Question

Question 4 --/1 View Policies Current Attempt in Progress Sunland 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 $4,907,000 and the fair value of pension plan assets was $2,941,000. The market-related asset value was also $2,941,000. Unrecognized prior service cost was $1,966,000. On December 31, 2020, the projected benefit obligation and the accumulated benefit obligation were $4,792,000 and $3,961,000, respectively. The fair value of the pension plan assets amounted to $4,128,000 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 $203,000. The employer's contribution to the plan assets amounted to $764,000 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 O decimal places, e.g. 2,525.) Prior Service Cost Amortization 2020 $ 2021 $ 2022 $

Answer 1

ГЛА 1 Ans: 21) Calculate prior service cost amortization. 3 Year Prior service cost amortization Workings 4 20201 $163.833 ($1,966,000/12) 5 2021 $163,833 (S1,966,000/12) 6 2022 $163,833 ($1.966,000/12) 82) Calculate pension expense for year 2020 is calculated as follo Particulars Amount Service Cost $203,000 Interest on Projected Benefit Obligation $490.700(4,907,000*10%) Actual Return on Plan Assets -$423.000 (4,128,000 - 2.941.000 - 764,000) Unexpected Gain $128.900|(2.941.000*10% - 423.000) Amortization of Prior Service Cost $163,833 Pension Expense $563,433 Amount Amount Amount $4,128,000 Calculate change in net gain value on 2020: Particulars Fair Value of Plan Assets 31/12/2020 Less: Expected Fair Value of Assets Add: Fair Value of Plan Assets 01/01/2020 Expected Return (2.941,000*10%) Contributions to the Plan Less: Benefits Asset Gain $2.941.000 $294.100 $764.000 SO $3.999.100 -$128.900 Projected Benefit Obligation 31/12/2020 Less: Projected Benefit Obligation 01/01/2020 Add: Interest (4,907,000*10%) Add: Service Cost Less: Benefits Liability Gain Net Gain $4.792.000 $5,038,000 $490,700 $203,000 SO $5,731,700 -$939,700 $1,068,600

Year Amortization Calculate amount to be amortized in 2020 and 2021: Accumulated Fair Value of Other Projected Benefit Obligation Corridor Plan Assets Comprehensiv e Income $4.907.000 $2,941,000 $490.700 $4,792,000 $4,128,000 $479,200 $1,068,600 37 2020 so/ 20211 $49,117 [(1,068,600 - 479,200/12] 40 4) Prepare journal entry 41 Date Account Titles and Explanation Pension Expense Pension Asset/Liability Other Comprehensive Income (G/L) Other Comprehensive Income (PSC) Cash $1,302.000 Debit Credit $563,433 $1,433,000 $1.068,600 $163.833 $764.000

1 Ans: 21) Calculate prior service cost amortization. 3 Year Prior service cost amortization 4 2020 =(1966000/12) 5 2021 =(1966000/12) 6 2022 =(1966000/12) Workings ($1,966,000/12) ($1.966,000/12) ($1,966,000/12) 8 2) Calculate pension expense for year 2020 is calculated as follows Particulars Amount Service Cost 203000 Interest on Projected Benefit Obligation =(4907000*10%) (4,907,000*10%) Actual Return on Plan Assets =-(4128000 -2941000-7(4.128.000 - 2.941,000 - 764,000) Unexpected Gain =-((2941000*10%) - 42 (2.941,000*10% - 423.000) Amortization of Prior Service Cost =B6 Pension Expense =SUM(C10:C14) 17 3) Amount Amount Amount 4128000 Calculate change in net gain value on 2020: Particulars Fair Value of Plan Assets 31/12/2020 Less: Expected Fair Value of Assets Add: Fair Value of Plan Assets 01/01/2020 Expected Return (2.941,000*10%) Contributions to the Plan Less: Benefits Asset Gain 2941000 =(2941000*10%) 764000 =SUM(C21:C24) =E24-E19 4792000 Projected Benefit Obligation 31/12/2020 Less: Projected Benefit Obligation 01/01/2020 Add: Interest (4,907,000*10%) Add: Service Cost Less: Benefits Liability Gain Net Gain 5038000 =(4907000*10%) 203000 =SUM(C28:C31) =D27-D31 =SUM(E25:E32)

Year Projected Benefit Obligation Amortization Calculate amount to be amortized in 2020 and 2021: Accumulated Fair Value of Plan Other Corridor Assets Comprehensive Income 2941000 =B37*10% 4128000 =B38*10% =E33 37 2020 4907000 38 2021 4792000 =(1068600 - 479200/12 [(1.068.600 - 479,200)/12] 40 4) Debit Credit Prepare journal entry Account Titles and Explanation Pension Expense Pension Asset/Liability Other Comprehensive Income (G/L) Other Comprehensive Income (PSC) Cash =C15 =D44+D45+D46-C42 =(1966000-(4792000-4128000)) 1068600 =B6 =C23