I Need Help ASAP Please. This question is graded. Please provide me with the Cor
ID: 2436481 • Letter: I
Question
I Need Help ASAP Please. This question is graded. Please provide me with the Correct solution. Thank you in Advance.
Sweet pie company sponsors a defined bene data relates to the operation of the plan for the year 2017 fit pension plan for employees. The following 2017 575000 480,000 650,000 410,000 160,000 75,000 Accumulated benefit obligation January 1 Vested benefit obligation, January 1 Projected Benefit obligation, January l Plan assets Januarv 1 AOCI- Unrecognized prior service cost, January 1 AOCI- Unrecognized gain, January 1 Relevant information for 2017 includes the following information Service Cost Interest Rate (Settlement Rate) Expected Rate of Return Actual return on plan assets Contribution made by company to trust in 2017 Benefits paid retirees in 2017 Average remaining service period 40,000 10.00% 8.00% 36,000 50,000 31,500 10 years Unrecognized prior service cost amortized on straight-line basis based on average remaining service life. The company uses the corridor method for amortization of unrecognized gains or losses Al. Prepare a pension worksheet for 2017. Be sure to calculate the January 1 2017. Balance in the pension asset Liability Account, Determine Pension expense for 2017 and indicate ending balance in all pension accounts on the company's books and trustee accounts. A2. Show your corridor calculation in the space provided here. B. Prepare the journal entry for pension expense for 2017Explanation / Answer
A)
Meaning:
Plan Assets is another version of Pension Fund.
Basically a pension plan consists of two components:
1. The first element is Future liabilities or benefit obligations that are created by employee service.
2.The second one is Pension Fund or plan assets used to make payment of retiree benefits.
The difference between the two is known as funded status.
Explanation and Calculation:
Plan Assets:
Fair Value at the start of the year 410000
Add:
Return on Plan Assets 36000
Employer Contributions 50000
Less:
Benefits paid 31500
Plan Assets at the end of the year 464500
Projected Benefit Obligation
PBO at the start of the year 650000
Add:
Service Cost 40000
Interest Cost 65000
Acturial Gain 1000
Amortisation of prior service costs 16000
Less:
Acturial Loss
Plan Ammendment Loss
Benefits Paid 31500
PBO at the end of the year 740500
Unrecognised prior service costs amortised on straight line basis=160000/10=16000
Actuarial Gain will be as per coridor method:
10 per cent of ( Paln assets or Projected benefit obligation whichever is higher)
410000 or 650000= 650000 is higher
10 per cent of 650000=65000
Gain as per information shown is 75000
Difference = (75000-65000)=10000
Remaining life in years=10
Amortisation= 10000/10=1000
1000 will be the pension expense.
Balance of 75000-1000=74000 will be carried forward in the next year and to be amortised in remaining 9 years of life.
Pension Expense:
It is the annual cost for running an employee's pension plan.
Calculation Formulae:
Service Cost + Interest Cost + Expected return on planned assets + Amortization of prior service cost + Effects of gain and losses.
=40000+65000+ 32800+16000+1000
=154800
Service cost is given in the question.
Interest Cost=650000*10/100=65000
Amortised cost=160000/10=16000
Gain=1000 as calcualted above.
B:
Journal entry for pension expense:
Pension Expense Account Debit 154800
To Cash Account Credit 50000
To Accrued Pension Liability 54800
As contribution made was only 50000 so in cash only 50000 has been shown by the company and the remaining balance will be treated as liability for it.
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