CHAPTER 20ACCOUNTING FOR PENSIONS AND POSTRETIREMENT BENEFITS CHAPTER LEARNING OBJECTIVES 1. Distinguish between accounting for the employer's pension plan and accounting for the pension fund. 2. Identify types of pension plans and their characteristics. 3. Explain measures for valuing the pension obligation. 4. Identify amounts reported in financial statements. 5. Use a worksheet for employer's pension plan entries. 6. Explain the accounting for past service costs. 7. Explain the accounting for remeasurements. 8. Describe the requirements for reporting pension plans in financial statements. 9. Explain the accounting for other postretirement benefits. 20 - 2 Test Bank for Intermediate Accounting: IFRS Edition, 2e TRUE-FALSE—Conceptual 1. A pension plan is contributory when the employer makes payments to a funding agency. 2. Qualified pension plans permit deductibility of the employer’s contributions to the pension fund. 3. Qualified pension plans permit tax-free status of earnings from pension fund assets. 4. In a defined contribution plan, the employer must make up any shortfall in the accumulated assets held by the defined contribution trust. 5. IFRS encourages, but does not require, companies to use actuaries in the measurement of the pension amounts. 6. The employees are the beneficiaries of a defined contribution trust, but the employer is the beneficiary of a defined benefit trust. 7. An employer does not have to report a liability on its statement of financial position in a defined-benefit plan. 8. Employers are at risk with defined-benefit plans because they must contribute enough to meet the cost of benefits that the plan defines. 9. Companies compute the vested benefit obligation using only vested benefits, at current salary levels. 10. The accumulated benefit obligation bases the deferred compensation amount on both vested and nonvested service using future salary levels. 11. Regarding the alternatives for measuring the pension liability, the profession adopted the accumulated benefit obligation using the present value of vested and non-vested benefits accrued to date, based on employees’ future salary levels. 12. If a company grants plan amendments, it allocates the past service cost of providing these retroactive benefits to pension expense in the future, specifically to the remaining serviceyears of the affected employees. 13. Service cost is the expense caused by the increase in the accumulated benefit obligation because of employees’ service during the current year. 14. The interest expense component of pension expense in the current period is computed by multiplying the discount rate by the beginning balance of the defined benefit obligation. 15. Companies should recognize the entire increase in defined benefit obligation due to a plan initiation or amendment as pension expense in the year of amendment. 16. For defined benefit plans, IFRS recognizes a pension asset or liability as the funded status of the plan. Accounting for Pensions and Postretirement Benefits 20-3 17. The difference between the expected return and the actual return is referred to as the asset gain or loss. 18. The unexpected gains and losses from changes in the defined benefit obligation are called asset gains and losses. 19. Companies report any actuarial gains or losses charged or credited to other comprehensive income in the statement of financial position. 20. A curtailment occurs when a company enters into a transaction that eliminates all further obligations for part or all of the benefits provided under a defined benefit plan. True-False Answers—Conceptual Item 1. 2. 3. 4. Ans. F T T F Item 5. 6. 7. 8. Ans. T T F T Item 9. 10. 11. 12. Ans. T F F F Item 13. 14. 15. 16. Ans. F T T T Item 17. 18. 19. 20. Ans. T F T F MULTIPLE CHOICE—Conceptual 21. In determining the present value of the prospective benefits (often referred to as the defined benefit obligation), the following are considered by the actuary: a. retirement and mortality rate. b. interest rates. c. benefit provisions of the plan. d. all of these answer choices are considered. 22. In a defined-benefit plan, the process of funding refers to a. determining the defined benefit obligation. b. determining the accumulated benefit obligation. c. making the periodic contributions to a funding agency to ensure that funds are available to meet retirees' claims. d. determining the amount that might be reported for pension expense. 23. In all pension plans, the accounting problems include all the following except a. measuring the amount of pension obligation. b. disclosing the status and effects of the plan in the financial statements. c. allocating the cost of the plan to the proper periods. d. determining the level of individual premiums. 24. In a defined-contribution plan, a formula is used that a. defines the benefits that the employee will receive at the time of retirement. b. ensures that pension expense and the cash funding amount will be different. c. requires an employer to contribute a certain sum each period based on the formula. d. ensures that employers are at risk to make sure funds are available at retirement. the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels. The defined benefit obligation is the measure of pension obligation that a. requires the longest possible period for funding to maximize the tax deduction. defines the benefits that the employee will receive at the time of retirement. 2e 25. s 28. d. s In accounting for a defined-benefit pension plan a. The benefit of gain or the risk of loss from the assets contributed to the pension fund are borne by the employee. defines the contribution the employer is to make. s Which of the following is not a characteristic of a defined-contribution pension plan? a. Defined benefit obligation d. The employer's contribution each period is based on a formula.4 Test Bank for Intermediate Accounting: IFRS Edition. 26. is not sanctioned under international financial reporting standards for reporting the service cost component of pension expense. d. 30. c. b. Accumulated benefit obligation c. d. b. the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels. . Alternative methods exist for the measurement of the pension obligation (liability).20 . Restructured benefit obligation 29. The benefits to be received by employees are usually determined by an employee’s three highest years of salary defined by the terms of the plan. Vested benefit obligation b. the liability is determined based upon known variables that reflect future salary levels promised to employees. In a defined-benefit plan. The accumulated benefit obligation measures a. an estimated total benefit at retirement and then computes the level cost that will be sufficient. Which measure requires the use of future salaries in its computation? a. b. b. c. the employer's responsibility is simply to make a contribution each year based on the formula established in the plan. c. The accounting for a defined-contribution plan is straightforward and uncomplicated. c. requires that pension expense and the cash funding amount be the same. is required to be used for reporting the service cost component of pension expense. d. c. the shortest possible period for funding to maximize the tax deduction. requires that the benefit of gain or the risk of loss from the assets contributed to the pension plan be borne by the employee. an appropriate funding pattern must be established to ensure that enough monies will be available at retirement to meet the benefits promised. to provide the total benefits at retirement. requires pension expense to be determined solely on the basis of the plan formula applied to years of service to date and based on existing salary levels. together with interest expected to accumulate at the assumed rate. d. b. no promise is made concerning the ultimate benefits to be paid out to the employees. 