*EXERCISE 20.23 (15–20 minutes)
20–40 Copyright © 2019 WILEY Kieso, Intermediate Accounting, 17/e, Solutions Manual (For Instructor Use Only)
*EXERCISE 20.24 (25–30 minutes)
(a) Below is the completed worksheet, indicating debit and credit entries.
General Journal Entries
Memo Record Entries
Annual
Expense
Cash
Other
Comprehensive
Income—PSC
Postretirement
Asset/Liability
APBO
Plan
Assets
Balance, Jan. 1, 2020
290,000 Cr.
410,000 Cr.
120,000 Dr.
Service cost
Interest cost
Actual/Expected return
Contributions
Benefits
Amortization of PSC
Accumulated OCI, Dec. 31, 2019
30,000 Dr.
Balance, Dec. 31, 2020
27,000 Dr.
314,900 Cr.
497,900 Cr.
183,000 Dr.
(b) Pension Expense ………………………………………. 93,900
Cash …………………………………………………… 66,000
Other Comprehensive Income (PSC) ……. 3,000
Postretirement Asset/Liability ……………… 24,900
TIME AND PURPOSE OF PROBLEMS
Problem 20.1 (Time 40–50 minutes)
Problem 20.2 (Time 45–55 minutes)
Problem 20.3 (Time 40–50 minutes)
Purpose—to provide a problem that requires computation of the annual pension expense, preparation of
Problem 20.4 (Time 30–40 minutes)
Purpose—to provide a problem that requires computation of pension expense and preparation of the
Problem 20.5 (Time 45–55 minutes)
Problem 20.6 (Time 45–60 minutes)
Problem 20.7 (Time 35–45 minutes)
Purpose—to provide a problem that requires preparation of a worksheet.
Problem 20.9 (Time 40–45 minutes)
Purpose—to provide a problem that requires preparation of a worksheet for two years, journal entries,
Problem 20.10 (Time 25–30 minutes)
Purpose—to provide a problem to understand elements of a pension worksheet.
Problem 20.11 (Time 35–45 minutes)
Purpose—to provide a problem that requires preparation of a worksheet, journal entries, and indicates
Time and Purpose of Problems (Continued)
Problem 20.12 (Time 35–45 minutes)
Purpose—to provide a problem that requires preparation of a worksheet, journal entries, and indicates
financial statement presentation.
*Problem 20.13 (Time 30–35 minutes)
*Problem 20.14 (Time 40–45 minutes)
Purpose—to provide a problem that requires a worksheet for two years, journal entries, and indicates
20-44 Copyright © 2019 WILEY Kieso, Intermediate Accounting, 17/e, Solutions Manual (For Instructor Use Only)
(a) HARRINGTON COMPANY
Pension Worksheet—2020 and 2021
General Journal Entries
Memo Record
Annual
Pension
Expense
Cash
OCI—Prior
Service
Cost
OCI—Gain/
Loss
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Dec. 31, 2021
64,000 Dr.
12,070 Cr.
203,400 Cr.
520,000 Cr.
316,600 Dr.
Expense
Gain/Loss
Balance, Jan. 1, 2019
250,000 Cr.
200,000 Dr.
Service cost
16,000 Dr.
25,000 Dr.
Actual return
18,000 Cr.
18,000 Dr.
2,000 Cr.
Contributions
16,000 Cr.
16,000 Dr.
Benefits
14,000 Cr.
Journal entry for 2019
21,000 Dr.
16,000 Cr.
Accumulated OCI, Dec. 31, 2018
Balance, Dec. 31, 2019
277,000 Cr.
220,000 Dr.
Balance, Jan. 1, 2020
437,000 Cr.
Service cost
19,000 Dr.
43,700 Dr.
22,000 Cr.
22,000 Dr.
Amortization of PSC
54,400 Dr.
Contributions
40,000 Cr.
40,000 Dr.
Benefits
Journal entry for 2020
95,100 Dr.
40,000 Cr.
160,700 Cr.
Accumulated OCI, Dec. 31, 2019
0
Balance, Dec. 31, 2020
217,700 Cr.
483,300 Cr.
265,600 Dr.
Service cost
26,000 Dr.
48,330 Dr.
Actual return
24,000 Cr.
24,000 Dr.
2,560 Cr.
48,000 Cr.
48,000 Dr.
Benefits
21,000 Cr.
16,630 Cr.
Journal entry for 2021
89,370 Dr.
48,000 Cr.
14,070 Cr.
PROBLEM 20.2 (Continued)
Worksheet computations:
(a)$25,000 = $250,000 X 10%
(Note to instructor: Because the amount of net gain or loss does not exceed
10% of the larger of the projected benefit obligation or the fair value of the
plan assets at the beginning of any of the years, no amortization is recorded.
(b) Journal entries:
2019
Other Comprehensive Income (G/L) ………………….. 2,000
Pension Expense …………………………………………….. 21,000
PROBLEM 20.2 (Continued)
(c) Financial Statements—2021
Income Statement
Operating expenses …………………………………..
