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Chapter 20: Q15Q. (page 1161)

If pension expense recognized in a period exceeds the current amount funded by the employer, what kind of account arises, and how should it be reported in the financial statements? If the reverse occurs鈥攖hat is, current funding by the employer exceeds the amount recognized as pension expense鈥攚hat kind of account arises, and how should it be reported?

Short Answer

Expert verified

Funding is a term used when an organization raises money from the financial market or the investors in the initial days of incorporation to begin its activities.

Step by step solution

01

If the pension expense recognized exceeds the current amount funded by the employer

The pension liability account will rise. Further, the increased amount will be reported under the head of current or non-current liability in the organizations鈥� balance sheet that will strictly depend upon the payment date.

02

If the amount of current funding by the employer exceeds the amount recognized as pension expense

In this case, the pension asset account will rise. The amount increased will be reputed under the organization's balance sheet below the head current or non-current assets. It will strictly depend upon the nature of the payment. Further, it is treated under the head of pension asset/liability while recording the transaction in the organization's journal book.

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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.

What is the difference between the APBO and the EPBO? What are the components of post-retirement expense?

The following information is available for the pension plan of Radcliffe Company for the year 2017. Actual and expected return on plan assets $ 15,000 Benefits paid to retirees 40,000 Contributions (funding) 90,000 Interest/discount rate 10% Prior service cost amortization 8,000 Projected benefit obligation, January 1, 2017 500,000 Service cost 60,000 Instructions (a) Compute pension expense for the year 2017. (b) Prepare the journal entry to record pension expense and the employer鈥檚 contribution to the pension plan in 2017.

Erickson Company sponsors a defined benefit pension plan. The corporation鈥檚 actuary provides the following information about the plan. January 1, December 31, 2017 2017 Vested benefit obligation \(1,500 \)1,900 Accumulated benefit obligation 1,900 2,730 Projected benefit obligation 2,500 3,300 Plan assets (fair value) 1,700 2,620 Settlement rate and expected rate of return 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 the other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.) (c) Compute the amount of net gain or loss amortization for 2017 (corridor approach). (d) Compute pension expense for 2017.

For 2017, Carson Majors Inc. had pension expense of \(77 million and contributed \)55 million to the pension fund. Which of the following is the journal entry that Carson Majors would make to record pension expense and funding? (a) Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 55,000,000 (b) Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 99,000,000 (c) Pension Expense 55,000,000 Pension Asset/Liability 22,000,000 Cash 77,000,000 (d) Pension Expense 22,000,000 Pension Asset/Liability 55,000,000 Cash 77,000,000
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