EXERCISE 20-9 (Continued)
(c) Accumulated OCI at December 31, 2012 is $255,680; this amount is
comprised of the following:
General Journal Entries Memo Record
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Pension
Asset/
Liability
Projected
Benefit
Obligation
Plan Assets
Balance, Jan. 1, 2012
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 © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/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 2012
213,320 Dr.
Accumulated OCI, Dec. 31, 2011
252,000 Dr.
Balance, Dec. 31, 2011
210,000 Dr.
458,671 Cr.
EXERCISE 20-10 (20–25 minutes)
Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/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, 2012
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 2012
Accumulated OCI, Dec. 31, 2011
100,000 Dr
Balance, December 31, 2012
186,000 Cr.
735,000 Cr.
549,000 Dr.
EXERCISE 20-11 (20–30 minutes)
(a) Pension expense for 2012 composed of the following:
Service cost ………………………………………………. $ 56,000
Interest on projected benefit obligation
(9% X $900,000) ……………………………………… 81,000
Net income ………………………………………………………. $ XXXX
Other comprehensive income
Amortization of PSC ………………………………………. 50,000
Comprehensive income…………………………………….. $ XXXX
Balance Sheet
Partial worksheet
Bal. January 1, 2012
$600,000
$ 900,000
Service cost
Interest on PBO
Actual return
54,000
Contribution
145,000
Bal. December 31,2012
$799,000
$1,037,000
Stockholders’ equity
Accumulated OCI (PSC) Jan. 1, 2012 400,000
Amortization of prior service cost (50,000)
Accumulated OCI (PSC) Dec. 31, 2012 350,000
EXERCISE 20-12 (20–30 minutes)
(a) Pension expense for 2012 composed of the following:
Service cost …………………………………………… $ 77,000
Interest on projected benefit obligation
(10% X $1,500,000) ……………………………… 150,000
employer’s contribution)
(c) Income Statement:
Pension expense ……………………………………. $ 267,000
Comprehensive Income Statement
Net income …………………………………………….. $ XXXX
EXERCISE 20-12 (Continued)
20–26 Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/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, 2012
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 2012
267,000 Dr.
Accumulated OCI, Dec. 31, 2011
1,200,000 Dr.
Balance, Dec. 31, 2012
1,080,000 Dr.
EXERCISE 20-13 (35–45 minutes)
(a) Actual Return = (Ending – Beginning) – (Contributions – Benefits)
Fair value of plan assets,
1. Difference between 12/31/12 actuarially computed PBO and 12/31/12
recorded projected benefit obligation (PBO):
PBO at end of year ……………………….. $3,300
PBO per memo records:
1/1/12 PBO ……………………………….. $2,500
Add interest (10%) ……………………. 250
Add service cost ………………………. 400
Less benefits paid …………………….. (200) 2,950
Liability loss …………………………….. $350
2. Difference between actual fair value of
plan assets and expected fair value:
12/31/12 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
2012
$2,500
$1,700
$250
$240
-0-
EXERCISE 20-14 (40–50 minutes)
Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only) 20–29
ERICKSON COMPANY
Pension Worksheet—2012
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, 2012
800 Cr.
2,500 Cr.
1,700 Dr.
Contributions
700 Cr.
700 Dr.
Benefits
200 Dr.
200 Cr.
Liability increase(d)
350 Dr.
350 Cr.
Journal entry for 2012
480 Dr.
700 Cr.
100 Dr.
120 Dr.
Accumulated OCI, Dec. 31, 2011
0
Balance, Dec. 31, 2012
100 Dr.
680 Cr.
3,300 Cr.
2,620 Dr.
Service cost
400 Dr.
400 Cr.
Interest cost(a)
250 Dr.
250 Cr.
Actual return(b)
420 Cr.
420 Dr.
Unexpected gain(c)
250 Dr.
250 Cr.
EXERCISE 20-14 (Continued)
Journal entries 12/31/12
1. Other Comprehensive Income (G/L) ………………… 100
Pension Expense …………………………………………… 480
Pension Asset /Liability ………………………………….. 120
EXERCISE 20-15 (15–20 minutes)
(a) Computation of pension expense:
Service cost …………………………………………… $ 80,000
Interest cost ($700,000 X .10) ………………….. 70,000
General Journal Entries
Memo Record Entries
Annual Pension
Expense
Cash
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2012
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 © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/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 2012
Balance, Dec. 31, 2012
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:
2012
2014
(210,000)
2015
(290,000)
Year
Projected
Benefit
Obligation (a)
Plan
Assets (a)
Corridor (b)
Accumulated
OCI (G/L) (a)
Minimum
Amortization
of (Gain) Loss
EXERCISE 20-17 (30–40 minutes)
(a)
Year
Prior Service Cost
Amortized
2012
$120,000
($1,260,000 ÷ 10.5 years)
2013
120,000
($1,260,000 ÷ 10.5 years)
Year
Benefit
Obligation (a)
Plan
Assets(a)
10%
Corridor(b)
Accumulated
OCI (G/L)(a)
Amortization
of (Gain) Loss
2012
$2,800,000
$1,700,000
$280,000
($ 0
$ –0–
2013
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 2013 is composed of the following:
Service cost ……………………………………………………….….. $475,000
General Journal Entries Memo Record
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Pension
Asset/
Liability
Projected
Benefit
Obligation
Plan Assets
Balance, Jan. 1, 2012
1,100,000 Cr.