27. a formula is used that a. the expense recognized each period is equal to the cash contribution. c. d. 35. b. 33. b. pension expense will be more than the amount funded. is the same rate used to compute the interest revenue on plan assets. 32. a company should employ an actuarial funding method to report pension expense that best reflects the cost of benefits to employees. d. b. d. In computing the service cost component of pension expense. The interest rate used on the defined benefit obligation component of pension expense a. all years of service—both vested and nonvested—using current salary levels. pension expense will be less than the amount funded. All of these answer choices are included in the computation. plan assets still under the control of the company. both vested and nonvested service using future salaries. c. service cost component measured using current salary levels. are those that the employee is entitled to receive even if fired.Accounting for Pensions and Postretirement Benefits 20-5 31. Vested benefits a. c. reflects the rates at which pension benefits could be effectively settled. b. the accumulated benefit obligation provides a more realistic measure of the pension obligation on a going concern basis. 34. interest revenue on plan assets. the defined benefit obligation using future compensation levels provides a realistic measure of present pension obligation and expense. d. None of these answer choices are correct. are not contingent upon additional service under the plan. interest on defined benefit obligation. Differing measures of the pension obligation can be based on a. All of these answer choices are correct. are defined by all of these answer choices. or less than the amount funded. pension expense must equal the amount funded. usually require a certain minimum number of years of service. reflects the incremental borrowing rate of the employer. the IASB concluded that a. Plan assets include a. One component of pension expense is interest revenue on plan assets. b. d. only the vested benefits using current salary levels. The relationship between the amount funded and the amount reported for pension expense is as follows: a. c. 36. b. only assets reported on the statement of financial position of the employer as pension asset/liability. The computation of pension expense includes all the following except a. . d. equal to. 37. c. b. All of these answer choices are correct. may be stated implicitly or explicitly when reported. c. pension expense may be greater than. d. c. contributions made by the employer and contributions made by the employee when a contributory plan of some type is involved. All of these answer choices are correct. amount of employer contributions exceeds the pension expense. pension asset/liability.6 Test Bank for Intermediate Accounting: IFRS Edition. c. d. recorded in other comprehensive income (PSC). as accumulated other comprehensive income (PSC). amount of pension expense exceeds the amount of employer contributions. c. c. is equal to the change in the fair value of the plan assets during the year. c. 40. and changes in the fair value of the fund assets. other comprehensive income (PSC). b. past service costs should be a. defined benefit obligation exceeds the fair value of the plan assets. In accounting for a pension plan. dividends.20 . fair value of the plan assets exceeds the defined benefit obligation. any difference between the pension cost charged to expense and the payments into the fund should be reported as a. straight-line basis over 10 years. 2e 38. years-of-service method or on a straight-line basis over the average remaining service life of active employees. c. b. as other comprehensive income (G/L) d. is equal to the expected rate of return times the fair value of the plan assets at the beginning of the period. operations of prior periods. reported as an expense in the period the plan is amended. 43. Which of the following items should be included in pension expense calculated by an employer who sponsors a defined-benefit pension plan for its employees? a. Past service cost is amortized on a a. treated as a prior period adjustment because no future periods are benefited. b. retained earnings. b. straight-line basis over the expected future years of service. The actual return on plan assets a. A pension liability will result at the end of the year if the a. includes interest. d. d. Fair value of plan assets Yes Yes No No Past service cost Yes No Yes No 41. amortized in accordance with procedures used for income tax purposes. c. d. d. past service costs are not amortized. d. When a company amends a pension plan. When a company adopts a pension plan. for accounting purposes. 42. c. 39. past service costs should be charged to a. . 44. operations of the current period. b. an offset to the liability for past service cost. b. b. A corporation has a defined-benefit plan. Asset Gains & Losses Yes No Yes No Liability Gains & Losses Yes No No Yes 47. Unrecognized net gain or loss should be reported in the liability section of the balance sheet. recognition of a liability is required when the defined benefit obligation exceeds the fair value of plan assets. the expense should be recognized immediately. d.Accounting for Pensions and Postretirement Benefits 20-7 45. c. Conversely. There is an account titled Pension Asset / Liability. d. 48. d. d. b. The unexpected gains or losses that result from changes in the defined benefit obligation are called a. d. b. 46. . the Board a. the accumulated benefit obligation exceeds the fair value of pension plan assets. requires recognition of an asset. A pension asset is reported when a. b. pension plan assets at fair value exceed the defined benefit obligation. 49. Whenever a defined-benefit plan is amended and credit is given to employees for years of service provided before the date of amendment a. accumulated other comprehensive income exceeds the fair value of pension plan assets. but a past service cost exists. the accumulated benefit obligation exceeds the fair value of pension plan assets. b. requires recognition of an asset if the excess fair value of plan assets exceeds the corridor amount. when the fair value of plan assets exceeds the defined benefit obligation. c. d. Which of the following statements is correct? a. c. Other comprehensive income (PSC) should be included in net income. 50. but the liability may be deferred until a reasonable basis for its determination has been identified. c. pension plan assets at fair value exceed the accumulated benefit obligation. c. both the accumulated benefit obligation and the defined benefit obligation are usually less than before. the expense and the liability should be recognized at the time the benefits are paid. the pension expense reported for the period is greater than the funding amount for the same period. recommends recognition of an asset but does not require such recognition. the defined benefit obligation exceeds the fair value of pension plan assets. There is an account titled Defined Benefit Obligation. A pension liability is reported when a. does not permit recognition of an asset. both the accumulated benefit obligation and the defined benefit obligation are usually greater than before. b. According to the IASB. b. c. the accumulated benefit obligation is less than the fair value of pension plan assets. Presented below is pension information related to Woods. Ans. Postretirement healthcare benefits are generally not funded while pensions are generally funded. 45. 32. 38. 31. c. 51.8 Test Bank for Intermediate Accounting: IFRS Edition. 26. Ans.000 Expected return on plan assets 18. pensions are generally paid to the retiree. 2e 51. 41. 33. 52. 36.20 . 22. Ans. d c d c b b a Item 28. d. $108. The amount of past service cost changed or credited in previous years. Postretirement healthcare benefits are generally paid only to the retiree while. whereas pension benefits are generally paid monthly. 