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.
SOLUTIONS TO PROBLEMS
20–42 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
(a) HARRINGTON COMPANY
Pension Worksheet—2014 and 2015
General Journal Entries
Memo Record
Items
Cash
OCI—Prior
Service
Cost
OCI—Gain/
Loss
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2014
300,000 Cr.
4,500,000 Cr.
4,200,000 Dr.
Service cost
150,000 Cr.
Interest cost*
450,000 Cr.
Actual return
252,000 Dr.
Contributions
240,000 Cr.
240,000 Dr.
Benefits
200,000 Dr.
200,000 Cr.
Journal entry for 2014
240,000 Cr.
0
0
108,000 Cr.
Accumulated OCI, Dec. 31, 2013
(b) Journal Entry (2015)
Pension Expense ……………………………………………………… 450,640
Other Comprehensive Income (PSC) ………………………… 410,000
408,000 Cr.
4,900,000 Cr.
4,492,000 Dr.
Additional PSC, 1/1/2015
500,000 Cr.
Balance, Jan. 1, 2015
5,400,000 Cr.
180,000 Dr.
180,000 Cr.
Interest cost**
540,000 Dr.
540,000 Cr.
Actual return
260,000 Cr.
260,000 Dr.
99,360 Cr.
Amortization of PSC
90,000 Dr.
90,000 Cr.
Contributions
285,000 Cr.
285,000 Dr.
280,000 Dr.
280,000 Cr.
0
1,083,000 Cr.
4,757,000 Dr.
Actual return
18,000 Cr.
18,000 Dr.
Unexpected loss(b)
Contributions
16,000 Cr.
16,000 Dr.
Benefits
14,000 Dr.
14,000 Cr.
Journal entry for 2013
21,000 Dr.
16,000 Cr.
Accumulated OCI, Dec. 31, 2012
Balance, Dec. 31, 2013
2,000 Dr.
57,000 Cr.
277,000 Cr.
220,000 Dr.
Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 20–43
(a) JACKSON COMPANY
Pension Worksheet—2013, 2014, 2015
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, 2013
50,000 Cr.
250,000 Cr.
200,000 Dr.
Service cost
16,000 Dr.
16,000 Cr.
Interest cost(a)
25,000 Dr.
25,000 Cr.
Additional PSC, 1/1/2014
160,000 Dr.
160,000 Cr.
Balance, Jan. 1, 2014
437,000 Cr.
Service cost
19,000 Dr.
19,000 Cr.
Interest cost(c)
43,700 Dr.
43,700 Cr.
Actual return(d)
22,000 Cr.
22,000 Dr.
Amortization of PSC
54,400 Dr.
54,400 Cr.
Contributions
40,000 Cr.
40,000 Dr.
Benefits
16,400 Dr.
16,400 Cr.
Journal entry for 2014
95,100 Dr.
40,000 Cr.
105,600 Dr.
Accumulated OCI, Dec. 31, 2013
0
Balance, Dec. 31, 2014
105,600 Dr.
483,300 Cr.
265,600 Dr.
Service cost
26,000 Dr.
26,000 Cr.
Interest cost(e)
48,330 Dr.
48,330 Cr.
Actual return
24,000 Cr.
24,000 Dr.
Unexpected loss(f)
Contributions
48,000 Cr.
48,000 Dr.
Benefits
21,000 Dr.
21,000 Cr.
Liability gain(g)
16,630 Dr.
Journal entry for 2015
89,370 Dr.
48,000 Cr.
41,600 Cr.
14,300 Dr.
Accumulated OCI, Dec. 31, 2014
105,600 Dr.
PROBLEM 20-2 (Continued)
Worksheet computations:
(a)$25,000 = $250,000 X 10%
(b) Journal entries:
2013
Other Comprehensive Income (G/L) ………………….. 2,000
Pension Expense …………………………………………….. 21,000
Cash ………………………………………………………… 16,000
Pension Asset /Liability ……………………………… 7,000
PROBLEM 20-2 (Continued)
(c) Financial Statements—2015
Income Statement
Pension expense ………………………………………. $ 89,370
PROBLEM 20-3
(a) Pension expense for 2014 comprises the following:
Service cost …………………………………………………… $52,000
Interest on projected benefit obligation
(b) Journal Entries—2014
Other Comprehensive Income (G/L) ………………… 29,000
(c) 2014 Increase/Decrease in Gains/Losses
(1) 12/31/14 new actuarially computed
PBO $490,000
Less: Projected benefit obligation
PROBLEM 20-3 (Continued)
(2) 12/31/14 fair value of plan assets $276,000
Less: Expected fair value
1/1/14 fair value of plan
assets $200,000
Add expected return
(10% X $200,000) 20,000
(d) Financial Statements—2014
Income Statement
Pension expense ……………………………………… $ 85,000
Comprehensive Income Statement
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, 2014
180,000 Cr.
