Homework Answers
| (a) Pension worksheet | ||||||||||||||
| Howard Corp. | ||||||||||||||
| Pension Worksheet-2017 | ||||||||||||||
| General Journal Entries | Memo Record | |||||||||||||
| Items | Annual Pension Expense | Cash | OCI-Prior Service Cost | OCI-Gain/Loss | Pension Asset/ Liability | Projected Benefit Obligation | Plan Assets | |||||||
| Balance, Jan.1, 2017 | $100,000 | Dr. | $ 65,000 | Cr. | $150,000 | Cr. | $ 600,000 | Cr. | $ 450,000 | Dr. | ||||
| Service cost | $ 75,000 | Dr. | $ 75,000 | Cr. | ||||||||||
| Interest cost (600000*7%) | $ 42,000 | Dr. | $ 42,000 | Cr. | ||||||||||
| Actual return | $ 45,000 | Cr. | $ 45,000 | Dr. | ||||||||||
| Unexpected Gain on assets | $ 9,000 | Dr. | $ 9,000 | Cr. | ||||||||||
| Amortization of PSC | $ 20,000 | Dr. | $ 20,000 | Cr. | ||||||||||
| Contributions | $115,000 | Cr. | $ 115,000 | Dr. | ||||||||||
| Benefits | $ 70,000 | Dr. | $ 70,000 | Cr. | ||||||||||
| Amortization of Net Gain-AOCI | $ 500 | Cr. | $ 500 | Dr | ||||||||||
| Journal entry for 2017 | $ 100,500 | Dr. | $115,000 | Cr. | $ 20,000 | Cr. | $ 8,500 | Cr. | $ 43,000 | Dr. | ||||
| Accumulated OCI, Dec 31, 2016 | $100,000 | Dr. | $ 65,000 | Cr. | ||||||||||
| Balance, Dec 31, 2017 | $ 80,000 | Dr. | $ 73,500 | Cr. | $107,000 | Cr. | $ 647,000 | Cr. | $ 540,000 | Dr. | ||||
| (b) Journal entry | ||
| Account Titles and Explanation | Debit | Credit |
| Pension Expense | $ 100,500 | |
| Pension Asset/ Liability | $ 43,000 | |
| Cash | $ 115,000 | |
| OCI-PSC | $ 20,000 | |
| OCI - Gain | $ 8,500 | |
| (To record pension expense) | ||
| Computation of unexpected gain on assets for the year 2017:- | ||
| Expected return on the plan assets (450000*8%) | $ 36,000 | |
| Less: Actual return on the plan assets | $ 45,000 | |
| Unexpected loss/(gain) on plan assets for 2017 | $ (9,000) | |
| Computation of amount of gain to be amortized from OCI-gain Account in 2017:- | ||
| a. OCI - Gain at 01-01-2017 | $ 65,000 | |
| Projected Benefit Obligation as on 01-01-2017 | $ 600,000 | |
| Plan Assets as on 01-01-2017 | $ 450,000 | |
| Higher value | $ 600,000 | |
| b. Corridor =10% of $650000 | $ 60,000 | |
| c. Excess at the beginning of the year (a-b) | $ 5,000 | |
| d. Average remaining service period | 10 years | |
| e. Amount amortized to 2017 pension expense (c/d) | $ 500 | |
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