25.000 Interest on defined benefit obligation 54. 30. c c a b b c a Item 42.000. the spouse. d. Ans. Postretirement healthcare benefits are generally paid as needed and used. The funded status of the plan and the amounts recognized in the financial statements d. 27. The major components of pension expense b. 29. 40.000. c d d a d a d Item 49. 24. 44. . Differences between pensions and postretirement benefits include all of the following except a. $144. Postretirement healthcare benefits are generally uncapped while pensions are generally well-defined. Inc. a a b c MULTIPLE CHOICE—Computational 53. b. Ans. The rates used in measuring the benefit amounts 52. 23. c. 47. 43. and other dependents.000 The amount of pension expense to be reported for 2016 is a. 37. Multiple Choice Answers—Conceptual Item 21.000. 34. $120. 46. c. 50. 39. c a a d d d a Item 35.000 Interest on vested benefits 24. $162. Which of the following disclosures of pension plan information would not normally be required? a. for the year 2016: Service cost $72. b. 48.000. 000 Defined benefit obligation 4. 2016 Fair value of pension plan assets $4. $1. January 1. $531.000 The discount rate was 10%. $200. $360.000.000 Actual return on plan assets 180. Service cost $ 200.Accounting for Pensions and Postretirement Benefits 54.000 Actual return on plan assets 210.000 $4.160.000 . $280.000 d.000 Fair value of plan assets (beginning of year) 1.000 b.600.200. $260.000 Past service cost due to increase in benefits 165. Inc.275. The discount rate is 10%.000 c. c.365.000) The service cost component of pension expense for 2016 is $360.155. Inc. The amount of pension expense reported for 2016 is a. $432.000 Net loss 30. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31.000 and the past service cost due to an increase in benefits is $60. $440.000 What amount should be reported for pension expense in 2016? a. $1. What is the amount of pension expense for 2016? a. 20-9 Kraft. $1.000 b. d.800. 55.000 Interest revenue on plan assets 180.000 Accumulated OCI—Net Gain / Loss -0(90.000 c.500. Barton. Service cost $900.000 Interest on defined benefit obligation 390. $1. pension plan for 2016. $522.000 5. 2016.000 d.000 56.000. 2016 December 31.000. b. Presented below is information related to Jensen Inc.000.000 Defined benefit obligation (beginning of year) 2.000 Contributions to the plan 220. The following data relates to the operation of the plan for the year 2016.000. sponsors a defined-benefit pension plan.335.400. 000 60.000 21.000 5. $15. $83.000 362.000. $1. What is the amount that Cooper Enterprises should report as its pension liability on its statement of financial position as of December 31. $93. 2e Use the following information for questions 57 and 58. $60. 2016 Assets and obligations Plan assets (at fair value) Defined benefit obligation Other Items Pension asset / liability.000 18. b.000 30.165. $1.000 d.500. c.000 82. $110.195.082. Actual return on plan assets Net gain on liability Past service cost due to increase in benefits Interest on plan assets Interest on defined benefit obligation Service cost $200.500 800. 60.000.000 Pension expense for 2016 is a. The average remaining service life of employees is 10 years.000. $71. Presented below is pension information for Green Company for the year 2016: Interest on plan assets Interest on vested benefits Service cost Interest on defined benefit obligation Past service cost due to increase in benefits The amount of pension expense to be reported for 2016 is a.000.000 15.000 d. b.20 .000.000 c. 2016 Contributions Accumulated OCI(Gain/Loss) $100. The following information for Cooper Enterprises is given below: December 31. 2016.000 . $200. $105. 2016? a.000 83.10 Test Bank for Intermediate Accounting: IFRS Edition. for 2016.000. $100.000 230. $1.000 b. c. What is the pension expense that Cooper Enterprises should report for 2016? a. Inc.000.000 59. 57. $24.000 200. The following information is related to the pension plan of Long.000 c.500 150.950 58.050 b. $1. $69. January 1.950 There was no accumulated OCI at January 1. $60. d. c. 2016. $149. $600.000 d.440.000 effective January 1. What amount related to its pension plan will be reported on the company’s statement of financial position? a.000 7% Lockett’s contribution was $1.000 d. What is the amount of pension expense for 2016? a.100. $765. £90.000.000.000 6.380. Oxford Ltd.400. £5. b. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31. has a defined benefit obligation of £195.000. $45.000 1.100. d.000.000.000. c.000 c.260. Inc. 62. 63.000. $191. Lockett estimates that the average remaining service life is 15 years.900. b.800. $170.000.000 9.578.000 and pension plan assets with a fair value of £110. The actual return on plan assets in 2016 was a.000 and the past service cost due to an increase in benefits is $180. $1. $900. $107. $465.000 -0- 12/31/15 $8.000 in 2016 and benefits paid were $1. The amount of the vested benefits for the plan is £105.000 The service cost component of pension expense for 2016 is $840.900.000. 61. $1. The following data are for the pension plan for the employees of Lockett Company. The gain on plan assets in 2016 was a. At the end of the current period. 64. The discount rate is 10%.000 b. $1.760.000. 2016.000 Net (gains) and losses -0240. Defined benefit obligation Plan assets (at fair value) AOCI – net loss Discount rate (for year) 1/1/15 $8.000.000.000 c.000 1. d.000 9.000 . Assume that the actual return on plan assets in 2016 was $800.900.000.000 Pension assets (at fair value) 6.000 $11.000.000 b. £85. $1.125. Hubbard.506.400.000 6.Accounting for Pensions and Postretirement Benefits 20-11 d. 1/1/16 12/31/16 Defined benefit obligation $11.000 Use the following information for questions 62 and 63.000 8% 12/31/16 $11. £20.000.500. 000 52. Churchill has an accumulated actuarial gain of £12..000 c.000. 2e 65.000 and pension plan assets with a fair value of £265. 61.20 .900.900 d.300 b.000.000 9.000 b. Which of the following is the journal entry that Garvey Chambers would make to record pension expense and funding? a. Pension Asset/Liability………………………………… Cash………………………………………………… 52. Pension liability of £74. has a defined benefit obligation of £335..000 70. At the end of the current year.000.000.300 d. The amount of the vested benefits for the plan is £225. Pension Asset/Liability…………………………………. Cash………………………………………………. The amount of the vested benefits for the plan is £225.100 c. What account and amountrelated to its pension plan will be reported on the company’s statement of financial position? a.000 61. Pension Expense…………………………………………..12 Test Bank for Intermediate Accounting: IFRS Edition.000.000.000 66.300. Pension asset of £233. For 2016.000 and pension plan assets with a fair value of £245.000. Cash………………………………………………… 61.000.000.000 9. Pension liability of £109.000.000 52.000 9.000.000.000.000. At the end of the current year. Garvey Chambers plc had pension expense of £61 million and contributed £52 million to the pension fund.000 c.000 61.000 b. Pension liability of £90. Pension asset of £110. Pension asset of £168.000. Pension asset of £115. Kennedy Co.000 d. Pension liability of £134. Pension Expense………………………………………… Pension Asset/Liability………………………………… Cash………………………………………………… 9. Kennedy has an accumulated actuarial gain of £8. Pension Expense…………………………………………..900 67.000 . What account and amountrelated to its pension plan will be reported on the company’s statement of financial position? a. Churchill Industries has a defined obligation of £433.000. Pension Asset/Liability…………………………………. Pension Expense…………………………………………. 000 710. 