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E20-14

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Intermediate Accounting (Kieso)
Found in: Page 1166

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Short Answer

Using the information in E20-13 about Erickson Company’s defined benefit pension plan, prepare a 2017 pension worksheet with supplementary schedules of computations. Prepare the journal entries at December 31, 2017, to record pension expense and related pension transactions. Also, indicate the pension amounts reported in the balance sheet.

Defined benefit pension plans are retirement pension plans that are fully sponsored by the employer.

See the step by step solution

Step by Step Solution

Step 1: Pension Worksheet.

Erickson Company
Pension Worksheet
General journal entriesMemo record

Particulars

Annual pension expense

Cash

OCI- Gain/Loss

Pension asset/liability

Projected benefit obligation

Plan assets

Balance Jan 1, 2017

$800 Cr.

$2,500 Cr.

$1,700 Dr.

Service cost

$400 Dr.

$400 Cr.

Interest cost

$250 Dr.

$250 Cr.

Actual return

$420 Dr.

$420 Dr.

Unexpected gain

$250 Dr.

$250 Cr.

Contributions

$700 Cr.

$700 Dr.

Benefits

$200 Dr.

$200 Cr.

Liability increase

$350 Cr.

$350 Cr.

Journal entry for 2017

$480 Dr.

$700 Cr.

$100 Dr.

$120 Dr.

Accumulated OCI Dec31, 2017

0

Balance Dec 31, 2017

$100 Dr.

$680 Cr.

$3,300 Cr.

$2,620 Dr.

Step 2: Journal entry to record the pension expense on December 31, 2017.

Erickson Company
Journal Entry

Date

Particulars

Debit

Credit

Dec 31, 2017

Other comprehensive income

$100

Pension Expense

$480

Pension Asset/Liability

$120

Cash

$700

(To record the pension expense)

Step 3: Indication of the pension amounts to be reported in the balance sheet

Erickson Company
Balance Sheet as on December 31, 2017

Liabilities

Amount

Pension Liability

$680

Stockholder’s Equity

Accumulated other comprehensive loss (Gain/Loss)

$100

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