Howard, Inc. established a defined benefit pension plan two years ago. Details related to the pension plan are as follows: Defined benefit, noncontributory plan with immediate full vesting. Benefits paid at the end of each retirement year beginning at age60. Expected11% rate of return on plan assets. December 31, 20X4 December 31, 20X5 Projected benefit obligation $840,000 $1,336,000 Fair & market-related value of plan assets $869,800 1,394,176 Accumulated benefit obligation 700,000 800,000 Additional information: Howard funded $440,000to the plan on December 31, 20X5 Howard's discount is10%. Average remaining service period of active employees is20 years. Service cost for20X5 is $432,000. Howard did not award retroactive benefits when the plan was adopted. Unrecognized prior net gain on January1, 20X5 was $4,150. Benefits paid $20,000 Calculate and record Howard's minimum required net periodic pension cost for 20X5.Debit Credit Cash $250,000 Accounts Receivable $757,800 Inventory $224,800 Equity Investments $205,000 Valuation Account-Equity Investments Available for Sale Debt Securities $310,000 Valuation Account-AFS Securities $30,000 Held to Maturity Securities $107,000 Land $242,150 Buildings $394,000 Accumulated Depreciation--Buildings $(98,500) Equipment $167,000 Accumulated Depreciation-- Equipment $(83,500) Tools $100,000 Accumulated Depreciation-- Tools $(78,400) Right-to-use asset Deferred Tax Asset Interest Payable Accounts Payable $(75,000) Unearned Revenue $(100,000) Prepaid/Accrued Pension Cost $29,800 Income Tax Payable Obligations Under Capital Lease Litigation Payable $(30,000) Notes Payable $(129,800) Bonds Payable Discount on Bonds Payable Deferred Tax Liability Accumulated OCI--investments $(30,000) Accumulated OCI--pension $(4,150) Retained Earnings $(599,000) Common Stock, $.20 par value $(100,000) Paid-in-capital in excess of par $(300,000) Unrealized Gain/Loss--Trading Sec. Unrealized Gain/Loss--AFS Sec. Dividends $20,000 Sales $(2,033,000) Sales Discounts $9,200 Purchases $600,200 Purchase Discounts $(32,000) Freight-in $24,800 Salaries Expense $139,600 Utilities Expense $18,800 Repair Expense $11,800 Depreciation/Amortization Interest Expense Advertising Expense $14,400 Pension Cost Insurance Expense $7,000 Litigation Expense $30,000 Income Tax Expense Totals $3,693,350 $(3,693,350)
Howard, Inc. established a defined benefit pension plan two years ago. Details related to the pension plan are as follows:
- Defined benefit, noncontributory plan with immediate full vesting.
- Benefits paid at the end of each retirement year beginning at age60.
- Expected11%
rate of return on plan assets.
December 31, 20X4 December 31, 20X5
Projected benefit obligation $840,000 $1,336,000
Fair & market-related value of plan assets $869,800 1,394,176
Accumulated benefit obligation 700,000 800,000
Additional information:
- Howard funded $440,000to the plan on December 31, 20X5
- Howard's discount is10%.
- Average remaining service period of active employees is20 years.
- Service cost for20X5 is $432,000.
- Howard did not award retroactive benefits when the plan was adopted.
- Unrecognized prior net gain on January1, 20X5 was $4,150.
- Benefits paid $20,000
Calculate and record Howard's minimum required net periodic pension cost for 20X5.Debit Credit
Cash $250,000
Inventory $224,800
Equity Investments $205,000
Valuation Account-Equity Investments
Available for Sale Debt Securities $310,000
Valuation Account-AFS Securities $30,000
Held to Maturity Securities $107,000
Land $242,150
Buildings $394,000
Equipment $167,000
Accumulated Depreciation-- Equipment $(83,500)
Tools $100,000
Accumulated Depreciation-- Tools $(78,400)
Right-to-use asset
Interest Payable
Accounts Payable $(75,000)
Unearned Revenue $(100,000)
Prepaid/Accrued Pension Cost $29,800
Income Tax Payable
Obligations Under Capital Lease
Litigation Payable $(30,000)
Notes Payable $(129,800)
Bonds Payable
Discount on Bonds Payable
Accumulated OCI--investments $(30,000)
Accumulated OCI--pension $(4,150)
Common Stock, $.20 par value $(100,000)
Paid-in-capital in excess of par $(300,000)
Unrealized Gain/Loss--Trading Sec.
Unrealized Gain/Loss--AFS Sec.
Dividends $20,000
Sales $(2,033,000)
Sales Discounts $9,200
Purchases $600,200
Purchase Discounts $(32,000)
Freight-in $24,800
Salaries Expense $139,600
Utilities Expense $18,800
Repair Expense $11,800
Depreciation/Amortization
Interest Expense
Advertising Expense $14,400
Pension Cost
Insurance Expense $7,000
Litigation Expense $30,000
Income Tax Expense
Totals $3,693,350 $(3,693,350)
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