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Concept explainers
(1)
Pension expense: Pension expense is an expense to the employer paid as compensation after the completion of services performed by the employees.
Pension expense includes the following components:
- Service cost
- Interest cost
- Expected return on plan assets
- Amortization of prior service cost
- Amortization of net loss or net gain
To compute: The amount of actual return on plan assets
(1)
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Explanation of Solution
Calculate the amount of actual return.
(2)
To compute: The loss or gain on plan assets
(2)
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Explanation of Solution
Compute the loss or gain on plan assets.
Step 1: Compute the expected returns.
Step 2: Compute the loss or gain on plan assets (Refer to Equations (1) and (2) for both the values).
(3)
To compute: The service cost.
(3)
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Explanation of Solution
Compute the service cost.
Step 1: Compute the interest cost.
Step 2: Compute the service cost (Refer to Equation (3) for interest cost value).
(4)
To compute: The pension expense
(4)
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Explanation of Solution
The following table shows pension expense.
Particulars | Amount ($) |
Service Cost | $310,000 |
Interest cost | 161,000 |
Expected return on plan assets | (240,000) |
Amortization of Prior Service Cost - AOCI | 25,000 |
Amortization of net gain | 6,000 |
Pension Expense | $250,000 |
Table (1)
Working Note:
Refer to Requirement (3) for service cost, Equation (3) for interest cost, and Equation (2) for expected return on plan assets value.
Compute the amount of Amortization of Prior Service Cost – AOCI.
Compute the Amortization of Net Gain –AOCI.
Amortization of Net Gain –AOCI: | |
Beginning Balance | $330,000 |
Less: | |
Ending Balance | (300,000) |
Loss on Plan Assets | (24,000) |
Net Gain – AOCI Amortization | $6,000 |
Table (2)
(5)
To compute: The average remaining service life of active employees.
(5)
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Explanation of Solution
Compute the average service period.
Working Note:
Refer to Table (2) for Net Gain amount amortized.
Calculate the amount of Net Gain to be amortized.
Details | Amount ($) |
Net Gain, Beginning | $330,000 |
10% of $2,400,000 | 240,000 |
Amount to be Amortized | $90,000 |
Table (3)
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Chapter 17 Solutions
INTERMEDIATE ACCT.-CONNECT PLUS ACCESS
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