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)
Purpose—to provide a problem that requires preparation of a worksheet and entries for postretirement
benefit expense.
*Problem 20-14 (Time 40–45 minutes)
Purpose—to provide a problem that requires a worksheet for two years, journal entries, and indicates
financial statement presentation.
SOLUTIONS TO PROBLEMS
20–42 Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only)
(a) HARRINGTON COMPANY
Pension Worksheet—2012 and 2013
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, 2012
300,000 Cr.
4,500,000 Cr.
4,200,000 Dr.
Service cost
150,000 Cr.
Interest cost**
540,000 Cr.
Actual return
260,000 Dr.
Unexpected loss***
99,360 Dr.
Amortization of PSC
90,000 Cr.
Contributions
285,000 Cr.
285,000 Dr.
Benefits
280,000 Dr.
280,000 Cr.
Journal entry for 2013
285,000 Cr.
410,000 Dr.
99,360 Dr.
675,000 Cr.
0
0
99,360 Dr.
1,083,000 Cr.
5,840,000 Cr.
4,757,000 Dr.
450,000 Dr.
450,000 Cr.
Actual return
252,000 Cr.
252,000 Dr.
Contributions
240,000 Cr.
240,000 Dr.
200,000 Dr.
200,000 Cr.
Journal entry for 2012
348,000 Dr.
240,000 Cr.
108,000 Cr.
Accumulated OCI, Dec. 31, 2011
Balance, Dec. 31, 2012
408,000 Cr.
4,900,000 Cr.
4,492,000 Dr.
Additional PSC, 1/1/2013
Balance, Jan. 1, 2013
5,400,000 Cr.
Service cost
180,000 Dr.
180,000 Cr.
PROBLEM 20-2
Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only) 20–43
(a) JACKSON COMPANY
Pension Worksheet—2011, 2012, 2013
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, 2011
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.
Actual return
18,000 Cr.
18,000 Dr.
Unexpected loss(b)
2,000 Cr.
2,000 Dr.
Contributions
16,000 Cr.
16,000 Dr.
Benefits
14,000 Dr.
14,000 Cr.
Journal entry for 2011
21,000 Dr.
16,000 Cr.
2,000 Dr.
7,000 Cr.
Accumulated OCI, Dec. 31, 2010
0
Balance, Dec. 31, 2011
2,000 Dr.
57,000 Cr.
277,000 Cr.
220,000 Dr.
Additional PSC, 1/1/2012
160,000 Dr.
160,000 Cr.
Balance, Jan. 1, 2012
437,000 Cr.
Service cost
19,000 Dr.
19,000 Cr.
43,700 Dr.
43,700 Cr.
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 2012
95,100 Dr.
40,000 Cr.
105,600 Dr.
Accumulated OCI, Dec. 31, 2011
Balance, Dec. 31, 2012
105,600 Dr.
2,000 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)
2,560 Cr.
2,560 Dr.
Amortization of PSC
41,600 Dr.
41,600 Cr.
Contributions
48,000 Cr.
48,000 Dr.
Benefits
21,000 Dr.
21,000 Cr.
16,630 Dr.
Journal entry for 2013
89,370 Dr.
48,000 Cr.
41,600 Cr.
14,300 Dr.
Accumulated OCI, Dec. 31, 2012
105,600 Dr.
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.
2012
Other Comprehensive Income (PSC) ………………… 105,600
Pension Expense …………………………………………….. 95,100
Cash ………………………………………………………… 40,000
Pension Asset /Liability ……………………………… 160,700
PROBLEM 20-2 (Continued)
(c) Financial Statements—2013
Income Statement
Pension expense ………………………………………. $ 89,370
Balance Sheet
Liabilities
Pension liability …………………………………….. $203,400
Stockholders’ equity
PROBLEM 20-3
(a) Pension expense for 2012 comprises the following:
Service cost …………………………………………………… $52,000
Interest on projected benefit obligation
(10% X $380,000) ………………………………………… 38,000
*([10% X $200,000] – $11,000)
(b) Journal Entries—2012
*Computed in part (c)
(c) 2012 Increase/Decrease in Gains/Losses
(1) 12/31/12 new actuarially computed
PBO $490,000
Less: Projected benefit obligation
PROBLEM 20-3 (Continued)
(2) 12/31/12 fair value of plan assets $276,000
Less: Expected fair value
1/1/12 fair value of plan
assets $200,000
2013. It follows that no amortization occurs in 2012 because no balance
existed in the accumulated OCI (G/L) account at the beginning of 2012.
