Intermediate Accounting II: ACCTG 472 Spring 2018 Section 2 April Kisam 7 Excel

Question

Intermediate Accounting II: ACCTG 472 Spring 2018 Section 2 April Kisam 7 Excel 15.00 points The Kollar Company has a defined benefit pension plan. Pension information 2016 and 2017 are presented below (S in millions) Information Provided by Pension Plan Actuary a Projected benefit obligation as of December 31, 2015 $2450 b. Prior service cost from plan amendment on January 2, 2016-$750 (straight-ine amortization for 10- year average remaining service period) c. Service cost for 2016 $590 d. Service cost for 2017 $640 e. Discount rate used by actuary on projected benefit obligation tr 2016 and 2017-10% f. Payments to retirees in 2016 $450. g. Payments to retirees in 2017-$520. h. No changes in actuarial assumptions or estimates Net oains and oss ae a0 ypars in 2010 and 2017 j. Net gains and losses are amortized for 10 years in 2016 and 2017. Information Provided by Pension Fund Trustee a. Plan asset balance at fair value on January 1, 2016-$1,800. b. 2016 contributions-$610 c. 2017 contributions $660. d. Expected long-term rate of return on plan assets-12%. e. 2016 actual return on plan assets $160. f, 2017 actual return on plan assets S210. Required 1. Calculate pension expense for 2016 and 2017. (Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5)-) ($ in millions) 2016 2017 Pension expense Prepare the journal entries for 2016 and 2017 to record pension expense. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rou should be entered as 5.5)) 2. nded to 1 decimal place 0a. 8800.00

Explanation / Answer

Question – (1);

($ in millions)

2016

2017

Pension expense

$767

$826.60

Question – (2);

Accounts Titles & Explanation

Debit

Credit

Pension expense

$767

Plan assets (Expected return)

$216

Amortization of net gain-OCI

$2

      PBO ($590 + $320)

$910

     Amortization of prior service cost–OCI

$75

(For recording pension expense for 2016)

Pension expense

$826.60

Plan assets (Expected return)

$254.40

      PBO ($640 + $366)

$1006

     Amortization of prior service cost–OCI

$75

(For recording pension expense for 2016)

Working Note & Explanation;

(1). Pension expense will be calculated as follow;

2016

2017

Service cost

$590

$640

Interest cost @10% of PBO

$320

$366

Expected return on plan assets @12%

($216)

($254.40)

Amortization of prior service cost ($750 / 10)

$75

$75

Amortization of net gain (loss) – AOCI

($2)

Nil

Pension expense

$767

$826.60

(1). PBO balance will be calculated as follow;

Opening balance

$2450

Prior service cost

$750

Balance on January 2, 2016

$3200

Interest @10%

$320

Service cost

$590

Payments

($450)

Balance on December 31, 2016

$3660

(1). Plan assets balance will be calculated as follow;

Opening balance

$1800

Contribution- 2016

$610

Actual return – 2016

$160

Payments

($450)

Balance on December 31, 2016

$2120

(3). Amortization of net gain (loss) – AOCI, will be calculated as follow;

For 2016;

Net gain—AOCI on January 1, 2016

$265

Add: (10% of $2450)

$245

Excess ($265 - $245)

$20

Average service period remaining

10 years

Amount amortized to 2016 expense

$2

For 2017;

Net gain—AOCI on January 1, 2016

$265

Loss in 2016 ($216 - $160)

($56)

Amortization in 2016

($2)

Net gain—AOCI on January 1, 2017

$207

(10% of $3660)

$366

No excess ($207 - $366)

Nil

Amount amortized to 2017 expense

Nil

($ in millions)

2016

2017

Pension expense

$767

$826.60

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