Calculate the amount of pension expense of Company R for 2016.

Question

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Answer 1

Question

Chapter 19, Problem 2E

1.

To determine

Calculate the amount of pension expense of Company R for 2016.

1.

Expert Solution

Explanation of Solution

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the amount of pension expense of Company R for 2016 as follows:

Particulars	Amounts in ($)
Service cost	$105,000
Add: Interest cost on projected benefit obligation	$12,000
Less: Expected return on plan assets	$11,000
Add: Amortization of prior service cost	$2,000
Pension expense	$108,000

Table (1)

2.

To determine

Prepare necessary journal entries of Company R for 2016, if company R funds the pension plant in the amount of (a) $108,000, (b) 107,000 and (c) $112,000.

2.

Expert Solution

Explanation of Solution

Prepare necessary journal entries of Company R for 2016 if company R funds the pension plan in the amount of (a) $108,000, (b) 107,000 and (c) $112,000 as follows:

(a) Funding pension plan in the amount of $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			108,000
	(To record the pension expense incurred for 2016)

Table (2)

Pension expense is a component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (3)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(b) Pension plan in the amount of $107,000.

In this case, Company R has undervalued the pension contribution by $1,000($108,000−$107,000), hence credit the accrued/prepaid pension cost account by $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			107,000
	Accrued/prepaid pension cost			1,000
	(To record the pension expense incurred and its undervalued by $107,000)

Table (4)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $107,000.
Accrued/prepaid pension cost is liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (5)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(c) Pension plan in the amount of $112,000.

In this case, Company R has overvalued the pension contribution by $4,000($112,000−$108,000), hence debit the accrued/prepaid pension cost account by $4,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Accrued/prepaid pension cost		4,000
	Cash			112,000
	(To record the pension expense and its overvalued by $112,000)

Table (6)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Accrued/prepaid pension cost is asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $4,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $112,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (7)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

3.

To determine

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000.

3.

Expert Solution

Explanation of Solution

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000 as follows:

In this case, the company has amortized the prior service cost of $2,000. Hence, the ending balances of accumulated other comprehensive income: prior service cost is $58,000 (1).

Working note (1):

Calculate the ending balance of prior service cost.

Ending balance = Opening balance −Amortization of prior service cost=$60,000−$2,000=$58,000

4.

To determine

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016.

4.

Expert Solution

Explanation of Solution

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016 as follows:

Company R has reported a beginning accrued/prepaid pension cost liability of $14,000 and reported pension expense for the period of $108,000. In this case, Company R would need the pension fund of $127,000 (2) to report an accrued/prepaid pension cost assets of $5,000 at the end of the 2016.

Working note (2):

Calculate the pension fund.

Pension fund = (Pension expense +Beginning accrued/prepaid pension cost liability + Accrued/prepaid pension cost asset)=$108,000+$14,000+$5,000=$127,000

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Answer 2

Question

Chapter 19, Problem 2E

1.

To determine

Calculate the amount of pension expense of Company R for 2016.

1.

Expert Solution

Explanation of Solution

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the amount of pension expense of Company R for 2016 as follows:

Particulars	Amounts in ($)
Service cost	$105,000
Add: Interest cost on projected benefit obligation	$12,000
Less: Expected return on plan assets	$11,000
Add: Amortization of prior service cost	$2,000
Pension expense	$108,000

Table (1)

2.

To determine

Prepare necessary journal entries of Company R for 2016, if company R funds the pension plant in the amount of (a) $108,000, (b) 107,000 and (c) $112,000.

2.

Expert Solution

Explanation of Solution

Prepare necessary journal entries of Company R for 2016 if company R funds the pension plan in the amount of (a) $108,000, (b) 107,000 and (c) $112,000 as follows:

(a) Funding pension plan in the amount of $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			108,000
	(To record the pension expense incurred for 2016)

Table (2)

Pension expense is a component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (3)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(b) Pension plan in the amount of $107,000.

In this case, Company R has undervalued the pension contribution by $1,000($108,000−$107,000), hence credit the accrued/prepaid pension cost account by $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			107,000
	Accrued/prepaid pension cost			1,000
	(To record the pension expense incurred and its undervalued by $107,000)

Table (4)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $107,000.
Accrued/prepaid pension cost is liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (5)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(c) Pension plan in the amount of $112,000.

