Question 1 Sandhill Corp. sponsors a defined benefit pension plan for its employ

Question

Question 1 Sandhill 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) Projected benefit obligation Pension asset/liability Prior service cost Net gain or loss (debit) 480,000 650,000 170,000 Cr. 80,000 85,000 As a result of the operation of the plan during 2017, the actuary provided the following additional data for 2017 Service cost for 2017 Settlement rate, 9%; expected return rate, 10% Actual return on plan assets in 2017 Amortization of prior service cost Contributions in 2017 Benefits paid retirees in 2017 Average remaining service life of active employees $99,000 42,000 25,000 124,000 82,000 10 years using the preceding data, compute pension expense for Sandhill Corp. for the year 2017 by preparing a penslon worksheet that shows the journal entry for amounts as positive.)

Explanation / Answer

Answer: Requirement 1 Computation of pension expense Memo Record Annual pension expense cash OCI-Prior service cost OCI-Gain/Loss Pension asset/ liability Projected benefit obligation Plan asset Balance Jan 1, 2017 170000 Cr. 650000 Cr. 480000 Dr. Service cost 99000 Dr. 99000 Cr. 99000 Cr. Interest cost 58500 Dr. 58500 Cr. 58500 Cr. Actual return 42000 Cr. 42000 Dr. 42000 Dr. Unexpected loss 6000 Cr. 6000 Dr. Amortization of PSC 25000 Dr. 25000 Cr. Amortization of loss 2000 Dr. 2000 Cr. Contributions 124000 Cr. 124000 Dr. 124000 Dr. Benefits 82000 Dr. 82000 Cr. Journal Entry 136500 Dr. 124000 Cr. 25000 Cr. 4000 Dr. 8500 Cr. Accumulated OCI, Dec 31, 2016 80,000 Dr. 85,000 Dr. Balance, Dec 31, 2017 55,000 Dr. 89000 Dr. 161500 Cr. 725500 564000 161500 Requirement 2 Computation of expected return and corridor amortization Expected return =$480,000*10% $        48,000.00 Corridor amortization =$650,000*10% $        65,000.00 10% 650,000 being the higher of plan asset or projected benefit obligation Amortization of loss =(85000-65000)/ 10 years 2000 Maximum amount (10% corridor) 10% * 480000 Or 10% * 650000 = 65,000 10% 650,000 being the higher of plan asset or projected benefit obligation Work Note: Interest Cost =650000*9% 58500 Unexpected loss =480,000*10%-42,000 6000

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.