CHAPTER 20
SOLUTIONS TO B EXERCISES
E20-1B (5–10 minutes)
(a)
Computation of pension expense:
Service cost …………………………………………………
$250,000
Interest cost ($2,600,000 X 0.08) ……………………
208,000
Actual (expected) return on plan assets ………..
Prior service cost amortization ……………………..
40,000
(b) Pension Expense ………………………………………………
433,000
Cash …………………………..……………………………….
E20-2B (10–15 minutes)
Computation of pension expense:
Service cost …………………………………………………
$210,000
Actual (and expected) return on plan assets ….
Prior service cost amortization ……………………..
35,000
Pension expense for 2014 …………………………….
$284,000
E20-3B (15–25 minutes)
McCaw Company
Pension Worksheet—2014
General Journal Entries
Memo Record
Items
Annual
Pension
Expense
Cash
OCI—Prior
Service Cost
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan Assets
Balance, January 1, 2014
360,000 Cr.
1,800,000 Cr.
1,440,000 Dr.
(a) Service cost
210,000 Dr.
210,000 Cr.
20-2 Copyright © 2014 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Exercise B Solutions (For Instructor Use Only)
(b) Interest cost
162,000 Dr.
162,000 Cr.
(c) Actual return
123,000 Cr.
(d) Amortization of PSC
(e) Contributions
263,000 Cr.
220,000 Dr.
Journal entry*
263,000 Cr.
Accumulated OCI, Dec. 31, 2013
325,000 Dr.
Balance, Dec. 31, 2014
290,000 Dr.
1,952,000 Cr.
1,606,000 Dr.
E20-4B (10–15 minutes)
I-PASS CORPORATION
Pension Worksheet—2014
General Journal Entries
Memo Record
Items
Annual
Pension
Expense
Cash
Pension
Asset /
Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, January 1, 2014
950,000 Cr.
950,000 Dr.
(a) Service cost
75,000 Dr.
75,000 Cr.
Copyright © 2014 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Exercise B Solutions (For Instructor Use Only) 20-3
(b) Interest cost
57,000 Dr.
57,000 Cr.
(c) Actual return
40,600 Cr.
(d) Contributions
(e) Benefits
91,400 Dr.
81,400 Cr.
81,400 Cr.
958,400 Dr.
E20-5B (15–25 minutes)
Computation of Service-Years
Year
Jane
John
Jimmy
Jenny
Jerry
Total
2014
1
1
1
1
1
5
2015
1
1
1
1
4
2017
1
1
1
3
2018
1
1
2
2019
1
1
6
1
3
6
4
Cost per service-year: $210,000 ÷ 20 = $10,500
Computation of Annual Prior Service Cost Amortization
Year
Total
Service-Years
Cost Per
Service-Years
Annual
Amortization
2014
5
$10,500
$ 52,500
2015
4
2017
3
2018
2
$210,000
E20-6B (10–15 minutes)
Computation of Actual Return on Plan Assets
Fair value of plan assets at December 31, 2014 … $1,460,000
E20-7B (15–25 minutes)
EAGLE HOMES CORPORATION
Pension Worksheet—2014
General Journal Entries
Memo Record
Items
Annual
Pension
Expense
Cash
OCI—Prior
Service
Cost
Pension
Asset/
Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, January 1, 2014
59,400 Cr.
1,255,000 Cr.
1,195,600 Dr.
(a) Prior service cost
200,000 Dr.
200,000 Cr.
New Balance, January 1, 2014
200,000 Dr.
1,455,000 Cr.
1,195,600 Dr.
Copyright © 2014 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Exercise B Solutions (For Instructor Use Only) 20-5
(b) Service cost
(c) Interest cost
(d) Actual return
(e) Amortization of PSC
(f) Contributions
85,000 Cr.
(g) Benefits
Journal entry, December 31
85,000 Cr.
175,000 Dr.
Accumulated OCI, Dec. 31, 2013
Balance, Dec. 31, 2014
175,000 Dr.
1,559,300 Cr.
1,272,210 Dr.
E20-8B (20–25 minutes)
Corridor and Minimum Loss Amortization
Projected
Benefit
Plan Asset
10%
Accumulated
Minimum
Amortization
Year
Obligation (a)
Value (a)
Corridor
OCI (G/L)
of Loss
2014
$1,000,000
$ 900,000
$100,000
$ 0
$ 0
2,000,000
E20-9B (25–35 minutes)
(a) Note to financial statements disclosing components of 2014 pension
expense:
(b) Comprehensive income items, 2014
Amortization of prior service cost …………………… $ (36,800)
Unexpected asset loss …………………………………… 26,800
E20-9B (Continued)
(c) Accumulated OCI at December 31, 2014 is $394,800; the amount is
comprised of the following:
E20-10B (20–25 minutes)
(a) DADE SHUTTERS INC.
Pension Worksheet—2014
General Journal Entries Memo Record
Items
Annual
Pension
Expense
Cash
OCI—Prior
Service Cost
OCI—Net
Gain or Loss
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan assets
Balance, January 1, 2014
310,000 Cr.
1,960,000 Cr.
1,650,000 Dr.
(a) Service cost
133,000 Dr.
133,000 Cr.
(b) Interest cost
117,600 Dr.
117,600 Cr.
(b) $117,600 = $1,960,000 X 0.06
(c) Expected return = $160,000
Unexpected loss = Actual return – Expected return; $52,000 = $108,000 – $160,000
20-8 Copyright © 2014 John Wiley & Sons Inc Kieso Intermediate Accounting 14/e Exercise B Solutions (For Instructor Use Only)
(c) Return on assets
160,000 Cr.
(d) Amortization of PSC
(e) Liability decrease
211,000 Dr.
(f) Contributions
(g) Benefits
178,000 Dr.
114,600 Dr.
1,821,600 Cr.
1,723,000 Dr.
E20-11B (20–30 minutes)
(a) Pension expense for 2014 composed of the following:
Service cost ……………………………………………………… $186,000
(b) Pension Expense ……………………………………….. 333,000
Pension Asset/Liability ………………………….. 193,000
E20-12B (20–30 minutes)
(a) Pension expense for 2014 was composed of the following:
Service cost ……………………………………………………… $225,000
E20-12B (Continued)
(b) Pension Asset/Liability …………………………... 75,000
Pension Expense ……………………………………. 681,000
Cash …………………………..…………………….. 156,000
(c) Income Statement:
Pension expense ……………………………………………….. $ 681,000
Note: 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—Net
Gain/Loss
Pension
Asset/Liability
Projected
Benefit
Obligation
Plan
Assets
Balance, Jan. 1, 2014
3,200,000 Cr.
5,000,000 Cr.
1,800,000 Dr.
(a) Service cost
225,000 Dr.
225,000 Cr.
400,000 Dr.
400,000 Cr.
(c) Actual return
144,000 Cr.
200,000 Dr.
(e) Contributions
156,000 Cr.
400,000 Dr.
Journal entry Dec. 31
681,000 Dr.
156,000 Cr.
Accumulated OCI, Dec. 31, 2013
3,200,000 Dr. .
Copyright © 2014 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Exercise B Solutions (For Instructor Use Only) 20–11
E20-13B (35–45 minutes)
(a) Actual Return = (Ending – Beginning) – (Contributions – Benefits)
Fair value of plan assets,
December 31, 2014 …………………………..…… $740
(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):
Liability loss ………………………….. $0
2. Difference between actual fair value of plan assets and expected fair
value:
12/31/14 actual fair value
(c) Because no net gain or loss existed at the beginning of the period, no
amortization occurs. Therefore, the corridor calculation is not needed. An