Question

* Question 5

On January 1, 2020, Cheyenne Company has the following defined benefit pension plan balances. Projected benefit obligation $4,506,000 Fair value of plan assets 4,220,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends its pension agreement so that prior service costs of $508,000 are created. Other data related to the pension plan are as follows. 2020 2021 Service cost $152,000 $179,000 Prior service cost amortization 0 91,000 Contributions (funding) to the plan 237,000 281,000 Benefits paid 202,000 284,000 Actual return on plan assets 253,200 262,000 Expected rate of return on assets 6 % 8 %

Prepare a pension worksheet for the pension plan for 2020 and 2021. (Enter all amounts as positive.)

For 2021, prepare the journal entry to record pension-related amounts. (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.)

Answer 1

Below table showing worksheet and journal entry

CHEYENNE COMPANY
Pension Worksheet
	General Journal Entries					Memo Record
Items	Annual Pension Expense	Cash	OCI - Prior Service Cost	OCI - Gain/Loss	Pension Asset/ Liability	Projected Benefit Obligation	Plan Assets
Balance, Jan. 1					(286,000)	(4,506,000)	4,220,000
(a) Service cost	152,000					(152,000)
(b) Interest cost	450,600					(450,600)
(c) Actual return	(253,200)						253,200
(d) Contributions		(237,000)					237,000
(e) Benefits						202,000	(202,000)
Journal entry, 12/31	349,400	(237,000)	-	-	(112,400)
Accum OCI, 12/31
Balance, Dec. 31					(398,400)	(4,906,600)	4,508,200
(f) Additional PSC			508,000			(508,000)
Jan. 1						(5,414,600)
(g) Service cost	179,000					(179,000)
(h) Interest cost	541,460					(541,460)
(i) Actual return	(262,000)						262,000
(j) Unexpected loss	(98,656)			98,656
(k) Amortization of PSC	91,000		(91,000)
(l) Contributions		(281,000)					281,000
(m) Benefits						284,000	(284,000)
Journal entry, 12/31	450,804	(281,000)	417,000	98,656	(685,460)
Accum OCI, 12/31		-	-
Balance, Dec. 31			417,000	98,656	(1,083,860)	(5,851,060)	4,767,200
Interest Cost = $4,506,000*10% Settlement rate = $450,600
Interest cost = $5,414,600*10% settlement rate = $541,460
Unexpected loss = ($4,508,200*8% expected return on assets) - $262,000 actual return on plan assets = $98,656

Journal Entry

Journal Entry
General Journal	Debit	Credit
Pension Expense	450,804
Other Comprehensive Income (PSC)	417,000
Other Comprehensive Income (G/L)	98,656
Cash		281,000
Pension Asset/Liability		685,460
(to record the pension related amounts)