380,000 Cr.
200,000 Dr.
Service cost
52,000 Dr.
52,000 Cr.
Interest cost
38,000 Dr.
38,000 Cr.
20–48 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
PROBLEM 20-3 (Continued)
Actual return
11,000 Cr.
Unexpected loss
Liability loss
20,000 Cr.
Contributions
PSC amortization
15,000
Journal entry for 2014
85,000
Accumulated OCI, Dec. 31, 2013
Balance, Dec. 31, 2014
490,000 Cr.
276,000 Dr.
PROBLEM 20-4
(a) Computation of pension expense:
2014
2015
Service cost ………………………………………………
($ 60,000
$ 90,000
Expected return on plan assets ………………….
Amortization of prior service cost ………………
12,000
Pension expense ……………………………………….
(b)
2014
Pension Asset/Liability ………………………………
(39,000
Pension Expense ……………………………………….
109,000
Other Comprehensive Income (PSC) ……..
Other Comprehensive Income (G/L)……….
Cash ……………………………………………………
Note to instructors: Although not required, students could be encouraged
to prepare a 2-year pension worksheet, as shown on the following page.
20–50 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
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, 2014
140,000 Cr.
700,000 Cr.
560,000 Dr.*
Service cost
60,000 Dr.
60,000 Cr.
Interest cost
63,000 Dr.
63,000 Cr.
Actual return
24,000 Cr.
24,000 Dr.
Unexpected loss
Amortization of PSC
10,000 Dr.
10,000 Cr.
Contributions
115,000 Cr.
Increase in PBO
23,000 Dr.**
Journal entry for 2014
115,000 Cr.
Accumulated OCI, Jan. 1, 2014
Balance, Dec. 31, 2014
800,000 Cr.
Service cost
90,000 Dr.
90,000 Cr.
Interest cost
72,000 Dr.
72,000 Cr.
Actual return
30,000 Cr.
30,000 Dr.
Unexpected gain
Amortization of PSC
12,000 Dr.
12,000 Cr.
Amortization of loss
Contributions
120,000 Cr.
Journal entry for 2015
120,000 Cr.
12,000 Cr.
12,000 Cr.
Accumulated OCI, Dec. 31, 2014
23,000 Cr.
Balance, Dec. 31, 2015
23,000 Cr.
962,000 Cr.
PROBLEM 20-5
(a) Pension expense for 2014 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, 2014.
Pension expense for 2015 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
2014
$ 0
$ 0
$ 0
$( 0
$( 0
(b) Journal Entries—2014
Pension Expense …………………………………………….. 60,000
Cash ………………………………………………………… 50,000
Pension Asset /Liability …………………………..…. 10,000
Journal Entries—2015
Pension Asset /Liability …………………………..…. 105,000
Journal Entries—2016
Pension Expense ……………………………………………… 131,367
PROBLEM 20-5 (Continued)
Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 20–53
General Journal Entries Memo Record
Annual
Pension
Expense
Cash
OCI—
Gain/Loss
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2014
Service cost
60,000 Dr.
60,000 Cr.
Interest cost
Expected return
Contributions
50,000 Dr.
Journal entry for 2014
60,000 Dr.
Accumulated OCI, Dec. 31, 2013
Balance, Dec. 31, 2014
60,000 Cr.
50,000 Dr.
Service cost
85,000 Dr.
85,000 Cr.
Interest cost
6,600 Dr.
6,600 Cr.
Actual return
5,000 Cr.
5,000 Dr.
Contributions
60,000 Cr.
60,000 Dr.
Increase in liability
78,400 Dr.
78,400 Cr.
Benefits
30,000 Dr.
30,000 Cr.
Journal entry for 2015
86,600 Dr.
60,000 Cr.
78,400 Dr.
105,000 Cr.
Accumulated OCI, Dec. 31, 2014
0
Balance, Dec. 31, 2015
78,400 Dr.
200,000 Cr.
85,000 Dr.
Service cost
119,000 Dr.
119,000 Cr.
Interest cost
16,000 Dr.
16,000 Cr.
Amortization of loss
4,867 Dr.
Contributions
105,000 Cr.
105,000 Dr.
Benefits
18,500 Dr.
18,500 Cr.
Liability loss*
7,500 Cr.
Journal entry for 2016
131,367 Dr.
105,000 Cr.
Accumulated OCI, Dec. 31, 2015
78,400 Dr.
Balance, Dec. 31, 2016
81,033 Dr.
324,000 Cr.
180,000 Dr.