In this case, Company R has overvalued the pension contribution by $4,000($112,000−$108,000), hence debit the accrued/prepaid pension cost account by $4,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Accrued/prepaid pension cost		4,000
	Cash			112,000
	(To record the pension expense and its overvalued by $112,000)

Table (6)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Accrued/prepaid pension cost is asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $4,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $112,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (7)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

3.

To determine

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000.

3.

Expert Solution

Explanation of Solution

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000 as follows:

In this case, the company has amortized the prior service cost of $2,000. Hence, the ending balances of accumulated other comprehensive income: prior service cost is $58,000 (1).

Working note (1):

Calculate the ending balance of prior service cost.

Ending balance = Opening balance −Amortization of prior service cost=$60,000−$2,000=$58,000

4.

To determine

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016.

4.

Expert Solution

Explanation of Solution

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016 as follows:

Company R has reported a beginning accrued/prepaid pension cost liability of $14,000 and reported pension expense for the period of $108,000. In this case, Company R would need the pension fund of $127,000 (2) to report an accrued/prepaid pension cost assets of $5,000 at the end of the 2016.

Working note (2):

Calculate the pension fund.

Pension fund = (Pension expense +Beginning accrued/prepaid pension cost liability + Accrued/prepaid pension cost asset)=$108,000+$14,000+$5,000=$127,000

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Answer 3

Question

Chapter 19, Problem 2E

1.

To determine

Calculate the amount of pension expense of Company R for 2016.

1.

Expert Solution

Explanation of Solution

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the amount of pension expense of Company R for 2016 as follows:

Particulars	Amounts in ($)
Service cost	$105,000
Add: Interest cost on projected benefit obligation	$12,000
Less: Expected return on plan assets	$11,000
Add: Amortization of prior service cost	$2,000
Pension expense	$108,000

Table (1)

2.

To determine

Prepare necessary journal entries of Company R for 2016, if company R funds the pension plant in the amount of (a) $108,000, (b) 107,000 and (c) $112,000.

2.

Expert Solution

Explanation of Solution

Prepare necessary journal entries of Company R for 2016 if company R funds the pension plan in the amount of (a) $108,000, (b) 107,000 and (c) $112,000 as follows:

(a) Funding pension plan in the amount of $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			108,000
	(To record the pension expense incurred for 2016)

Table (2)

Pension expense is a component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (3)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(b) Pension plan in the amount of $107,000.

In this case, Company R has undervalued the pension contribution by $1,000($108,000−$107,000), hence credit the accrued/prepaid pension cost account by $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			107,000
	Accrued/prepaid pension cost			1,000
	(To record the pension expense incurred and its undervalued by $107,000)

Table (4)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $107,000.
Accrued/prepaid pension cost is liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (5)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(c) Pension plan in the amount of $112,000.

In this case, Company R has overvalued the pension contribution by $4,000($112,000−$108,000), hence debit the accrued/prepaid pension cost account by $4,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Accrued/prepaid pension cost		4,000
	Cash			112,000
	(To record the pension expense and its overvalued by $112,000)

Table (6)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Accrued/prepaid pension cost is asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $4,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $112,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (7)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

3.

To determine

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000.

3.

Expert Solution

Explanation of Solution

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000 as follows:

In this case, the company has amortized the prior service cost of $2,000. Hence, the ending balances of accumulated other comprehensive income: prior service cost is $58,000 (1).

Working note (1):

Calculate the ending balance of prior service cost.

Ending balance = Opening balance −Amortization of prior service cost=$60,000−$2,000=$58,000

4.

To determine

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016.

4.

Expert Solution

Explanation of Solution

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016 as follows:

Company R has reported a beginning accrued/prepaid pension cost liability of $14,000 and reported pension expense for the period of $108,000. In this case, Company R would need the pension fund of $127,000 (2) to report an accrued/prepaid pension cost assets of $5,000 at the end of the 2016.

Working note (2):

Calculate the pension fund.

Pension fund = (Pension expense +Beginning accrued/prepaid pension cost liability + Accrued/prepaid pension cost asset)=$108,000+$14,000+$5,000=$127,000

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Answer 4

Question

Chapter 19, Problem 2E

1.

To determine

Calculate the amount of pension expense of Company R for 2016.

1.

