Question

Pina Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances related to this plan.

Plan assets (market-related value)		$471,000
Projected benefit obligation		687,000
Pension asset/liability		216,000	Cr.
Prior service cost		87,000
Net gain or loss (debit)		88,000

As a result of the operation of the plan during 2017, the actuary provided the following additional data for 2017.

Service cost for 2017		$112,000
Settlement rate, 9%; expected return rate, 10%
Actual return on plan assets in 2017		40,000
Amortization of prior service cost		25,000
Contributions in 2017		142,000
Benefits paid retirees in 2017		83,000
Average remaining service life of active employees		10	years

Using the preceding data, compute pension expense for Pina Corp. for the year 2017 by preparing a pension worksheet that shows the journal entry for pension expense. (Enter all amounts as positive.)

Answer 1

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The below table is self explanatory. All inputs are standardized and based on numbers given with questions: Solution: Problem 20-7: Annual Expense General Journal Entries OCI-Prior Oci-Gain/ Service Cost Loss Cash Pension Asset Liability 216000 Cr. Memo Record Projected Plan Obligation Assets 687000 Cr. 471000 Dr. 112000 Cr. 61830 Cr. 40000 Dr. Items Balance, Jan. 1, 2017 Service cost Interest cost-9% of Beg PBO Actual return Unexpected Loss (47100-40000) Amortization of PSC Amortization of loss Contribution Benefits Paid Journal entry for 2017 Accumulated OCI, Dec.31,2016 Balance, Dec. 31, 2017 112000 Dr. 61830 Dr. 40000 Cr. 7100 Cr. 25000 Dr. 7100 Dr. 25000 Cr. 1930 Cr. 1930 Dr. 142000 Cr. 142000 Dr. 83000 Cr. 83000 Dr. 151730 Dr. 142000 Cr. 10100 Dr. 25000 Cr. 87000 Dr. 62000 Dr. 5170 Dr. 88000 Dr. 93170 Dr. 205900 Cr 775900 Cr. 570000 Dr.

Expected Return (471000*10%) $ 47,100 b) Corridor Amortization: (Corridor is taken 10% of larger of PBO or Plan asset amount): $ 1,930 Beginning Beginning 10% Accm. Minimum PBO Plan assets Corridor OCI, Beg. Difference Amortization 687000 471000 68700 88000 19300 $ 1,930 (19300/10) period