Pension Expense Worksheet Carpenter Company adopted a defined benefit pension pl

Question

Pension Expense Worksheet Carpenter Company adopted a defined benefit pension plan for its employees on January 1, 2016. At the time of adoption, the pension contract provided for retroactive benefits for the company's active participating employces. These retroactive benefits resulted in a prior service cost of $1,860,000 that created a projected benefit obligation of the same amount on that date. Carpenter decided to amortize the prior service cost by the straight-line method over the 20-year average remaining service life of the employees. The following addi- tional information is also available for 2016 and 2017: (1) discount rate for both 2016 and 2017: 8%; (2) company contribution (funded 12/31): 2016, $550,000; 2017, s530,000; (3) expected long-term rate of return on plan assets: 9%; (4) actual rate of return on plan assets, 10%; (5) service cost: 2016, S257,000, 2017, S264 ,000, and (6) plan assets: 1/1/2016, $0. Carpenter paid pension benefits of $30,000 each year. Carpenter uses the corridor approach to amortize gains or losses. There are no other components of Carpenter's pension expense. Ignore any adjustment of accumulated other comprehensive income Required: Prepare a pension plan worksheet that includes the calculation of Carpenter's pension expense for 2016 and 2017, the reconciliation of the beginning and ending projected benefit obligation for 2016 and 2017, the reconciliation of the beginning and ending plan assets for 2016 and 2017, and the journal entry to record the pension expense at the end of 2016 and 2017, indicating whether each component is a debit or credit.

Explanation / Answer

Carpenter Company Defined benefit employee pension plan Prior year service cost 1860000 2016 2017 Discount rate 8.00% 8.00% Amortization 93000 93000 Company contribution 550000 530000 Expected return on plan assets 9.00% 9.00% Actual return on plan assets 10.00% 10.00% Service cost 2570 2640 Pension benefit paid 30000 30000 Company contribution 550000 530000 Amortization of prior period 93000 93000 Service cost 2570 2640 Pension benefit paid 30000 30000 Pension expense 675570 655640 Journal entry to record pension expense $ $ Pension expense Debit 675570 655640 Amortization Credit 93000 93000 Service cost Credit 2570 2640 Pension benefit paid Credit 30000 30000 Cash Credit 550000 530000 (Recording pension expense) Reconciliation of projected benefit organization: Beginning assets 0

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