Expert Solution

Explanation of Solution

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the amount of pension expense of Company R for 2016 as follows:

Particulars	Amounts in ($)
Service cost	$105,000
Add: Interest cost on projected benefit obligation	$12,000
Less: Expected return on plan assets	$11,000
Add: Amortization of prior service cost	$2,000
Pension expense	$108,000

Table (1)

2.

To determine

Prepare necessary journal entries of Company R for 2016, if company R funds the pension plant in the amount of (a) $108,000, (b) 107,000 and (c) $112,000.

2.

Expert Solution

Explanation of Solution

Prepare necessary journal entries of Company R for 2016 if company R funds the pension plan in the amount of (a) $108,000, (b) 107,000 and (c) $112,000 as follows:

(a) Funding pension plan in the amount of $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			108,000
	(To record the pension expense incurred for 2016)

Table (2)

Pension expense is a component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (3)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(b) Pension plan in the amount of $107,000.

In this case, Company R has undervalued the pension contribution by $1,000($108,000−$107,000), hence credit the accrued/prepaid pension cost account by $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			107,000
	Accrued/prepaid pension cost			1,000
	(To record the pension expense incurred and its undervalued by $107,000)

Table (4)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $107,000.
Accrued/prepaid pension cost is liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (5)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(c) Pension plan in the amount of $112,000.

In this case, Company R has overvalued the pension contribution by $4,000($112,000−$108,000), hence debit the accrued/prepaid pension cost account by $4,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Accrued/prepaid pension cost		4,000
	Cash			112,000
	(To record the pension expense and its overvalued by $112,000)

Table (6)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Accrued/prepaid pension cost is asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $4,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $112,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (7)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

3.

To determine

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000.

3.

Expert Solution

Explanation of Solution

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000 as follows:

In this case, the company has amortized the prior service cost of $2,000. Hence, the ending balances of accumulated other comprehensive income: prior service cost is $58,000 (1).

Working note (1):

Calculate the ending balance of prior service cost.

Ending balance = Opening balance −Amortization of prior service cost=$60,000−$2,000=$58,000

4.

To determine

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016.

4.

Expert Solution

Explanation of Solution

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016 as follows:

Company R has reported a beginning accrued/prepaid pension cost liability of $14,000 and reported pension expense for the period of $108,000. In this case, Company R would need the pension fund of $127,000 (2) to report an accrued/prepaid pension cost assets of $5,000 at the end of the 2016.

Working note (2):

Calculate the pension fund.

Pension fund = (Pension expense +Beginning accrued/prepaid pension cost liability + Accrued/prepaid pension cost asset)=$108,000+$14,000+$5,000=$127,000

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Answer 5

Chapter 19, Problem 2E

1.

To determine

Calculate the amount of pension expense of Company R for 2016.

1.

Expert Solution

Explanation of Solution

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the amount of pension expense of Company R for 2016 as follows:

Particulars	Amounts in ($)
Service cost	$105,000
Add: Interest cost on projected benefit obligation	$12,000
Less: Expected return on plan assets	$11,000
Add: Amortization of prior service cost	$2,000
Pension expense	$108,000

Table (1)

2.

To determine

Prepare necessary journal entries of Company R for 2016, if company R funds the pension plant in the amount of (a) $108,000, (b) 107,000 and (c) $112,000.

2.

Expert Solution

Explanation of Solution

Prepare necessary journal entries of Company R for 2016 if company R funds the pension plan in the amount of (a) $108,000, (b) 107,000 and (c) $112,000 as follows:

(a) Funding pension plan in the amount of $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			108,000
	(To record the pension expense incurred for 2016)

Table (2)

Pension expense is a component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (3)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(b) Pension plan in the amount of $107,000.

In this case, Company R has undervalued the pension contribution by $1,000($108,000−$107,000), hence credit the accrued/prepaid pension cost account by $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			107,000
	Accrued/prepaid pension cost			1,000
	(To record the pension expense incurred and its undervalued by $107,000)

Table (4)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $107,000.
Accrued/prepaid pension cost is liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (5)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(c) Pension plan in the amount of $112,000.

In this case, Company R has overvalued the pension contribution by $4,000($112,000−$108,000), hence debit the accrued/prepaid pension cost account by $4,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Accrued/prepaid pension cost		4,000
	Cash			112,000
	(To record the pension expense and its overvalued by $112,000)

Table (6)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Accrued/prepaid pension cost is asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $4,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $112,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (7)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

3.

To determine

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000.

3.

