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EXERCISES
E201.

(PensionExpense,JournalEntries)
4

ThefollowinginformationisavailableforthepensionplanofRadcliffeCompanyfortheyear2014.
Actualandexpectedreturnonplanassets
$15,000
Benefitspaidtoretirees
40,000
Contributions(funding)
90,000
Interest/discountrate
10%
Priorservicecostamortization
8,000
Projectedbenefitobligation,January1,2014 500,000
Servicecost
60,000

Instructions
(a)

Computepensionexpensefortheyear2014.

(b)

Preparethejournalentrytorecordpensionexpenseandtheemployer'scontributiontothepensionplanin2014.

E202. (ComputationofPensionExpense)
4

VeldreCompanyprovidesthefollowinginformationaboutitsdefinedbenefitpensionplanfortheyear2014.
Servicecost
Contributiontotheplan
Priorservicecostamortization
Actualandexpectedreturnonplanassets
Benefitspaid
PlanassetsatJanuary1,2014
ProjectedbenefitobligationatJanuary1,2014
AccumulatedOCI(PSC)atJanuary1,2014
Interest/discount(settlement)rate

$90,000
105,000
10,000
64,000
40,000
640,000
700,000
150,000
10%

Instructions
Computethepensionexpensefortheyear2014.
E203. (PreparationofPensionWorksheet)
5
UsingtheinformationinE202,prepareapensionworksheetinsertingJanuary1,2014,balances,showingDecember31,2014,
balances,andthejournalentryrecordingpensionexpense.
E204. (BasicPensionWorksheet)
5
ThefollowingfactsapplytothepensionplanofBoudreauInc.fortheyear2014.
Planassets,January1,2014
$490,000
Projectedbenefitobligation,January1,2014 490,000
Settlementrate
8%
Servicecost
40,000
Contributions(funding)
25,000
Actualandexpectedreturnonplanassets
49,700
Benefitspaidtoretirees
33,400

Instructions
Usingtheprecedingdata,computepensionexpensefortheyear2014.Aspartofyoursolution,prepareapensionworksheetthat
showsthejournalentryforpensionexpensefor2014andtheyearendbalancesintherelatedpensionaccounts.

E205. (ApplicationofYearsofServiceMethod)
6
AndrewsCompanyhasfiveemployeesparticipatinginitsdefinedbenefitpensionplan.Expectedyearsoffutureserviceforthese
employeesatthebeginningof2014areasfollows.
Employee FutureYearsofService
Jim
3
Paul
4
Nancy
5
Dave
6
Kathy
6
OnJanuary1,2014,thecompanyamendeditspensionplan,increasingitsprojectedbenefitobligationby$72,000.

Instructions
Computetheamountofpriorservicecostamortizationfortheyears2014through2019usingtheyearsofservicemethod,settingup
appropriateschedules.
E206. (ComputationofActualReturn)
4
GingrichImportersprovidesthefollowingpensionplaninformation.
Fairvalueofpensionplanassets,January1,2014
$2,400,000
Fairvalueofpensionplanassets,December31,2014 2,725,000
Contributionstotheplanin2014
280,000
Benefitspaidretireesin2014
350,000

Instructions
Fromthedataabove,computetheactualreturnontheplanassetsfor2014.
E207.

(BasicPensionWorksheet)
5

ThefollowingdefinedpensiondataofRydellCorp.applytotheyear2014.
Projectedbenefitobligation,1/1/14(beforeamendment)
$560,000
Planassets,1/1/14
546,200
Pensionliability
13,800
OnJanuary1,2014,RydellCorp.,throughplanamendment,grantspriorservicebenefitshavingapresentvalueof 120,000
Settlementrate
9%
Servicecost
58,000
Contributions(funding)
65,000
Actual(expected)returnonplanassets
52,280
Benefitspaidtoretirees
40,000
Priorservicecostamortizationfor2014
17,000

