1) If pension expense recognized in a period exceeds the current amount funded b
ID: 2489435 • Letter: 1
Question
1) If pension expense recognized in a period exceeds the current amount funded by the employer, what kind of account arises, and how should it be reported in the financial statements? If the reverse occurs- that is, current funding by the employer exceeds the amount recognized as pension expense - what kind of accounts arises, and how should it be reported in the financial statements?
2) For Warren Corporation, year-end plan assets were $2,000,000. At the beginning of the year, plan assets were $1,780,000. During the year, contributions to the pension fund were $120,000, and benefits paid were $200,000. Compute Warren's actual return on plan assets.
3) Mancuso Corporation amended its pension plan on January 1, 2014, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2014. Computer prior service cost amortization for 2014.
Explanation / Answer
1. If pension expense recognized in a period exceeds the the current amount funded by the employer, then there is excess pension liability generated for the year. If the total liability of the penion fund exceeds pension fund assets , it is shown as underfunded pesion plan and underfunded part is a liability.
On the other hand if the pension expense recognized is lower that the actual payment , then asset is recognized and if the total asset exceeds totoal liability ,then the addtional asset is recognized as overfunded pension plan part. and shown as prepaid Pesion Asset.
2.
Details Amt $ 2 Plan assets at the beginning of the year 1,780,000 Add Contribution to pension fund 120,000 Less Benefits paid (200,000) Net Value 1,700,000 Year End Plan Asset Value 2,000,000 So Plan Asset Actual Return=$2m-$1.7M= $ 300,000.00 3 Prior service cost 160,000 Expected service Year in future 2,000 Amortization of prior service cost/service year 80 No of service years in 2014 350 Prior service amortization in 2014 28,000Related Questions
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