(2-Year Worksheet) On January 1, 2012, Harrington Company has the following defi
ID: 2348381 • Letter: #
Question
(2-Year Worksheet) On January 1, 2012, Harrington Company has the following defined benefit pension plan balances.Projected benefits obligation $4,500,000
Fair value of plan assets 4,200,000
The interest (settlement) rate applicable to the plan is 10%. On January 1, 2013, the company amends its pension agreement so that service costs of $500,000 are created. Other data related to the pension plan are as follows:
2012 2013
Service costs $150,000 $180,000
Prior service costs amortization 0 90,000
Contributions (funding) to the plan 240,000 285,000
Benefits paid 200,000 280,000
Actual return on plan assets 252,000 260,000
Expected rate of return on assets 6% 8%
a) prepare a pension worksheet for the pension plan for 2012 and 2013
b) for 2013, prepare the journal entry to record pension-related amounts
Explanation / Answer
a)
b)
HARRINGTON COMPANY Pension Worksheet—2012 and 2013 General Journal Entries Memo Record Items AnnualPension
Expense Cash OCI - Prior Service Cost OCI - Gain/Loss Pension
Asset/
Liability Projected
Benefit
Obligation Plan
Assets Balance, Jan. 1, 2012 (300,000) (4,500,000) 4,200,000 (a) Service cost 150,000 (150,000) (b) Interest cost 450,000 (450,000) (c) Actual return (252,000) 252,000 (d) Contributions (240,000) 240,000 (e) Benefits 200,000 (200,000) Journal entry, 12/31/12 348,000 (240,000) 0 0 (108,000) Accum OCI, 12/31/11 Balance, Dec. 31, 2012 (408,000) (4,900,000) 4,492,000 (f) Additional PSC 500,000 (500,000) January 1, 2013 (5,400,000) (g) Service cost 180,000 (180,000) (h) Interest cost 540,000 (540,000) (i) Actual return (260,000) 260,000 (j) Unexpected loss (99,360) 99,360 (k) Amortization of PSC 90,000 (90,000) (l) Contributions (285,000) 285,000 (m) Benefits 280,000 (280,000) Journal entry, 12/31/13 450,640 (285,000) 410,000 99,360 (675,000) Accum OCI, 12/31/12 0 0 Balance, Dec. 31, 2013 410,000 99,360 (1,083,000) (5,840,000) 4,757,000 2012 Interest cost = $4,500,000 × 10% settlement rate = $450,000. 2013 Interest cost = $5,400,000 × 10% settlement rate = $540,000. 2013 Unexpected loss = ($4,492,000 × 8% expected return on assets in 2012) - $260,000 actual return on plan assets in 2013 = $99,360.
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