Question

Jay Company has had a defined benefit pension plan for several years. At the beginning of 2016, Jay amended the plan; this amendment provided for increased benefits to employees based on services rendered in prior periods. The prior service cost related to this amendment totaled $88,000. As a result, the projected benefit obligation increased. Jay decided not to fund the increased obligation at the time of the amendment, but rather to increase its periodic year-end contributions to the pension plan.
The following information for 2016 has been provided by Jay’s actuary and funding agency and obtained from a review' of its accounting records:
Projected benefit obligation (12/31) ........... $808,090
Service cost ................... 183,000
Discount rate ................... . 9%
Cumulative net loss (1/1) .............. 64,500
Company contribution to pension plan (12/31) ....... 200,000
Projected benefit obligation (1/1)* ........... 513,000
Plan assets, fair value (12/31) ............. 698,000
Accrued pension cost (liability) (1/1) .......... 33,000*
Expected (and actual) return on plan assets ....... 48,000
Plan assets, fair value (1/1) .............. 480,000
Retirement benefits paid ............... 30,000
* Before the increase of $88,000 due to the prior service cost from the amendment
Jav decided to amortize the prior service cost and any excess cumulative net loss by' die straight line method over the average remaining service life of the participating employees. It has developed the following .schedule concerning these 50 employees:
*per employee
Required:
1. Compute the average remaining service lift: and prepare a schedule to determine the amortization of the prior service cost of Jay for 2016.
2. Prepare a schedule to compute the net gain or loss component of pension expense for 2016.
3. Prepare a schedule to compute the pension expense for 2016.
4. Prepare all the journal entries related to Jay’s pension plan for 2016.
5. What is Jay’s total accrued/prepaid pension cost at the end of 2016? Is it an asset or liability?


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  • CreatedOctober 05, 2015
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