Expert Solution

Explanation of Solution

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000 as follows:

In this case, the company has amortized the prior service cost of $2,000. Hence, the ending balances of accumulated other comprehensive income: prior service cost is $58,000 (1).

Working note (1):

Calculate the ending balance of prior service cost.

Ending balance = Opening balance −Amortization of prior service cost=$60,000−$2,000=$58,000

4.

To determine

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016.

4.

Expert Solution

Explanation of Solution

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016 as follows:

Company R has reported a beginning accrued/prepaid pension cost liability of $14,000 and reported pension expense for the period of $108,000. In this case, Company R would need the pension fund of $127,000 (2) to report an accrued/prepaid pension cost assets of $5,000 at the end of the 2016.

Working note (2):

Calculate the pension fund.

Pension fund = (Pension expense +Beginning accrued/prepaid pension cost liability + Accrued/prepaid pension cost asset)=$108,000+$14,000+$5,000=$127,000

Answer 6

Chapter 19, Problem 2E

1.

To determine

Calculate the amount of pension expense of Company R for 2016.

1.

Expert Solution

Explanation of Solution

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the amount of pension expense of Company R for 2016 as follows:

Particulars	Amounts in ($)
Service cost	$105,000
Add: Interest cost on projected benefit obligation	$12,000
Less: Expected return on plan assets	$11,000
Add: Amortization of prior service cost	$2,000
Pension expense	$108,000

Table (1)

Answer 7

Chapter 19, Problem 2E

1.

To determine

Calculate the amount of pension expense of Company R for 2016.

Answer 8

1.

Expert Solution

Explanation of Solution

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Calculate the amount of pension expense of Company R for 2016 as follows:

Particulars	Amounts in ($)
Service cost	$105,000
Add: Interest cost on projected benefit obligation	$12,000
Less: Expected return on plan assets	$11,000
Add: Amortization of prior service cost	$2,000
Pension expense	$108,000

Table (1)

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

2.

To determine

Prepare necessary journal entries of Company R for 2016, if company R funds the pension plant in the amount of (a) $108,000, (b) 107,000 and (c) $112,000.

2.

Expert Solution

Explanation of Solution

Prepare necessary journal entries of Company R for 2016 if company R funds the pension plan in the amount of (a) $108,000, (b) 107,000 and (c) $112,000 as follows:

(a) Funding pension plan in the amount of $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			108,000
	(To record the pension expense incurred for 2016)

Table (2)

Pension expense is a component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (3)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(b) Pension plan in the amount of $107,000.

In this case, Company R has undervalued the pension contribution by $1,000($108,000−$107,000), hence credit the accrued/prepaid pension cost account by $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			107,000
	Accrued/prepaid pension cost			1,000
	(To record the pension expense incurred and its undervalued by $107,000)

Table (4)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $107,000.
Accrued/prepaid pension cost is liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (5)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(c) Pension plan in the amount of $112,000.

In this case, Company R has overvalued the pension contribution by $4,000($112,000−$108,000), hence debit the accrued/prepaid pension cost account by $4,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Accrued/prepaid pension cost		4,000
	Cash			112,000
	(To record the pension expense and its overvalued by $112,000)

Table (6)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Accrued/prepaid pension cost is asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $4,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $112,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (7)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

Answer 13

2.

To determine

Prepare necessary journal entries of Company R for 2016, if company R funds the pension plant in the amount of (a) $108,000, (b) 107,000 and (c) $112,000.

Answer 14

2.

Expert Solution

Explanation of Solution

Prepare necessary journal entries of Company R for 2016 if company R funds the pension plan in the amount of (a) $108,000, (b) 107,000 and (c) $112,000 as follows:

(a) Funding pension plan in the amount of $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			108,000
	(To record the pension expense incurred for 2016)

Table (2)

Pension expense is a component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $108,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (3)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(b) Pension plan in the amount of $107,000.

In this case, Company R has undervalued the pension contribution by $1,000($108,000−$107,000), hence credit the accrued/prepaid pension cost account by $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Cash			107,000
	Accrued/prepaid pension cost			1,000
	(To record the pension expense incurred and its undervalued by $107,000)

Table (4)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $107,000.
Accrued/prepaid pension cost is liability account and it is increased. Therefore, credit the accrued/prepaid pension cost account with $1,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (5)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

(c) Pension plan in the amount of $112,000.

