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Keeton Company sponsors a defined benefit pension plan for its 600 employees. The company’s actuary provided the following information about the plan.
\r\nJanuary 1, December 31,
\r\n2014 2014 2015
\r\nProjected benefi t obligation $2,800,000 $3,650,000 $4,195,000
\r\nAccumulated benefi t obligation 1,900,000 2,430,000 2,900,000
\r\nPlan assets (fair value and market-related asset value) 1,700,000 2,900,000 3,790,000
\r\nAccumulated net (gain) or loss (for purposes of the corridor calculation) –0– 198,000 (24,000)
\r\nDiscount rate (current settlement rate) 9% 8%
\r\nActual and expected asset return rate 10% 10%
\r\nContributions 1,030,000 600,000
\r\nThe average remaining service life per employee is 10.5 years. The service cost component of net periodic pension expense for employee services rendered amounted to $400,000 in 2014 and $475,000 in 2015. The accumulated OCI (PSC) on January 1, 2014, was $1,260,000. No benefits have been paid.
\r\nInstructions
\r\n(Round to the nearest dollar.)
\r\n(a) Compute the amount of accumulated OCI (PSC) to be amortized as a component of net periodic pension expense for each of the years 2014 and 2015.
\r\n(b) Prepare a schedule which reflects the amount of accumulated OCI (G/L) to be amortized as a component of pension expense for 2014 and 2015.
\r\n(c) Determine the total amount of pension expense to be recognized by Keeton Company in 2014 and 2015.
The actuary for the pension plan of Gustafson Inc. calculated the following net gains and losses.
\r\nIncurred during the Year (Gain) or Loss
\r\n2014 $300,000
\r\n2015 480,000
\r\n2016 (210,000)
\r\n2017 (290,000)
\r\nOther information about the company’s pension obligation and plan assets is as follows.
\r\nProjected Benefi t Plan Assets
\r\nAs of January 1, Obligation (market-related asset value)
\r\n2014 $4,000,000 $2,400,000
\r\n2015 4,520,000 2,200,000
\r\n2016 5,000,000 2,600,000
\r\n2017 4,240,000 3,040,000
\r\nGustafson Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total service-years for all participating employees is 5,600. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2014. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization.
\r\nInstructions
\r\n(Round to the nearest dollar.)
\r\nPrepare a schedule which reflects the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense for each of the years 2014, 2015, 2016, and 2017. Apply the “corridor” approach in determining the amount to be amortized each year.
Latoya Company provides the following selected information related to its defined benefit pension plan for 2014. Pension asset/liability (January 1) $ 25,000 Cr.
\r\nAccumulated benefi t obligation (December 31) 400,000
\r\nActual and expected return on plan assets 10,000
\r\nContributions (funding) in 2014 150,000
\r\nFair value of plan assets (December 31) 800,000
\r\nSettlement rate 10%
\r\nProjected benefi t obligation (January 1) 700,000
\r\nService cost 80,000
\r\nInstructions
\r\n(a) Compute pension expense and prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2014. Preparation of a pension worksheet is not required. Benefits paid in 2014 were $35,000.
\r\n(b) Indicate the pension-related amounts that would be reported in the company’s income statement and balance sheet for 2014.
Using the information in E20-13 about Erickson Company’s defined benefit pension plan, prepare a 2014 pension worksheet with supplementary schedules of computations. Prepare the journal entries at December 31, 2014, to record pension expense and related pension transactions. Also, indicate the pension amounts reported in the balance sheet.
Erickson Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, December 31, 2014 2014
\r\nVested benefi t obligation $1,500 $1,900
\r\nAccumulated benefi t obligation 1,900 2,730
\r\nProjected benefi t obligation 2,500 3,300
\r\nPlan assets (fair value) 1,700 2,620
\r\nSettlement rate and expected rate of return 10%
\r\nPension asset/liability 800 ?
\r\nService cost for the year 2014 400
\r\nContributions (funding in 2014) 700
\r\nBenefi ts paid in 2014 200
\r\nInstructions
\r\n(a) Compute the actual return on the plan assets in 2014.
\r\n(b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2014. (Assume the January 1, 2014, balance was zero.)
\r\n(c) Compute the amount of net gain or loss amortization for 2014 (corridor approach).
\r\n(d) Compute pension expense for 2014.
Ferreri 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, 2014.
\r\nJanuary 1, December 31, 2014 2014
\r\nProjected benefi t obligation $1,500,000 $1,527,000
\r\nMarket-related and fair value of plan assets 800,000 1,130,000
\r\nAccumulated benefi t obligation 1,600,000 1,720,000
\r\nAccumulated OCI (G/L)—Net gain –0– (200,000)
\r\nThe service cost component of pension expense for employee services rendered in the current year amounted to $77,000 and the amortization of prior service cost was $120,000. The company’s actual funding (contributions) of the plan in 2014 amounted to $250,000. 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 $1,200,000 on January 1, 2014. Assume no benefits paid in 2014.