Instructions
For2014,prepareapensionworksheetforRydellCorp.thatshowsthejournalentryforpensionexpenseandtheyearendbalances
intherelatedpensionaccounts.
E208. (ApplicationoftheCorridorApproach)
8
KensethCorp.hasthefollowingbeginningoftheyearpresentvaluesforitsprojectedbenefitobligationandmarketrelatedvalues
foritspensionplanassets.
ProjectedBenefitObligation PlanAssetsValue

2013
$2,000,000
$1,900,000
2014
2,400,000
2,500,000
2015
2,950,000
2,600,000

2016

3,600,000

3,000,000

Theaverageremainingservicelifeperemployeein2013and2014is10yearsandin2015and2016is12years.Thenetgainorloss
thatoccurredduringeachyearisasfollows:2013,$280,000loss2014,$90,000loss2015,$11,000lossand2016,$25,000gain.
(Inworkingthesolution,thegainsandlossesmustbeaggregatedtoarriveatyearendbalances.)

Instructions
Usingthecorridorapproach,computetheamountofnetgainorlossamortizedandchargedtopensionexpenseineachofthefour
years,settingupanappropriateschedule.
E209. (Disclosures:PensionExpenseandOtherComprehensiveIncome)
9
TaverasEnterprisesprovidesthefollowinginformationrelativetoitsdefinedbenefitpensionplan.
BalancesorValuesatDecember31,2014
Projectedbenefitobligation
$2,737,000
Accumulatedbenefitobligation
1,980,000
Fairvalueofplanassets
2,278,329
AccumulatedOCI(PSC)
210,000
AccumulatedOCINetloss(1/1/14balance,0)
45,680
Pensionliability
458,671
Otherpensionplandatafor2014:

Servicecost
94,000
Priorservicecostamortization
42,000
Actualreturnonplanassets
130,000
Expectedreturnonplanassets
175,680
InterestonJanuary1,2014,projectedbenefitobligation
253,000
Contributionstoplan
93,329
Benefitspaid
140,000

Instructions
(a)

Preparethenotedisclosingthecomponentsofpensionexpensefortheyear2014.

(b)

Determinetheamountsofothercomprehensiveincomeandcomprehensiveincomefor2014.Netincomefor2014is
$35,000.

(c)

ComputetheamountofaccumulatedothercomprehensiveincomereportedatDecember31,2014.

E2010. (PensionWorksheet)
5
WebbCorp.sponsorsadefinedbenefitpensionplanforitsemployees.OnJanuary1,2014,thefollowingbalancesrelatetothisplan.
Planassets
$480,000
Projectedbenefitobligation 600,000
Pensionasset/liability
120,000
AccumulatedOCI(PSC)
100,000 Dr.
Asaresultoftheoperationoftheplanduring2014,thefollowingadditionaldataareprovidedbytheactuary.
Servicecost
$90,000
Settlementrate,9%

Actualreturnonplanassets
55,000
Amortizationofpriorservicecost
19,000
Expectedreturnonplanassets
52,000
Unexpectedlossfromchangeinprojectedbenefitobligation,duetochangeinactuarialpredictions 76,000
Contributions
99,000
Benefitspaidretirees
85,000

Instructions
(a)

Usingthedataabove,computepensionexpenseforWebbCorp.fortheyear2014bypreparingapensionworksheet.

(b)

Preparethejournalentryforpensionexpensefor2014.

E2011. (PensionExpense,JournalEntries,StatementPresentation)
4

HenningCompanysponsorsadefinedbenefitpensionplanforitsemployees.Thefollowingdatarelatetotheoperationoftheplan

fortheyear2014inwhichnobenefitswerepaid.
1.Theactuarialpresentvalueoffuturebenefitsearnedbyemployeesforservicesrenderedin2014amountedto$56,000.
2.Thecompany'sfundingpolicyrequiresacontributiontothepensiontrusteeamountingto$145,000for2014.
3.AsofJanuary1,2014,thecompanyhadaprojectedbenefitobligationof$900,000,anaccumulatedbenefitobligationof
$800,000,andadebitbalanceof$400,000inaccumulatedOCI(PSC).Thefairvalueofpensionplanassetsamountedto
$600,000atthebeginningoftheyear.Theactualandexpectedreturnonplanassetswas$54,000.Thesettlementratewas
9%.Nogainsorlossesoccurredin2014andnobenefitswerepaid.
4.Amortizationofpriorservicecostwas$50,000in2014.Amortizationofnetgainorlosswasnotrequiredin2014.

