Hiatt Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2017.
Question:
There were no balances as of January 1, 2017, when the plan was initiated. The actual and expected return on plan assets was 10% over the 3-year period, but the settlement rate used to discount the company's pension obligation was 13% in 2017, 11% in 2018, and 8% in 2019. The service cost component of net periodic pension expense amounted to the following: 2017, $60,000; 2018, $85,000; and 2019, $119,000. The average remaining service life per employee is 12 years. No benefits were paid in 2017, $30,000 of benefits were paid in 2018, and $18,500 of benefits were paid in 2019 (all benefits paid at end of year).
Instructions
(Round to the nearest dollar.)
(a) Calculate the amount of net periodic pension expense that the company would recognize in 2017, 2018, and 2019.
(b) Prepare the journal entries to record net periodic pension expense, employer's funding contribution, and related pen-sion amounts for the years 2017, 2018, and 2019.
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1118742976
16th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield