Problem 20-7 Monty Corp. sponsors a defined benefit pension plan for its employe
ID: 2570165 • Letter: P
Question
Problem 20-7
Monty Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances related to this plan.
Plan assets (market-related value) $470,000
Projected benefit obligation 727,000
Pension asset/liability 257,000 Cr.
Prior service cost 89,000
Net gain or loss (debit) 86,000
As a result of the operation of the plan during 2017, the actuary provided the following additional data for 2017.
Service cost for 2017 $102,000
Settlement rate, 9%; expected return rate, 10%
Actual return on plan assets in 2017 42,000
Amortization of prior service cost 22,000
Contributions in 2017 126,000
Benefits paid retirees in 2017 90,000
Average remaining service life of active employees 10 years
Using the preceding data, compute pension expense for Monty Corp. for the year 2017 by preparing a pension worksheet that shows the journal entry for pension expense. (Enter all amounts as positive.)
MONTY CORP.
Pension Worksheet—2017
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, 2017
$
Dr.
Cr.
$
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Cr.
$
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Cr.
$
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Cr.
$
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Cr.
$
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Cr.
$
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Cr.
Service cost
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
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Dr.
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Dr.
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Interest cost
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Dr.
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Dr.
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Dr.
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Dr.
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Actual return
Dr.
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Dr.
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Dr.
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Dr.
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Dr.
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Dr.
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Unexpected loss
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Dr.
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Dr.
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Amortization of PSC
Dr.
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Dr.
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Amortization of loss
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Contributions
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Benefits
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Journal entry for 2017
$
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Cr.
$
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Cr.
Dr.
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Dr.
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Dr.
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Dr.
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Cr.
Accumulated OCI, Dec. 31, 2016
Dr.
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Dr.
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Dr.
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Balance, Dec. 31, 2017
$
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$
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$
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$
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$
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Cr.
Use the market-related asset value to compute the expected return and for corridor amortization.
Expected return
$
Corridor amortization
$
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Explanation / Answer
MONTY CORP. Pension Worksheet—2017 General Journal Entries Memo Record Annual OCI—Prior Projected Pension Service Cost OCI— Pension Benefit Plan Items Expense Cash Gain/Loss Asset/Liability Obligation Assets Balance, Jan. 1, 2017 257,000 Cr. 727,000 Cr. 470,000 Dr. Service cost 102,000 Dr. 102,000 Cr. Interest cost* 65,430 Dr. 65,430 Cr. Actual return 42,000 Cr. 42,000 Dr. Unexpected loss** 5,000 Cr. 5,000 Dr. Amortization of PSC 22,000 Dr. 22,000 Cr. Amortization of loss*** 1,330 Dr. 1,330 Cr. Contributions 126,000 Cr. 126,000 Dr. Benefits 90,000 Dr. 90,000 Cr. Journal entry for 2017 143,760 Dr. 126,000 Cr. 22,000 Cr. 3,670 Dr. 570 Dr. Accumulated OCI, Dec. 31, 2016 89,000 Dr. 86,000 Dr. Balance, Dec. 31, 2017 67,000 Dr. 89,670 Dr. 256,430 Cr. 804,430 Cr. 548,000 Dr. *$65,430 = $727,000 X .09. **$5,000 = ($470,000 X .10) – $42,000. *** 1/1 Projected Minimum Benefit Value of 1/1 10% Accumulated Amortization of Loss for 2017 Year Obligation Plan Assets Corridor OCI (G/L), 1/1 2017 $727,000 $470,000 $72,700 $86,000 *$1,330**** ****$86,000 – $72,700 = $13,300; $13,300 ÷ 10 = $1,330.
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