AFM391 Chapter Notes - Chapter 17: Pension, Actuary, Corporate Bond

33 views2 pages

lemonbeetle804

16 Dec 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM391

Professor

Sasan Saiy

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Pension trust: the legal entity that holds the investments and discharges the obligations of a pension plan. Defined contribution plan: a pension plan that specifies how much funds the employer needs to contribute. Defined benefit plan: a pension plan that specifies how much in pension payments employees will receive during their retirement. Actuary: a professional who specializes in the estimation of risk and uncertainties. Current service cost: the increase in the present value of pension obligations due to an employee"s provision of services during the current period. Accrued benefit obligation: the present value of pension benefits that employees have earned. Past service cost: the change in the present value of pension obligations due to initiation, amendment, or curtailment of a pension . Curtailment: a reduction in the number of employees or the amount of benefits they will receive in the future.

Related Questions

ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014.

Note: Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entry.

Pension asset/liability (January 1) $0

Actual return on plan assets $40,000

Expected return on plan assets $20,000

Contributions (funding) in 2014 $37,000

Fair value of plan assets (December 31) $77,000

Settlement rate 10%

Projected benefit obligation (January 1) $0

Service cost $60,000

Benefits paid in 2014 $0

I came up with the following adjusting entries:

Pension Expense 40,000

Pension Related Asset 14,000

Other Comp. Income 17,000

Cash 37,000

Is this correct?

coralwildebeest17

Problem 20-3

Gottschalk Company sponsors a defined benefit plan for its 100employees. On January 1, 2014, the companyâs actuary provided thefollowing information.

Accumulated other comprehensive loss (PSC)		$155,100
Pension plan assets (fair value and market-related assetvalue)		200,400
Accumulated benefit obligation		268,500
Projected benefit obligation		380,600

The average remaining service period for the participatingemployees is 10 years. All employees are expected to receivebenefits under the plan. On December 31, 2014, the actuarycalculated that the present value of future benefits earned foremployee services rendered in the current year amounted to $53,400;the projected benefit obligation was $495,500; fair value ofpension assets was $277,200; the accumulated benefit obligationamounted to $367,600. The expected return on plan assets and thediscount rate on the projected benefit obligation were both 10%.The actual return on plan assets is $11,400. The companyâs currentyearâs contribution to the pension plan amounted to $65,400. Nobenefits were paid during the year.

Determine the components of pension expense that the companywould recognize in 2014.

Components of Pension Expense

Service Cost - 53,400

Interest on Projected Benefit Obligation - 38,060

Actual Return on Plan Assets - (11,400)

Unexpected Loss - (8,640)

Amortization of Gain or Loss - 0

Amortization of Prior Service Cost - 15,510

Pension Expense - 86,930

Prepare the journal entry to record the pension expense and thecompanyâs funding of the pension plan in 2014

Other Comprehensive Income (G/L) -

Pension Expense -

Cash -

Pension Asset/Liability -

Other Comprehensive Income (PSC) -

Compute the amount of the 2014 increase/decrease in gains orlosses and the amount to be amortized in 2014 and 2015.

2014 Increase/Decrease in _____________ $_____________

Amortization in 2014

Amortization in 2015

Indicate the pension amounts reported in the financial statementas of December 31, 2014.

Gottschalk Company Income Statement (Partial) For the year endedDcember 31, 2014


	$

Gottschalk Company Comprehensive Income Statement December 31,2014

Gottschalk company Balance Sheer (Partial) December 31, 2014

silverotter963

Pharoah Corp. sponsors a defined benefit pension plan for itsemployees. On January 1, 2017, the following balances relate tothis plan.

Plan assets $498,300

Projected benefit obligation 614,700

Pension asset/liability 116,400

Accumulated OCI (PSC) 96,900 Dr.

As a result of the operation of the plan during 2017, thefollowing additional data are provided by the actuary.

Service cost $92,500

Settlement rate, 9%

Actual return on plan assets 54,200

Amortization of prior service cost 18,100

Expected return on plan assets 51,200

Unexpected loss from change in projected benefit obligation,

due to change in actuarial predictions 74,200

Contributions 97,200

Benefits paid retirees 82,600

Using the data above, compute pension expense for Pharoah Corp.for the year 2017 by preparing a pension worksheet. (Enter allamounts as positive.)

PHAROAH CORP.

Pension Worksheet

General Journal Entries

Memo Record

Items

Annual Pension

Expense

Cash

OCIâPrior

Service Cost

OCIâ Gain/

Loss

Pension Asset/

Liability

Projected Benefit

Obligation

Plan

Assets

Balance, Jan. 1, 2017

Service cost

Interest cost

Actual return

Unexpected gain

Amortization of PSC

Liability increase

Contributions

Benefits

Journal entry for 2017

Accumulated OCI, Dec. 31, 2016

Balance, December 31, 2017

Prepare the journal entry for pension expense for 2017. (Creditaccount 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

purpletiger787

AFM391 Chapter Notes - Chapter 17: Pension, Actuary, Corporate Bond

Document Summary

Get access

Related Documents

AFM391 Study Guide - Final Guide: Defined Benefit Pension Plan, Pension, Balance Sheet

AFM391 Chapter Notes - Chapter 19: Employee Benefits, Pension, Deferred Compensation

AFM391 Chapter Notes - Chapter 19: Corporate Bond, Defined Contribution Plan, Pension

Related Questions