Instructions
(a)

Determinetheamountsofthecomponentsofpensionexpensethatshouldberecognizedbythecompanyin2014.

(b)

Preparethejournalentryorentriestorecordpensionexpenseandtheemployer'scontributiontothepensiontrusteein
2014.

(c)

Indicatetheamountsthatwouldbereportedontheincomestatementandthebalancesheetfortheyear2014.

E2012. (PensionExpense,JournalEntries,StatementPresentation)
4

FerreriCompanyreceivedthefollowingselectedinformationfromitspensionplantrusteeconcerningtheoperationofthecompany's
definedbenefitpensionplanfortheyearendedDecember31,2014.
January1,2014 December31,2014

Projectedbenefitobligation
$1,500,000
$1,527,000
Marketrelatedandfairvalueofplanassets
800,000
1,130,000
Accumulatedbenefitobligation
1,600,000
1,720,000
AccumulatedOCI(G/L)Netgain
0
(200,000)
Theservicecostcomponentofpensionexpenseforemployeeservicesrenderedinthecurrentyearamountedto$77,000andthe
amortizationofpriorservicecostwas$120,000.Thecompany'sactualfunding(contributions)oftheplanin2014amountedto
$250,000.Theexpectedreturnonplanassetsandtheactualratewereboth10%theinterest/discount(settlement)ratewas10%.
Accumulatedothercomprehensiveincome(PSC)hadabalanceof$1,200,000onJanuary1,2014.Assumenobenefitspaidin2014.

Instructions
(a)

Determinetheamountsofthecomponentsofpensionexpensethatshouldberecognizedbythecompanyin2014.

(b)

Preparethejournalentrytorecordpensionexpenseandtheemployer'scontributiontothepensionplanin2014.

(c)

IndicatethepensionrelatedamountsthatwouldbereportedontheincomestatementandthebalancesheetforFerreri
Companyfortheyear2014.

E2013. (ComputationofActualReturn,GainsandLosses,CorridorTest,andPensionExpense)
4

EricksonCompanysponsorsadefinedbenefitpensionplan.Thecorporation'sactuaryprovidesthefollowinginformationaboutthe
plan.
January1,2014 December31,2014

Vestedbenefitobligation
$1,500
$1,900
Accumulatedbenefitobligation
1,900
2,730
Projectedbenefitobligation
2,500
3,300
Planassets(fairvalue)
1,700
2,620
Settlementrateandexpectedrateofreturn

10%
Pensionasset/liability
800
?
Servicecostfortheyear2014

400
Contributions(fundingin2014)

700
Benefitspaidin2014

200

Instructions
(a)

Computetheactualreturnontheplanassetsin2014.

(b)

Computetheamountoftheothercomprehensiveincome(G/L)asofDecember31,2014.(AssumetheJanuary1,2014,
balancewaszero.)

(c)

Computetheamountofnetgainorlossamortizationfor2014(corridorapproach).

(d)

Computepensionexpensefor2014.

