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SE THE FOLLOWING INFORMATION FOR #11 - 20 Interest (Cost) Rate Expected rate of return on plan assets Actual rate of retum on

14.) Calculate the 2017 adjustment for gain or loss and write the answer on the cover sheet.15.) Calculate the 2017 amortization of Prior Service Cost and write the answer on the cover sheet.

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Answer #1
14. Computation of 2017 adjustment for gain/loss :-
Unexpected loss/(gain) on plan assets for 2017 $        (2,500)
Loss on PBO for assumption changes $          3,500
Amortization of Net Loss $        (2,188)
2017 adjustment for gain/loss $        (1,188)
15. Computation of 2017 amortization of Prior Service Cost:-
Prior Service Costs incurred beginning of 2016 $             40,000
Average remaining service years of employees 4 years
2017 Amortization of Prior Service Cost ($40000/4) $             10,000
Pension Worksheet- 2017
Memo Record General Journal Entries
PROJECTED BENEFIT OBLIGATION PLAN ASSET Prior Service Cost-AOCI Net Loss (Gain)-AOCI Annual Pension Expense Cash Pension Asset/ Liability
Balance, Jan 1, 2017 $      (350,000) $   250,000 $     30,000 $       43,750 $                (100,000)
Service cost $        (40,000) $ 40,000 $                  (40,000)
Interest cost,3% (350000*3%) $        (10,500) $ 10,500 $                  (10,500)
Expected return on assets (250000*3%) $      7,500 $ (7,500) $                     7,500
Adjust for: $                          -  
Gain on assets (250000*4%=10000-7500) $      2,500 $        (2,500) $                     2,500
Loss on PBO for assumption changes $          (3,500) $         3,500 $                   (3,500)
Amortization of Prior Service Cost (40000/4) $    (10,000) $ 10,000 $                          -  
Amortization of Net Loss $        (2,188) $ 2,188 $                          -  
Contributions $     44,000 $ (44,000) $                   44,000
Retiree Benefits $         45,000 $   (45,000) $                          -  
Balance, Dec 31, 2017 $      (359,000) $   259,000 $     20,000 $       42,563 $ 55,188 $ (44,000) $                (100,000)
Computation of unexpected loss/(gain) on assets for the year 2017:-
Expected return on the plan assets (250000*3%) $               7,500
Less: Actual return on the plan assets (250000*4%) $             10,000
Unexpected loss/(gain) on plan assets for 2017 $             (2,500)
Computation of amount of loss to be amortized from OCI-loss Account in 2017:-
a. Net loss-AOCI beginning $       43,750
Projected Benefit Obligation, beginning $    350,000
Plan Assets, beginning $    250,000
Higher value $    350,000
b. Corridor =10% of $350000 $       35,000
c. Excess at the beginning of the year (a-b) $8,750
d. Average remaining service period 4 years
e. loss amortized to current year pension expense (c/d) $2,188
Computation of Pension Expense for 2017:-
Service cost $     40,000
Interest cost $     10,500
Expected return on the plan assets $     (7,500)
Amortization of past service cost $     10,000
Amortization of net loss $      2,188
Pension Expense $     55,188
Journal entry
Account Titles and Explanation Debit Credit
Pension Expense $         55,188
         Cash $     44,000
         OCI-PSC $     10,000
         OCI - loss $      1,188
(To record pension expense)

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