\r\nInstructions
\r\n(a) Determine the amounts of the components of pension expense that should be recognized by the company in 2014.
\r\n(b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2014.
\r\n(c) Indicate the pension-related amounts that would be reported on the income statement and the balance sheet for Ferreri Company for the year 2014.
Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2014 in which no benefits were paid.
\r\n1. The actuarial present value of future benefits earned by employees for services rendered in 2014 amounted to $56,000.
\r\n2. The company’s funding policy requires a contribution to the pension trustee amounting to $145,000 for 2014.
\r\n3. As of January 1, 2014, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2014 and no benefits were paid.
\r\n4. Amortization of prior service cost was $50,000 in 2014. Amortization of net gain or loss was not required in 2014.
\r\nInstructions
\r\n(a) Determine the amounts of the components of pension expense that should be recognized by the company in 2014.
\r\n(b) Prepare the journal entry or entries to record pension expense and the employer’s contribution to the pension trustee in 2014.
\r\n(c) Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2014.
Webb Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2014, the following balances relate to this plan. Plan assets $480,000
\r\nProjected benefi t obligation 600,000
\r\nPension asset/liability 120,000 Accumulated OCI (PSC) 100,000 Dr.
\r\nAs a result of the operation of the plan during 2014, the following additional data are provided by theactuary. Service cost $90,000
\r\nSettlement rate, 9%
\r\nActual return on plan assets 55,000
\r\nAmortization of prior service cost 19,000
\r\nExpected return on plan assets 52,000
\r\nUnexpected loss from change in projected benefi t obligation, due to change in actuarial predictions 76,000 Contributions 99,000 Benefi ts paid retirees 85,000
\r\nInstructions
\r\n(a) Using the data above, compute pension expense for Webb Corp. for the year 2014 by preparing a pension worksheet.
\r\n(b) Prepare the journal entry for pension expense for 2014.
Taveras Enterprises provides the following information relative to its defined benefit pension plan.
\r\nBalances or Values at December 31, 2014
\r\nProjected benefi t obligation $2,737,000
\r\nAccumulated benefi t obligation 1,980,000
\r\nFair value of plan assets 2,278,329
\r\nAccumulated OCI (PSC) 210,000
\r\nAccumulated OCI—Net loss (1/1/14 balance, –0–) 45,680
\r\nPension liability 458,671
\r\nOther pension plan data for 2014:
\r\nService cost 94,000
\r\nPrior service cost amortization 42,000
\r\nActual return on plan assets 130,000
\r\nExpected return on plan assets 175,680
\r\nInterest on January 1, 2014, projected benefi t obligation 253,000
\r\nContributions to plan 93,329
\r\nBenefi ts paid 140,000
\r\nInstructions
\r\n(a) Prepare the note disclosing the components of pension expense for the year 2014.
\r\n(b) Determine the amounts of other comprehensive income and comprehensive income for 2014. Net income for 2014 is $35,000.
\r\n(c) Compute the amount of accumulated other comprehensive income reported at December 31, 2014.
\r\n
Taveras Enterprises provides the following information relative to its defined benefit pension plan.
\r\nBalances or Values at December 31, 2014
\r\nProjected benefi t obligation $2,737,000
\r\nAccumulated benefi t obligation 1,980,000
\r\nFair value of plan assets 2,278,329
\r\nAccumulated OCI (PSC) 210,000
\r\nAccumulated OCI—Net loss (1/1/14 balance, –0–) 45,680
\r\nPension liability 458,671
\r\nOther pension plan data for 2014:
\r\nService cost 94,000
\r\nPrior service cost amortization 42,000
\r\nActual return on plan assets 130,000
\r\nExpected return on plan assets 175,680
\r\nInterest on January 1, 2014, projected benefi t obligation 253,000
\r\nContributions to plan 93,329
\r\nBenefi ts paid 140,000
\r\nInstructions
\r\n(a) Prepare the note disclosing the components of pension expense for the year 2014.
\r\n(b) Determine the amounts of other comprehensive income and comprehensive income for 2014. Net income for 2014 is $35,000.
\r\n(c) Compute the amount of accumulated other comprehensive income reported at December 31, 2014.
The following defined pension data of Rydell Corp. apply to the year 2014.
\r\nProjected benefi t obligation, 1/1/14 (before amendment) $560,000
\r\nPlan assets, 1/1/14 546,200
\r\nPension liability 13,800
\r\nOn January 1, 2014, Rydell Corp., through plan amendment, grants prior service benefi ts having a present value of 120,000
\r\nSettlement rate 9%
\r\nService cost 58,000
\r\nContributions (funding) 65,000
\r\nActual (expected) return on plan assets 52,280
\r\nBenefi ts paid to retirees 40,000
\r\nPrior service cost amortization for 2014 17,000
\r\nInstructions
\r\nFor 2014, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
Gingrich Importers provides the following pension plan information.
