Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2020 and 2021.

Instructions

a. Prepare a pension worksheet presenting both years 2020 and 2021 and accompanying computations and amortization of the loss (2021) using the corridor approach.

b. Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year.

c. For 2021, indicate the pension amounts reported in the financial statements.

Transcribed Image Text:

2020 2021 Projected benefit obligation, January 1 Plan assets (fair value and market-related value), January 1 Pension asset/liability, January 1 Prior service cost, January 1 $600,000 410,000 190,000 Cr. 160,000 $ 59,000 Service cost 40,000 10% Settlement rate 10% Expected rate of return Actual return on plan assets Amortization of prior service cost 10% 10% 36,000 61,000 70,000 50,000 Annual contributions 97,000 81,000 Benefits paid retirees Increase in projected benefit obligation due to changes in actuarial assumptions Accumulated benefit obligation at December 31 Average service life of all employees Vested benefit obligation at December 31 31,500 54,000 87,000 -0- 721,800 789,000 20 years 464,000