Melanie Vail Corp. sponsors a defined benefit pension plan for its employees. On
ID: 2493478 • Letter: M
Question
Melanie Vail Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2015, the following balances relate to this plan.
Plan assets
$480,000
Projected benefit obligation
625,000
Accumulated OCI (PSC)
100,000
As a result of the operation of the plan during 2015, the following additional data are provided by the actuary.
Service cost for 2015
$90,000
Settlement rate
9%
Actual return on plan assets in 2015
57,000
Amortization of prior service cost
19,000
Expected return on plan assets
52,000
Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions
76,000
Contributions in 2015
99,000
Benefits paid retirees in 2015
85,000
1. prepare a pension worksheet. On the pension worksheet, compute pension expense, pension asset/liability, projected benefit obligation, plan assets, prior service cost, and net gain or loss.
2. Compute the same items as in (#1), assuming that the settlement rate is now 7% and the expected rate of return is 10%.
3. Prepare the journal entry using the spreadsheet Journal Entries to record pension expense in 2015. You need to prepare journal entries for only #1 above.
4. Indicate the reporting of the 2015 pension amounts in the income statement and balance sheet using the spreadsheet Pensions. You need to show financial statements’ presentations for only #1 above.
Plan assets
$480,000
Projected benefit obligation
625,000
Accumulated OCI (PSC)
100,000
Explanation / Answer
Answer:1
'Answer 2:
Answer:3
Pension Expense A/C Dr. $113,250
To Pension Asset/Liability A/C $14,250
To Cash A/C $99,000
Answer:4
Pension amount for income statement = $113,250
Pension amount for balance sheet = $59,250
General Journal entries Memo Record Items Annual pension expense Cash OCI-PSC OCI-Gain/Loss Pension Asset/Liability Projected benefit obligations Plan assets Balance, Jan. 1, 2015 45,000 Cr 625,000 Cr 480,000 Dr Service cost 90,000 Dr 90,000 Cr Interest cost 56,250 Dr 56,250 Cr Actual Return 57,000 Cr 57,000 Dr Expected Return 5,000 Dr 5,000 Cr Amortization of PSC 19,000 Dr 19,000 Cr Contributions 99,000 Cr 99,000 Dr Benefits 85,000 Dr 85,000 Cr Liability increase 76,000 Dr 76,000 Cr Journal entry for 2015 113,250 Dr 99,000 Cr 19,000 Cr 71,000 Dr 14,250 Cr Accumulated OCI, Dec. 31, 2015 100,000 Dr Balance, Dec. 31, 2015 81,000 Dr 71,000 Dr 59,250 Cr 762,250 Cr 551,000 Dr