E20.11. (pension Expense, Journal Entries, S benefit pension plan for its employ
ID: 2509813 • Letter: E
Question
E20.11. (pension Expense, Journal Entries, S benefit pension plan for its employees. The following data relate t year 2012 in which no benefits tatement Presentation) 49 Henning Company sponsors a defined o the operation of the plan for the were paid. 1. The actuarial present value of future benefits earned by 2. The company's funding policy requires a contribution to the pension trustee amounting to $145,000 for 2012. 3. As of January 1, 2012, the company had a projected benefit obligation of $900,000, an a $800,000, and a balance of $400,000 in accumulated Oci (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2012 and no benefits were paid. 4. Amortization of prior service cost was $50,000 in 2012. Amortization of net gain or loss was not required in 2012 ccumulated benefit obligation of Instructions (a) Determine the amounts of the components of pension expense that should be recognized by the company in 2012. (b) Prepare the journal entry or entries to record pension expense and the employer's contribution to the pension trustee in 2012. (c) Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2012.Explanation / Answer
(a) Calculation of Pension Expense:
1. Service Cost = 65000 --> actuarial value of services rendered during the year
2. Interest Cost = 900,000*9% = 81,000
3. Expected Return = (54,000)
4. Amortized gains or losses = 0
5. Amortized prior service costs = 50,000
Total Pension Expenses = Sum of 1 to 5 = 142,000
(b) Journal Enntries
1. debit pension expense 142000
debit Gain/Loss 53000
credit cash 145000
credit PSC 50000
(c) In the income statement the pension of $142000 will be shown and in the balancesheet the balances of PBO and PSC will be $937000 and $450,000 respectively. The amount of plan assets would be 205,000.
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