\r\nFair value of pension plan assets, January 1, 2014 $2,400,000
\r\nFair value of pension plan assets, December 31, 2014 2,725,000
\r\nContributions to the plan in 2014 280,000
\r\nBenefi ts paid retirees in 2014 350,000
\r\nInstructions
\r\nFrom the data above, compute the actual return on the plan assets for 2014.
Andrews Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2014 are as follows.
\r\nFuture
\r\nEmployee Years of Service
\r\nJim 3
\r\nPaul 4
\r\nNancy 5
\r\nDave 6
\r\nKathy 6
\r\nOn January 1, 2014, the company amended its pension plan, increasing its projected benefit obligation by $72,000.
\r\nInstructions
\r\nCompute the amount of prior service cost amortization for the years 2014 through 2019 using the years-ofservice method, setting up appropriate schedules.
The following facts apply to the pension plan of Boudreau Inc. for the year 2014.
\r\nPlan assets, January 1, 2014 $490,000
\r\nProjected benefi t obligation, January 1, 2014 490,000
\r\nSettlement rate 8%
\r\nService cost 40,000
\r\nContributions (funding) 25,000
\r\nActual and expected return on plan assets 49,700
\r\nBenefi ts paid to retirees 33,400
\r\nInstructions
\r\nUsing the preceding data, compute pension expense for the year 2014. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2014 and the year-end balances in the related pension accounts.
Using the information in E20-2, prepare a pension worksheet inserting January 1, 2014, balances, showing December 31, 2014, balances, and the journal entry recording pension expense.
Veldre Company provides the following information about its defined benefit pension plan for the year 2014.
\r\nService cost $ 90,000
\r\nContribution to the plan 105,000
\r\nPrior service cost amortization 10,000
\r\nActual and expected return on plan assets 64,000
\r\nBenefi ts paid 40,000
\r\nPlan assets at January 1, 2014 640,000
\r\nProjected benefi t obligation at January 1, 2014 700,000
\r\nAccumulated OCI (PSC) at January 1, 2014 150,000
\r\nInterest/discount (settlement) rate 10%
\r\nInstructions
\r\nCompute the pension expense for the year 2014.
The following information is available for the pension plan of Radcliffe Company for the year 2014.
\r\nActual and expected return on plan assets $ 15,000
\r\nBenefi ts paid to retirees 40,000
\r\nContributions (funding) 90,000
\r\nInterest/discount rate 10%
\r\nPrior service cost amortization 8,000
\r\nProjected benefi t obligation, January 1, 2014 500,000
\r\nService cost 60,000
\r\nInstructions
\r\n(a) Compute pension expense for the year 2014.
\r\n(b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2014.
For 2014, Sampsell Inc. computed its annual postretirement expense as $240,900. Sampsell’s contribution to the plan during 2014 was $180,000. Prepare Sampsell’s 2014 entry to record postretirement expense.
Manno Corporation has the following information available concerning its postretirement benefit plan for 2014.
\r\nService cost $40,000
\r\nInterest cost 47,400
\r\nActual and expected return on plan assets 26,900
Lahey Corp. has three defined benefit pension plans as follows.
\r\nPension Assets Projected Benefi t
\r\n(at Fair Value) Obligation
\r\nPlan X $600,000 $500,000
\r\nPlan Y 900,000 720,000
\r\nPlan Z 550,000 700,000
\r\nHow will Lahey report these multiple plans in its financial statements?
Norton Co. had the following amounts related to its pension plan in 2014.
\r\nActuarial liability loss for 2014 $28,000
\r\nUnexpected asset gain for 2014 18,000 Accumulated other comprehensive income (G/L) (beginning balance) 7,000 Cr. Determine for 2014: (a) Norton’s other comprehensive income (loss), and (b)N comprehensive income. Net income for 2014 is $26,000; no amortization of gain or loss is necessary in 2014.
Hawkins Corporation has the following balances at December 31, 2014.
\r\nProjected benefi t obligation $2,600,000
\r\nPlan assets at fair value 2,000,000
\r\nAccumulated OCI (PSC) 1,100,000
\r\nHow should these balances be reported on Hawkins’s balance sheet at December 31, 2014?
Shin Corporation had a projected benefit obligation of $3,100,000 and plan assets of $3,300,000 at
\r\nJanuary 1, 2014. Shin also had a net actuarial loss of $465,000 in accumulated OCI at January 1, 2014. The average remaining service period of Shin’s employees is 7.5 years. Compute Shin’s minimum amortization of the actuarial loss.
At December 31, 2014, Besler Corporation had a projected benefit obligation of $560,000, plan assets of $322,000, and prior service cost of $127,000 in accumulated other comprehensive income. Determine the pension asset/liability at December 31, 2014.
\r\n
Mancuso Corporation amended its pension plan on January 1, 2014, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2014. Compute prior service cost amortization for 2014.
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