You have the following information related to Chalmers Corporation's pension plan: Use the PV of 1, PVAD of 1, and PVOA of 1 tables where appropriate. (Use the appropriate factor(s) from the tables provided.) a. Defined benefit, noncontributory pension plan. b. Plan initiation, January 1, 20X3 (no credit given for prior service). c. Retirement benefits paid at year-end with the first payment one year after retirement. d. Assumed discount rate of 7%. e. Assumed expected rate of return on plan assets of 9%. f. Annual retirement benefit equals years of credited service x 0.02 x highest salary. g. Chalmers made $1,200 contributions to the pension fund at the end of each year. h. The actual returns were $0 and $48 in 20X3 and 20X4, respectively. i. Information for Frank Bullitt, the firm's only employee, follows: January 1, 20X0 December 31, 20Y7 (15 years from plan inception) Start date Expected retirement date Expected number of payments during retirement 20 Selected actual and expected salary levels: Salary Date Level January 1, 20X0 January 1, 20X3 January 1, 20X4 January 1, 20Y7 $22,000 27,000 30,000 75,000 Required: 1. Calculate the service cost and the interest cost components of pension cost for 20X3 and 20X4. 2. Calculate the PBO at the end of 20X3 and 20X4. 3. Compute the fair value of plan assets for 20X3 and 20X4.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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You have the following information related to Chalmers Corporation's pension plan: Use the PV of 1, PVAD of 1, and
PVOA of 1 tables where appropriate. (Use the appropriate factor(s) from the tables provided.)
a. Defined benefit, noncontributory pension plan.
b. Plan initiation, January 1, 20X3 (no credit given for prior service).
c. Retirement benefits paid at year-end with the first payment one year after retirement.
d. Assumed discount rate of 7%.
e. Assumed expected rate of return on plan assets of 9%.
f. Annual retirement benefit equals years of credited service × 0.02 x highest salary.
g. Chalmers made $1,200 contributions to the pension fund at the end of each year.
h. The actual returns were $0 and $48 in 20X3 and 20X4, respectively.
i. Information for Frank Bullitt, the firm's only employee, follows:
January 1, 20X0
December 31, 20Y7
(15 years from plan inception)
Start date
Expected retirement date
Expected number of payments during retirement
20
Selected actual and expected salary levels:
Salary
Date
Level
January 1, 20X0
January 1, 20X3
January 1, 20X4
January 1, 20Y7
$22,000
27,000
30,000
75,000
Required:
1. Calculate the service cost and the interest cost components of pension cost for 20X3 and 20X4.
2. Calculate the PBO at the end of 20X3 and 20X4.
3. Compute the fair value of plan assets for 20X3 and 20X4.
4. Compute funded status at December 31, 20X3, and December 31, 20X4.
5. Calculate pension expense for 20X3 and 20X4.
6. Prepare the required journal entries for 20X3 and 20X4.
Transcribed Image Text:You have the following information related to Chalmers Corporation's pension plan: Use the PV of 1, PVAD of 1, and PVOA of 1 tables where appropriate. (Use the appropriate factor(s) from the tables provided.) a. Defined benefit, noncontributory pension plan. b. Plan initiation, January 1, 20X3 (no credit given for prior service). c. Retirement benefits paid at year-end with the first payment one year after retirement. d. Assumed discount rate of 7%. e. Assumed expected rate of return on plan assets of 9%. f. Annual retirement benefit equals years of credited service × 0.02 x highest salary. g. Chalmers made $1,200 contributions to the pension fund at the end of each year. h. The actual returns were $0 and $48 in 20X3 and 20X4, respectively. i. Information for Frank Bullitt, the firm's only employee, follows: January 1, 20X0 December 31, 20Y7 (15 years from plan inception) Start date Expected retirement date Expected number of payments during retirement 20 Selected actual and expected salary levels: Salary Date Level January 1, 20X0 January 1, 20X3 January 1, 20X4 January 1, 20Y7 $22,000 27,000 30,000 75,000 Required: 1. Calculate the service cost and the interest cost components of pension cost for 20X3 and 20X4. 2. Calculate the PBO at the end of 20X3 and 20X4. 3. Compute the fair value of plan assets for 20X3 and 20X4. 4. Compute funded status at December 31, 20X3, and December 31, 20X4. 5. Calculate pension expense for 20X3 and 20X4. 6. Prepare the required journal entries for 20X3 and 20X4.
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  1. Calculate pension expense for 20X3 and 20X4.
  2. Prepare the required journal entries for 20X3 and 20X4.
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