The following defined pension data of Kay-Mart, Inc. apply to the year 2014: Pla

Question

The following defined pension data of Kay-Mart, Inc. apply to the year 2014: Plan Assets (balance 1/1/14) Service cost Contributions to the plan Actual return on Plan Assets Expected Return on Plan assets oh Prior Service Cost (OCI) Balance (1/1/14) Projected Benefit Obligation (balance 1/1/14) Accrued Pension Liability (balance 1/1/14) Prior Service Cost Amortization Settlement/Discount Rate Benefits paid to retirees $790,000 180,000 160,000 160,000 44,000 8% 75,000 800,000 10,000 14,000 1096 75,000 Instructions ,2 1. Complete the attached pension worksheet for Kay-Mart and show the journal entry(s) required to recognize pension costs. (The worksheet should include yea end balances for 2014) 2. Explain how the balances determined in instruction 1 would be shown in the fina statements by completing the table below. Be specific and state for each accou the worksheet which financial statement the account would appear (if at all) an where in the financial statements e.g. current asset, stockholder's equity where in the financial statements e.g. current asset, stockholders equity Which Financial Statement What Section of Financial Staten Account Pension Expense Cash Pension Liability Projected Benefit Obligat Projected Beneft Obligation ntbne tnei Plan Assets NO

Explanation / Answer

General Journal entries

                               General Journal entries                                       Memo record

Interest cost

800,000@10%

accrued liabiltiy = 1,060,000- 919,000 -10,000 = 131,000

Jouranl entry

fianancial statements

balance sheet:

Assets

Cash         (160,000)

liabiltiies

Accrued   131,000

Equity

OCI              61,000

RE           230,000

income statement

Revenues

Expenses:

pension                                  230,000

Net income(loss)                   230,000

General Journal entries

                               General Journal entries                                       Memo record

Annual pension expense Cash OCI Pension Assets/liabilities PBO Plant Assets Prior service cost (10,000) (800,000) 790,000 75,000 (75,000) Adjusted 75000 (10,000) (875,000) 790,000 Amortise prior service cost 14,000 (14,000) Annual service cost 180,000 (180,000)

Interest cost

800,000@10%

80,000 (80,000) Actual return (44,000) 44,000 contribution (160,000) 160,000 Benfits paid 75,000 (75,000) 230,000 (160,000) 61,000) 131,000 1,060,000 919,000

accrued liabiltiy = 1,060,000- 919,000 -10,000 = 131,000

Jouranl entry

OCI $61,000 Pension expense 230,000 To cash $160,000 To Pension liability    131,000

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