hart o active participating employees Smith\'s actuary has also provided the ret

Question

hart o active participating employees Smith's actuary has also provided the return on plan assets: 2017, 533,000 and (3) projected benefit $1,522,000. The pension fund at the end of 2016 and 2017, respectively. There are no other components of Smith's On January 1, 2016, Smith Company adopted a defined benefit pension plan At that time, Smith awarded retroactive benets to its employees, resuting in a pror service cost that created a proje benefit obligation of $1.250.000 on that date (which it did not fund) Smith decided to amortize the prior service cost by the straight ine method over the 20-year aveage remaneng f and 2017: (1) service cost 2016, $147,000,2017, $153,000 (2) expected (and achua obligation: 1/1/2017. S1.522 000 Thediscount rate was 10% n both 2016 and 2017 Smthcontenedssooooadssaootohe pension expense Required: 1. Compute the amount of Smith s pension expense for 2016 and 2017 2 Prepare all the journal entries reisted to Smith's pension pian for 2016 and 2017 3. if the prior service cost wss ve explain how

Explanation / Answer

1. Computation of Smith's Pension Expense for 2016 and 2017 Particular 2016 2017 Projected Benefit Obligation $1,250,000.00 $1,522,000.00 Service Cost $147,000.00 $153,000.00 Expected Return on Asset $0.00 $0.00 Amortization of Prior Service Cost ($1250000/20) ($1522000/20) $62,500.00 $76,100.00 Total Pension Expense $1,459,500.00 $1,751,100.00 2. Journal Enty Account Titles Debit Credit For 2016 Prior Service Cost $1,250,000.00 Projected Benefit Obligation $1,250,000.00 Pension Expense $147,000.00 Amount Adjusted to Accrued Pension Cost $183,000.00 Amount Funded $330,000.00 For 2017 Prior Service Cost $1,522,000.00 Projected Benefit Obligation $1,522,000.00 Pension Expense $1,751,000.00 Amount Adjusted to Accrued Pension Cost $350,000.00 Amount Funded $1,401,000.00 3. If the Prior service cost is removed then Pension expense will have a major changes as per IAS-19 as follows:- - Service Cost Will increase resulting in the increase in the pesion Obligation - The Net Interest Component will increase as result of the removal of Pension expense

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