Exercise 20-12 January 1, 2017 December 31, 2017 Components of Pension Expense S
ID: 2528550 • Letter: E
Question
Exercise 20-12
January 1, 2017
December 31, 2017
Components of Pension Expense
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Account Titles and Explanation
Debit
Credit
(To record pension expense and employer’s contribution)
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$XXXX
$XXXX
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Exercise 20-12
Crane Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2017.January 1, 2017
December 31, 2017
Projected benefit obligation $1,523,000 $1,550,000 Market-related and fair value of plan assets 794,000 1,128,400 Accumulated benefit obligation 1,597,000 1,716,400 Accumulated OCI (G/L)—Net gain 0 (202,300 )The service cost component of pension expense for employee services rendered in the current year amounted to $77,000 and the amortization of prior service cost was $119,400. The company’s actual funding (contributions) of the plan in 2017 amounted to $255,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,194,000 on January 1, 2017. Assume no benefits paid in 2017. Determine the amounts of the components of pension expense that should be recognized by the company in 2017. (Enter amounts that reduce pension expense with either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).)
Components of Pension Expense
Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService Cost
$Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService Cost
Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService Cost
Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService Cost
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Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)Account Titles and Explanation
Debit
Credit
(To record pension expense and employer’s contribution)
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Indicate the pension-related amounts that would be reported on the income statement and the balance sheet for Crane Company for the year 2017.Crane Company
Income Statement (Partial)
December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017
DividendsExpensesNet Income / (Loss)Retained Earnings – January 1, 2017Retained Earnings – December 31, 2017RevenuesTotal ExpensesTotal Revenues
Amortization of PSC Interest Expense Pension Expense Rent Expense Service Cost
$ Crane CompanyComprehensive Income Statement
December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017
DividendsExpensesNet Income / (Loss)Retained Earnings – January 1, 2017Retained Earnings – December 31, 2017RevenuesTotal ExpensesTotal Revenues
$XXXX
Amortization of PSCComprehensive IncomeInterest ExpenseLiability GainPension ExpenseRent ExpenseService CostOther Comprehensive Income (Loss)
Amortization of PSC Comprehensive Income Interest Expense Liability Gain Pension Expense Rent Expense Service Cost Other Comprehensive Income (Loss)
$Amortization of PSC Comprehensive Income Interest Expense Liability Gain Pension Expense Rent Expense Service Cost Other Comprehensive Income (Loss)
Amortization of PSCComprehensive IncomeInterest ExpenseLiability GainPension ExpenseRent ExpenseService CostOther Comprehensive Income (Loss)
$XXXX
Crane CompanyBalance Sheet (Partial)
December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017
Current AssetsLiabilitiesIntangible AssetsProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Property, Plant and EquipmentTotal Stockholders' Equity
Accounts Payable Accounts Receivable Accumulated Depreciation Accumulated Other Comprehensive Income (G/L) Accumulated Other Comprehensive Loss (G/L) Accumulated Other Comprehensive Income (PSC) Accumulated Other Comprehensive Loss (PSC) Common Stock Pension Liability Retained Earnings
$Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity
Accounts Payable Accounts Receivable Accumulated Depreciation Accumulated Other Comprehensive Income (G/L) Accumulated Other Comprehensive Loss (G/L) Accumulated Other Comprehensive Income (PSC) Accumulated Other Comprehensive Loss (PSC) Common Stock Pension Liability Retained Earnings
$Accounts Payable Accounts Receivable Accumulated Depreciation Accumulated Other Comprehensive Income (G/L) Accumulated Other Comprehensive Loss (G/L) Accumulated Other Comprehensive Income (PSC) Accumulated Other Comprehensive Loss (PSC) Common Stock Pension Liability Retained Earnings
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Explanation / Answer
Determine the amounts of the components of pension expense that should be recognized by the company in 2017. Service cost $77,000 Interest on projected benefit obligations ($1523000 x 10%) $152,300 Expected return on plan assets ($794000 x 10%) -$79,400 Amortization of prior service cost $119,400 Pension expense-2017 $269,300 Journal Entry Account Title & Explanation Debit Credit Pension Expense $269,300 Pension asset / Liability $105,100 Cash $255,000 Other Conperhensive Income (PSC) ($1194000*10%) $119,400 (To record pension expense and employer’s contribution)
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