:

                   Service Cost                                                          $123,000

                   Settlement rate                                                               9%

                   Expected rate of return on plan assets                              8%

                   Plan contribution (at year-end)                                    90,000

                   Benefit payments to retirees (at year-end)                    80,000

                  

In 2017, Jayson’s actual return on plan assets was $54,000. Jayson follows a policy of recognizing gains/losses on a delayed basis using the "corridor approach". In 2017, there were no changes in estimates and assumptions relating to computation of the projected benefit obligation.

Required:

a.   Prepare Jayson’s pension worksheet, and prepare the journal entry that Jayson would make to record the expense calculated.

b. Prepare the pension note to the 12/31/17 financial statements.

Answer 1

GIVEN DATA :

Jayson Company has had a defined benefit pension plan for several years and their details mention below

REQURIED:

a.   Prepare Jayson’s pension worksheet, and prepare the journal entry that Jayson would make to record the expense calculated?

b. Prepare the pension note to the 12/31/17 financial statements?

SOLUTION:

COMPUTE OF EXPECTED & ACTUAL RETURN PLAN :

Rate of Return plan asset (A) = 8%

Fair Value asset as on 1-1-17 (B) = 725000         

Return (A*B) 725000*8/100 (C) =    58000

   Contribution rate(90000- 80000*8%) (D) = 800     

Therefore expected return plan on asset for year ending is 58800

(C+ D) = (58000 +800)      

Actual return on asset = 54000

liability in the books of jason as on 1.1.2017

projected benefit = 980000

less : unrecognized service cost = 60000

less : FV of asset = 725000

195000

HENCE CREATED LIABILITY IS 195,000

PROFIT AND LOSS STATEMENT :

service cost	123000
ADD : Actual loss	4800
ADD : Service cost	6000
LESS : Expected return	58800
EXPENSES RECOGNISED FOR THE YEAR	75000

JOURNAL ENTRY:

Narration:

(Being expense for the year recored in profit and loss account)