2016 Defined benefit obligation at January 1.000 65. During 2016.000.000 16. the discount rate was 10% actual and expected return on plan assets were €26.500. Wembley Company had plan assets of €250.000 c.000 c. the discount rate was 10%.500 d. 2016.900 c.000 62. service cost was €27. €27.000 8% Based on this information.000 9% Based on this information.000.500 d.000 40. Based on this information what would be the defined benefit obligation for Wembley Company for 2016? a.000 100. €277. £108. £211.000 810.500 b. 2016 Unrecognized past service cost balance at January 1.000 100. 2016 Discount rate £95. £208. contributions were €20.000 . 20-13 Clarkson Co.500. €302. Service cost Contribution to the plan Actual return on plan assets Benefits paid Plan assets at January 1. what is the pension expense for 2016? a. contributions were €20. 2016.500 c. £72.000 and a defined benefit obligation of the same amount.000.000 910.500 b.500. €22. At January 1.000 810. Carlton Co.000 d. what is the pension expense for 2016? a. service cost was €22. £271. During 2016. €239. 2016 Defined benefit obligation at January 1. Trevor Company had plan assets of €215. At January 1.800 111.000 40. Based on this information what would be the Defined benefit obligation for Trevor Company for 2016? a.Accounting for Pensions and Postretirement Benefits 68. and benefits paid were €17. £203. provides the following information about its pension plan for the year 2016.500. 2016 Unrecognized past service cost balance at January 1. €259.000 b.500 71. €285.000. £210. provides the following information about its pension plan for the year 2016. €263.000 16. 2016 Discount rate £90.800 b.000 d. actual and expected return on plan assets were €25. Service cost Contribution to the plan Actual return on plan assets Benefits paid Plan assets at January 1. £199.000 69. and benefits paid were €19.000 and a defined benefit obligation of the same amount.000 70. $2. b. Newlin Co. contributions were £22.000. . 2016.250. the discount rate was 10% actual return on plan assets was €25.14 Test Bank for Intermediate Accounting: IFRS Edition. 2016 is a.000 300.214. $2. b.500 b. $2. what would be the amount of plan assets on 12/31/16? a. service cost was €27. A credit balance of €7. A debit balance of £5. 2e 72.337.500 Use the following information for questions 74 and 75.500. A debit balance of €295.355. The balance of the defined benefit obligation at December 31. $2.430. At January 1.500. and benefits paid were £18.000 The discount rate is 10%. d. Pimlico Company had plan assets of £215. Other data related to the pension plan for 2016 are: Service cost Past service costs due to increase in benefits Contributions Benefits paid Actual return on plan assets Net gain on liability $180.000. During 2016. 2016. 75.000 73 At January 1. what would be the amount of plan assets on 12/31/16? a.000 60.000 c.000.000 and a defined benefit obligation of the same amount.000 1. The fair value of plan assets at December 31. $2. $2. contributions were €20.000 b.500 c. 2016.500. has the following balances: Defined benefit obligation Fair value of plan assets $2. c. c.000.500 d.433.000 and a defined benefit obligation of the same amount.000.000. service cost was £27.000. Wembley Company had plan assets of €250. $2.500.232. $2.000. On January 1.000 18. A debit balance of £265.20 . A credit balance of €285. A credit balance of £246.385.100. 2016 is a. and benefits paid were €17.000 74. Based on this information. A debit balance of €277. d.000.000. the discount rate was 10% actual return on plan assets was £28.000.500 d.800. Based on this information. During 2016. A credit balance of £283.000 237.000.000 105. $657.000 gain. $201. The net interest amount for 2016 is a. $537.000 6. The actual return on plan assets in 2016 is a. Turner's contribution was $756. $230.000 c.004.000.200.000. of which 100 vest immediately (25%) and the other 300 (75%) vest in four years.000 d. 80.580. 76.976.760 loss. d.000 5. $456.360 loss. £168. b.000 . $122. £105.888.100.000 6. $880. £420.360.240. b. Dawson plc amends its defined pension plan on January 1.440.000 and vests over five years. b. The past service cost applicable to the vested employees is £105. resulting in £420. How much of past service costs would Dawson include in pension expense in 2016? a.000 (164.000 b. The past service cost related to the unvested employees is £315. c. 79. $408.000 and vests immediately. The company has 400 active employees. $30.000 in 2016 and benefits paid were $564. The following information relates to the pension plan for the employees of Turner Co.000. The interest expense for 2016 is a. $648.800 loss.000 -0- 12/31/15 $5. $607. £126.000) 11% 12/31/16 $8.800 gain. 78. 2016. c.Accounting for Pensions and Postretirement Benefits 20-15 Use the following information for questions 76 through 79.000 gain. d.000. b. 77. $122. $96. $38.000 (96.000.766 gain d.840.: Defined benefit obligation Fair value of plan assets Net (gain) or loss Discount rate (for year) 1/1/15 $5. $588. c.400 loss.000 of past service cost. $68.000) 11% Turner estimates that the average remaining service life is 16 years. d. c. The gain or loss on plan assets in 2016 is a. £416.000 c. What is the total past service cost included in pension expense 2016? a. What is the total past service cost included in pension expense 2016? a. resulting in £520. €225.455 b. Employees in this plan have an average period to vesting of 5 years. €25.000 and vests immediately. has experienced tough competition. Employees in this plan have an average period to vesting of 6 years. the employees agreed to receive lower pension benefits in the future. £436. The company has 600 active employees. Willshire Ltd. On January 1.000 (in exchange.000 d. €37. 2016. €43. is evaluating amendments to its pensions plans.000 b. 2016.750 83.000 (in exchange.000 c. Towson amended its pension plan on January 1. Plan 1 covers its salaried employees and Plan 2 provides benefits to its hourly workers. Employees in this plan have an average period to vesting of 6 years.000 of past service cost.000 and vests over five years. The average period to vesting for the benefits affected by this plan is 6 years. €112. On January 1. £332. 2016.500 c. of which 120 vest immediately (20%) and the other 480 (80%) vest in three years. Plan 1 will be amended to reduce benefits by €160. The past service cost related to the unvested employees is £416. Clarkson plc amends its defined pension plan on January 1. €120.000 84.000 d. 2e 81.800 b.000 c. Employees in this plan have an average period to vesting of 8 years. How much of the past service costs would Clarkson include in pension expense in 2016? a. employees will receive increased contributions to the company’s defined contribution plan).20 . Brompton Ltd. €18. What is the amount of past service cost included in pension expense for 2016? a. Willshire will grant employees in Plan 2 additional pension benefits of £240.800 82. Plan 1 will be amended to reduce benefits by £120. £520. Brompton will grant employees in Plan 2 additional pension benefits of €318.000 based on their past service. €50. As a result.933 d.714 d.16 Test Bank for Intermediate Accounting: IFRS Edition. €36. Towson Ltd. €158.000 based on their past service.500 b. Plan 1 covers its salaried employees and Plan 2 provides benefits to its hourly workers. and recorded past service cost of €225. 2016.000 . €21.000. leading it to seek concessions from its employees in the company’s pension plan. The past service cost applicable to the vested employees is £104. is evaluating amendments to its pensions plans. In exchange for promises to avoid layoffs and wage cuts. €10. employees will receive increased contributions to the company’s defined contribution plan). 600.884. $60. d.000. $1.800. 2015 December 31. $ -0-.000. $200. $360. 2016 Defined benefit obligation $1. The amount reported as the pension liability at December 31. c. $ -0-. $ -0-. b. b. $220.600.000 480.000 Use the following information for questions 87 and 88. 