Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2020 in which no benefits were paid. The actuarial present value of future benefits earned by employees for services rendered in 2020 amounted to $56,000. The company's funding policy requires a contribution to the pension trustee amounting to $145,000 for 2020. As of January 1, 2020, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2020 and no benefits were paid. Amortization of prior service cost was $50,000 in 2020. Amortization of net gain or loss was not required in 2020. Instructions Determine the amounts of the components of pension expense that should be recognized by the company in 2020. Prepare the journal entry or entries to record pension expense and the employer's contribution to the pension trustee in 2020. Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2020.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2020 in which no benefits were paid.

The actuarial present value of future benefits earned by employees for services rendered in 2020 amounted to $56,000.
The company's funding policy requires a contribution to the pension trustee amounting to $145,000 for 2020.
As of January 1, 2020, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2020 and no benefits were paid.
Amortization of prior service cost was $50,000 in 2020. Amortization of net gain or loss was not required in 2020.

Instructions

Determine the amounts of the components of pension expense that should be recognized by the company in 2020.
Prepare the journal entry or entries to record pension expense and the employer's contribution to the pension trustee in 2020.
Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2020.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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