Question

Problem 2. Measuring and recording pension expense. Presented below is information related to the pension plan of Zimmer Inc. for the year 2017. The service cost related to pension expense is $240,000 using the projected benefits approach. 2 The projected benefit obligation and the accumulated benefit obligation at the beginning of the year are $300,000 and $200,000, respectively. The expected return on plan assets is 9% and the settlement rate is 10%. 3 The accumulated OCI-prior service cost at the beginning of the year is $140,000. The company has a workforce of 200 employees, all who are expected to receive benefits under the plan. The total number of service-years is 1,000 and the service-years attributable to 2017 is 200. The company has decided to use the years-of-service method of amortization for these costs. 4 At the beginning of the period, fair value of pension plan assets. $280,000. The company had an Accumulated OCI (loss) at the beginning of the period of $90,000. Any amortization of unrecognized net loss is recognized on a straight- line basis over the average remaining service-life of the employees. 5 The contribution made to the pension fund in 2017 was $231,000. 6 Actual return on plan assets in 2017 is $27,000 $35,000 benefits are paid to retirees. Instructions (a) Determine the pension expense to be reported on the income statement for 2017 (b) Prepare the journal entries to record pension expense for 2017.

Answer 1

Answer Particulars Amount & Service COSES . QUOOOO interest on projected benefit obligation (10% * $ 30000 o) 30000 expected return on Plan assets (96 x 200000) on Plan assets 1 (-)18000 Amortization of prior service costci) 28000 Amortization of the loss (2) 12000 Pension expense 292,000 $ 100000/1000 = $100 $ 140 x 200 - $ 28000 Particulars Fair value of the plan assets 080000 10% of above 28000 Projected benefit obligation 300000 10% of above - 30000

Net loss at the beginning of period 90000 30000 10% of the fair Projected benefit value of plan dess) Higher of obligation on assets Armount to 60 000 be oтorhizе в Expected future years of service/ number of employees = 100 years / 200 E5 Yea, o Amortization of loss = $60000 15 = $12000 Particulars Оebt E credit Pension expense 292000 Oci CGK) 12000 28000 Oci poc Pension Asset / liability 138 00 238200 Cash (contribution made)