2016 is a. $380. $520. Inc.000 1. Foster Corporation received the following report from its actuary at the end of the year: December 31.000. $1. The amount reported as the liability for pensions on the December 31.Accounting for Pensions and Postretirement Benefits 20-17 Use the following information for questions 85 and 86.000.000.000 570.000 c.000 0 87. 2015 is a. The following information relates to Jackson.824. 86.000 Fair value of pension plan assets 1.000 1.260. The amount reported as the liability for pensions on the December 31. $360. d. The amount reported as the pension liability at December 31.000 85.800.000 $1.884.000.000 1. 2016 statement of financial position is a.620.: Plan assets (at fair value) Pension expense Defined benefit obligation Annual contribution to plan Past service costs For the Year Ended December 31.000 450. c.000 b. $30.000. 2015 statement of financial position is a.440.000 $1.380.000. b.000. d. $360. 88. c.000 450. . $1. $390. 2015 2016 $1.000 d.000 600. 000. 90.000.000.000 The amount to be reported as Pension Asset / Liability as of December 31.629.000 Net gain on liability 18. c.000.000. 2016.000. b. $126. 92. $216.000 3. Pension Asset of $200.000. c. 2016 is a.750. $4. $90.384. $3. Pension Liability of $100.600. $3.18 Test Bank for Intermediate Accounting: IFRS Edition. The balance of the defined benefit obligation at December 31.200. 2016 is a. as of December 31. . Pension Asset of $100.000. Other data related to the pension plan for 2016 are: Service cost $240.000 Net gain/loss 100. d.000.20 . d. has the following balances: Defined benefit obligation Fair value of plan assets $4.000.284.000. 2016 is as follows: a. Net gain/loss $ 90.000 The discount rate is 10%. $4. Presented below is information related to Noble Inc.000 Vested benefits 1. On January 1. d. $4. Pension Liability of $200.059. Parks Co.000 Plan assets (at fair value) 3.600. 2e 89.400. d.676. c.572. 2016.635.789. Presented below is pension information related to Waters Company as of December 31.000.000 Actual return on plan assets 264.000 Benefits paid 225.000 91. $4.620.000.000 The amount reported as the pension liability on Noble's statement of financial position at December 31. b.000 Past service costs 54.000 Contributions 270.000. b. $4. The fair value of plan assets at December 31. c. Use the following information for questions 91 and 92. 2016: Defined benefit obligation $3. b.531. $ -0-.000 Plan assets (at fair value) 3. $4.500.000 Defined benefit obligation 3. 2016 is a. Pension asset of $200. €61.000 which included €122. what is the funded status of Crosson’s pension? a. The following pension plan information is for Farr Company at December 31. 2016 related to its pension plan: Defined benefit obligation $4.000 2. 94. At December 31. c.150.400. c. Trafalgar Corporation had a defined benefit obligation of €510.250.000 The amount to be reported as the liability for pensions on the December 31. Pension liability of $200. Pension asset of $1.Accounting for Pensions and Postretirement Benefits 93. b. €322.000 of past service costs. and plan assets of €322.000 The amount of pension asset / liability Huggins Company would recognize at December 31.000 which included €127. 2016 is a.000 6.000 d. d.000.000. $2.000. $1. $1. b. €151. €315.000. 20-19 Huggins Company has the following information at December 31.000.000 c. €273.000.000 d. Pension liability of $300. 2016.950. Based on this information. 2016.000. 95.000. $1. and plan assets of €347.000 b.000. €395.050. Defined benefit obligation Plan assets (at fair value) Past service costs Pension expense for 2016 Contribution for 2016 $8. €347.710.000 .000 96. Based on this information.000 b. d. what is the funded status of Trafalgar’s pension? a.000 3.000 540.000.200. €188.000 c.000.000 of past service costs. 2016 balance sheet is a. 2016. Crosson Corporation had a defined benefit obligation of €620.000 Plan assets (fair value) 4. At December 31.000.400.000. 89. 67. 62. Using current actuarial assumptions (including current market interest rates and other current market prices) immediately before the curtailment. What was the effect of the curtailment? a. c d c b d d b c 93. €100 loss d. Item Ans. 58. 56. Guzman has a defined benefit obligation (000 omitted) with a net present value of €1. €95 gain Multiple Choice Answers—Computational Item Ans. 73. 74. What journal entry would be recorded for the curtailment by Wimbledon? a. 86. 98. 95. 87. d b b a c a c c 77. 55. 84. 71. Item Ans. d c c b a a d d 61. 70. 54. and net cumulative actuarial gains of €50. d a c c b a . 76. 75. 92. €180 loss c. 66. 96. 60. 78. 97. 64. 72. Defined benefit obligation (Credit) €(1. 57. plan assets with a fair value of €820. b c b a b d b b 85. Pension Asset/Liability 170 Pension Expense 170 b. It has the following data related to the plan. 80. Item Ans. €100 gain b. 63. 83. 91.350 Pension asset/liability € (150) The reduction results in a €180 reduction in the defined benefit obligation (there is no impact on the plan assets). Pension Asset/Liability 30 Pension Expense 30 d. 94. Pension Asset/Liability 180 Pension Expense 180 c. 81. Item Ans.20 . 53. 79. Wimbledon Ltd. As a result of a discontinued operation. 2e 97. 65. The curtailment reduces the net present value of the obligation by €100 to €900. and employees of the discontinued segment will earn no further benefits. Pension Asset/Liability 210 Pension Expense 210 98. is curtailing some benefits provided in its pension plan.000. 82. b b b c b a a d 69. The employees affected comprise 20% of all employees in the plan. 59.20 Test Bank for Intermediate Accounting: IFRS Edition. 90. 88.500) Fair value of plan assets (Debit) 1. Guzman Company discontinues an operating segment. 68. Item Ans. increase in the fair value of plan assets due to the passage of time. $75.000 Past service cost 60. defined benefit obligation. Pension liability of $600.000 $15. b. amortization of the discount on PSC. $64. In its December 31. The following information pertains to Hopson Co.000 Interest on defined benefit obligation 24. 2016 was a. shortage between the expected and actual returns on plan assets. c. . provides a noncontributory defined-benefit pension plan for its employees. 2016: Defined benefit obligation $600. vested benefit obligation. At each statement of financial position date.000 No contributions have been made for 2016 pension cost.000 If no change in actuarial estimates occurred during 2016. a company whose stock is publicly traded. Logan should report a pension asset / liability of a.000 d.000 b. b. Logan Corp. $79. Pension asset of $225.. 2016 statement of financial position. maintains a defined-benefit pension plan for its employees. Interest cost included in pension expense recognized for a period by an employer sponsoring a defined-benefit pension plan represents the a.'s pension plan: Actuarial estimate of defined benefit obligation at 1/1/16 Assumed discount rate Service costs for 2016 Pension benefits paid during 2016 $72.200. c. c. b. accumulated benefit obligation.200.200. Pension asset of $824. d. d.000 Service cost 240.000.000 10% $18. The company's actuary has provided the following information for the year ended December 31. 101.000 c. funded status relative to the defined benefit obligation. 100. d.000 Fair value of plan assets 825.000 102. increase in the defined benefit obligation due to the passage of time. $82. Pension liability of $525. Yeager should report a pension asset / liability equal to the a. Hopson's defined benefit obligation at December 31.Accounting for Pensions and Postretirement Benefits 20-21 MULTIPLE CHOICE—CPA Adapted 99. Seigel Co.000 Expected return and interest revenue on plan assets 33. As of December 31.000 × . 59. 102.000 + $165.000 d. 57.000 × .080.000. 101.000 × . maintains a defined-benefit pension plan for its employees. pension plan administrator: Fair value of plan assets $4.000 = $108.000 c.000 + $18. At December 31. 