/*! 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} E20-8 Kenseth Corp. has the following ... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 20: E20-8 (page 1164)

Kenseth Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets. Projected Plan Benefit Assets Obligation Value 2016 \(2,000,000 \)1,900,000 2017 2,400,000 2,500,000 2018 2,950,000 2,600,000 2019 3,600,000 3,000,000 The average remaining service life per employee in 2016 and 2017 is 10 years and in 2018 and 2019 is 12 years. The net gain or loss that occurred during each year is as follows: 2016, \(280,000 loss; 2017, \)90,000 loss; 2018, \(11,000 loss; and 2019, \)25,000 gain. (In working the solution, the gains and losses must be aggregated to arrive at year-end balances.) Instructions Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.

Short Answer

Expert verified

Amortization of loss is a term used when an organization tends to decrease their loans or debts book valueto be secure from incurring losses.

Step by step solution

01

 Step 1: Firstly, we will ascertain the amount of accumulated OCI and the minimum amortization of loss for 2017, 2018, and 2019.

Minimumamortizationofloss2017=AccumulatedOCI2017-Corridor脳10100Numberofyears=$280,000-$2,500,000脳1010010years=$3,000AccumulatedOCI2017=AccumulatedOCI2017-Minimumamortizationofloss2017+Loss=$280,000-$3,000+$90,000=$367,000Minimumamortizationofloss2018=AccumulatedOCI2017-(Corridor脳10100)Numberofyears=$367,000-($2,950,000脳10100)12years=$6,000

AccumulatedOCI2019=AccumulatedOCI2018-Minimumamortizationofloss2018+Loss=$367,000-$6,000+$11,000=$372,000Minimumamortizationofloss2019=AccumulatedOCI2019-(Corridor脳10100)Numberofyears=$372,000-($3,600,000脳10100)12years=$1,000

02

Computation of Corridor and Minimum Loss Amortization

Year

Projected Benefit Obligation

Plan Assets

Corridor @10%

Accumulated OCI

Minimum Amortization of Loss

2016

$2,000,000

$1,900,000

$200,000

0

0

2017

$2,400,000

$2,500,000

$250,000

$280,000

$3,000

2018

$2,950,000

$2,600,000

$295,000

$367,000

$6,000

2019

$3,600,000

$3,000,000

$360,000

$372,000

$1,000

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

Aykroyd Inc. has sponsored a noncontributory, defined benefit pension plan for its employees since 1994. Prior to 2017, cumulative net pension expense recognized equaled cumulative contributions to the plan. Other relevant information about the pension plan on January 1, 2017, is as follows. 1. The company has 200 employees. All these employees are expected to receive benefits under the plan. The average remaining service life per employee is 12 years. 2. The projected benefit obligation amounted to \(5,000,000 and the fair value of pension plan assets was \)3,000,000. The market-related asset value was also \(3,000,000. Unrecognized prior service cost was \)2,000,000. On December 31, 2017, the projected benefit obligation and the accumulated benefit obligation were \(4,850,000 and \)4,025,000, respectively. The fair value of the pension plan assets amounted to \(4,100,000 at the end of the year. A 10% settlement rate and a 10% expected asset return rate were used in the actuarial present value computations in the pension plan. The present value of benefits attributed by the pension benefit formula to employee service in 2017 amounted to \)200,000. The employer鈥檚 contribution to the plan assets amounted to $775,000 in 2017. This problem assumes no payment of pension benefits. Instructions (Round all amounts to the nearest dollar.)

(a) Prepare a schedule, based on the average remaining life per employee, showing the prior service cost that would be amortized as a component of pension expense for 2017, 2018, and 2019.

(b) Compute pension expense for the year 2017.

(c) Compute the amount of the 2017 increase/decrease in net gains or losses and the amount to be amortized in 2017 and 2018.

(d) Prepare the journal entries required to report the accounting for the company鈥檚 pension plan for 2017

The following items appear on Brueggen Company鈥檚 financial statements. 1. Under the caption Assets: Pension asset/liability. 2. Under the caption Liabilities: Pension asset/liability. 3. Under the caption Stockholders鈥� Equity: Prior service cost as a component of Accumulated Other Comprehensive Income. 4. On the income statement: Pension expense. Instructions Explain the significance of each of the items above on corporate financial statements. (Note: All items set forth above are not necessarily to be found on the statements of a single company.)

Using the information in E20-2, prepare a pension worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording pension expense.

Linda Berstler Company sponsors a defined benefit pension plan. The corporation鈥檚 actuary provides the following information about the plan.

January 1, 2017 December 31, 2017

Defined benefit obligations \(2,500 \)3,300

Plan assets (fair value) 1,700 2,620

Discount rate 10%

Pension asset/liability 800 ?

Service cost for the year 2017 400

Contributions (funding in 2017) 700

Benefits paid in 2017 200

Instructions

(a) Compute the actual return on the plan assets in 2017.

(b) Compute the amount of other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.)

Andrews Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2017 are as follows. Future Employee Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2017, the company amended its pension plan, increasing its projected benefit obligation by $72,000. Instructions Compute the amount of prior service cost amortization for the years 2017 through 2022 using the years-of-service method, setting up appropriate schedules.
See all solutions

Recommended explanations on Business Studies Textbooks

Organizational Communication

Read Explanation

Intermediate Accounting

Read Explanation

Human 91影视

Read Explanation

Change Management

Read Explanation

Business Operations

Read Explanation

Introduction to Business

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.