Question

Problem 20-1 On January 1, 2017, Kingbird Company has the following defined benefit pension plan balances. Projected benefit obligation Fair value of plan assets $4,508,000 4,250,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2018, the company amends its pension agreement so that prior service costs of $493,000 are created. Other data related to the pension plan are as follows. 2017 $148,000 Service cost Prior service cost amortization Contributions (funding) to the plan Benefits paid Actual return on plan assets Expected rate of return on assets 2018 $179,000 89,000 291,000 281,000 259,000 239,000 198,000 255,000 6 % 8 %

Answer 1

KINGBIRD COMPANY Pension Worksheet - 2017 and 2018 General Entries OCI - Prior Service Cash Cost OCI -Gain/Loss Annual Pension Expense Pension | Asset/Liabilities 258,000 Cr. 148,000 Dr. 450,800 Dr. 255,000 Cr. Memo Record Project Benefit Obiligation Plan Assets 4,508,000 Cr. 4,250,000 Dr. 148,000 Cr. 450,800 Cr. 255,000 Dr. 239,000 Dr. 198,000 Dr. 198,000 Cr. 239,000 Cr. 343,800 Dr. 239,000 Cr. 104,800 Cr. 362,800 Cr. 4,546,000 Dr 493,000 Dr. Items Balance Jan.1, 2017 Service Cost Interest Cost Actual Return Contributions Benefits Journal Entry for 2017 Accumulated OCI Dec 31, 2016 Balance Dec 31, 2017 Additional PSC, 1/1/2018 Balance Jan 1, 2018 Service Cost Interest Cost Actual Return Unexpected Loss Amortization of PSC Contributions Benefits Journal Entry for 2018 Accumulated OCI Dec 31, 2017 Balance Dec 31, 2018 4,908,800 Cr. 493,000 Cr. 5,401,800 Cr. 179,000 Cr. 540,180 Cr. 179,000 Dr. 540,180 Dr. 259,000 Cr. 104,680 Cr. 89,000 Dr. 259,000 Dr. 104,680 Dr. 89,000 Cr. 291,000 Cr. 291,000 Dr. 281,000 Cr. 281,000 Dr. 444,500 Dr. 291,000 Cr. . 404,000 Dr. 104,680 Dr. 662,180 Cr. 404,000 Dr. 104,680 Dr._ 1,024,980 Cr. 5,839,980 Cr. 4,815,000 Dr.

Working Notes: 1) Interest Cost = (Projected Benefit obligation at the beginning of year x Interest rate) 2017 = (4,508,000 10%) 450,800 2018 = (5,401,800 x 10%) 540,180 2) Unexpected Loss = (Expected Return - Actual Return) Expected Return = (Plan Assets at the beginning x Expected Return) Expected Return = (4,546,000 x 8%) 363,680 Actual Return (259,000) Unexpected loss 104,680 b) Journal Entry for 2018 Credit Account Titles and Explanation Annual Pension Expense OCI - Prior Service Cost OCI -Gain/Loss Cash Pension Asset/Liabilities |(to record the pension related amounts) Debit 444,500 404,000 104,680 291,000 662,180