61. a b DERIVATIONS — Computational No.10) – ($1. Ans.000 + $21.500 – $230. 104.000 = $100.000 Defined benefit obligation 7.000 = $1.000 + $390. Inc. b.000.000 Multiple Choice Answers—CPA Adapted Item Ans. c d Item 103.580. 55. 2016.10) – ($4.000 + ($4.$83.000 . d $72.275. defined benefit obligation.10) = $280. Ohlman should report a liability in the amount of the a.000 .000 × . 99. b $360. 2016. b $840.000. excess of the vested benefit obligation over the fair value of the plan assets.620.400. $1. excess of the defined benefit obligation over the fair value of the plan assets. 56.860.000.600. 60.$100.000.20 . c $200. 100.000 = $1.200.082. $7. c. a $100.000 × .050.000 × . . Answer Derivation 53.000.000 + $150.200. 2016.000. d $800. d. the fair value of the plan assets is less than the vested benefit obligation.000 What is the amount of the pension liability that should be shown on Vargas' December 31.000 – $24.22 Test Bank for Intermediate Accounting: IFRS Edition. a $200.500. $2.10) + $180.000 b. 2e 103. d b Item Ans.000 + $54.000 – $180.10) = $486. Ohlman.000 – $5.578. $1. 104.700.500.000 = $45. 58. d $30.000 – $18. The defined benefit obligation exceeds the vested benefit obligation.000 + $362.000.000 + $60. vested benefit obligation.10) – ($6.200.950 = $71.000 + $60.000 = $1.000 + ($2. 2016 statement of financial position? a.000 + ($11. In its balance sheet as of December 31. 54. c $900. the following information was provided by the Vargas Corp. 000 + £28.400 loss.000 = $220.360. d €225.380.000) = £120.000 = £420.000 × .000.10) + $60.000 = £520.) No.900.000.100.000.09) – £63.125.800.000 + £104. b (€318.500 = €277. c $5.000 – £18.500 + (€215. 79.500. b €215. 82.000 – $1. Answer Derivation 62. b £416. c $1.000.976. 72.000.000) = $456. b €250. .11 = $29. 75.000 – £120. b (£240. c $456. 85.000 + €25.000 – $5. 69. 70.000 63.000 – ($9.000 + $300. d £90.000 + £22.Accounting for Pensions and Postretirement Benefits 20-23 DERIVATIONS — Computational (cont. 66.000 + $180.500 74. a $2.000 – £110.500 + (€250.240.000. c $1.500.232. b ($9.000.000 + $237. b $800.240. c £195.000 – $18. 76. d £95.000 + €20.000.433.11 = $657.000) – ($756.10) – €17.000 = $2.000 × .000) – $1.000) = €158.900 + £100. 67. 78.000.000 = $765.000 – €160. 64.000 + €22.000 + €27.160.000 = £208.500 = €285.600.000) × . 71.000 = $2.888.040 gain.000 × .000 – £265.000 × .500 = €239. b ($6.000 – $9. 73.976.500 = £246.800 + £100.000 + (£910.000. a £61 – £52 = £9cr 68.260. 77. a £433.000.10) – €19.07) = $170.000 – $6.000 = £211. a £105. 65.000 × .000 = £168.000.000.000 = £85. 80. b £335. c £215.11) = $230. a €250.000 + $1.000 – $105.000.000 – €17.000 × . 81.000.000 × .000 × .000 + (£1. b ($6. 84.000.000 + ($2.000 – ($6. 83.000 + £315.240.000 =£90.08) – £64.000 – $105.000 – $564.010.000 – £245.000.000. 250. 92.10) – $15.000 = $2. 91. d Conceptual.000 – $3. d $72.620.800.000 – $1.676. d $1.000 pension asset. 93.000.000 = $60.000 + ($4.000 + $270.000 = $82. b $7.000.000.000 = $200.000 – $225. b Conceptual. 94. b €180.000 + ($72. 100.254. c €620. 95.000 = $2. 88.824.000 – . .000 = $4. 96.884. d $3.200. 97.750.000 – $1.000. a $8.000. c $3.000 = $360.000 = €188.€347.600.$600. 103. b $4.400.000 – $3.059. c $825.000.000 .000 – $4. b $1. a Conceptual. d $3. 2e 86.000 = $4.10) + $54.000. 90.260.000 – $18.440.500.000 – $4. DERIVATIONS — CPA Adapted No.000 × . c $1. 98.000. Answer Derivation 99.000 = €273. 89.000 + $18.200.000 = $100.000 (Asset).700.600.384.000 = $216.200.000 – €322.000 = $360.150. 104.200.500.000 + $240.000.000 – $6. c €510. a €100 gain.24 Test Bank for Intermediate Accounting: IFRS Edition.000 = $225.000 + $264.000.400.000 – $225.000 × . 87.20 .000 – $1. d $4. 101.000. 102. (b) Interest revenue on plan assets. 20-106—Pension assets. Solution 20-106 (a) The actual return on plan assets is computed by finding the change in the fair value of plan assets during the period. the amount of interest is computed by applying a single rate to the beginning balance of the defined benefit obligation. . credit that is given to employees for service provided before the date of initiation or amendment results in past service cost.Accounting for Pensions and Postretirement Benefits 20-25 EXERCISES Ex. (d) Vested benefits are those the employee is entitled to receive even if the employee is no longer employed under the plan. Briefly explain the following terms: (a) Service cost (b) Interest cost (c) Past service cost (d) Vested benefits Solution 20-105 (a) The service cost component of pension expense is the actuarial present value of benefits attributed by the pension benefit formula to employee service during the current period. (c) Gains and losses on plan assets. (b) The interest cost component of pension expense is the interest for the period on the defined benefit obligation outstanding during the period. To simplify the calculation. Ex. (c) An interest revenue asset gain occurs when the actual return on plan assets is greater than the interest revenue on plan assets and a loss occurs when the actual return is less than the interest revenue. Discuss the following ideas related to pension assets: (a) Actual return on plan assets. (c) When a defined-benefit plan is initiated or amended. The amount of past service cost is computed by an actuary. 20-105—Pension accounting terminology. (b) The interest revenue on plan assets is found by multiplying the discount rate by the fair value of plan assets at the beginning of the period. This change is adjusted by deducting contributions and adding benefits paid out during the year. ..........000 and past service cost is $240...000...000 × 8%) Past service cost Pension expense—2016 (b) Pension Expense ....26 Test Bank for Intermediate Accounting: IFRS Edition. 2016: January 1...600. Instructions (a) Determine the pension expense to be reported in 2016.000 × 8%) Interest revenue on plan assets ($1. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31. (Show computations..000 Instructions (a) Compute the amount of pension expense to be reported for 2016........ The discount rate is 8%.........000 The service cost component for 2016 is $150. 2016) 100.......500.. 2016 Defined benefit obligation $2..... Service cost $520.... Solution 20-107 (a) Service cost Interest on defined benefit obligations ($2................000 (plan amendment effective January 1.000 1...... 2016)..............................20 ....... $150.000 Defined benefit obligation (at beginning of period) 480. 2e Ex...250.........000 $509...... The company's actual funding of the plan in 2016 amounted to $510.... Inc............... (b) Prepare the journal entry to record pension expense and the employers' contribution to the pension plan in 2016.850..........200 800 510...... pension plan for 2016.000 Discount rate 10% Past service costs (due to benefit increase as of January 1. Inc......200 509.200 (100. Presented below is information related to Jones Department Stores................000 Ex.740.....000 Fair value of plan assets 1. 2016 December 31.......000 219.... Kessler.000 Funding contribution for 2016 500..000) 240..) (b) Prepare the journal entry to record pension expense and the employer's contribution for 2016...000 Fair value of plan assets (at beginning of period) 360..... 20-108—Measuring and recording pension expense....250....... Pension Asset / Liability ..... Cash . 20-107—Measuring and recording pension expense.000 $2....... .... 000 3...........000 $642... 642.......000 500.... Defined benefit obligation Fair value of plan assets Discount rate 12/31/15 $3............ ..000 Ex. Payne's contribution was $520....080....000 pension liability. 2016........520......000 (36................... 2016: Defined benefit obligation Fair value of plan assets $4....700.000 8% Payne estimates that the average remaining service life is 15 years. (b) Calculate the actual return on plan assets in 2016..000 4... 