/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} E20-4 The following facts apply to the... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 20: E20-4 (page 1163)

The following facts apply to the pension plan of Boudreau Inc. for the year 2017. Plan assets, January 1, 2017 $490,000 Projected benefi t obligation, January 1, 2017 490,000 Settlement rate 8% Service cost 40,000 Contributions (funding) 25,000 Actual and expected return on plan assets 49,700 Benefi ts paid to retirees 33,400 Instructions Using the preceding data, compute pension expense for the year 2017. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2017 and the year-end balances in the related pension accounts.

Short Answer

Expert verified

Contribution is a term used when an organization contributes a certain percentage of money towards the employees鈥� defined benefit pension plans.It is regarded as an employees鈥� provident fund.

Step by step solution

01

Pension Worksheet for Boudreau Inc for the year 2017.

Boudreau Inc
Pension Worksheet for the year 2017
General Journal Entries
Memo Record

Particulars

Annual pension expense

Cash

Pension Asset/Liability


Projected benefit obligation

Plan Assets

Balance Jan 1, 2017

$490,000 Cr.

$490,000 Dr.

Service cost

$40,000 Dr.

$40,000 Cr.

Interest cost

$490,000脳8%

$39,200 Dr.

$39,200 Cr.

Actual return

$49,700 Cr.

$49,700 Dr.

Contributions

$25,000 Cr.

$25,000 Dr.

Benefits

$33,400 Dr.

$33,400Cr.

Journal entry for Dec 31, 2017

$29,500 Dr.

$25,000 Cr.

$4,500 Cr.

Balance Dec 31, 2017

$4,500 Cr.

$535,800 Cr.

$531,300 Dr.

02

Journal entry for recording the transaction of pension expense for the year 2017.

Boudreau Company
Journal Entry

Date

Particulars

Debit

Credit

2017

Pension Expense

$29,500

Pension Asset/Liability

$4,500

Cash

$25,000

(To record the pension expense)

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The following data relate to the operation of Kramer Co.鈥檚 pension plan in 2018. The pension worksheet for 2017 is provided in P20-10. Service cost $59,000 Actual return on plan assets 32,000 Amortization of prior service cost 28,000 Annual contributions 51,000 Benefits paid retirees 27,000 Average service life of all employees 25 years For 2018, Kramer will use the same assumptions as 2017 for the expected rate of returns on plan assets. The settlement rate for 2018 is 10%. Instructions (a) Prepare a pension worksheet for 2018 and accompanying computations and amortization of the loss, if any, in 2018 using the corridor approach. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31. (c) Indicate the pension amounts reported in the financial statements.

Determine the meaning of the following terms. (a) Contributory plan. (b) Vested benefits. (c) Retroactive benefits. (d) Years-of-service method.

Explain how cash-basis accounting for pension plans differs from accrual-basis accounting for pension plans. Why is cash-basis accounting generally considered unacceptable for pension plan accounting?

What is a private pension plan? How does a contributory pension plan differ from a noncontributory plan?

Many business organizations have been concerned with providing for the retirement of employees since the late 1800s. Increase in this concern resulted in the establishment of private pension plans in most large companies and in many medium- and small-sized ones. The substantial growth of these plans, both in numbers of employees covered and in amounts of retirement benefits, has increased the significance of pension costs in relation to the financial position, results of operations, and cash flows of many companies. In examining the costs of pension plans, a CPA encounters certain terms. The components of pension costs that the terms represent must be dealt with appropriately if generally accepted accounting principles are to be reflected in the financial statements of entities with pension plans.

Instructions

(a) Define a private pension plan. How does a contributory pension plan differ from a noncontributory plan?

(b) Differentiate between 鈥渁ccounting for the employer鈥� and 鈥渁ccounting for the pension fund.鈥�

(c) Explain the terms 鈥渇unded鈥� and 鈥減ension liability鈥� as they relate to: (1) The pension fund. (2) The employer.

(d) (1) Discuss the theoretical justification for accrual recognition of pension costs. (2) Discuss the relative objectivity of the measurement process of accrual versus cash (pay-as-you-go) accounting for annual pension costs.

(e) Distinguish among the following as they relate to pension plans. (1) Service cost. (2) Prior service costs. (3) Vested benefits.
See all solutions

Recommended explanations on Business Studies Textbooks

Change Management

Read Explanation

Intermediate Accounting

Read Explanation

Insurance

Read Explanation

Human 91影视

Read Explanation

Actuarial Science in Business

Read Explanation

Startups

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.