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Intermediate Accounting (Kieso)
Found in: Page 1172

Short Answer

Question: Kramer Co. has prepared the following pension 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 pension worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2017 pension expense for Kramer Co. (c) Determine the following for Kramer for 2017: (1) settlement rate used to measure the interest on the liability and (2) expected return on plan assets.

Expected return on plan assets is a term used when an organization determines the future value of its plan assets based on the time value of money. This value is determined by combining the actual return and the loss on the plan assets.

See the step by step solution

Step by Step Solution

Step 1: (a) Pension worksheet

Kramer Co.
Pension Worksheet for the year 2017
General journal entriesMemo Record


Annual pension expense


OCI-Prior service cost


Pension asset/liability

Projected benefit obligation

Plan assets

Balance Jan 1, 2017


$120,000 Cr.

$325,00 Cr.

$205,000 Dr.

Service cost

$20,000 Dr.

$20,000 Cr.

Interest cost

$26,000 Dr.

$26,000 Cr.

Actual return

$18,000 Cr.

$18,000 Dr.

Unexpected loss

$2,500 Cr.

$2,500 Dr.

Amortization of PSC

$35,000 Dr.

$35,000 Cr.


$41,000 Cr.

$41,000 Dr.


$15,000 Dr.

$15,000 Cr.

Increase in PBO

$43,500 Dr.

$43,500 Cr.

Journal entry for 2018

$60,500 Dr.

$41,000 Cr.


$46,000 Dr.

$30,500 Cr.

Accumulated OCI Dec 31, 2016

$80,000 Dr.


Balance Dec 31, 2017

$45,000 Dr.


$150,500 Cr.


$249,000 Dr.

Step 2: (b) Journal entry for the year 2017.

Kramer Co.
Journal Entry






Pension Expense


Other comprehensive income (gain/loss)




Pension asset/liability


Other comprehensive income (PSC)


(To record the pension expense)

Step 3: (c) Determination of the following rates.

1. The settlement rate used to measure the interest on the liability:

2. The expected return on plan assets

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