20-110—Pension plan calculations.000....040. Instructions (a) Calculate the interest cost for 2016.. Cash. 20-109— Recording pension asset / liability.....000 58...000 142...... Pension Asset / Liability.....000 – $ 4...000 8% 12/31/16 $4....... Inc........ 2016) Pension expense—2016 $520..... Solution 20-109 $4... Ex.......000..340..000 × 10%) Expected return on plan assets ($360........000 (b) Pension Expense. Miles Co............ The following information is for the pension plan for the employees of Payne....700..............................000 3.000 = $360. had the following selected balances at December 31....000) 100.........000 × 10%) Past service costs (plan amendment effective January 1.... (c) Calculate the gain or loss in 2016......340.Accounting for Pensions and Postretirement Benefits 20-27 Solution 20-108 (a) Service cost Interest on defined benefit obligation ($580.........000 Instructions Calculate the pension asset / liability to be recorded at December 31..000 in 2016 and benefits paid were $280.... ..... Selected Information about the pension plan of Roman Co...... 1........000 × 8%) Loss on plan assets $3......200 (b) Fair value of plan assets (12/31/16) Fair value of plan assets (1/1/16) Contributions Benefits paid Actual return on plan assets (c) Actual return (see b.............28 Test Bank for Intermediate Accounting: IFRS Edition...000 $ 200...000 (246..... 2016..........000 (b) Pension Expense..... 20-111—Pension plan calculations and entries..020..800.000 × 8% = $243..........800..000 70..20 . 1... is as follows: 12/31/15 Defined benefit obligation $4... (b) Prepare the entry for 2016 to record the pension expense and contribution.....040...000 Past service costs (Plan amendment January 1...............000) 440.000 500......000) $ 220.800.000 4..520...350..000 8% Instructions (a) Calculate the pension asset / liability at December 31......................000 . 2e Solution 20-110 (a) $3...........000......... Pension Asset / Liability.080.420......... 2016) Fair value of plan assets 4.000 1...420........000 $ 200...000 (520...000 Contribution 985....................650.....400) Ex..000 (4..000) 280..) Interest revenue ($3. Solution 20-111 (a) Defined benefit obligation Fair value of plan assets Pension asset / liability $5..000 Cash.000 1..020.400) $ (46..000 Discount rate (for year) 9% 12/31/16 $5...000 Pension expense 1..350...080....000 (3....... 20-112—Pension plan calculations and journal entry... 2016.....000 459.000 144..000 432. McGee Co.....000 432.000 (c) Service cost Interest cost (6% × $7....000) $315..200. had the following balances: Defined benefit obligation Fair value of plan assets $7..... There are no net gains or losses.... (d) Prepare the journal entry to record pension expense and the contributions for 2016........ December 31 $7.000 315......000 450.....000 (450....000 432......... $315....000 (b) Fair value of plan assets. (b) Determine the fair value of plan assets at December 31...... (c) Calculate pension expense for 2016...... 2016......200.000 315.200.000) $7............000 Other data related to the pension plan for 2016: Service cost Contributions to the plan Benefits paid Actual return on plan assets Discount rate 315.... January 1 Service cost Interest cost (6% × $7.000 459. Solution 20-112 (a) Defined benefit obligation...... January 1 Actual return Contributions Benefits paid Fair value of plan assets.200....000 (432.Accounting for Pensions and Postretirement Benefits 20-29 Ex..497...000 ...000 459.000 6% Instructions (a) Determine the defined benefit obligation at December 31.... 2016....000 (450.000 7.000) $7.. On January 1....641....200.000 432..........000) Actual (and expected) return on plan assets Pension expense (d) Pension Expense……………………………………………………… Pension Asset / Liability................000) Benefits paid Defined benefit obligation.. December 31 $7..... Cash...200...... ........200 Statement of Financial Position Liabilities Pension liability $4..600..000 × 8%) Pension expense—2016 (b) Pension Expense..000 Defined benefit obligation 6............040....000 Service cost 600.... 2016... 2016 was $5.. recording.....................000 403...600..200 1..........000. On December 31....... The average remaining service life per employee is 12 years..... 20-113—Measuring.................443...043...............000 ...043...000 Discount rate 8% Instructions (a) Compute the pension expense recognized in 2016....200 Pension Asset / Liability... Inc.043... (b) Prepare the journal entries to reflect accounting for the company's pension plan for the year ended December 31.. 2016 the following information was provided concerning the pension plan's operations for its first year..... An actuarial consulting firm has indicated that the present value of the defined benefit obligation on January 1. and reporting pension expense and liability..........040.........443........ Cash... 2e PROBLEMS Pr..200 Plan assets (at fair value) 1..... on January 1...30 Test Bank for Intermediate Accounting: IFRS Edition.. 2016 initiated a noncontributory....... Employer's contribution at end of year $1.20 .... 6.040.600....... Tucker.200 4.. (c) Indicate the amounts that are reported on the income statement and the statement of financial position for 2016....043.... defined-benefit pension plan that grants benefits to its 100 employees for services rendered in years prior to the adoption of the pension plan..........200 $ 600......200 $6.000 5....... (c) Income statement Pension Expense $6.. Solution 20-113 (a) Service cost Past service cost Interest on defined benefit obligation ($5...... . 2016.... The discount rate is 10%....Accounting for Pensions and Postretirement Benefits 20-31 Pr.................. Cash................................ The service cost related to pension expense is $240.... The contribution made to the pension fund in 2016 was $231.... 2016 0% Instructions (a) Using the above information for Marlin Corporation..000 Benefits paid to retirees 60............000....... 3....000....000)] Interest revenue on plan assets (10% × $280.. 2016 105.. for the year 2016........000 231...... The plan was modified on January 1.000 and $80...........000 + $140....) (b) Prepare the journal entry(ies) to record pension expense for 2016..... The defined benefit obligation and plan assets at the beginning of the year are $300.000 Discount rate 10% Accumulated OCI—Gain/Loss...... Indicate (credit) entries by parentheses.000 Annual contribution to the plan 900.000 Pr..... . Presented below is information related to the pension plan of Zimmer Inc..000 Past service cost....000 (28..000 165.. effective January 1.....000 Actual return on plan assets 260...... 2016 resulting in past service cost of $140.... Instructions (a) Determine the pension expense to be reported on the income statement for 2016.......... January 1. (Round all computations to nearest dollar. respectively.000 44....... Pension Asset / Liability.... Calculated amounts should be supported. 2.. 20-115—Preparing a pension work sheet. 20-114—Measuring and recording pension expense.000) Past service cost Pension expense (b) Pension Expense...... Solution 20-114 (a) Service cost Interest on defined benefit obligation [10% × ($300....... complete the pension work sheet for 2016. (b) Prepare the journal entry to reflect the accounting for the company's pension plan for the year ending December 31. $240....... 1.000... 4......000 using the defined benefits approach..............000 $396.. The accountant for Marlin Corporation has developed the following information for the company's defined-benefit pension plan for 2016: Service cost $500.000) 140.000 396........... 000 —————————————————————————————————————————————————————————— Past Service Cost —————————————————————————————————————————————————————————— Adjusted Bal. 2016 20 . 