At the end of 2019, the balances in the accounts related to the
defined benefit pension plan of the Warren Company were as
follows:
Projected benefit
obligation
1,320,000
Unrecognized prior service cost
(remainder to be amortized over 12 years)
110,000
Unrecognized net loss
192,000
Plan assets (at fair value)
1,047,500
On 1/1/20, Warren amended the plan to provide an increased amount
of pension benefits; the prior service cost resulting from this
amendment was $70,000. At 1/1/20, the average remaining service
life of employees expected to receive benefits was 12
years.
The following information relates to the year 2020:
Service Cost
175,500
Settlement rate
7%
Expected rate of return on plan assets
6%
Plan contribution (at year-end)
158,000
Benefit payments to retirees (at year-end)
135,000
In 2020, Warren’s actual return on plan assets was $75,000. Warren
follows a policy of recognizing gains/losses on a delayed
basis
using the "corridor approach". At the end of 2020, there was one
change in the estimates and assumptions relating to computation of
the
projected benefit obligation, resulting in a decrease in the PBO of
$35,000.
Required:
a. Prepare Warren’s pension worksheet, and prepare the
journal entry that Warren would make to record the expense
calculated.
b. Prepare the pension note required for the 12/31/20
financial statements.
Pension accounting for the year ended 2020
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At the end of 2019, the balances in the accounts related to the defined benefit pension...
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