EXERCISE 20-9 (Continued)
(c) Accumulated OCI at December 31, 2014 is $255,680; this amount is
comprised of the following:
PSC
Gain/Loss
Balance Jan. 1, 2014*
$252,000 Dr.
$ 0
Amortization of PSC
Actuarial loss
Balance Dec. 31, 2014
$210,000 Dr.
General Journal Entries Memo Record
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Pension
Asset/
Liability
Projected
Benefit
Obligation
Plan Assets
Balance, Jan. 1, 2014
335,000 Cr.
2,530,000 Cr.1
2,195,000 Dr.2
Service cost
94,000 Cr.
EXERCISE 20-9 (Continued)
20–22 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
Interest cost
253,000 Dr.
Actual return
130,000 Cr.
Unexpected gain
45,680 Cr.
Amortization of PSC
42,000 Dr.
Contributions
Journal entry for 2014
213,320 Dr.
Accumulated OCI, Dec. 31, 2013
252,000 Dr.
Balance, Dec. 31, 2014
210,000 Dr.
458,671 Cr.
EXERCISE 20-10 (20–25 minutes)
Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 20–23
(a) WEBB CORP.
Pension Worksheet
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
120,000 Cr.
600,000 Cr.
480,000 Dr.
Service cost
90,000 Dr.
90,000 Cr.
Interest cost*
54,000 Dr.
54,000 Cr.
Actual return
55,000 Cr.
55,000 Dr.
Unexpected gain**
Amortization of PSC
19,000 Dr.
Liability increase
76,000 Cr.
Contributions
Benefits
85,000 Dr.
85,000 Cr.
Journal entry for 2014
Accumulated OCI, Dec. 31, 2013
100,000 Dr
Balance, December 31, 2014
186,000 Cr.
735,000 Cr.
549,000 Dr.
EXERCISE 20-11 (20–30 minutes)
(a) Pension expense for 2014 composed of the following:
Service cost ………………………………………………. $ 56,000
(b) Pension Expense ……………………………………………… 133,000
Pension Asset /Liability …………………………………….. 62,000
Cash …………………………………………………………. 145,000
Other Comprehensive Income (PSC) …………… 50,000
Balance Sheet
Liabilities
Pension liability …………………………………………. $238,000*
*Projected benefit obligation $1,037,000
Plan assets (799,000)
Pension liability $ 238,000
EXERCISE 20-12 (20–30 minutes)
(a) Pension expense for 2014 composed of the following:
(b) Pension Expense ………………………………………….. 267,000
Pension Asset /Liability …………………………………. 303,000
(c) Income Statement:
Pension expense ……………………………………. $ 267,000
Comprehensive Income Statement
Net income …………………………………………….. $ XXXX
EXERCISE 20-12 (Continued)
20–26 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
Note to instructor: To prove the amounts reported, a worksheet might be prepared as follows:
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
700,000 Cr.
*1,500,000 Cr.
800,000 Dr.
Service cost
77,000 Dr.
77,000 Cr.
Interest cost*
150,000 Dr.
150,000 Cr.
Actual return**
80,000 Cr.
Amortization of PSC
120,000 Dr.
Liability gain
200,000 Dr.
Contributions
250,000 Dr.
Journal entry, for 2014
267,000 Dr.
Accumulated OCI, Dec. 31, 2013
1,200,000 Dr.
Balance, Dec. 31, 2014
1,080,000 Dr.
EXERCISE 20-13 (35–45 minutes)
(a) Actual Return = (Ending – Beginning fair value of assets) –
(Contributions – Benefits)
Fair value of plan assets,
(b) Computation of pension liability gains and losses and pension asset gains
and losses.
