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Chapter 20: Question 28Q (page 1161)
What are the major differences between postretirement healthcare benefits and pension benefits?
A single-life pension plan is the type of plan offered by an organization to its employees where the amount of pension will be payable to an employee until their death.
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Question: The following defined pension data of Doreen Corp. apply to the year 2017.
Defined benefit obligation, 1/1/17 (before amendment) $560,000
Plan assets, 1/1/17 546,200
Pension asset/liability 13,800 Cr.
On January 1, 2017, Doreen Corp., through plan amendment,
grants past service benefits having a present value of 120,000
Discount rate 9%
Service cost 58,000
Contributions (funding) 65,000
Actual return on plan assets 49,158
Benefits paid to retirees 40,000
Instructions
For 2017, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
Manno Corporation has the following information available concerning its postretirement benefit plan for 2017. Service cost $40,000 Interest cost 47,400 Actual and expected return on plan assets 26,900 Compute Manno鈥檚 2017 postretirement expense.
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.
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.
Hobbs Co. has the following defined benefit pension plan balances on January 1, 2017. Projected benefit obligation \(4,600,000 Fair value of plan assets 4,600,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2018, the company amends its pension agreement so that prior service costs of \)600,000 are created. Other data related to the pension plan are: 2017 2018 Service cost \(150,000 \)170,000 Prior service cost amortization 鈥�0鈥� 90,000 Contributions (funding) to the plan 200,000 184,658 Benefits paid 220,000 280,000 Actual return on plan assets 252,000 350,000 Expected rate of return on assets 6% 8% Instructions (a) Prepare a pension worksheet for the pension plan in 2017. (b) Prepare any journal entries related to the pension plan that would be needed at December 31, 2017. (c) Prepare a pension worksheet for 2018 and any journal entries related to the pension plan as of December 31, 2018. (d) Indicate the pension-related amounts reported in the 2018 financial statements.
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