Question

Van Persie Corp, sponsors a defined benefit pension plan for its employees. The following balances related to the plan exist on December 31, 2016. Plan assets (market value) Projected benefit obligation Pension asset/liability $450,000 600,000 150,000 Cr. Van Persie amends the pension plan, effective 1/1/2017, and the actuary informs Van Persie that the Prior Service Cost associated with the amendment equals $90,000 As a result of the operation of the plan during 2017, the actuary provided the following additional data on December 31, 2017. Service cost for 2017 Actual return on plan assets in 2017 Amortization of prior service cost Contributions in 2017 Benefits paid retirees in 2017 Settlement rate Expected return rate $ 75,000 45,000 20,000 115,000 70,000 7% 8% Instructions (a) Compute pension expense for Van Persie Corp. for the year 2017 by preparing the attached pension worksheet. (b) Prepare the journal entry for pension expense.

Answer 1

ANSWER:

Van Persie Corp Pension worksheet- 2017 General Journal Entries Memo Record OCI-Prior OCI Pension Projected pension Expense Plan Assets Items Cash Service Gain/Lo Asset/Liabi Benefit Obligation $(1,50,000) $(6,00,000) 4,50,000 $ (75,000) $ (42,000) lity cost SS Balance, Dec.31, 2016 75,000 Service Cost Interest cost (WN 1) Actual return $ 42,000 (45,000) $ $ 45,000 Amortisation of PSC $ 20,000 (20,000) Unexpected gain $ $(9,000) 9,000 $ (1,15,000) $1.15.000 Contribution $ (70,000) Benefits 70,000 S (1,15,000) $ (20,000) S(9,000) S Journal entry for 2017 $ 1,01.000 43,000 90,000 Accumulated OCI, Dec. 31, 2016 70,000(9,000) S(1,07,000) S(6,47,000) 5,40,000 Balance, Dec.31, 2017 $ Working note (WN): 1) Interest Cost: 7% $600,000= $42,000 2) Unexpected gain (8% * $450,000) - $45,000 $9,000 Journal Entry: Account Titles and Explanation Debit Credit Date Dec. 31, 2017 Pension Expense $ 1,01,000 Pension Assets /Liability $ 43,000 1,15,000 9,000 Cash other Comprehensive Income - Gain/Loss other Comprehensive Income/Loss - PSC 20,000

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