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E20-24

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Intermediate Accounting (Kieso)
Found in: Page 1168

Short Answer

The accounting staff of Holder Inc. has prepared the following postretirement benefit worksheet. Unfortunately, several entries in the worksheet are not decipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for 2017.

Instructions (a) Determine the missing amounts in the 2017 postretirement worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2017 postretirement expense for Holder Inc. (c) What discount rate is Holder using in accounting for the interest on its other postretirement benefit plan? Explain

Accounting is a term used when an organization records its financial transactions in its books of accounts. The primary purpose of accounting is to track all business transactions.

See the step by step solution

Step by Step Solution

Step 1: (a) Determining the missing amount in the 2017 post-retirement worksheet.

Holder Inc
Post-retirement benefit worksheet
General journal entriesMemo record

Particulars

Annual post-retirement expense

Cash

OCI-Prior service cost

Post-retirement asset/liability

Annual projected benefit obligation

Plan assets

Balance Jan 1, 2017

$290,000 Cr.

$410,000 Cr.

$120,000 Dr.

Service cost

$56,000 Dr.

$56,000 Cr.

Interest cost

$36,900 Dr.

$36,900 Cr.

Actual return

$2,000 Cr.

$2,000 Dr

Contributions

$66,000 Cr.

$66,000 Dr.

Benefits

$5,000 Dr.

$5,000 Cr.

Amortization of PSC

$3,000 Dr.

$3,000 Cr.

Journal entry for 2017

$93,900 Dr.

$66,000 Cr.

$3,000 Cr.

$24,900Cr.

Accumulated OCI 2016

$30,000 Dr.

Balance Dec 31, 2017

$27,000 Dr.

$314,900Cr.

$497,900 Cr.

$183,000 Dr.

Step 2: (b) Preparation of the journal entry to record 2017 post-retirement expense for Holder Inc

Holder Inc
Journal Entry

Date

Particulars

Debit

Credit

2017

Pension expense

$93,900

Cash

$66,000

Other comprehensive income

$3,000

Post-retirement asset/liability

$24,900

(To record the post-retirement expense)

Step 3: (c) Computation of discount rate

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