Brown Inc. has the following information available regarding their defined benefit pension plan. Prior service costs (PSC) were $60,000.

Settlement (discount) rate is 6% and expected return on plan assets is 7%.

Brown has 18 employees and 2 are expected to retire each year. (check figure for PSC amortization formula is 20%)

PBO (1/1/2020)                                                             $500,000 (includes PSC)

Service cost for 2020 $140,000

Plan Assets (1/1/2020)                                                   $300,000

Plan Assets (12/31/2020) $491,000

Contributions to plan (at year end) 2020 $220,000

Benefits paid from plan in 2020 $30,000

Unrecognized Actuarial Loss (as of 1/1/2020)                 <$100,000>

Average remaining service life of employees is 5 years.

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Original JE on 1/1/20 for Prior Service Cost (PSC) due to the amendment to pension plan

OCI -PSC                               60,000

            Accrued/Prepaid Pension Cost    60,000

Jan 1 Balance in Acc/Ppd Pension Cost account is $84,000 (credit); after $60,000 PSC JE was posted

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REQUIRED: 

Determine the actual return on plan assets.

Show the “SYD” employee formula and work for calculating the 20% amortization for PSC.

Determine each of the components of 2020 pension cost (expense) and total. Show all work.

Prepare the 2020 pension adjusting entry; Brown funds the pension assets with $220,000 (shown above).

Prepare the necessary entry for the amortization of prior service cost.

Answer rating: 100% (QA)

I Determination of the actual return on plan assets The actual return on plan assets can be calculat... View the full answer