3a. Haley Inc. amended its defined benefit pension plan as of January 1, 2021. The amendment provided additional pension credit for work already done in the amount of $800,000. Haley estimated that the average remaining service lives of employees covered by the prior service cost amendment was 10 years.

For the year ended December 31, 2022, which of the following statements are correct? Choose ONE option from A-D and ANOTHER ONE from E-H. There will be TWO CORRECT ANSWERS.

1. The pension amendment will cause pension expense to increase by $80,000 in 2021.
2. Comprehensive income will decrease $800,000 for 2021.
3. A and B.
4. Neither A nor B.
5. Pension expense will increase $80,000.
6. Comprehensive income is not affected by the amortization of prior service.
7. E and F.
8. Neither E nor F.

3b. The information below pertains to a company’s defined benefit pension plan:

• Fair value of pension assets on January 1, 2021                                   $440,000
• Fair value of pension assets on December 31, 2021                              487,000
• Pensions paid during 2021                                                                           60,000
• Employer contribution to the trust in 2021                                                63,000
• Expected return on pension assets                                                               10%
• Market related value of pension assets at January 1, 2021                    475,000
• Market related value of pension assets at December 31, 2021              517,000

What is the unexpected gain (loss) on pension assets for 2021?

1. $ 3,500.
2. $(3,500).
3. $ 7,700.
4. $(7,700).

3c. The following amounts have been abstracted from a firm’s pension work paper for the year ended December 31, 2021:

• Pension expense                                                                                              $                     75,000
• Employer contribution                                                                                                           45,000
• Other comprehensive income: prior service cost                                                               8,000
• Other comprehensive income: unexpected gains (losses)                                              63,000
• Pension asset (liability) at January 1, 2021                                                                        (90,000)
• Accumulated other comprehensive income: prior service cost (at 1/1/21)                 80,000
• Accumulated other comprehensive income: unexpected (actuarial) - Gains (losses) at 1/1/21       0

In the journal entry to record pension expense for 2021, the pension asset/liability account should be

1. credited for $22,000.
2. credited for $30,000.
3. debited for $25,000.
4. debited for $41,000.

 

3d. The following amounts have been abstracted from a firm’s pension work paper for the year ended December 31, 2021:

• Plan assets 1/1/21                                                                            $              715,000
• Projected benefit obligation 1/1/21                                                               810,000
• Service cost                                                                                                          84,000
• Interest cost                                                                                                         48,600
• Expected return                                                                                                                 82,500
• Actual return                                                                                                       63,600
• Amortization of prior service cost                                                                  7,500
• Employer contribution                                                                                     65,000
• Pensions paid                                                                                                    112,500
• Amortization of unexpected loss                                                                      900
• Increase in projected benefit obligation at 12/31/21 resulting from actuarial changes           45,000

At December 31, 2021....

What is the fair value of pension assets?

                A.            Pension Assets: $731,100.

                B.            Pension Assets: $690,000. 

                C.            Pension Assets: $750,000. 

                D.            Pension Assets: $749,100. 

What is the projected benefit obligation?

                A.            Projected benefit obligation: $785,100.

                B.           Projected benefit obligation: $875,100.

                C.           Projected benefit obligation: $762,600.

                D.           Projected benefit obligation: $830,100.

What is the pension expense?

1. Pension Expense: $57,600.
2. Pension Expense: $58,500.
3. Pension Expense: $50,100.
4. Pension Expense: $51,000.

What was the total dollar effect on other comprehensive income (loss)-unexpected gains (losses)?

A.            $(64,800).

                B.            $(63,900).

                C.            $(45,900).

                D.            $(63,000).

Answer rating: 100% (QA)

The detailed answer for the above question is provided below 3a The correct answers are A and B A The pension amendment will cause pension expense to ... View the full answer