Question

Problem 17-8 Pension spreadsheet; record pension expense and funding; new gains and losses [LO17-7, 17-8] A partially completed pension spreadsheet showing the relationships among the elements that constitute Carney, Inc., defined benefit pension plan follows. Six years earlier. Carney revised its pension formula and recalculated benefits earned by employees in prior years using the more generous formula. The prior service cost created by the recalculation is being amortized at the rate of $4 million per year. At the end of 2018. the pension formula was amended again, creating an additional prior service cost of $45 million. The expected rate of return on assets and the actuary's discount rate were 10%, and the average remaining service life of the active employee group is 10 years. Required: 1. Fill in the missing amounts. 2. to 4. Prepare all the necessary journal entries for 2018. Complete this question by entering your answers in the tabs below. Rea 1 Reg 2 to 4 Fill in the missing amounts. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Enter credit amounts with a minus sign and debit amounts with a positive sign.) ( )s indicate credits; debits otherwise Prior ($ in millions) PBO Plan Assets Service Net Loss- AOCI Pension Expense Cash Net Pension (Liability) Asset Cost-AOCI 25 (200) 800 100 (100) Balance, Jan. 1. 2018 Service cost Interest cost Expected return on assets Adjust for: Loss on assets Amortization of: Prior service cost Net loss Loss on PBO Prior service cost Cash funding Retiree benefits Bal., Dec. 31, 2018 (20) (800) 770 25 100 (35) Req1 Req 2 to 4 >

Answer 1

Please find below table useful to compute desired results: -

в H A i Amortized per year 2 Prior service cost 3 Discount rate 45 =10/100 4 Plan Assets 800 Prior Service cost - AOCI Net Loss - AOCI Pension Expense Cash 25 100 PBO -900 =-F7 =B6*B3 Net Pension (liability) Asset -100 =-F7 =-B8 =-F9 =-B8 =-C9 =C6*B3 =-C11 =-E11 5 (S in millions) 6 Balance, Jan. 1. 2018 7 Service Cost 8 Interest Cost 9 Expected return on assets 10 Adjust for: 11 Loss on assets 12 Amortization of 13 Prior service cost 14 Net Loss 15 Loss on PBO 16 Prior service cost 17 Cash funding 18 Retiree benefits 19 Bal., Dec. 31, 2018 20 =E11 =-E14 =-(E6-F8)/10 =-H15 =-E15 =-B2 =-D16 =-H17 85 -H17 =-C18 =C19-SUM(C6:C17) =SUM(B6:B18) 770 =SUM(DOD18) =SUM(E6:E18) =SUM(F6:F18) =SUM(H6-H18)

2 KL General Journal Pension Expense 1=F19 Plan Assets =C9 PBO =K2+K3-L5-L6 Amortization of prior service cost - OCI =E11 Amortization of net loss - OCI =F14 =L5 Loss-OCI Plan Assets =K8 10 11 Loss-OCI Prior service cost- OCI PBO =E15 =D16 13 =K11+K12 17 Plan Assets Cash =K15 19 PBO Plan Assets =B18

End results would be as follows: -

Ε 1 2 3 А Amortized per year Prior service cost Discount rate 4 Cash PBO (900) (84) Plan Assets Prior Service cost - AOCI 800 Net Loss - AOCI Pension Expense 100 Net Pension (liability)/ Asset (100) (84) 90 84 (90) (80) 80 (10) 5 (S in millions) 6 Balance, Jan. 1. 2018 7 Service Cost 8 Interest Cost 9 Expected return on assets 10 Adjust for: 11 Loss on assets 12 Amortization of 13 Prior service cost 14 Net Loss 15 Loss on PBO 16 Prior service cost 17 Cash funding 18 Retiree benefits 19 Bal., Dec. 31, 2018 20 (10) (209 (20) (45) (45) 85 (85) 85 (185) 185 (954) 770 60 129 105

K L 2 | 105 | 3 General Journal Pension Expense Plan Assets PBO Amortization of prior service cost - OCI Amortization of net loss - OCI 74 8 Loss-OCI Plan Assets 10 11 12 13 Loss-OCI Prior service cost- OCI PBO 14 15 Plan Assets Cash PBO Plan Assets