1. Difference between 12/31/14 actuarially computed PBO and 12/31/14
recorded projected benefit obligation (PBO):
2. Difference between actual fair value of
plan assets and expected fair value:
12/31/14 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
2014
$2,500
$1,700
$250
$240
–0–
(d) Pension expense for 2014:
Service cost ……………………………………………………….. $ 400
EXERCISE 20-14 (40–50 minutes)
Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 20–29
ERICKSON COMPANY
Pension Worksheet—2014
General Journal Entries
Memo Record Entries
Items
Annual Pension
Expense
Cash
OCI—
Gain/Loss
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2014
800 Cr.
2,500 Cr.
1,700 Dr.
Service cost
400 Dr.
400 Cr.
Interest cost(a)
250 Dr.
250 Cr.
Actual return(b)
420 Cr.
Unexpected gain(c)
250 Dr.
Contributions
700 Cr.
Benefits
200 Dr.
Liability increase(d)
350 Cr.
Journal entry for 2014
Accumulated OCI, Dec. 31, 2013
Balance, Dec. 31, 2014
3,300 Cr.
EXERCISE 20-14 (Continued)
Journal entries 12/31/14
1. Other Comprehensive Income (G/L) ………………… 100
Balance Sheet at December 31, 2014
Liabilities
EXERCISE 20-15 (15–20 minutes)
(a) Computation of pension expense:
(b) Income Statement:
Pension expense …………………………..……….. $140,000
Balance Sheet:
Liabilities
General Journal Entries
Memo Record Entries
Annual Pension
Expense
Cash
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2014
25,000 Cr.
700,000 Cr.
675,000 Dr.*
Service cost
80,000 Dr.
80,000 Cr.
Interest cost
70,000 Dr.
70,000 Cr.
EXERCISE 20-15 (Continued)
Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 20–31
Actual return
10,000 Cr.
Contributions
150,000 Dr.
Benefits
35,000 Dr.
Journal entry for 2014
Balance, Dec. 31, 2014
815,000 Cr.
800,000 Dr.
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:
Average remaining service life per employee =
5,600
400
= 14.
Amortization of Net (Gain) or Loss
(Gain) or Loss For the Year
Ended December 31,
Amount
2014
(300,000
2015
(480,000
2016
2017
Year
Projected
Benefit
Obligation (a)
Plan
Assets (a)
Corridor (b)
Accumulated
OCI (G/L) (a)
Minimum
Amortization
of (Gain) Loss
2014
$4,000,000
$2,400,000
$400,000
$ 0
$ 0
2015
4,520,000
2,200,000
452,000
300,000
0
2017
4,240,000
3,040,000
424,000
EXERCISE 20-17 (30–40 minutes)
(a)
Prior Service Cost
(b) The excess of the accumulated OCI (G/L) over the corridor amount is
amortized by dividing the excess by the average remaining service life
per employee. The average service life is 10.5 years.
Amortization of Net (Gain) or Loss
Year
Projected
Benefit
Obligation (a)
Plan
Assets(a)
10%
Corridor(b)
Accumulated
OCI (G/L)(a)
Minimum
Amortization
of (Gain) Loss
2014
$2,800,000
$1,700,000
$280,000
($ 0
$ –0–
2015
3,650,000
2,900,000
365,000
198,000
–0–(c)
(a) As of the beginning of the year.
(c) Pension expense for 2014 is composed of the following:
Service cost ……………………………………………………….. $ 400,000
EXERCISE 20-17 (Continued)
Pension expense for 2015 is composed of the following:
Service cost ……………………………………………………….….. $475,000
Interest on projected benefit obligation
General Journal Entries Memo Record
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Pension
Asset/
Liability
Projected
Benefit
Obligation
Plan Assets
Balance, Jan. 1, 2014
1,100,000 Cr.
2,800,000 Cr.
1,700,000 Dr.
Service cost
400,000 Cr.
Interest cost
252,000 Cr.
EXERCISE 20-17 (Continued)
Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 20–35
Actual return
170,000 Cr.
Amortization of PSC
120,000 Dr.
Contributions
Actuarial loss
198,000 Cr.
Journal entry for 2014
602,000 Dr.
