Turner Inc. provides a defined benefit pension plan to its employees. The company has 150 employees. The remaining amortization period at December 31, 20X0, for prior service cost is 5 years. The average remaining service life of employees is 11 years at January 1, 20X1, and 10 years at December 31, 20X1. The AOCI-net actuarial (gain) loss was zero at December 31, 20X0. Turner smooths recognition of its gains and losses when computing its market-related value to compute expected return. Additional Information: December 31, 20X1 Description 20X0 PBO $1,450,000 $1,377,000 1,425,000 1,350,000 1,085,000 1,085,000 292,000 (292,000) ABO Fair value of plan assets Market-related value of plan assets (smoothed recognition) AOCI-prior service cost Balance sheet pension asset (liability) Service cost 1,395,000 1,369,000 ? 117,400 169,000 113,250 Contribution PBO actuarial gain Benefit payments made Discount rate None None 5% 5% Expected rate of return 7% 7% Required: 1. Compute the amount of prior service cost that would be amortized as a component of pension expense for 20X1 and 20X2. 2. Compute the actual return on plan assets for 20X1. 3. Compute the unexpected net gain or loss on plan assets for 20X1. 4. Compute pension expense for 20X1. 5. Prepare the company's required pension journal entries for 20X1. 6. Compute the 20X1 increase/decrease in AOCI-net actuarial (gain) loss and the amount to be amortized in 20X1 and 20X2. 7. Confirm that the pension asset (liability) on the balance sheet equals the funded status as of December 31, 20X1.
Turner Inc. provides a defined benefit pension plan to its employees. The company has 150 employees. The remaining amortization period at December 31, 20X0, for prior service cost is 5 years. The average remaining service life of employees is 11 years at January 1, 20X1, and 10 years at December 31, 20X1. The AOCI-net actuarial (gain) loss was zero at December 31, 20X0. Turner smooths recognition of its gains and losses when computing its market-related value to compute expected return. Additional Information: December 31, 20X1 Description 20X0 PBO $1,450,000 $1,377,000 1,425,000 1,350,000 1,085,000 1,085,000 292,000 (292,000) ABO Fair value of plan assets Market-related value of plan assets (smoothed recognition) AOCI-prior service cost Balance sheet pension asset (liability) Service cost 1,395,000 1,369,000 ? 117,400 169,000 113,250 Contribution PBO actuarial gain Benefit payments made Discount rate None None 5% 5% Expected rate of return 7% 7% Required: 1. Compute the amount of prior service cost that would be amortized as a component of pension expense for 20X1 and 20X2. 2. Compute the actual return on plan assets for 20X1. 3. Compute the unexpected net gain or loss on plan assets for 20X1. 4. Compute pension expense for 20X1. 5. Prepare the company's required pension journal entries for 20X1. 6. Compute the 20X1 increase/decrease in AOCI-net actuarial (gain) loss and the amount to be amortized in 20X1 and 20X2. 7. Confirm that the pension asset (liability) on the balance sheet equals the funded status as of December 31, 20X1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Turner Inc. provides a defined benefit pension plan to its employees. The company has 150 employees. The
remaining amortization period at December 31, 20X0, for prior service cost is 5 years. The average remaining
service life of employees is 11 years at January 1, 20X1, and 10 years at December 31, 20X1. The AOCI-net actuarial
(gain) loss was zero at December 31, 20X0. Turner smooths recognition of its gains and losses when computing its
market-related value to compute expected return.
Additional Information:
December 31,
Description
PBO
20X1
20X0
$1,450,000 $1,377,000
1,350,000
1,085,000
1,085,000
292,000
(292,000)
АВО
1,425,000
1,395,000
Fair value of plan assets
Market-related value of plan assets (smoothed recognition)
AOCI-prior service cost
Balance sheet pension asset (liability)
Service cost
1,369,000
?
117,400
169,000
113,250
Contribution
PBO actuarial gain
Benefit payments made
None
None
Discount rate
5%
5%
Expected rate of return
7%
7%
Required:
1. Compute the amount of prior service cost that would be amortized as a component of pension expense for 20X1
and 20X2.
2. Compute the actual return on plan assets for 20X1.
3. Compute the unexpected net gain or loss on plan assets for 20X1.
4. Compute pension expense for 20X1.
5. Prepare the company's required pension journal entries for 20X1.
6. Compute the 20X1 increase/decrease in AOCI-net actuarial (gain) loss and the amount to be amortized in 20X1
and 20X2.
7. Confirm that the pension asset (liability) on the balance sheet equals the funded status as of December 31, 20X1.
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