Thorp Inc. maintains a defined benefit pension plan for its employees. Pension plan balances as at January
Question:
Thorp Inc. maintains a defined benefit pension plan for its employees. Pension plan balances as at January 1, 2020 include:
Projected Benefit Obligation (PBO), January 1, 2020 | $ 600,000 |
Plan assets at market-related value, January 1, 2020 | $ 550,000 |
Prior service cost (PSC- OCI)1 | $ 150,000 |
Average remaining service period | 15 years |
Service cost | $ 90,000 |
Expected returns on plan assets | 8% |
Actual returns earned on plan assets | $40,000 |
Actuarial interest rate | 4% |
Contributions paid | $ 150,000 |
Benefits to retirees in 2020 | $ 100,000 |
Loss from change in actuarial assumption, December 31, 2020 | $ 46,000 |
1 These prior service costs are from 2019 and already included in PBO on January 1,2020.
Required:
- Determine the pension expenses recognized in 2020.
- Prepare the journal entries to reflect the accounting for the pension plan for 2020.
- Prepare the ending balances (31 December 2020) for plan assets, PBO, and calculate net pension liability.
- What will be the expected impact of the current pandemic (Covid-19) on PBO?
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach