Problem 20-8 (Part Level Submission) Lemke Company sponsors a defined benefit pe
ID: 2779402 • Letter: P
Question
Problem 20-8 (Part Level Submission)
Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2014 and 2015.
2014
2015
Prepare a pension worksheet presenting both years 2014 and 2015.
Accompanying computations and amortization of the loss (2015) using the corridor approach.
2014
2015
Projected benefit obligation, January 1 $602,500 Plan assets (fair value and market-related value), January 1 413,400 Pension asset/liability, January 1 189,100 Cr. Prior service cost, January 1 167,900 Service cost 48,600 $65,100 Settlement rate 10 % 10 % Expected rate of return 10 % 10 % Actual return on plan assets 35,200 67,800 Amortization of prior service cost 70,800 54,800 Annual contributions 98,300 88,200 Benefits paid retirees 35,300 63,950 Increase in projected benefit obligation due to changes in actuarial assumptions 88,600 0 Accumulated benefit obligation at December 31 725,600 798,200 Average service life of all employees 20 years Vested benefit obligation at December 31 471,600Explanation / Answer
LEMKE COMPANY
Pension Worksheet—2014 and 2015
General Journal Entries Memo Record
Items
Annual Pension Expense
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Pension
Asset/
Liability
Projected
Benefit
Obligation
Plan Assets
Balance, Jan. 1, 2014
189100 Cr.
602500 Cr.
413,400 Dr.
Service cost
48600 Dr.
48,600 Cr.
Interest cost(a)
60250 Dr.
60,250 Cr.
Actual return
35,200 Cr.
35,200 Dr.
Unexpected loss(b)
6140 Cr.
6140 Dr.
Amortization of PSC
70,800 Dr.
70,800 Cr.
Contributions
98,300 Cr.
98,300 Dr.
Benefits
35300 Dr.
35,300 Cr.
Increase in PBO
88,600 Dr.
88,600 Cr.
Journal entry for 2014
138310 Dr.
98,300 Cr.
70,800 Cr.
94,740 Dr.
63950 Cr.
Accumulated OCI, Dec. 31, 2013
167,900 Dr.
0
Balance, Dec. 31, 2014
97100 Dr.
94,740 Dr.
253050 Cr.
764650 Cr.
511,600 Dr.
Service cost
65100 Dr.
59,000 Cr.
Interest cost(c)
76465 Dr.
76465 Cr.
Actual return
67,800 Cr.
67,800 Dr.
Unexpected gain(d)
16640 Dr.
16640 Cr.
Amortization of PSC
54,800 Dr.
54,800 Cr.
Amortization of loss(e)
606.75 Dr.
606.75 Cr.
Contributions
88,200 Cr.
88,200 Dr.
Benefits
63950 Dr.
63950 Cr.
Journal entry for 2015
145811.8 Dr
88,200 Cr.
54,800 Cr.
17,246.75 Cr.
14434.95Dr.
Accumulated OCI, Dec. 31, 2014
97,100 Dr.
94740 Dr.
Balance, Dec. 31, 2015
42,300 Dr.
77493.25 Dr.
238615.1Cr.
836165 Cr.
603,650 Dr.
a). 602500*10%=60250
b). 413400*10%-35200=41340-35200= 6140
c). 764650*10%=76465
d). 511600*10%-67800=51160-67800= 16640
e). 2015 Corridor Test:
Accumulated net (gain) or loss at beginning of year................................................ $88600
10% of larger of PBO or fair value of plan assets............................................................... (76465)
Amortizable amount........................................................................................................... $12135
2015 amortization ($12135 ÷ 20 years) $ 606.75
LEMKE COMPANY
Pension Worksheet—2014 and 2015
General Journal Entries Memo Record
Items
Annual Pension Expense
Cash
OCI—Prior
Service
Cost
OCI—
Gain/Loss
Pension
Asset/
Liability
Projected
Benefit
Obligation
Plan Assets
Balance, Jan. 1, 2014
189100 Cr.
602500 Cr.
413,400 Dr.
Service cost
48600 Dr.
48,600 Cr.
Interest cost(a)
60250 Dr.
60,250 Cr.
Actual return
35,200 Cr.
35,200 Dr.
Unexpected loss(b)
6140 Cr.
6140 Dr.
Amortization of PSC
70,800 Dr.
70,800 Cr.
Contributions
98,300 Cr.
98,300 Dr.
Benefits
35300 Dr.
35,300 Cr.
Increase in PBO
88,600 Dr.
88,600 Cr.
Journal entry for 2014
138310 Dr.
98,300 Cr.
70,800 Cr.
94,740 Dr.
63950 Cr.
Accumulated OCI, Dec. 31, 2013
167,900 Dr.
0
Balance, Dec. 31, 2014
97100 Dr.
94,740 Dr.
253050 Cr.
764650 Cr.
511,600 Dr.
Service cost
65100 Dr.
59,000 Cr.
Interest cost(c)
76465 Dr.
76465 Cr.
Actual return
67,800 Cr.
67,800 Dr.
Unexpected gain(d)
16640 Dr.
16640 Cr.
Amortization of PSC
54,800 Dr.
54,800 Cr.
Amortization of loss(e)
606.75 Dr.
606.75 Cr.
Contributions
88,200 Cr.
88,200 Dr.
Benefits
63950 Dr.
63950 Cr.
Journal entry for 2015
145811.8 Dr
88,200 Cr.
54,800 Cr.
17,246.75 Cr.
14434.95Dr.
Accumulated OCI, Dec. 31, 2014
97,100 Dr.
94740 Dr.
Balance, Dec. 31, 2015
42,300 Dr.
77493.25 Dr.
238615.1Cr.
836165 Cr.
603,650 Dr.
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