E2014. (WorksheetforE2013)

5
UsingtheinformationinE2013aboutEricksonCompany'sdefinedbenefitpensionplan,preparea2014pensionworksheetwith
supplementaryschedulesofcomputations.PreparethejournalentriesatDecember31,2014,torecordpensionexpenseandrelated
pensiontransactions.Also,indicatethepensionamountsreportedinthebalancesheet.
E2015. (PensionExpense,JournalEntries)
4
LatoyaCompanyprovidesthefollowingselectedinformationrelatedtoitsdefinedbenefitpensionplanfor2014.
Pensionasset/liability(January1)
$25,000 Cr.
Accumulatedbenefitobligation(December31) 400,000
Actualandexpectedreturnonplanassets
10,000
Contributions(funding)in2014
150,000
Fairvalueofplanassets(December31)
800,000
Settlementrate
10%
Projectedbenefitobligation(January1)
700,000
Servicecost
80,000

Instructions
(a)

Computepensionexpenseandpreparethejournalentrytorecordpensionexpenseandtheemployer'scontributiontothe
pensionplanin2014.Preparationofapensionworksheetisnotrequired.Benefitspaidin2014were$35,000.

(b)

Indicatethepensionrelatedamountsthatwouldbereportedinthecompany'sincomestatementandbalancesheetfor
2014.

E2016. (AmortizationofAccumulatedOCI(G/L),CorridorApproach,PensionExpenseComputation)
8
TheactuaryforthepensionplanofGustafsonInc.calculatedthefollowingnetgainsandlosses.
IncurredduringtheYear (Gain)orLoss
2014
$300,000
2015
480,000
2016
(210,000)
2017
(290,000)
Otherinformationaboutthecompany'spensionobligationandplanassetsisasfollows.
AsofJanuary1, ProjectedBenefitObligation PlanAssets(marketrelatedassetvalue)
2014
$4,000,000
$2,400,000
2015
4,520,000
2,200,000
2016
5,000,000
2,600,000
2017
4,240,000
3,040,000
GustafsonInc.hasastablelaborforceof400employeeswhoareexpectedtoreceivebenefitsundertheplan.Thetotalserviceyears
forallparticipatingemployeesis5,600.ThebeginningbalanceofaccumulatedOCI(G/L)iszeroonJanuary1,2014.Themarket
relatedvalueandthefairvalueofplanassetsarethesameforthe4yearperiod.Usetheaverageremainingservicelifeperemployee
asthebasisforamortization.

Instructions
(Roundtothenearestdollar.)
PrepareaschedulewhichreflectstheminimumamountofaccumulatedOCI(G/L)amortizedasacomponentofnetperiodicpension
expenseforeachoftheyears2014,2015,2016,and2017.Applythecorridorapproachindeterminingtheamounttobeamortized
eachyear.
E2017. (AmortizationofAccumulatedOCIBalances)
8
KeetonCompanysponsorsadefinedbenefitpensionplanforits600employees.Thecompany'sactuaryprovidedthefollowing
informationabouttheplan.
January1,
December31,

2014
2014
2015

Projectedbenefitobligation
$2,800,000 $3,650,000 $4,195,000
Accumulatedbenefitobligation
1,900,000 2,430,000 2,900,000
Planassets(fairvalueandmarketrelatedassetvalue)
1,700,000 2,900,000 3,790,000
Accumulatednet(gain)orloss(forpurposesofthecorridorcalculation)
0
198,000
(24,000)
Discountrate(currentsettlementrate)

9%
8%

Actualandexpectedassetreturnrate
Contributions

10%
1,030,000

10%
600,000

Theaverageremainingservicelifeperemployeeis10.5years.Theservicecostcomponentofnetperiodicpensionexpensefor
employeeservicesrenderedamountedto$400,000in2014and$475,000in2015.TheaccumulatedOCI(PSC)onJanuary1,2014,
was$1,260,000.Nobenefitshavebeenpaid.

