Question

6,000,000 Ilussets at fair value) 1,600,000 Expected return on plan assets Settlement rate 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. 9% 8% 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 retum 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 200 employees, all who are expected to receive benefits under the plan. The total number of service-years is 1,000 and the service-years attributable to 2017 is 200. The company has decided to use the years-of-service method of amortization for these costs. 4 At the beginning of the period, fair value of pension plan assets, $280,000. The company had an Accumulated OCI (loss) at the beginning of the period of $90,000. Any amortization of unrecognized net loss is recognized on a straight- line basis over the average remaining service-life of the employees. 5 The contribution made to the pension fund in 2017 was $231,000. 6 Actual return on plan assets in 2017 is $27,000. $35,000 benefits are paid to retirees. Instructions (a) Determine the pension expense to be reported on the income statement for 2017 (b) Prepare the journal entries to record pension expense for 2017. Problem 3. Amortization of prior service cost using years-of-service method. On January 1, 2016, Solano Incorporated amended its pension plan which caused an increase of $6,000,000 in its projected benefit obligation. The company has 400 employees who are expected to receive benefits under the company's defined-benefit pension plan. TI Jaunumant navided the following information regarding expected employee retirements:

Answer 1

Answer :-

(a)Determination the pension Expense to be reported on the Income Statement for 2017 are as follows :-

Particular	Amount
Services Cost	$240,000
Interest on Projected Benefit obligation (Note - 1)	$30,000
Expected return on Plan Assets (Note -2)	($18,000)
Amortization of Prior service cost (Note -3)	$28,000
Amortization of loss (Note - 4)	$12,000
Pension Expense	$292,000

Note 1 :-

Interest on Projected Benefit obligation = Projected Benefit obligation × Settlement rate

Projected Benefit Obligation = $ 300,000

Settlement rate = 10%

Interest on Projected Benefit obligation = $300,000 × 10% = $30,000

Note 2:-

Expected return on Plan Assets = Accumulated Benefits obligation × Expected return on Plan Assets rate

Accumulated Benefits obligation = $200,000

Expected return on Plan Assets rate = 9%

Expected return on Plan Assets = $ 200,000 × 9% = $ 18,000

Note 3:-

Amortization of Prior service cost = (140,000/ 1,000) × 200 = $28,000

Note -4:-

Net Loss = $90,000

10% of Project Benefits obligation = $30,000

Amount to be ammortized = 90,000 - $30,000 = $60,000

Amortization of loss = Amount to be ammortized / (Expected future year of service / No of employees)

Amortization of loss = $ 60,000 / ( 1000/200)

Amortization of loss = $12,000

b) Journal entries to record pension Expense for 2017

	Pension Expense A/c. Dr.	$292,000
	To OCI ( Amortization of loss)		$12,000
	To OCI (prior service cost)		$28,000
	To Cash		$231,000
	To Pension Assets /Liability		$21,000