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Chapter 20: Question 23Q (page 1161)

Describe the reporting of pension plans for a company with multiple plans, some of which are underfunded and some of which are overfunded.

Short Answer

Expert verified

An underfunded pension planis the type of plan an organization carries in which thevalue of pension liabilityismore than the value of pension assets. Themain reasonfor underfunding is caused due tolosses incurred in investmentsof the firm.

Step by step solution

01

Introduction

Organizations generally combine various amounts that are similar in nature under one head in the balance sheet. In simple words, amounts that require more funds to operate are headed under the column of underfunded, and on the other hand, payments that have excess funds are reported under the head of overfunded.

02

Reporting of the pension plans, some of which are underfunded and some are overfunded

Organizations report the total amount of overfunded or underfunded pension plans under the head of pension asset/liability in the balance sheet.

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Most popular questions from this chapter

Campbell Soup Company reported pension expense of \(73 million and contributed \)71 million to the pension fund. Prepare Campbell Soup Company鈥檚 journal entry to record pension expense and funding, assuming Campbell has no OCI amounts

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.

Englehart Co. provides the following information about its postretirement benefit plan for the year 2017. Service cost $ 90,000 Prior service cost amortization 3,000 Contribution to the plan 56,000 Actual and expected return on plan assets 62,000 Benefits paid 40,000 Plan assets at January 1, 2017 710,000 Accumulated postretirement benefit obligation at January 1, 2017 760,000 Accumulated OCI (PSC) at January 1, 2017 100,000 Dr. Discount rate 9% Instructions Compute the postretirement benefit expense for 2017.

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

Taveras Enterprises provides the following information relative to its defined benefit pension plan. Balances or Values at December 31, 2017 Projected benefit obligation \(2,737,000 Accumulated benefit obligation 1,980,000 Fair value of plan assets 2,278,329 Accumulated OCI (PSC) 210,000 Accumulated OCI鈥擭et loss (1/1/17 balance, 鈥�0鈥�) 45,680 Pension liability 458,671 Other pension plan data for 2017: Service cost 94,000 Prior service cost amortization 42,000 Actual return on plan assets 130,000 Expected return on plan assets 175,680 Interest on January 1, 2017, projected benefi t obligation 253,000 Contributions to plan 93,329 Benefi ts paid 140,000

Instructions (a) Prepare the note disclosing the components of pension expense for the year 2017. (b) Determine the amounts of other comprehensive income and comprehensive income for 2017. Net income for 2017 is \)35,000. (c) Compute the amount of accumulated other comprehensive income reported at December 31, 2017.
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