PROBLEM 20-6
(a) Prior Service Cost Amortization
2014
$166,667
($2,000,000 ÷ 12 years)
2015
166,667
($2,000,000 ÷ 12 years)
2016
166,667
($2,000,000 ÷ 12 years)
(b) Pension expense for 2014 comprised the following:
Service cost ……………………………………………………………… $200,000
Interest on projected benefit obligation* …………………….. 500,000
(c) Pension liability, beginning of year …………………………... $2,000,000
Journal Entries—2014
Pension Expense ………………………………………….. 566,667
Pension Asset /Liability …………………………………. 1,250,000
PROBLEM 20-6 (Continued)
(d) 12/31/14 Fair value of plan assets $4,100,000
Less: Expected fair value of assets
12/31/14 Actuarially computed PBO 4,850,000
Less: 1/1/14 PBO $5,000,000
Add interest
(10% X $5,000,000) 500,000
Year
Projected Benefit
Obligation
Fair Value
of Plan Assets
Corridor
Accumulated
OCI (G/L)
Amortization
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, 2014
2,000,000 Cr.
5,000,000 Cr.
3,000,000 Dr.
Service cost
200,000 Dr.
200,000 Cr.
20–56 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
PROBLEM 20-6 (Continued)
Interest cost*
500,000 Dr.
500,000 Cr.
Actual return
Unexpected gain
25,000 Cr.
Amortization of PSC
166,667 Dr.
Contributions
Decrease in PBO
850,000 Cr.
850,000 Dr.
Journal entry for 2014
566,667 Dr.
875,000 Cr.
1,250,000 Dr.
Accumulated OCI, Dec. 31, 2013
Balance, Dec. 31, 2014
875,000 Cr.
4,850,000 Cr.
4,100,000 Dr.
Actual return
48,000 Cr.
48,000 Dr.
Unexpected loss**
4,000 Dr.
Amortization of PSC
25,000 Dr.
25,000 Cr.
Amortization of loss***
2,100 Cr.
Contributions
133,000 Dr.
Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 20–57
HANSON CORP.
Pension Worksheet—2014
General Journal Entries Memo Record
Items
Annual
Pension
Expense
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2014
180,000 Cr.
700,000 Cr.
520,000 Dr.
Service cost
108,000 Dr.
108,000 Cr.
Interest cost*
63,000 Dr.
63,000 Cr.
Benefits
85,000 Dr.
85,000 Cr.
Journal entry for 2014
146,100 Dr.
133,000 Cr.
25,000 Cr.
1,900 Dr.
10,000 Dr.
Accumulated OCI, Dec. 31, 2013
Balance, Dec. 31, 2014
56,000 Dr.
92,900 Dr.
170,000 Cr.
786,000 Cr.
616,000 Dr.
***
Year
1/1 Projected
Benefit
Obligation
Value of 1/1
Plan Assets
10%
Corridor
Accumulated
OCI (G/L), 1/1
Minimum
Amortization of
Loss for 2012
PROBLEM 20-8
(a) LEMKE COMPANY
Pension Worksheet—2014 and 2015
General Journal Entries Memo Record
Items
Annual
Pension
Expense
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Pension
Asset/
Liability
Projected
Benefit
Obligation
Plan Assets
Balance, Jan. 1, 2014
190,000 Cr.
600,000 Cr.
410,000 Dr.
Service cost
40,000 Dr.
40,000 Cr.
Interest cost(a)
60,000 Dr.
60,000 Cr.
Actual return
36,000 Cr.
36,000 Dr.
Unexpected loss(b)
5,000 Cr.
5,000 Dr.
20–58 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
Amortization of PSC
70,000 Dr.
70,000 Cr.
Contributions
97,000 Dr.
Benefits
31,500 Dr.
31,500 Cr.
Increase in PBO
87,000 Cr.
Journal entry for 2014
70,000 Cr.
Accumulated OCI, Dec. 31, 2013
0
Balance, Dec. 31, 2014
244,000 Cr.
755,500 Cr.
511,500 Dr.
Service cost
59,000 Dr.
59,000 Cr.
Interest cost(c)
75,550 Dr.
75,550 Cr.
Actual return
61,000 Cr.
61,000 Dr.
Unexpected gain(d)
9,850 Dr.
9,850 Cr.
Amortization of PSC
50,000 Dr.
50,000 Cr.
Amortization of loss(e)
Contributions
81,000 Dr.
Benefits
54,000 Dr.
54,000 Cr.
Accumulated OCI, Dec. 31, 2014
Balance, Dec. 31, 2015
236,550 Cr.
836,050 Cr.
599,500 Dr.
PROBLEM 20-8 (Continued)
Worksheet computations:
(a)$60,000 = $600,000 X 10%.
(b) 2014
Pension Expense ………………………………………………. 129,000
Other Comprehensive Income (G/L) ……………………. 92,000
Cash ………………………………………………………….. 97,000
Pension Asset /Liability ……………………………….. 54,000
Other Comprehensive Income (PSC) ……………. 70,000
PROBLEM 20-8 (Continued)
(c) Financial Statements—2015
Income Statement
Pension expense …………………………..………… $134,223
Comprehensive Income Statement