31.000) 2. Dec.000) (3. 20-115 (cont. 31. —————————————————————————————————————————————————————————— Service Cost —————————————————————————————————————————————————————————— Interest Expense —————————————————————————————————————————————————————————— Interest Revenue —————————————————————————————————————————————————————————— Asset Gain/Loss —————————————————————————————————————————————————————————— Contributions —————————————————————————————————————————————————————————— Benefits —————————————————————————————————————————————————————————— Journal entry for 2016 ________ Balance.Marlin Corporation Pension Work Sheet—2016 —————————————————————————————————————————————————————————— General Journal Entries Memo Entries ————————————————————————————————————————————————————————— Annual Defined Pension OCI Pension Asset/ Plan Expense Cash Gain/Loss Liability Obligation Assets —————————————————————————————————————————————————————————— Bal.) .36 Test Bank for Intermediate Accounting: IFRS Edition Pr.750. Dec.000. 2015 (1.750.. 750..000 (15.000 (830.000.000) —————————————————————————————————————————————————————————— Interest Revenue (2) (275.680. 2016 0 15.500) (4.000) 275.000 —————————————————————————————————————————————————————————— Past Service Cost 105.000) —————————————————————————————————————————————————————————— Interest Expense (1) 385.000 (60.500 (900.000 Accounting for Pensions and Postretirement Benefits Marlin Corporation Pension Work Sheet—2016 —————————————————————————————————————————————————————————— General Journal Entries Memo Entries ————————————————————————————————————————————————————————— Annual Defined Pension OCI Pension Asset/ Plan Expense Cash Gain/Loss Liability Obligation Assets —————————————————————————————————————————————————————————— Bal.500) 3.000) 15. 31. 1 Balance.000 —————————————————————————————————————————————————————————— Asset Gain/Loss (3) 15.500 for 2016 20-37 .000 (105.000) —————————————————————————————————————————————————————————— Contributions (900.Solution 20-115 Accumulated OCI.000) —————————————————————————————————————————————————————————— Service Cost 500.000) 900. 31.000) 2.500 (385.000) —————————————————————————————————————————————————————————— Adjusted Bal. (3.000) —————————————————————————————————————————————————————————— Journal entry 715. Dec.000 —————————————————————————————————————————————————————————— Benefits 60.000 169.750.855.850. 2015 (1. Dec.000) (3. Jan.000 (500. ... 2016 (300) (7) (8) (9) (10) (11) (12) 1... 1..........700 (4...750.... General Journal Entries Items Annual Pension Expense Balance......... OCI—Gain/Loss.....750....500 15. Jan.................000 + $105.. Cash......... indicating whether the amounts are debits or credits.. 31.... (b) Prepare the journal entry to record 2016 pension expense for Elias Inc...... ....500 (1) (1) Adj..750........000 – ($2........000) × 10% = $385............................... 20-116 – Pension Worksheet – Missing Amounts The accounting staff of Elias Inc.......500 $2.......000 Pr.. Unfortunately........ 1.......200 Benefits 300 Liability increase Journal entry Acc........ (5.. 2016 Balance..... The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for 2016............585 5.......000 × 10% = $275.. Pension Asset / Liability.....000 × 10%) = $15........ OCI...........000 Pension Expense... 715.................38 Test Bank for Intermediate Accounting: IFRS Edition Solution 20-115 (cont........000 $260..........000) Service cost (2) (600) Interest expense (3) (500) Interest revenue (4) (5) Asset gain/loss 25 Contributions (6) (1...... Bal. has prepared the following pension worksheet.......880 Instructions (a) Determine the missing amounts in the 2016 pension worksheet......200) 1.500 169.. Jan.... several entries in the worksheet are not readable........ 2016 PSC Cash OCI— Gain/Loss Memo Record Pension Asset/ Liability Defined Benefit Obligation Plan Assets 1.......) (1) (2) (3) (b) ($3.465 3.............200) 2........000 900............ Dec.20 . ..... OCI—Gain/Loss......700) (4................ Jan....................345 1..... 31..000) Service cost 600 (600) Interest expense 500 (500) Interest revenue (250) 250 Asset gain/loss 25 Contributions (25) (1.........650 Acc............. OCI..650 570 1........ Bal...200) 570 (300) (545) (1................. General Journal Entries Items Annual Pension Expense Balance.Accounting for Pensions and Postretirement Benefits 20-39 SOLUTION 20-116 (a) Below is the completed worksheet........................................200) 1..... indicating debit and credit entries............... Jan.500 800 (800) Adj... 1....020) 0 570 (2.....020 1.......200 3.. 2016 PSC Cash OCI— Gain/Loss Memo Record Pension Asset/ Liability Defined Benefit Obligation Plan Assets (1. Dec........ Cash....200 Benefits 300 Liability increase Journal entry 545 1.......... 6..................... 2016 Balance..720) Pension Expense....... (5.................. Pension Asset/Liability........200) 2...625 ...... 1..... 2016 (b) (1... the following balances related to this plan. (b) Prepare the journal entry for pension expense. 20-117 .000 Contributions in 2016 115. effective Jan.000 Benefits paid retirees in 2016 70.000 Cr. for the year 2016 by preparing a pension worksheet.000 Defined benefit obligation 600.40 Test Bank for Intermediate Accounting: IFRS Edition Pr. .20 .000 Actual return on plan assets in 2016 45.000 Past service cost. Service cost for 2016 $ 75. 2016. sponsors a defined-benefit pension plan for its employees. 2016. On January 1.000 Discount rate 8% Average remaining service life of active employees 10 years Instructions (a) Compute pension expense for Howard Corp. As a result of the operation of the plan during 2016. the actuary provided the following additional data at December 31.Pension Worksheet Howard Corp.000 Pension asset/liability 10. Plan assets (fair value) $450. 1 120. 000 Dr. Jan 1 720. —————————————————————————————————————————————————————————— Service cost 75. —————————————————————————————————————————————————————————— Interest expense* 57. 115.000 . Jan. —————————————————————————————————————————————————————————— Benefits 70.000 Dr. 242.000 Cr. 75.600 Cr. Accounting for Pensions and Postretirement Benefits Howard Corp.600 = $720. **$36. 120.000 Cr. 9.000. —————————————————————————————————————————————————————————— Contributions 115. 9. 2016 *$57. 31.000 Cr.000 Cr.08) – $45.000 Cr. 782. —————————————————————————————————————————————————————————— Past Service Cost 120. for 2016 20-41 .000 Dr.000 Dr. 600.08. —————————————————————————————————————————————————————————— Adjusted Bal.000 Dr.000 Cr.000 Cr. —————————————————————————————————————————————————————————— Asset gain*** 9. 31.(a) Accumulated OCI. 36.000 Cr. —————————————————————————————————————————————————————————— Journal entry 216.000 Cr.000 Dr.08.000 Dr. —————————————————————————————————————————————————————————— Interest revenue** 36.000 Dr.000 Cr..000 Dr. 1 Balance.600 Cr. 70. ***$9.000 = ($450.000 = $450. Dec. 57. 540.600 Cr. Pension Worksheet—2016 ————————————————————————————————————————————————————————— General Journal Entries Memo Record ————————————————————————————————————————————————————————— Annual Defined Pension OCI Pension Asset/ Benefit Plan Expense Cash Gain/Loss Liability Obligation Assets —————————————————————————————————————————————————————————— Balance Jan.600 Cr. 450. 115.000 .000 Cr. 2016 150.000 Dr.000 . 92. .......................................................42 Test Bank for Intermediate Accounting: IFRS Edition SOLUTION 20-117 (Continued) (b) Pension Expense..20 .........600 115......................................... 216................................. Cash.....................600 92....................... Pension Asset/Liability.........000 9......................................................................... OCI—Gain/Loss.........000 ................................