(d) Financial Statements—2012
Income Statement
Pension expense ……………………………………… $ 85,000
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, 2012
180,000 Cr.
380,000 Cr.
200,000 Dr.
Service cost
52,000 Dr.
52,000 Cr.
20–48 Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only)
PROBLEM 20-3 (Continued)
Interest cost
38,000 Dr.
38,000 Cr.
Actual return
11,000 Cr.
Unexpected loss
Liability loss
20,000 Cr.
Contributions
PSC amortization
15,000
Journal entry for 2012
85,000
Accumulated OCI, Dec. 31, 2011
Balance, Dec. 31, 2012
276,000 Dr.
PROBLEM 20-4
(a) Computation of pension expense:
Service cost ………………………………………………
Expected return on plan assets ………………….
Amortization of prior service cost ………………
Pension expense ……………………………………….
(b)
2012
Pension Asset/Liability ………………………………
(39,000
Pension Expense ……………………………………….
109,000
Other Comprehensive Income (PSC) ……..
10,000
Other Comprehensive Income (G/L)……….
23,000
Cash ……………………………………………………
(115,000
12,000
12,000
20–50 Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/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, 2012
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.
115,000 Dr.
Increase in PBO
23,000 Dr.**
Journal entry for 2012
115,000 Cr.
Accumulated OCI, Jan. 1, 2012
250,000 Dr.
Balance, Dec. 31, 2012
240,000 Dr.
23,000 Cr.
101,000 Cr.
800,000 Cr.
699,000 Dr.
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.
120,000 Dr.
Journal entry for 2013
120,000 Cr.
12,000 Cr.
12,000 Cr.
Accumulated OCI, Dec. 31, 2012
23,000 Cr.
Balance, Dec. 31, 2013
228,000 Dr.
23,000 Cr.
962,000 Cr.
849,000 Dr.
PROBLEM 20-5
(a) Pension expense for 2012 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, 2012.
Pension expense for 2013 comprised the following:
Pension expense …………………………………………….. $ 86,600
Pension expense for 2014 comprised the following:
Service cost ………………………………………………………….. $119,000
Interest on projected benefit obligation
($200,000 X 8%) ………………………………………………….. 16,000
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
2012
$ 0
$ 0
$ 0
$( 0
$( 0
2013
60,000
50,000
6,000
0
0
2014
200,000
85,000
20,000
78,400
4,867 (c)
(b) Journal Entries—2012
Pension Expense …………………………………………….. 60,000
Cash ………………………………………………………… 50,000
Pension Asset /Liability …………………………..…. 10,000
Journal Entries—2014
Pension Expense ……………………………………………… 131,367
Other Comprehensive Income (G/L) …………………… 2,633*
Cash …………………………………………………………. 105,000
Pension Asset /Liability …………………………..….. 29,000
PROBLEM 20-5 (Continued)
Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/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
Service cost
60,000 Dr.
60,000 Cr.
Interest cost
Expected return
Contributions
50,000 Dr.
Journal entry for 2012
60,000 Dr.
50,000 Cr.
Accumulated OCI, Dec. 31, 2011
Balance, Dec. 31, 2012
60,000 Cr.
50,000 Dr.
Service cost
85,000 Dr.
85,000 Cr.
Interest cost
6,600 Dr.
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 2013
86,600 Dr.
60,000 Cr.
78,400 Dr.
105,000 Cr.
Accumulated OCI, Dec. 31, 2012
0
Balance, Dec. 31, 2013
78,400 Dr.
115,000 Cr.
200,000 Cr.
85,000 Dr.
Service cost
119,000 Dr.
119,000 Cr.
Interest cost
16,000 Dr.
16,000 Cr.
Expected return
8,500 Cr.
8,500 Dr.
Amortization of loss
4,867 Dr.
Contributions
105,000 Cr.
105,000 Dr.
Benefits
18,500 Dr.
18,500 Cr.
Liability loss*
Journal entry for 2014
131,367 Dr.
105,000 Cr.
Accumulated OCI, Dec. 31, 2013
78,400 Dr.
Balance, Dec. 31, 2014
81,033 Dr.
324,000 Cr.
180,000 Dr.
