Question

Metlock Co. has the following postretirement benefit plan balances on January 1, 2020.

Accumulated postretirement benefit obligation		$2,239,000
Fair value of plan assets		2,239,000

The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends the plan so that prior service costs of $177,000 are created. Other data related to the plan are:

		2020			2021
Service costs		$75,000			$85,000
Prior service costs amortization		0			12,000
Contributions (funding) to the plan		45,000			35,000
Benefits paid		41,000			45,000
Actual return on plan assets		142,000			119,000
Expected rate of return on assets		8	%		6	%

1. Prepare a worksheet for the postretirement plan in 2020.

2.Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2020.

3.Prepare a worksheet for 2021

4.Prepare journal entries related to the postretirement plan as of December 31, 2021.

5. Indicate the postretirement-benefit–related amounts reported in the 2021 financial statements.

Answer 1

		Metlock Co.
General Journal Entries					Memo Record
	Annual Pension Expense	Cash	OCI-Gain/loss	Pension Assets/liability	Projected benefit obligation	Plan Assets
Balance 1/1/2020				$                         -	$         -22,39,000.00	$ 22,39,000.00
Service Cost(given)	$                75,000.00				$               -75,000.00
Interest Cost($2239000*10%)	$            2,23,900.00				$            -2,23,900.00
Actual Return($2239000*10%)	$          -2,23,900.00					$     2,23,900.00
Contributions(given)		$       -45,000.00				$        45,000.00
Benefits(given)					$                 41,000.00	$       -41,000.00
Assets loss(*)			$       81,900.00			$       -81,900.00
Journal entry in 2020	$                75,000.00	$       -45,000.00	$       81,900.00	$    -1,11,900.00	$         -24,96,900.00	$ 23,85,000.00
Accumulated OCI December 31st,2020			$                      -
Balance Dec 31st,2020			$       81,900.00	$    -1,11,900.00	$         -24,96,900.00	$ 23,85,000.00
Addition to Prior service cost amortization(given)	$            1,77,000.00				$            -1,77,000.00
Balance jan 1,2021					$         -26,73,900.00
Service Cost(given)	$                85,000.00				$               -85,000.00
Interest Cost=($2673900*10%)	$            2,67,390.00				$            -2,67,390.00
Interest Revenue($2385000*10%)	$          -2,38,500.00					$     2,38,500.00
Contributions(given)		$       -35,000.00				$        35,000.00
Benefits(given)					$                 45,000.00	$       -45,000.00
Assets loss(**)			$   1,19,500.00			$   -1,19,500.00
Journal Entry for 2021	$            2,90,890.00	$       -35,000.00	$   1,19,500.00	$      3,75,390.00
Accumulated OCI December 31st,2021			$       81,900.00
Balance Dec 31st,2021			$   2,01,900.00	$      2,63,490.00	$         -29,80,070.00	$ 24,95,300.00
Positive figures=(DR)
Negative figures=(CR)
Pension assets/liability=(22390000-22390000)	0
Assets Loss(*)	($223900-$142000)
Assets Loss(**)	($238500-$119000)
	Journal Entry -2020
General,Journal	Debit	Credit
Other comprehensive income-(G/L)	$                81,900.00
Pension Expense	$                75,000.00
To Cash		$         45,000.00
To Pension Assets/Liability		$     1,11,900.00
	Journal Entry -2021
General,Journal	Debit	Credit
Other comprehensive income-(G/L)	$            1,19,500.00
Pension Expense	$            2,90,890.00
To Cash		$         35,000.00
To Pension Assets/Liability		$     3,75,390.00
Financial Statement
Year 2021
Partial Income Statement
Pension Expense	$            2,90,890.00
Comprehensive Income Statement
Net Income	*****
Other comprehensive income(loss)
Assets gain(loss)	$          -1,19,500.00
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