In this case, Company R has overvalued the pension contribution by $4,000($112,000−$108,000), hence debit the accrued/prepaid pension cost account by $4,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Pension expense		108,000
	Accrued/prepaid pension cost		4,000
	Cash			112,000
	(To record the pension expense and its overvalued by $112,000)

Table (6)

Pension expense is component of shareholders’ equity, and it decreases the value of shareholders equity. Hence, debit the pension expense with $108,000.
Accrued/prepaid pension cost is asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $4,000.
Cash is an asset account and it is decreased. Therefore, credit the cash account with $112,000.

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2016	Accrued/prepaid pension cost		2,000
	Other comprehensive income: Prior service cost			2,000
	(To record the amortization of prior service cost)

Table (7)

Accrued/prepaid pension cost is an asset account and it is increased. Therefore, debit the accrued/prepaid pension cost account with $2,000.
Other comprehensive income: Prior service cost is component of shareholders’ equity, and it increases the value of shareholders equity. Hence, credit the other comprehensive income: Prior service cost account with $2,000.

Answer 15

2.

Expert Solution

Answer 16

2.

Expert Solution

Answer 17

Expert Solution

Answer 18

3.

To determine

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000.

3.

Expert Solution

Explanation of Solution

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000 as follows:

In this case, the company has amortized the prior service cost of $2,000. Hence, the ending balances of accumulated other comprehensive income: prior service cost is $58,000 (1).

Working note (1):

Calculate the ending balance of prior service cost.

Ending balance = Opening balance −Amortization of prior service cost=$60,000−$2,000=$58,000

Answer 19

3.

To determine

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000.

Answer 20

3.

Expert Solution

Explanation of Solution

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000 as follows:

In this case, the company has amortized the prior service cost of $2,000. Hence, the ending balances of accumulated other comprehensive income: prior service cost is $58,000 (1).

Working note (1):

Calculate the ending balance of prior service cost.

Ending balance = Opening balance −Amortization of prior service cost=$60,000−$2,000=$58,000

Answer 21

3.

Expert Solution

Answer 22

3.

Expert Solution

Answer 23

Expert Solution

Answer 24

4.

To determine

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016.

4.

Expert Solution

Explanation of Solution

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016 as follows:

Company R has reported a beginning accrued/prepaid pension cost liability of $14,000 and reported pension expense for the period of $108,000. In this case, Company R would need the pension fund of $127,000 (2) to report an accrued/prepaid pension cost assets of $5,000 at the end of the 2016.

Working note (2):

Calculate the pension fund.

Pension fund = (Pension expense +Beginning accrued/prepaid pension cost liability + Accrued/prepaid pension cost asset)=$108,000+$14,000+$5,000=$127,000

Answer 25

4.

To determine

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016.

Answer 26

4.

Expert Solution

Explanation of Solution

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016 as follows:

Company R has reported a beginning accrued/prepaid pension cost liability of $14,000 and reported pension expense for the period of $108,000. In this case, Company R would need the pension fund of $127,000 (2) to report an accrued/prepaid pension cost assets of $5,000 at the end of the 2016.

Working note (2):

Calculate the pension fund.

Pension fund = (Pension expense +Beginning accrued/prepaid pension cost liability + Accrued/prepaid pension cost asset)=$108,000+$14,000+$5,000=$127,000

Answer 27

4.

Expert Solution

Answer 28

4.

Expert Solution

Answer 29

Expert Solution

Answer 30

Ch. 19 - Prob. 1GI Ch. 19 - Prob. 2GI Ch. 19 - Prob. 3GI Ch. 19 - Prob. 4GI Ch. 19 - Prob. 5GI Ch. 19 - Prob. 6GI Ch. 19 - Prob. 7GI Ch. 19 - Prob. 8GI Ch. 19 - Prob. 9GI Ch. 19 - Prob. 10GI

Calculate the amount of pension expense of Company R for 2016.

Calculate the amount of pension expense of Company R for 2016.

Explanation of Solution

Prepare necessary journal entries of Company R for 2016, if company R funds the pension plant in the amount of (a) $108,000, (b) 107,000 and (c) $112,000.

Explanation of Solution

Calculate the ending balance of accumulated other comprehensive income: prior service cost account, assume that the beginning balance of the account is $60,000.

Explanation of Solution

Calculate the amount of pension fund needed in order to report an accrued/prepaid pension cost of $5,000 at the end of 2016.

Explanation of Solution

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