PROBLEM 20-6
(a) Prior Service Cost Amortization
(b) Pension expense for 2012 comprised the following:
Service cost ……………………………………………………………… $200,000
Interest on projected benefit obligation* …………………….. 500,000
Actual return on plan assets** …………………………………… (325,000)
unexpected gain)
(c) Pension liability, beginning of year …………………………... $2,000,000
Pension liability, end of year …………………………………….. 750,000*
Decrease in liability …………………………………………… $1,250,000
*$4,850,000 – $4,100,000
PROBLEM 20-6 (Continued)
(d) 12/31/12 Fair value of plan assets $4,100,000
12/31/12 Actuarially computed PBO 4,850,000
Less: 1/1/12 PBO $5,000,000
Add interest
(10% X $5,000,000) 500,000
Add service cost 200,000
Less benefits 0 5,700,000
Liability gain 850,000
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, 2012
2,000,000 Cr.
5,000,000 Cr.
3,000,000 Dr.
Service cost
200,000 Dr.
200,000 Cr.
Interest cost*
500,000 Dr.
500,000 Cr.
20–56 Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only)
PROBLEM 20-6 (Continued)
Actual return
325,000 Cr.
Unexpected gain
25,000 Cr.
Amortization of PSC
166,667 Dr.
Contributions
Decrease in PBO
850,000 Cr.
850,000 Dr.
Journal entry for 2012
566,667 Dr.
875,000 Cr.
1,250,000 Dr.
Accumulated OCI, Dec. 31, 2011
Balance, Dec. 31, 2012
875,000 Cr.
4,850,000 Cr.
4,100,000 Dr.
Service cost
108,000 Cr.
Interest cost*
63,000 Cr.
Actual return
48,000 Dr.
Unexpected loss**
4,000 Dr.
Amortization of PSC
25,000 Cr.
Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only) 20–57
HANSON CORP.
Pension Worksheet—2012
General Journal Entries Memo Record
Items
Annual
Pension
Expense
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Penison
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2012
180,000 Cr.
700,000 Cr.
520,000 Dr.
Amortization of loss***
2,100 Dr.
2,100 Cr.
Contributions
133,000 Cr.
133,000 Dr.
Benefits
85,000 Dr.
85,000 Cr.
Journal entry for 2012
146,100 Dr.
133,000 Cr.
25,000 Cr.
1,900 Dr.
10,000 Dr.
Accumulated OCI, Dec. 31, 2011
81,000 Dr.
91,000 Dr.
Balance, Dec. 31, 2012
56,000 Dr.
92,900 Dr.
170,000 Cr.
786,000 Cr.
616,000 Dr.
PROBLEM 20-8
(a) LEMKE COMPANY
Pension Worksheet—2012 and 2013
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
190,000 Cr.
600,000 Cr.
410,000 Dr.
Amortization of PSC
70,000 Dr.
70,000 Cr.
Contributions
97,000 Cr.
97,000 Dr.
Benefits
31,500 Dr.
31,500 Cr.
Increase in PBO
87,000 Dr.
87,000 Cr.
Journal entry for 2012
129,000 Dr.
97,000 Cr.
70,000 Cr.
92,000 Dr.
54,000 Cr.
Accumulated OCI, Dec. 31, 2011
160,000 Dr.
0
Balance, Dec. 31, 2012
90,000 Dr.
92,000 Dr.
244,000 Cr.
755,500 Cr.
511,500 Dr.
Service cost
59,000 Dr.
59,000 Cr.
75,550 Dr.
75,550 Cr.
Actual return
61,000 Cr.
61,000 Dr.
9,850 Cr.
Amortization of PSC
50,000 Dr.
50,000 Cr.
Contributions
81,000 Cr.
81,000 Dr.
Benefits
54,000 Dr.
54,000 Cr.
Accumulated OCI, Dec. 31, 2012
92,000 Dr.
Balance, Dec. 31, 2013
81,327 Dr.
236,550 Cr.
836,050 Cr.
599,500 Dr.
20–58 Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only)
Service cost
40,000 Dr.
40,000 Cr.
60,000 Dr.
60,000 Cr.
Actual return
36,000 Cr.
36,000 Dr.
5,000 Dr.
PROBLEM 20-8 (Continued)
Worksheet computations:
(a)$60,000 = $600,000 X 10%.
(e)2013 Corridor Test:
Accumulated net (gain) or loss at beginning of year …………….. $92,000
10% of larger of PBO or fair value of plan assets …………………. (75,550)
Amortizable amount …………………………………………………………… $16,450
2013 amortization ($16,450 ÷ 20 years) ………………………………… $ 823
PROBLEM 20-8 (Continued)
(c) Financial Statements—2013
Income Statement
Pension expense …………………………..………… $134,223
Comprehensive income $ XXXX
Balance Sheet
Liabilities
Pension liability ………………………………… $236,550