Question

* Question 6

Cheyenne Inc. has sponsored a noncontributory, defined benefit pension plan for its employees since 1997. Prior to 2020, cumulative net pension expense recognized equaled cumulative contributions to the plan. Other relevant information about the pension plan on January 1, 2020, is as follows. 1. The company has 200 employees. All these employees are expected to receive benefits under the plan. The average remaining service life per employee is 12 years. 2. The projected benefit obligation amounted to $5,094,000 and the fair value of pension plan assets was $2,993,000. The market-related asset value was also $2,993,000. Unrecognized prior service cost was $2,101,000. On December 31, 2020, the projected benefit obligation and the accumulated benefit obligation were $4,809,000 and $3,978,000, respectively. The fair value of the pension plan assets amounted to $4,090,000 at the end of the year. A 10% settlement rate and a 10% expected asset return rate were used in the actuarial present value computations in the pension plan. The present value of benefits attributed by the pension benefit formula to employee service in 2020 amounted to $201,000. The employer’s contribution to the plan assets amounted to $786,000 in 2020. This problem assumes no payment of pension benefits.

Prepare a schedule, based on the average remaining life per employee, showing the prior service cost that would be amortized as a component of pension expense for 2020, 2021, and 2022. (Round answers to 0 decimal places, e.g. 2,525.) Prior Service Cost Amortization 2020 $ 2021 $ 2022 $

Compute pension expense for the year 2020. (Round answers to 0 decimal places, e.g. 2,525.) Pension expense $

Compute the amount of the 2020 increase/decrease in net gains or losses and the amount to be amortized in 2020 and 2021. (Round answers to 0 decimal places, e.g. 2,525.) Net gain 12/31/20 $ Amortization in 2020 $ Amortization in 2021 $

Prepare the journal entries required to report the accounting for the company’s pension plan for 2020. (Round answers to 0 decimal places, e.g. 2,525. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

Answer! 1) The prior service cost amortization 2020 ($2,101,000/12): $175083 | 2021 £2,101,000/12] = $175,083 2022 [$2,101.000 /12] = $ 175,083 2) The pension expenses for the year 2020. particulars Amount Service cost $ 201,000 Interest on projected benefit obligation $509400 5094000 x10%) Actual return on plan Assets 4311.000) 34090,000 - $2.993,000 - $ 786.000] unexpected Gain ($2,993000 x10%-$311,000] $11,700 Amortization of prior Service cool $115,083 pension Expenses $586,183 3) The value of Net gain. Fair value of plau Asset 31/12/2020 4,090,000 Leses Expected fair value of asset Add. Fair value of plan Asset ih/2020 $2,993,000 Expected Return { $2,993,000 x 10'/] $299,300 contribution to plan $ 786,000 Lesst Benefits $0 ($4078, 300 Asset gain (4) ($11,700) projected benefit obligation 31/12/2020 $4,809000 Lesst projected benefit obligation 111/2010 $5,094,000 add: Interest £$5094000 x107] &509400 Add: Serviee cost $ 201,000 ($ 5759400) Liability gain (3) 1950,400) Nel gain ($11700 +$ 950,4007 6962,100 value of Amortization Year PRO Fair value of corridor Accumulated Amortization Less Benefits plan 43 sets $o $0 POLO $5094000 $2,991000 2021 $4309000 $4090 000 $509400 $ 480900 (696210040,100 ° 7662.100-1180900

4) Journal entry Date particulars pension expenses Ale pension Assets/eiabilities Alle os [2101000(4809000-4090000) To other comprehensive income To other compre leusine jucové (pse) To cash EF Debit Teredit $586183 $1382000 $962100 $175083 $831000