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Illustrated Solution: Problem 17-43
Chapter 17 Illustrated Solution: Problem 17-43 Preparing a Pension Worksheet
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Pension Worksheet — Beginning Balances
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Pension Worksheet — Beginning Balances
– + The “Periodic Pension Expense” column will have a zero balance at the beginning of the period—think of it as an expense account that was closed out at the end of last period just like any other expense account. The other three highlighted accounts above can be thought of as balance sheet accounts. Assets should have a debit balance (positive sign) and liabilities should have a credit balance (negative sign).
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Pension Worksheet — Beginning Balances
– + – One way to think of these items is to consider them future expenses. (Notice that at the present time they are all “unamortized” or “unrecognized.”) The opening balance in these columns should be a debit (positive sign) if these items will increase pension expense when they are recognized. Likewise, the opening balance should be a credit (negative sign) if these items will reduce pension expense when they are recognized.
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Pension Worksheet — Beginning Balances
+ = – + –
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Pension Worksheet — Beginning Balances
Balance Sheet Accounts
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Pension Worksheet — Beginning Balances
Deferred Expense Accounts
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Pension Worksheet — Beginning Balances
=
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Pension Worksheet — Given Information
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Interest Cost Projected benefit obligation, Jan. 1, 2001 $3,800
Settlement discount rate 12% Interest cost $ 456
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Service Cost 2001 service cost:
Projected benefit obligation, Dec. 31, 2001 $4,161 Less: Projected benefit obligation, Jan. 1, ,800 Increase in projected benefit obligation $ 361 Less: Interest cost (.12 $3,800) (456) Plus: Benefits paid Service cost $
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Pension Worksheet
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Pension Worksheet
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Unrecognized Gain Market-related value of pension plan assets
(5-year weighted average) 2,100 Expected rate of return x 10% Expected return on plan assets 210 Actual return on plan assets 220 Deferred gain 10
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Pension Worksheet
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Amortization of Unrecognized Prior Service Cost
Number of years for amortization 12 Amortization per year $ 61
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Pension Worksheet
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Corridor Comparison for Unrecognized Gain
Corridor amount, 10% x $3,800, or $380 Unrecognized gain—$60 Amortization is $0 for 2001
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Pension Worksheet
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Pension Worksheet
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Pension Worksheet
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Pension Worksheet =
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Pension Worksheet 430
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Pension Worksheet
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Pension Worksheet — Completed
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End of Problem
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