EXERCISE 20.8 (20–25 minutes)
Corridor and Minimum Loss Amortization
Year
Projected
Benefit
Obligation (a)
Plan
Assets
10%
Corridor
Accumulated
OCI (G/L) (a)
Minimum
Amortization
of Loss
2019
$2,000,000
$1,900,000
$200,000
$ 0
$ 0
EXERCISE 20.9 (25–35 minutes)
(a) Note to financial statements disclosing components of 2020 pension
expense:
Note X: Net pension expense for 2020 is composed of the following
(b) Comprehensive income, 2020
Amortization of prior service cost …………………….. $ (42,000)
EXERCISE 20.9 (Continued)
(c) Accumulated OCI at December 31, 2020 is $255,680; this amount is
comprised of the following:
PSC
Gain/Loss
Balance Jan. 1, 2020*
$252,000 Dr.
$ 0
Amortization of PSC
Unexpected loss
Balance Dec. 31, 2020
$210,000 Dr.
EXERCISE 20.10 (20–25 minutes)
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(a) WEBB CORP.
Pension Worksheet
General Journal Entries Memo Record
Annual
Pension
OCI—Prior
Service
OCI—
Pension
Asset/
Projected
Benefit
EXERCISE 20.11 (20–30 minutes)
(a) Pension expense for 2020 composed of the following:
Service cost ………………………………………………. $ 56,000
(c) Income Statement
Pension expense ……………………………………….. $133,000
Comprehensive Income Statement
Net income ………………………………………………………. $ XXXX
Other comprehensive income
Partial worksheet
Plan Assets
Projected Benefit
Obligation
Bal. January 1, 2020
$600,000
$ 900,000
Service cost
56,000
Interest on PBO
81,000
Actual return
Contribution
Bal. December 31, 2020
$799,000
$1,037,000
EXERCISE 20.12 (20–30 minutes)
(a) Pension expense for 2020 composed of the following:
Service cost …………………………………………… $ 77,000
(b) Pension Expense ………………………………………….. 267,000
Pension Asset /Liability …………………………………. 303,000
Cash ……………………………………………………… 250,000
Other Comprehensive Income (PSC) ……….. 120,000
Other Comprehensive Income (G/L) ………… 200,000
(To record pension expense and
employer’s contribution)
(c) Income Statement:
Operating expense …………………………………………
Pension expense (Service cost) ………………. $ 77,000
EXERCISE 20.12 (Continued)
*Projected benefit obligation, Dec. 31, 2020 $1,527,000
Plan assets, Dec. 31, 2020 (1,130,000)
EXERCISE 20.12 (Continued)
20–28 Copyright © 2019 WILEY Kieso, Intermediate Accounting, 17/e, Solutions Manual (For Instructor Use Only)
Note to instructor: To prove the amounts reported, a worksheet might be prepared as follows:
EXERCISE 20.13 (35–45 minutes)
(a) Actual Return = (Ending – Beginning fair value of assets) –
(Contributions – Benefits)
(b) Computation of pension liability gains and losses and pension asset gains
and losses.
1. Difference between 12/31/20 actuarially computed PBO and 12/31/20
recorded projected benefit obligation (PBO):
PBO at end of year ……………………….. $3,300
2. Difference between actual fair value of
plan assets and expected fair value:
12/31/20 actual fair value
of plan assets ……………………….. 2,620
EXERCISE 20.13 (Continued)
Beginning-of-the-Year
Year
PBO
Plan
Assets (FV)
10%
Corridor
Accumulated
OCI (G/L)
Loss
Amortization
(d) Pension expense for 2020:
Service cost ……………………………………………………….. $ 400
Interest cost ($2,500 X 10%) ………………………………… 250
EXERCISE 20.14 (40–50 minutes)
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ERICKSON COMPANY
EXERCISE 20.14 (Continued)
Journal entries 12/31/20
Balance Sheet at December 31, 2020
Liabilities
EXERCISE 20.15 (15–20 minutes)
(a) Computation of pension expense:
Service cost …………………………………………… $ 80,000
(b) Income Statement:
Operating expenses
Pension expense (Service cost) …………. $ 80,000
Other revenues (expenses)
EXERCISE 20.15 (Continued)
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EXERCISE 20.16 (25–35 minutes)
The excess of the cumulative net gain or loss over the corridor amount is
amortized by dividing the excess by the average remaining service period of
employees. The average remaining service period is computed as follows:
Expected future years of service
Number of employees
= Average remaining service life per employee
Average remaining service life per employee = 14 (5,600 / 400)
Amortization of Net (Gain) or Loss
(Gain) or Loss For the Year
Year
Projected
Benefit
Obligation (a)
Plan
Assets (a)
Corridor (b)
Accumulated
OCI (G/L) (a)
Minimum
Amortization
of (Gain) Loss
2020
$4,000,000
$2,400,000
$400,000
$ 0
$ 0
EXERCISE 20.17 (30–40 minutes)
(a)
Year
Prior Service Cost
Amortized
(b) The excess of the accumulated OCI (G/L) over the corridor amount is
Amortization of Net (Gain) or Loss
(Gain) or Loss
For the Year Ended
December 31,
Amount
2020
($198,000
2021
(24,000)
Year
Projected
Benefit
Obligation (a)
Plan
Assets(a)
10%
Corridor(b)
Accumulated
OCI (G/L)(a)
Minimum
Amortization
of (Gain) Loss
2020
$2,800,000
$1,700,000
$280,000
($ 0
$ –0–
2021
3,650,000
2,900,000
365,000
198,000
–0–(c)
(a) As of the beginning of the year.
