Pension Expense Different Than Funding: Multiple Years Carli Company adopted a d
ID: 2556406 • Letter: P
Question
Pension Expense Different Than Funding: Multiple Years Carli Company adopted a defined benefit pension plan on January 1, 2015 and funded the entire amount of its 2015 pension expense. The following information pertains to the pension plan for 2016 and 2017: 2016 S200,000 $215,000 180,000 396,200 180,000 406,400 212,000 220,000 2017 Service cost Projected benefit obligation (1/1) Plan assets (1/1) Company contribution (funded 12/31) Discount rate Expected long-term (and actual) rate of return on plan assets 9% 800 9% 8% There are no other components of Carli's pension expenseExplanation / Answer
Working notes:-
Calculation of pension expense:-
PARTICULARS 2016($) 2017($)
Service cost 200,000 215,000
Expected return on plan assets (14400) (180000*8%) (32512) (406400*8%)
PENSION EXPENSE 185600 182488
1. Journal entries for the year 2016:-
To record company contribution to pension
DR. Defined benefit pension liability $ 212000
CR. Cash $ 212000
To record pension expense
DR. Pension expense $ 185600
CR. Defined benefit pension liability $ 185600
To adjust pension liability to fair value
DR. Net defined benefit asset $ 210200*
CR. Other comprehensive income $ 210200
Calculation of net defined benefit asset:-
Plan assets = 180000
+ return on plan asset = 14400(180000*8%)
+ Contribution to the fund = 212000
- Present value of projected
benefit obligation = (196200) (180000*1.09)
Net defined benefit asset = 210200
2. Journal entries for the year 2017:-
To record company contribution to pension
DR. Defined benefit pension liability $ 220000
CR. Cash $ 220000
To record pension expense
DR. Pension expense $ 182488
CR. Defined benefit pension liability $ 182488
To adjust pension liability to fair value
DR. Net defined benefit asset $ 227054*
CR. Other comprehensive income $ 227054
Calculation of net defined benefit asset:-
Plan assets = 406400
+ return on plan asset = 32512(406400*8%)
+ Contribution to the fund = 220000
- Present value of projected
benefit obligation = (431858) (396200*1.09)
Net defined benefit asset = 227054
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