On January 1, 2020, Solan Incorporated amended its pension plan whichcaused an increase of $6,000,000 in its projected benefit obligation. Thecompany has 400 employees who are expected to receive benefits underthe company's defined-benefit pension plan. The personnel department provided the following information regarding expected employee Retirements. See image Prepare a schedule which shows the amount of annual prior service cost amortization that the company will recognize as a component of pension expense from 2020 through 2024. Your answer should include two tables;one that shows the computation of the service years and the other that shows the annual prior service cost amortization for the five years. ### Solano Incorporated Pension Plan AmendmentOn January 1, 2020, Solano Incorporated amended its pension plan, resulting in a $6,000,000 increase in its projected benefit obligation. The company includes 400 employees expected to receive benefits under the company's defined-benefit pension plan. The personnel department has provided the following information regarding expected employee retirements:#### Expected Retirements| Number of Employees | Expected Retirements on December 31 ||---------------------|-------------------------------------|| 40 | 2020 || 120 | 2021 || 60 | 2022 || 160 | 2023 || 20 | 2024 || **Total** | **400** |### InstructionsPrepare a schedule showing the amount of annual prior service cost amortization that the company will recognize as a component of pension expense from 2020 through 2024. Your answer should include two tables:1. **Computation of the Service Years** - Show the distribution and calculation of service years across the workforce in relation to the amendments. 2. **Annual Prior Service Cost Amortization** - Display the amortization of prior service costs annually over the five years.

A pension plan seems to be an employee benefit in which the company pledges to make monthly…

Answered: On January 1, 2020, Solan Incorporated…

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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On January 1, 2020, Solan Incorporated amended its pension plan which
caused an increase of $6,000,000 in its projected benefit obligation. The
company has 400 employees who are expected to receive benefits under
the company's defined-benefit pension plan. The personnel department provided the following information regarding expected employee Retirements.

See image

Prepare a schedule which shows the amount of annual prior service cost amortization that the company will recognize as a component of pension expense from 2020 through 2024. Your answer should include two tables;
one that shows the computation of the service years and the other that shows the annual prior service cost amortization for the five years.

### Solano Incorporated Pension Plan Amendment

On January 1, 2020, Solano Incorporated amended its pension plan, resulting in a $6,000,000 increase in its projected benefit obligation. The company includes 400 employees expected to receive benefits under the company's defined-benefit pension plan. The personnel department has provided the following information regarding expected employee retirements:

#### Expected Retirements

| Number of Employees | Expected Retirements on December 31 |
|---------------------|-------------------------------------|
| 40 | 2020 |
| 120 | 2021 |
| 60 | 2022 |
| 160 | 2023 |
| 20 | 2024 |
| **Total** | **400** |

### Instructions

Prepare a schedule showing the amount of annual prior service cost amortization that the company will recognize as a component of pension expense from 2020 through 2024. Your answer should include two tables:

1. **Computation of the Service Years** - Show the distribution and calculation of service years across the workforce in relation to the amendments.

2. **Annual Prior Service Cost Amortization** - Display the amortization of prior service costs annually over the five years.

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