Problem 17–6
1. Projected Benefit Obligation ($ in 000s)
Balance, January 1, 2018 $ 0
Service cost 150
2. Plan Assets
Balance, January 1, 2018 $ 0
Actual return on plan assets (10% x $0) 0
3. Pension expense—2018
Service cost $150
Pension Expense—2019
Service cost $200
4. Net pension asset or net pension liability
PBO $150
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17– Intermediate Accounting 9e
Problem 17–7
Requirement 1
($ in 000s)
Requirement 2
Pension expense exclusive of net gain amortization $325
Requirement 3
Net gain—AOCI, beginning of 2018 $(170)
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17– Intermediate Accounting 9e
Problem 17–8
( )s indicate
credits; debits
otherwise
($ in millions) PBO
Plan
Assets
Prior
Service
Cost
–AOCI
Net
Loss
–AOCI
Pension
Expense Cash
Net
Pension
(Liability) /
Asset
Balance, Jan.
1, 2018 (830) 680 20 93 (150)
Service cost (74) 74 (74)
Interest
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17– Intermediate Accounting 9e
Problem 17–8 (concluded)
Calculations:
Interest cost = $830 x 10% = $83
Expected return on assets = $680 x 10% = $68
Amortization of net loss:
Requirement 2
($ in millions)
Pension expense (total)………………………………………………….….. 95
The amortization amounts are reported as other comprehensive income in the
statement of comprehensive income. Companies report the service cost
component of pension expense ($74M) in the income statement as part of the
Requirement 3
Record gains and losses and new prior service cost
($ in millions)
© The McGraw-Hill Companies, Inc., 2018
17– Intermediate
Accounting 9e
© The McGraw-Hill Companies, Inc., 2018
17– Intermediate
Accounting 9e
Problem 17–8 (concluded)
Requirement 4
($ in millions)
© The McGraw-Hill Companies, Inc., 2018
17– Intermediate
Accounting 9e
Problem 17–9
Requirement 1
Pension expense ($ in 000s)
Service cost $60
Requirement 2
Projected Benefit Obligation
Balance, January 1 $320
Requirement 3
Plan Assets
Balance, January 1 $400
© The McGraw-Hill Companies, Inc., 2018
17– Intermediate
Accounting 9e
Problem 17–9 (concluded)
Requirement 4
Net Pension Asset or Net Pension Liability
PBO $352
Requirement 5
Journal Entries
($ in 000s)
Pension expense (total)………………………………………………….….. 40
The amortization amounts are reported as other comprehensive income in the
statement of comprehensive income. Companies report the service cost
component of pension expense ($60,000) in the income statement as part of the
* Because Prior service cost—AOCI and Net loss—AOCI have debit balances, we amortize them with
credits. We would amortize a Net gain–AOCI (credit balance) with a debit. After the two amortization
amounts are reported as OCI in this year’s statement of comprehensive income, the respective AOCI
amounts in the balance sheet are reduced.
© The McGraw-Hill Companies, Inc., 2018
17– Intermediate
Accounting 9e
Plan assets 120
© The McGraw-Hill Companies, Inc., 2018
17– Intermediate
Accounting 9e
Problem 17–10
Requirement 1
($ in millions)
Service cost $ 75
Interest cost 45
Expected return on the plan assets
* Since the amendment was at the end of the year, there is
no amortization of prior service cost in 2018.
Companies report the service cost component of pension expense ($75M) in the
income statement as part of the total compensation costs arising from services
© The McGraw-Hill Companies, Inc., 2018
17– Intermediate
Accounting 9e
Problem 17–10 (continued)
Requirement 2
($ in millions)
Pension expense (calculated above) 96
Plan assets (expected return on assets: 8% x $300) 24
PBO ($75 service cost + $45 interest cost) 120
Prior service cost—OCI (from 2018 amendment) 12
PBO 12
PBO 22
Gain—OCI* (change in assumption) 22
© The McGraw-Hill Companies, Inc., 2018
17– Intermediate
Accounting 9e