Operating expense (Service cost) …………… $ 26,000
Balance Sheet
Liabilities
Pension liability …………………………………….. $203,400
Stockholders’ equity
Accumulated other comprehensive
PROBLEM 20.3
(a) Pension expense for 2020 comprises the following:
Service cost ………………………………………………….. $52,000
Interest on projected benefit obligation
(b) Journal Entries—2020
Other Comprehensive Income (G/L) …………………. 29,000**
Pension Expense ……………………………………………. 85,000
(c) 2020 Increase/Decrease in Gains/Losses
(1) 12/31/20 new actuarially computed
PBO $490,000
Less: Projected benefit obligation
PROBLEM 20.3 (Continued)
(2) 12/31/20 fair value of plan assets $276,000
Less: Expected fair value
1/1/20 fair value of plan
assets $200,000
Add expected return
(d) Financial Statements—2020
Income Statement
Operating expenses
Pension expense (service cost) ………. $ 52,000
Other income (expenses)
Pension expense (other components) $(33,000)
PROBLEM 20.3 (Continued)
Stockholders’ equity
20–50 Copyright © 2019 WILEY Kieso, Intermediate Accounting, 17/e, Solutions Manual (For Instructor Use Only)
PROBLEM 20.3 (Continued)
PROBLEM 20.4
(a) Computation of pension expense:
2020
2021
Service cost ………………………………………………
Expected return on plan assets ………………….
Amortization of prior service cost ………………
Pension expense ……………………………………….
(b)
2020
Pension Asset/Liability ………………………………
(39,000
Pension Expense ……………………………………….
109,000
Other Comprehensive Income (PSC) ……..
Other Comprehensive Income (G/L)……….
Cash ……………………………………………………
20–52 Copyright © 2019 WILEY Kieso, Intermediate Accounting, 17/e, Solutions Manual (For Instructor Use Only)
General Journal Entries Memo Record
Annual
OCI—Prior
Projected
PROBLEM 20.5
(a) Pension expense for 2020 consisted only of the service cost component
amounting to $60,000. There were no prior service cost, net gain or loss,
plan assets, or projected benefit obligation as of January 1, 2020.
Pension expense for 2021 comprised the following:
Pension expense for 2022 comprised the following:
PROBLEM 20.5 (Continued)
(1)
Year
Projected
Benefit
Obligation (a)
Plan Assets
(a)
Corridor
(b)
Accumulated
OCI (G/L) (a)
Minimum
Amortization
of (Gain) Loss
(c) $78,400 – $20,000 = $58,400; $58,400/12 = $4,867
(b) Journal Entries—2020
Pension Expense …………………………………………….. 60,000
Cash ………………………………………………………… 50,000
Pension Asset /Liability ……………………………… 10,000
Journal Entries—2021
Pension Expense …………………………………………….. 86,600
Journal entry for 2022
131,367 Dr.
105,000 Cr.
2,633 Dr.
29,000 Cr.
Accumulated OCI, Dec. 31, 2021
78,400 Dr.
Balance, Dec. 31, 2022
81,033 Dr.
144,000 Cr.
324,000 Cr.
180,000 Dr.
*$324,000 – ($200,000 + $119,000 + $16,000 – $18,500).
Asset/Liability
Assets
Service cost
Interest cost
Expected return
Contributions
Journal entry for 2020
Accumulated OCI, Dec. 31, 2019
Balance, Dec. 31, 2020
Service cost
Interest cost
Actual return
Contributions
Increase in liability
78,400 Dr.
Benefits
Journal entry for 2021
78,400 Dr.
Accumulated OCI, Dec. 31, 2020
Balance, Dec. 31, 2021
78,400 Dr.
200,000 Cr.
Service cost
119,000 Dr.
119,000 Cr.
Interest cost
Expected return
Amortization of loss
4,867 Cr.
Contributions
105,000 Cr.
Benefits
Liability loss*
PROBLEM 20.6
(a) Prior Service Cost Amortization
2020
$166,667
($2,000,000 ÷ 12 years)
2022
($2,000,000 ÷ 12 years)
(b) Pension expense for 2020 comprised the following:
Service cost ……………………………………………………………… $200,000
Interest on projected benefit obligation* …………………….. 500,000
(c) 12/31/20 Fair value of plan assets $4,100,000
Less: Expected fair value of assets
1/1/17 fair value of plan assets $3,000,000
Add expected return
PROBLEM 20.6 (Continued)
Amortization in 2020: None because there was no beginning balance.
Amortization in 2021 (corridor approach): $32,500, as shown below.
Year
Projected Benefit
Obligation
Fair Value
of Plan Assets
Corridor
Accumulated
OCI (G/L)
Amortization
(d) Pension liability, beginning of year ……………………………. $2,000,000*
Less: Pension liability, end of year ……………………………. 750,000**
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PROBLEM 20.6 (Continued)