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Splish Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1,...

Splish Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2017. The insurance company which administers the pension plan provided the following selected information for the years 2020, 2021, and 2022.

For Year Ended December 31,

2020

2021

2022

Plan assets (fair value) $50,000 $85,000 $180,200
Accumulated benefit obligation 44,700 165,300 289,100
Projected benefit obligation 60,000 200,400 326,100
Net (gain) loss (for purposes of corridor calculation) 0 78,800 83,971
Employer’s funding contribution (made at end of year) 50,000 60,000 105,100


There were no balances as of January 1, 2020, when the plan was initiated. The actual and expected return on plan assets was 10% over the 3-year period, but the settlement rate used to discount the company’s pension obligation was 13% in 2020, 11% in 2021, and 8% in 2022. The service cost component of net periodic pension expense amounted to the following: 2020, $60,000; 2021, $85,000; and 2022, $118,000. The average remaining service life per employee is 12 years. No benefits were paid in 2020, $30,000 of benefits were paid in 2021, and $18,400 of benefits were paid in 2022 (all benefits paid at end of year).

Partially correct answer iconYour answer is partially correct.

Calculate the amount of net periodic pension expense that the company would recognize in 2020, 2021, and 2022. (Round answers to 0 decimal places, e.g. 2,525.)

Pension expense for 2020

$

Pension expense for 2021

$

Pension expense for 2022

$

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List of Accounts

Partially correct answer iconYour answer is partially correct.

Prepare the journal entries to record net periodic pension expense, employer’s funding contribution, and related pension amounts for the years 2020, 2021, and 2022. (Round answers to 0 decimal places, e.g. 2,525. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2020

Dec. 31, 2021

Dec. 31, 2022

0 0
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Answer #1
                Splish Toothpaste Company
Pension Expense
Working 2020 2021 2022
Service Cost(Given) $               60,000 $                 85,000 $               1,18,000
(A) Interest on Projected Benefit obligation=(Projected benefit*Settlement Rate) $                         -   $                    6,600 $                   16,032
(B) Expected Return on Plan asets=(Plan Assets*Actual Return on plan assets) $                         -   $                  -5,000 $                   -8,500
(D ) Amortization of net gain/loss $                         -   $                           -   $                     4,897
Amortization of prior service cost $                         -   $                           -   $                            -  
Pension Expense $               60,000 $                 86,600 $               1,30,429
Year 2020 2021 2022
Projected Benefit obligation $                         -   $                 60,000 $               2,00,400
Plan Assets $                 50,000 $                   85,000
(C ) Corridor $                    6,000 $                   20,040
Accumulated OCI(G/L) $                   78,800
(D ) Minimum Amortization of gain/loss $                     4,897
(A) Interest on Projected Benefit Obligation
Year 2021 2022
Projected Benefit Obligation=(A) $         60,000.00 $        2,00,400.00
Settlement Rate=(B)(Given) 11% 8%
Interest on Projected Benefit Obligation=(A)*(B) $            6,600.00 $           16,032.00
(B) Expected Return on Plan Assets
Year 2021 2022
Plan Assets=(A) $         50,000.00 $           85,000.00
Actual /Expected return on plan assets=(B) 10% 10%
Expected return on Plan Assets=(A)*(B) $            5,000.00 $              8,500.00
Corridor
(C ) Year 2021 2022
Plan Assets=(A) $         50,000.00 $           85,000.00
Projected Benefit obligation=(B) $         60,000.00 $        2,00,400.00
10% * (Excess of A or B) $            6,000.00 $           20,040.00
Minimum Amortization of gain/loss
2022
(D ) Accumulated OCI(G/L)=(A) $               78,800
Corridor=(B) $               20,040
The average remaining life per employee is=(C ) 12
Minimum Amortization of gain/loss=(A-B)/(C ) $                  4,897
Note: Beginning balance would be considered for all calculations
Year Account Title & Explanation Debit Credit
Dec 31 2020 Pension Expense $               60,000
     To Cash(Employer's funding contribution) $           50,000.00
     To Pension Assets/Pension liability $           10,000.00
Dec 31 2021 Pension Expense $               86,600
Other comprehensive income(Gain/loss) $               78,800
     To Cash(Employer's funding contribution) $           60,000.00
     To Pension Assets/Pension liability $        1,05,400.00
Dec 31 2022 Pension Expense $            1,30,429
Other comprehensive income(Gain/loss)(As per Calculation below) $                  5,171
     To Cash(Employer's funding contribution) $              1,05,100
     To Pension Assets/Pension liability $                 30,500
Calculation of Other comprehensive income(Gain/loss)
Net Gain/loss in 2022=(A)(Given) $         83,971.00
Net gain/loss in 2021=(B)(Given) $         78,800.00
Excess loss=(A)-(B) $            5,171.00
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