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Chapter 20: Question 2CA (page 1175)

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.)

Short Answer

Expert verified

Assets and liabilitiesare the two components of theorganization's balance sheet. Both of the variables are opposite each other and help the business understand its position.

Step by step solution

01

(1) Pension asset/liability

Under the caption assets, pension asset/liability measures the employer's and the employee's contributions over the total net pension expense. It is reported under the asset section in the organization's balance sheet.

02

(2) Pension asset/liability

Under the caption liabilities, the employer makes the contributions and is reported under the liability section of the balance sheet.

03

(3) Prior service cost as a component of Accumulated Other Comprehensive Income

Under the caption stockholder's equity, the accumulated other comprehensive income components are generated because of the difference in actual return on plan assets and expected return on plan assets. It will be reported under the equity section of the organization's balance sheet under the head of other comprehensive income.

04

(4) Pension expense

Under the income statement of an organization, each pension plan component will be treated to identify the amount of pension expense. It will be reported under the income statement of the employer.

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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

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

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.

The following defined pension data of Rydell Corp. apply to the year 2017. Projected benefit obligation, 1/1/17 (before amendment) $560,000 Plan assets, 1/1/17 546,200 Pension liability 13,800 On January 1, 2017, Rydell Corp., through plan amendment, grants prior service benefi ts having a present value of 120,000 Settlement rate 9% Service cost 58,000 Contributions (funding) 65,000 Actual (expected) return on plan assets 52,280 Benefits paid to retirees 40,000 Prior service cost amortization for 2017 17,000 Instructions For 2017, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

For Warren Corporation, year-end plan assets were \(2,000,000. At the beginning of the year, plan assets were \)1,780,000. During the year, contributions to the pension fund were \(120,000, and benefits paid were \)200,000. Compute Warren鈥檚 actual return on plan assets.
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