Accumulated OCI, Dec. 31, 2013
1,260,000 Dr.
Balance, Dec. 31, 2014
1,140,000 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 2015
597,000 Dr.
Accumulated OCI, Dec. 31, 2014
1,140,000 Dr.
Balance, Dec. 31, 2015
1,020,000 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, 2014
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, 2013
1,100 Dr.
0
Balance, Dec. 31, 2014
1,045 Dr.
1,225 Cr.
3,745 Cr.
2,520 Dr.
(b) Pension Expense …………………………..……… 765
Other Comprehensive Income (G/L) ………. 215
Pension Asset/Liability ……………………… 125
Cash ………………………………………………… 800
Other Comprehensive Income (PSC) ….. 55
(c) Usher records no amortization of gain or loss in 2014, because there were
*EXERCISE 20-19 (5–10 minutes)
Postretirement benefit expense is comprised of the following:
EXERCISE 20-20 (25–30 minutes)
General Journal Entries
Memo Record
Annual
Postretirement
Expense
Cash
Postretirement
Asset/Liability
APBO
Plan Assets
Balance, Jan. 1, 2014
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 2014
60,400 Dr.
10,000 Cr.
Postretirement Expense …………………………………. 60,400
Postretirement Asset/Liability ………………….. 50,400
Cash ………………………………………………………. 10,000
*EXERCISE 20-21 (10–12 minutes)
Service cost …………………………………………………………. $ 83,000
*EXERCISE 20-22 (10–12 minutes)
Service cost …………………………………………………………. $ 90,000
*EXERCISE 20-23 (15–20 minutes)
See worksheet on next page.
*EXERCISE 20-23 (15–20 minutes)
20–38 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
ENGLEHART CO.
Postretirement Benefit Worksheet—2014
General Journal Entries
Memo Record
Items
Annual
Postretirement
Expense
Cash
OCI—Prior
Service Cost
Postretirement
Asset/Liability
APBO
Plan
Assets
Balance, Jan. 1, 2014
50,000 Cr.
760,000 Cr.
710,000 Dr.
Service cost
90,000 Dr.
90,000 Cr.
Interest cost
68,400 Cr.
Actual return
62,000 Cr.
Contributions
56,000 Cr.
Benefits
40,000 Dr.
Amortization of PSC
3,000 Cr.
Journal entry for 2014
99,400 Dr.
56,000 Cr.
40,400 Cr.
Accumulated OCI, Dec. 31, 2013
100,000 Dr.
Balance, Dec. 31, 2014
90,400 Cr.
878,400 Cr.
788,000 Dr.
*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, 2014
290,000 Cr.
410,000 Cr.
120,000 Dr.
Service cost
56,000 Dr.
56,000 Cr.
Interest cost
36,900 Cr.
Actual/Expected return
Contributions
66,000 Dr.
Benefits
Amortization of PSC
Accumulated OCI, Dec. 31, 2013
30,000 Dr.
Balance, Dec. 31, 2014
27,000 Dr.
314,900 Cr.
497,900 Cr.
183,000 Dr.
TIME AND PURPOSE OF PROBLEMS
Problem 20-1 (Time 40–50 minutes)
Purpose—to provide a problem that requires preparation of a pension worksheet for two separate
years’ pension transactions. Included in the problem are an unexpected loss and prior service cost
amortization.
Problem 20-2 (Time 45–55 minutes)
Problem 20-3 (Time 40–50 minutes)
Problem 20-4 (Time 30–40 minutes)
Problem 20-5 (Time 45–55 minutes)
Problem 20-6 (Time 45–60 minutes)
Purpose—to provide a problem that requires computation and amortization of prior service cost,
computation of pension expense, and preparation of pension journal entries.
Problem 20-8 (Time 45–60 minutes)
Problem 20-9 (Time 40–45 minutes)
Purpose—to provide a problem that requires preparation of a worksheet for two years, journal entries,
and indicates financial statement presentation.
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)