Elton Co. has the following postretirement benefit plan balances on January 1, 2020. Accumulated postretirement benefit obligation $2,250,000 Fair value of plan assets 2,250,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends the plan so that prior service costs of $175,000 are created. Other data related to the plan are: 2020 2021 Service costs $ 75,000 $ 85,000 Prior service costs amortization -0- 12,000 Contributions (funding) to the plan 45,000 35,000 Benefits paid 40,000 45,000 Actual return on plan assets 140,000 120,000 Expected rate of return on assets 8% 6% Instructions Prepare a worksheet for the postretirement plan in 2020. Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2020. Prepare a worksheet for 2021 and any journal entries related to the postretirement plan as of December 31, 2021. Indicate the postretirement-benefit-related amounts reported in the 2021 financial statements.
Elton Co. has the following postretirement benefit plan balances on January 1, 2020. Accumulated postretirement benefit obligation $2,250,000 Fair value of plan assets 2,250,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends the plan so that prior service costs of $175,000 are created. Other data related to the plan are: 2020 2021 Service costs $ 75,000 $ 85,000 Prior service costs amortization -0- 12,000 Contributions (funding) to the plan 45,000 35,000 Benefits paid 40,000 45,000 Actual return on plan assets 140,000 120,000 Expected rate of return on assets 8% 6% Instructions Prepare a worksheet for the postretirement plan in 2020. Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2020. Prepare a worksheet for 2021 and any journal entries related to the postretirement plan as of December 31, 2021. Indicate the postretirement-benefit-related amounts reported in the 2021 financial statements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Elton Co. has the following postretirement benefit plan balances on January 1, 2020.
| Accumulated postretirement benefit obligation | $2,250,000 | |
| Fair value of plan assets | 2,250,000 |
The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends the plan so that prior service costs of $175,000 are created. Other data related to the plan are:
| 2020 | 2021 | |||
| Service costs | $ 75,000 | $ 85,000 | ||
| Prior service costs amortization | -0- | 12,000 | ||
| Contributions (funding) to the plan | 45,000 | 35,000 | ||
| Benefits paid | 40,000 | 45,000 | ||
| Actual return on plan assets | 140,000 | 120,000 | ||
| Expected |
8% | 6% |
Instructions
- Prepare a worksheet for the postretirement plan in 2020.
- Prepare any
journal entries related to the postretirement plan that would be needed at December 31, 2020. - Prepare a worksheet for 2021 and any journal entries related to the postretirement plan as of December 31, 2021.
- Indicate the postretirement-benefit-related amounts reported in the 2021 financial statements.
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