2,800,000 Cr.
1,700,000 Dr.
Service cost
400,000 Cr.
Interest cost
252,000 Cr.
Actual return
170,000 Dr.
Amortization of PSC
120,000 Cr.
Contributions
1,030,000 Cr.
1,030,000 Dr.
Actuarial loss
198,000 Dr.
198,000 Cr.
Journal entry for 2012
1,030,000 Cr.
120,000 Cr.
198,000 Dr.
350,000 Dr.
Accumulated OCI, Dec. 31, 2011
1,260,000 Dr.
0
Balance, Dec. 31, 2012
1,140,000 Dr.
198,000 Dr.
750,000 Cr.
3,650,000 Cr.
2,900,000 Dr.
EXERCISE 20-17 (Continued)
Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only) 20–35
Service cost
475,000 Dr.
475,000 Cr.
Interest cost
292,000 Dr.
292,000 Cr.
Actual return
290,000 Cr.
290,000 Dr.
Actuarial gain
222,000 Dr.
Amortization of PSC
120,000 Dr.
120,000 Cr.
Contributions
600,000 Dr.
Journal entry for 2013
597,000 Dr.
120,000 Cr.
222,000 Cr.
345,000 Dr.
Accumulated OCI, Dec. 31, 2012
1,140,000 Dr.
198,000 Dr.
Balance, Dec. 31, 2013
1,020,000 Dr.
405,000 Cr.
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, 2012
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.
220 Dr.
Unexpected gain
150 Dr.
Amortization of PSC
55 Dr.
55 Cr.
Contributions
800 Dr.
Benefits
200 Dr.
200 Cr.
Liability increase
365 Cr.
Accumulated OCI, Dec. 31, 2011
1,100 Dr.
0
Balance, Dec. 31, 2012
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
*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, 2012
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 2012
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
Interest on accumulated postretirement
benefit obligation (10% X $710,000) …………………….. 71,000
Expected return on plan assets …………………………….. (34,000)
Amortization of prior service cost …………………………. 21,000
Postretirement expense ………………………………………… $141,000
*EXERCISE 20-22 (10–12 minutes)
*EXERCISE 20-23 (15–20 minutes)
20–38 Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only)
ENGLEHART CO.
Postretirement Benefit Worksheet—2012
General Journal Entries
Memo Record
Items
Annual
Postretirement
Expense
Cash
OCI—Prior
Service Cost
Postretirement
Asset/Liability
APBO
Plan
Assets
Balance, Jan. 1, 2012
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 2012
99,400 Dr.
56,000 Cr.
40,400 Cr.
Accumulated OCI, Dec. 31, 2011
100,000 Dr.
Balance, Dec. 31, 2012
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, 2012
290,000 Cr.
410,000 Cr.
120,000 Dr.
Service cost
56,000 Dr.
56,000 Cr.
Interest cost
36,900 Dr.
36,900 Cr.
Actual/Expected return
Contributions
66,000 Dr.
Benefits
Amortization of PSC
Accumulated OCI, Dec. 31, 2011
30,000 Dr.
Balance, Dec. 31, 2012
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)
Purpose—to provide a problem that requires preparation of a pension worksheet for three separate years’
pension transactions, three years of general journal entries for the pension plan, and reporting in financial
statements for the third year.
Problem 20-3 (Time 40–50 minutes)
Purpose—to provide a problem that requires computation of the annual pension expense, preparation of
the pension journal entries, measurement of gains and losses and their amortization, and presentation in
financial statements.
Problem 20-4 (Time 30–40 minutes)
Purpose—to provide a problem that requires computation of pension expense and preparation of the
pension journal entries.
Problem 20-5 (Time 45–55 minutes)
Purpose—to provide a problem that requires computation of the pension expense for three separate
years and the preparation of the pension journal entries for three years.
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 20-7 (Time 35–45 minutes)
Purpose—to provide a problem that requires preparation of a worksheet.
Problem 20-8 (Time 45–60 minutes)
Purpose—to provide a problem that requires preparation of a comprehensive worksheet for two years,
covering all facets of pension accounting.
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)
Purpose—to provide a problem that requires preparation of a worksheet, journal entries, and indicates
financial statement presentation (year 2 of P20-10).