*Problem 20-3 Wildhorse Company sponsors a defined benefit plan for its 100 empl

Question

*Problem 20-3 Wildhorse Company sponsors a defined benefit plan for its 100 employees. On January 1, 2017, the company's actuary provided the following information Accumulated other comprehensive loss (PSC) Pension plan assets (fair value and market-related asset value) Accumulated benefit obliga Projected benefit obligation $152,200 201,500 260,700 381,800 tion The average remaining service period for the participating employees is 10 years. All employees are expected to receive benefits under the plan. On December 31, 2017, the actuary calculated that the present value of future benefits earned for employee services rendered in the current year amounted to $53,000; the projected benefit obligation was $495,700; fair value of pension assets was $275,800; the accumulated benefit obligation amounted to $359,300. The expected return on plan assets and the discount rate on the projected benefit obligation were both 10%. The actual return on plan assets is $11,900. The company's current year's contribution to the pension plan amounted to $62,400 No benefits were paid during the year. Determine the components of pension expense that the company would recognize in 2017. (With only one year involved you need not prepare a worksheet.) (Enter amounts that reduce pension expense with either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).) Components of Pension Expense Service Cost Interest on Projected Ben ctual Return on Plan Ass Unexpected Loss mortization of Gain or mortization of Prior Ser Pension Expense Prepare the journal entry to record the pension expense and the company's funding of the pension plan in 2017. (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.) Account Titles and Explanation Debit Credit ther Comprehensive Income (G/L) Pension Expense Cash Pension Asset/Liability ther Comprehensive Income (PSC) Compute the amount of the 2017 increase/decrease in gains or losses and the amount to be amortized in 2017 and 2018

Explanation / Answer

Wildhorse Company a) Pension Expense for 2017 Service Cost $       53,000.00 Interest on Project benefit obligation($381800*10%) $       38,180.00 Actual Return on Plan assets $     -11,900.00 Unexpected loss($201500*10%-11900) $       -8,250.00 Amortization of prior service cost($152200/10) $       15,220.00 Pension Expense $       86,250.00 b) General ,Journal Account Title & Explaination Debit Credit Other comprehensive Income(Unexpected loss+Liability loss)=($8250+$22720) $       30,970.00 Pension Expense $       86,250.00      To Cash $     62,400.00      To Pension Assets/liability $     39,600.00      To Other Comprehensive income $     15,220.00 c ) Increase/Decrease in Gain/Loss Project Benefit Obligation on 31/12/2017 $ 4,95,700.00 Less: beginning PBO $   3,81,800.00 Add: Interest $       38,180.00 Add: Service Cost $       53,000.00 $ 4,72,980.00 Liability loss $     22,720.00     Fair value of Plan Assets on 31/12/2017 $ 2,75,800.00 Less: beginning Fair value of Plan Assets $   2,01,500.00 Expected Return($201500*10%) $       20,150.00 Pension Plan Contribution $       62,400.00 $ 2,84,050.00 Assets Loss $       8,250.00 Net loss(Liability loss+ Assets loss)=($22720+$8250) $     30,970.00 d) Income Statement Pension Expense $     86,250.00 Comprehensive Income statement Net Income Other comprehensive Income/Loss Assets loss $       -8,250.00 Liability loss $     -22,720.00 Prior service cost amortization $       15,220.00 $   -15,750.00 Comprehensive Income Balance Sheet Liabilities Pension Liability($229600+$23850+$15750) $   2,69,200.00 Stockholder's Equity Accumulated other comprehensive loss(PSC)=($152200-15220) $   1,36,980.00 Accumulated other comprehensive loss $       30,970.00 Pension Assets/Liability Project Benefit Obligation $   3,81,800.00 Less:Pension Plan assets $ -1,52,200.00 $ 2,29,600.00 Annual Pension expense $       86,250.00 Less: Cash Paid $     -62,400.00 $     23,850.00 Operating Gain /loss $       30,970.00 Less: Prior service cost amortization $     -15,220.00 $     15,750.00 $ 2,69,200.00

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