Question

INSTRUCT (a) Determine tica (b) Prepare the journal entry (c) Prepare the income tax expense sectill 2020. 2017 Part 11: Bill Inc, began business on Jan 1, 2017. Its ences once talp fol Advanced Accounting II Chapter 20 Pensions and Postretirement Benefits Problem 1. Measuring, recording, and reporting pension expense and liability. Tucker, Inc. on January 1, 2017 Top initiated a noncontributory, defined-benefit pension plan that grants benefits to its 100 employees for services rendered in years prior to the adoption of the pension plan. The total expected service-years of the 100 employees who are expected to De receive benefits under the plan is 1,200. An actuarial consulting firm has indicated that the present value of the prior service cost on January 1, 2017 was $5,040,000. On December 31, 2017 the following information was provided concerning the pension plan's operations for its first year. Employer's contribution at end of year $1,600,000 Service cost 600,000 Projected benefit obligation 6,000,000 Plan assets (at fair value) 1,600,000 Expected return on plan assets 9% Settlement rate 8% Instructions (a) Compute the pension expense recognized in 2017. Assume the prior service cost is amortized over the average remaining service life of the employees. (b) Prepare the journal entries to reflect accounting for the company's pension plan for the year ended December 31, 2017. (c) Indicate the amounts that are reported on the income statement and the balance sheet for 2017. Problem 2. Measuring and recording pension expense. Presented below is information related to the pension plan of Zimmer Inc. for the year 2017. 1 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 lutalon The total number of service-years is 1,000 and

Answer 1

Components of pension expense Service cost Interest on projected beneft obligation Expected return on plan assets Amortization of prior service cost Pension expense $ 6,00,000.00 $ 4,80,000.00 =6000000*8% $ -1,44,000.00 =1600000*9% | $ $ 9,36,000.00 DR Particulars Pension expense Pension asset/liability Cash Other comprehensive income (PSC) $ 9,36,000.00 $ 6,64,000.00 $ 16,00,000.00 None of prior service cost amortized Income statement (Partial) Expenses Pension expense $ 9,36,000.00 Comprehensive income statement Net income/(loss) Other comprehensive income Amortization of PSC Comprehensive income Balance sheet (Partial) Long term liabilities Pension liability Stockholders equity Accumulated other comprehensive income (PSC) $ 37,36,000.00 Note $50,40,000.00 $ 60,00,000.00 $ 6,00,000.00 $ 4,80,000.00 =6000000*8% $ 70,80,000.00 Note Projected benefit obligation, before adjustment Add: service cost Add: Interest on projected benefit obligation Projected benefit obligation Fair value of pension plan assets Add: Expected return on plan assets Add: Cash Contribution Plan assets Pension liability $ 16,00,000.00 $ 1,44,000.00 $ 16,00,000.00 =1600000*9% $ 33,44,000.00 $ 37,36,000.00