EXERCISE 20.17 (Continued)
Pension expense for 2021 is composed of the following:
Service cost …………………………………………………………… $475,000
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, Jan. 1, 2020
1,100,000 Cr.
2,800,000 Cr.
1,700,000 Dr.
Service cost
400,000 Dr.
400,000 Cr.
EXERCISE 20.17 (Continued)
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Actual return
170,000 Cr.
Amortization of PSC
120,000 Dr.
Contributions
1,030,000 Cr.
Actuarial loss
198,000 Cr.
Journal entry for 2020
602,000 Dr.
1,030,000 Cr.
Accumulated OCI, Dec. 31, 2019
1,260,000 Dr.
Balance, Dec. 31, 2020
1,140,000 Dr.
3,650,000 Cr.
2,900,000 Dr.
Service cost
475,000 Dr.
475,000 Cr.
Interest cost
292,000 Dr.
292,000 Cr.
Actual return
290,000 Cr.
Actuarial gain
222,000 Dr.
Amortization of PSC
120,000 Dr.
Contributions
Journal entry for 2021
597,000 Dr.
Accumulated OCI, Dec. 31, 2020
1,140,000 Dr.
Balance, Dec. 31, 2021
1,020,000 Dr.
4,195,000 Cr.
3,790,000 Dr.
EXERCISE 20.18 (20–25 minutes)
(a) Below is the completed worksheet, indicating debit and credit entries.
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, Jan. 1, 2020
1,100 Cr.
2,800 Cr.
1,700 Dr.
Service cost
500 Dr.
500 Cr.
Interest cost
280 Dr.
280 Cr.
Actual return
220 Cr.
Unexpected gain
150 Dr.
Amortization of PSC
55 Cr.
Contributions
Benefits
200 Dr.
Liability increase
365 Cr.
Accumulated OCI, Dec. 31, 2019
0
Balance, Dec. 31, 2020
1,225 Cr.
3,745 Cr.
2,520 Dr.
(b) Pension Expense ………………………………….. 765
Other Comprehensive Income (G/L) ………. 215
(c) Usher records no amortization of gain or loss in 2020, because there were
no gains or losses at the beginning of the year. For 2021, the corridor is
*EXERCISE 20.19 (5–10 minutes)
Postretirement benefit expense is comprised of the following:
Service cost ……………………………………………………. $45,000
EXERCISE 20.20 (25–30 minutes)
General Journal Entries
Memo Record
Annual
Postretirement
Expense
Cash
Postretirement
Asset/Liability
APBO
Plan Assets
Balance, Jan. 1, 2020
220,000 Cr.
330,000 Cr.
110,000 Dr.
Service cost
45,000 Dr.
45,000 Cr.
Interest cost
26,400 Dr.
26,400 Cr.
Actual return
11,000 Cr.
11,000 Dr.
Contributions
10,000 Cr.
10,000 Dr.
Benefits
20,000 Dr.
20,000 Cr.
Journal entry for 2020
60,400 Dr.
10,000 Cr.
Balance, Dec. 31, 2020
270,400 Cr.
381,400 Cr.
111,000 Dr.
*EXERCISE 20.21 (10–12 minutes)
Service cost …………………………………………………………. $ 83,000
*EXERCISE 20.22 (10–12 minutes)
Service cost …………………………………………………………. $ 90,000
Interest on accumulated postretirement
*EXERCISE 20.23 (15–20 minutes)