On January 1, 2019, James Company adopted a defined benefit pension plan. At that time, James awarded retroactive benefits to its employees, resulting in a prior service cost that created a projected benefit obligation of $1,250,000 on that date (which it did not fund). James decided to amortize the prior service cost by the straight-line method over the 20-year average remaining service life of its active participating employees. James' actuary has also provided the following additional information for 2019 and 2020: (1) service cost: 2019, $145,000; 2020, $152,000; (2) expected (and actual) return on plan assets: 2020, $34,000; and (3) projected benefit obligation: 1/1/2020, $1,520,000. The discount rate was 10% in both 2019 and 2020. James contributed $330,000 and $350,000 to the pension fund at the end of 2019 and 2020, respectively. There are no other components of James' pension expense. Required: 1. Compute the amount of James' pension expense for 2019 and 2020. 2. Prepare all the journal entries related to James' pension plan for 2019 and 2020. 3. Next Level If the prior service cost was vested, explain how James' pension expense for 2019 would be different under amended IAS 19.
On January 1, 2019, James Company adopted a defined benefit pension plan. At that time, James awarded retroactive benefits to its employees, resulting in a prior service cost that created a projected benefit obligation of $1,250,000 on that date (which it did not fund). James decided to amortize the prior service cost by the straight-line method over the 20-year average remaining service life of its active participating employees. James' actuary has also provided the following additional information for 2019 and 2020: (1) service cost: 2019, $145,000; 2020, $152,000; (2) expected (and actual) return on plan assets: 2020, $34,000; and (3) projected benefit obligation: 1/1/2020, $1,520,000. The discount rate was 10% in both 2019 and 2020. James contributed $330,000 and $350,000 to the pension fund at the end of 2019 and 2020, respectively. There are no other components of James' pension expense. Required: 1. Compute the amount of James' pension expense for 2019 and 2020. 2. Prepare all the journal entries related to James' pension plan for 2019 and 2020. 3. Next Level If the prior service cost was vested, explain how James' pension expense for 2019 would be different under amended IAS 19.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 1, 2019, James Company adopted a defined benefit pension plan. At that time, James awarded retroactive benefits to its employees, resulting in a prior service cost that created a projected benefit obligation of $1,250,000 on that date (which it did not fund). James decided to amortize the prior service cost by the straight-line method over the 20-year average remaining service life of its active participating employees. James' actuary has also provided the following additional information for 2019 and 2020: (1) service cost: 2019, $145,000; 2020, $152,000; (2) expected (and actual) return on plan assets: 2020, $34,000; and (3) projected benefit obligation: 1/1/2020, $1,520,000. The discount rate was 10% in both 2019 and 2020. James contributed $330,000 and $350,000 to the pension fund at the end of 2019 and 2020, respectively. There are no other components of James' pension expense.
Required:
| 1. | Compute the amount of James' pension expense for 2019 and 2020. |
| 2. | Prepare all the |
| 3. | Next Level If the prior service cost was vested, explain how James' pension expense for 2019 would be different under amended IAS 19. |
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