Instructions
(Roundtothenearestdollar.)
(a)
ComputetheamountofaccumulatedOCI(PSC)tobeamortizedasacomponentofnetperiodicpensionexpenseforeach
oftheyears2014and2015.
(b)
PrepareaschedulewhichreflectstheamountofaccumulatedOCI(G/L)tobeamortizedasacomponentofpension
expensefor2014and2015.
(c)
DeterminethetotalamountofpensionexpensetoberecognizedbyKeetonCompanyin2014and2015.
E2018. (PensionWorksheetMissingAmounts)
5

TheaccountingstaffofUsherInc.haspreparedthefollowingpensionworksheet.Unfortunately,severalentriesintheworksheetare
notdecipherable.Thecompanyhasaskedyourassistanceincompletingtheworksheetandcompletingtheaccountingtasksrelatedto
thepensionplanfor2014.

Instructions
(a)

Determinethemissingamountsinthe2014pensionworksheet,indicatingwhethertheamountsaredebitsorcredits.

(b)

Preparethejournalentrytorecord2014pensionexpenseforUsherInc.

(c)

Theaccountingstaffhasheardofapensionaccountingprocedurecalledcorridoramortization.IsUsherrequiredtorecord
anyamountsforcorridoramortizationin(1)2014?In(2)2015?Explain.

*E2019. (PostretirementBenefitExpenseComputation)
10 11
KreterCo.providesthefollowinginformationaboutitspostretirementbenefitplanfortheyear2014.
Servicecost
$45,000
Contributiontotheplan
10,000
Actualandexpectedreturnonplanassets
11,000
Benefitspaid
20,000
PlanassetsatJanuary1,2014
110,000
AccumulatedpostretirementbenefitobligationatJanuary1,2014 330,000
Discountrate
8%

Instructions
Computethepostretirementbenefitexpensefor2014.
*E2020. (PostretirementBenefitWorksheet)
10 11
Usingtheinformationin*E2019,prepareaworksheetinsertingJanuary1,2014,balances,andshowingDecember31,2014,
balances.Preparethejournalentryrecordingpostretirementbenefitexpense.
*E2021. (PostretirementBenefitExpenseComputation)
10 11
GarnerInc.providesthefollowinginformationrelatedtoitspostretirementbenefitsfortheyear2014.
AccumulatedpostretirementbenefitobligationatJanuary1,2014 $710,000
Actualandexpectedreturnonplanassets
34,000
Priorservicecostamortization
21,000
Discountrate
10%
Servicecost
83,000

Instructions
Computepostretirementbenefitexpensefor2014.
*E2022. (PostretirementBenefitExpenseComputation)
10 11
EnglehartCo.providesthefollowinginformationaboutitspostretirementbenefitplanfortheyear2014.
Servicecost
Priorservicecostamortization
Contributiontotheplan
Actualandexpectedreturnonplanassets
Benefitspaid
PlanassetsatJanuary1,2014
AccumulatedpostretirementbenefitobligationatJanuary1,2014
AccumulatedOCI(PSC)atJanuary1,2014
Discountrate

$90,000
3,000
56,000
62,000
40,000
710,000
760,000
100,000
9%

Dr.

Instructions
Computethepostretirementbenefitexpensefor2014.
*E2023. (PostretirementBenefitWorksheet)
10 11
Usingtheinformationin*E2022,prepareaworksheetinsertingJanuary1,2014,balances,showingDecember31,2014,balances,
andthejournalentryrecordingpostretirementbenefitexpense.
*E2024. (PostretirementBenefitWorksheetMissingAmounts)
10 11
TheaccountingstaffofHolderInc.haspreparedthefollowingpostretirementbenefitworksheet.Unfortunately,severalentriesinthe
worksheetarenotdecipherable.Thecompanyhasaskedyourassistanceincompletingtheworksheetandcompletingtheaccounting
tasksrelatedtothepensionplanfor2014.

Instructions
(a)

Determinethemissingamountsinthe2014postretirementworksheet,indicatingwhethertheamountsaredebitsorcredits.

(b)

Preparethejournalentrytorecord2014postretirementexpenseforHolderInc.

(c)

WhatdiscountrateisHolderusinginaccountingfortheinterestonitsotherpostretirementbenefitplan?Explain.

Copyright 2013 John Wiley & Sons, Inc. All rights reserved.