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A partially completed pension spreadsheet showing the relationships among the elements that constitute Carney, Inc.’s defined...

A partially completed pension spreadsheet showing the relationships among the elements that constitute Carney, Inc.’s defined benefit pension plan follows. At the end of 2018, Carney revised its pension formula and incurred a prior service cost of $100 million. At the end of 2019, the pension formula was amended again, creating an additional prior service cost of $200 million. At the beginning of 2020, $400 million prior service cost was incurred. At the beginning of 2021, $300 million prior service cost was incurred. In 2018 - 2021, the actuary’s discount rate remained 10%, and the average remaining service life of the active employee group remained 10 years. The expected rate of return on assets was 10% in 2019, and increased by 1% each year.

  1. Prepare all the necessary journal entries for 2019.

2019 Pension spreadsheet ($ in millions)

(PBO)

Plan Assets

Prior Service Cost–AOCI

Net Loss (Gain) –AOCI

Pension Expense

Cash

Net Pension (Liability) / Asset

Balance, Jan. 1, 2019

(25,000)

20,000

100

4,500

(5,000)

Service cost

(800)

800

(800)

Interest cost

(2,500)

2,500

(2,500)

Prior Service Cost

(200)

200

(200)

Expected return on assets

2,000

(2,000)

2,000

Adjust for: Gain (loss) on assets

400

(400)

400

Amortization of: "Prior service cost-AOCI"

(10)

10

Amortization of: "Net Loss (Gain)-AOCI"

(200)

200

Gain (Loss) on PBO

7000

(7,000)

7,000

Cash funding

1,000

(1,000)

1,000

Retiree benefits

950

(950)

Bal., Dec. 31, 2019

(20,550)

22,450

290

(3,100)

1,510

1,900

Solutions

Expert Solution

Workings 2019 General Journal entries Memo record
Pension Work Sheet
A negative sign indicates credits
A positive sign indicates debits
Annual Oci-prior Projected
Pension service Oci- Pension Benefit Plan
items Expense Cash Cost Gain/Loss Asset/liability Obligation assets
Balance, Jan. 1,2019
Service cost 800 Dr. -5000 Cr. -25000 Cr. 20000 Dr.
interest cost (settlement PBO*10%) 2500 Dr. -800 Cr.
Actual return -2500 Dr. -2500 Cr.
Loss of assets - Dr. -400 Cr. 2000 Dr.
Amortisation of past service cost 10 Dr. -10 Cr. 400 Dr.
Past service cost 200 Dr. -200 Cr.
Amortization of net gain or loss-AOCI(corridor) 200 Dr. -200 Cr.
Contributions -1000 Cr. 1000 Dr.
Benefits 950 Dr. -950 Cr.
Decrease/increase in PBO-(actual loss) -7000 Cr. 7000 Dr.
Journal entry for 2019 1510 Dr. -1000 Cr. 190 Dr. -7600 Cr. 6900 Dr.
Accumulated OCI, 1 Jan 2019 100 Dr. 4500 Dr.
Balance Dec. 2019 290 Dr. -3100 Cr. 1900 Dr. -20550 Cr. 22450 Dr.
Corridor approach
year Projected Benefit Obligation Plan assets Corridor @10% Cumulative unrecognized of gain or loss Minimum amortization of gain or loss Years
2019 25000 20000 2500 4500 200 Loss 10
2019 Pension spreadsheet ($ in millions) (PBO) Plan Assets Prior Service Cost–AOCI Net Loss (Gain) –AOCI Pension Expense Cash Net Pension (Liability) / Asset
Balance, Jan. 1, 2019 -25,000 20,000 100 4,500 -5,000
Service cost -800 800 -800
Interest cost -2,500 2,500 -2,500
Prior Service Cost -200 200 -200
Expected return on assets 2,000 -2,000 2,000
Adjust for: Gain (loss) on assets 400 -400 400
Amortization of: "Prior service cost-AOCI" -10 10 0
Amortization of: "Net Loss (Gain)-AOCI" -200 200 0
Gain (Loss) on PBO 7000 -7,000 7,000
Cash funding 1,000 -1,000 1,000
Retiree benefits 950 -950 0
Bal., Dec. 31, 2019 -20,550 22,450 290 -3,100 1,510 -1000 1,900

ekkarill92 answered 10 months ago
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