On January 1, 2016, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,290,000 on that date (which it did not fund). Baznik has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2016: Employee Expected Years of Future Service A 1 B D F 6. Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik's pension expense, in addition to the amortization of the prior service cost for 2016 and 2017: 2016 2017 Service cost $386,800 $410,683 Interest cost on projected benefit obligation 116,800 174,737 Expected return on plan assets 93,000 Baznik contributed $799,800 and $759,200 to the pension fund at the end of 2016 and 2017, respectively. Required: 1. Next Level Prepare a set of schedules for Baznik i determine (a) the amortization fraction for each year and (b) the amortization of the prior service cost. 2. Next Level Prepare all the journal entries related to Baznik's pension plan for 2016 and 2017.
On January 1, 2016, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,290,000 on that date (which it did not fund). Baznik has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2016: Employee Expected Years of Future Service A 1 B D F 6. Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik's pension expense, in addition to the amortization of the prior service cost for 2016 and 2017: 2016 2017 Service cost $386,800 $410,683 Interest cost on projected benefit obligation 116,800 174,737 Expected return on plan assets 93,000 Baznik contributed $799,800 and $759,200 to the pension fund at the end of 2016 and 2017, respectively. Required: 1. Next Level Prepare a set of schedules for Baznik i determine (a) the amortization fraction for each year and (b) the amortization of the prior service cost. 2. Next Level Prepare all the journal entries related to Baznik's pension plan for 2016 and 2017.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2016, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,290,000 on that date (which it did not fund). Baznik has six participating employees who are expected to receive the retroactive benefits. Below is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2016:
| Employee | Expected Years of Future Service |
|----------|----------------------------------|
| A | 1 |
| B | 3 |
| C | 4 |
| D | 5 |
| E | 5 |
| F | 6 |
Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik’s pension expense, in addition to the amortization of the prior service cost for 2016 and 2017:
| | 2016 | 2017 |
|--------------|---------|--------|
| Service cost | $386,800| $410,683|
| Interest cost on projected benefit obligation | 116,800| 174,737|
| Expected return on plan assets | | 93,000|
Baznik contributed $799,800 and $759,200 to the pension fund at the end of 2016 and 2017, respectively.
**Required:**
1. Next Level: Prepare a set of schedules for Baznik to determine (a) the amortization fraction for each year and (b) the amortization of the prior service cost.
2. Next Level: Prepare all the journal entries related to Baznik’s pension plan for 2016 and 2017.
Transcribed Image Text:**Instructions**
**General Journal**
Prepare the entries to record the prior service cost on January 1, 2016, and the pension expense and amortization of prior service cost.
---
**General Journal Entries for December 31, 2016:**
1. **Date:** Dec. 31, 2016
- **Account Title:** Pension Expense
- **Debit:** 826,100.00
- **Account Title:** Cash
- **Credit:** 799,800.00
- **Account Title:** Accrued/Prepaid Pension Cost
- **Credit:** 26,300.00
2. **Date:** Dec. 31, 2016
- **Account Title:** Accrued/Prepaid Pension Cost
- **Debit:** 29,200.00
- **Account Title:** Other Comprehensive Income: Prior Service Cost
- **Credit:** 29,200.00
---
**General Journal Entries for December 31, 2017:**
1. **Date:** Dec. 31, 2017
- **Account Title:** Pension Expense
- **Debit:** 761,170.00
- **Account Title:** Cash
- **Credit:** 759,200.00
- **Account Title:** Accrued/Prepaid Pension Cost
- **Credit:** 1,970.00
2. **Date:** Dec. 31, 2017
- **Account Title:** Accrued/Prepaid Pension Cost
- **Debit:** 29,200.00
- **Account Title:** Other Comprehensive Income: Prior Service Cost
- **Credit:** 29,200.00
---
Each entry shows the date, account titles, and corresponding debit and credit amounts necessary to record the transactions related to pension expenses and prior service costs for the years 2016 and 2017.
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