P20-2 Allison Co. has the following postretirement benefit plan balances on Janu
ID: 2490009 • Letter: P
Question
P20-2 Allison Co. has the following postretirement benefit plan balances on January 1, 2012. Accumulated Postretirement benefit obligation $2,535,000 Fair value of plan assets 2,535,000 The interest (settlement) rate applicable to the plan is 8% On January 1, 2013, the company amends the plan so that prior service costs of $185,000 were created. Other data related to the pension plan are as follows: 2012 2013 Service costs $80,000 $87,000 Prior service costs amortization 0 13,000 Contributions (funding) to the plan 47,000 38,000 Benefits paid 41,000 43,000 Actual return on plan assets 200,000 155,000 Expected rate of return on assets 9% 7% Instructions: (a) Prepare a worksheet for the postretirement plan for 2012 and 2013. Allison Co. Pension Worksheet—2012 and 2013 General Journal Entries Memo Record Items AnnualExpense DR/CR Cash DR/CR OCI - Prior Service Cost DR/CR OCI - Gain/Loss DR/CR Pension
Asset/
Liability DR/CR Accum Projected Benefit Obligation DR/CR Plan
Assets DR/CR Balance, Jan. 1, 2012 Service cost Interest cost Actual return Unexpected loss Contributions Benefits Journal entry, 12/31/12 Accum OCI, 12/31/11 Balance, Dec. 31, 2012 Additional PSC 1/1/2013 Balance, Jan 1, 2013 Service cost Interest cost Actual return Unexpected loss Amortization of PSC Contributions Benefits Journal entry, 12/31/13 Accum OCI, 12/31/12 Balance, Dec. 31, 2013 Area for calculations as desired Area for calculations as desired Area for calculations as desired (b) Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2012. (c) Prepare any journal entries related to the postretirement plan as of December 31, 2013. (d) Show the postretirement-benefit–related amounts reported in the 2013 Income Statement and Balance Sheet. Financial Statements-2013 Income Statement 0 Comprehensive Income Statement Net Income XXXXX Other comprehensive income (loss) 0 0 0 0 Comprehensive Income XXXXX Balance Sheet Liabilities 0 Stockholder's Equity 0 0 P20-2 Allison Co. has the following postretirement benefit plan balances on January 1, 2012. Accumulated Postretirement benefit obligation $2,535,000 Fair value of plan assets 2,535,000 The interest (settlement) rate applicable to the plan is 8% On January 1, 2013, the company amends the plan so that prior service costs of $185,000 were created. Other data related to the pension plan are as follows: 2012 2013 Service costs $80,000 $87,000 Prior service costs amortization 0 13,000 Contributions (funding) to the plan 47,000 38,000 Benefits paid 41,000 43,000 Actual return on plan assets 200,000 155,000 Expected rate of return on assets 9% 7% Instructions: (a) Prepare a worksheet for the postretirement plan for 2012 and 2013. Allison Co. Pension Worksheet—2012 and 2013 General Journal Entries Memo Record Items Annual
Expense DR/CR Cash DR/CR OCI - Prior Service Cost DR/CR OCI - Gain/Loss DR/CR Pension
Asset/
Liability DR/CR Accum Projected Benefit Obligation DR/CR Plan
Assets DR/CR Balance, Jan. 1, 2012 Service cost Interest cost Actual return Unexpected loss Contributions Benefits Journal entry, 12/31/12 Accum OCI, 12/31/11 Balance, Dec. 31, 2012 Additional PSC 1/1/2013 Balance, Jan 1, 2013 Service cost Interest cost Actual return Unexpected loss Amortization of PSC Contributions Benefits Journal entry, 12/31/13 Accum OCI, 12/31/12 Balance, Dec. 31, 2013 Area for calculations as desired Area for calculations as desired Area for calculations as desired (b) Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2012. (c) Prepare any journal entries related to the postretirement plan as of December 31, 2013. (d) Show the postretirement-benefit–related amounts reported in the 2013 Income Statement and Balance Sheet. Financial Statements-2013 Income Statement 0 Comprehensive Income Statement Net Income XXXXX Other comprehensive income (loss) 0 0 0 0 Comprehensive Income XXXXX Balance Sheet Liabilities 0 Stockholder's Equity 0 0
Explanation / Answer
(a) Prepare a worksheet for the postretirement plan for 2012 and 2013. Allison Co. Pension Worksheet—2012 and 2013 General Journal Entries Memo Record Items Annual DR/CR Cash DR/CR OCI - Prior Service Cost DR/CR OCI - Gain/Loss DR/CR Pension DR/CR Accum Projected Benefit Obligation DR/CR Plan DR/CR Expense Asset/ Assets Liability Balance, Jan. 1, 2012 -2535000 2535000 Service cost 80000 -80000 Interest cost 202800 -202800 Actual return -200000 200000 Unexpected loss -28150 28150 -41000 47000 Contributions -47000 41000 Benefits -358010 Journal entry, 12/31/12 54650 -47000 28150 -35800 -2858800 2823000 Accum OCI, 12/31/11 -185000 Balance, Dec. 31, 2012 3043800 Additional PSC 1/1/2013 185000 -37000 Balance, Jan 1, 2013 -243504 Service cost 87000 Interest cost 243504 Actual return -155000 Unexpected loss -42610 42610 155000 Amortization of PSC 13000 -13000 Contributions -38000 38000 Benefits -43000 43000 Journal entry, 12/31/13 145894 -38000 172000 42610 -322504 Accum OCI, 12/31/12 28510 Balance, Dec. 31, 2013 172000 70760 -358304 -3417304 3059000 Area for calculations as desired Area for calculations as desired Area for calculations as desired (b) Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2012. Pension expense 54,650 OCI - Gain/Loss 28,150 Pension asset/liability 35,800 Cash 47,000 (c) Prepare any journal entries related to the postretirement plan as of December 31, 2013. Pension expense 145,894 comprehensiveincome(PSC)172,000 OCI-Gain/Loss 42,610 Cash 38,000 Pension Asset/Liability 322,504 (d) Show the postretirement-benefit–related amounts reported in the 2013 Income Statement and Balance Sheet. Financial Statements-2013 Income Statement 145894 Comprehensive Income Statement Net Income XXXXX Other comprehensive income (loss) -42610 -87000 13000 -116610 Comprehensive Income XXXXX Balance Sheet Liabilities 358304 Stockholder's Equity 172000 70760
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