Describe the accounting for actuarial gains and losses.
A pension plan administrator refers to the group of people or a section of a department in an organization responsible for handling each employee's pension plans.
Actuarial gains and losses arise due to the difference in the amounts of actual and expected payments prescribed by the organization's actuary under the pension worksheet.
When an organization faces an actuarial gain or loss, that must be balanced with the amount of estimated pension payment to indicate a more precise and accurate value of the total pension benefit obligations. The amount of adjustments made should be reputed in an organization's financial statements at the end of each accounting period.
Linda Berstler Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan.
January 1, 2017 December 31, 2017
Defined benefit obligations $2,500 $3,300
Plan assets (fair value) 1,700 2,620
Discount rate 10%
Pension asset/liability 800 ?
Service cost for the year 2017 400
Contributions (funding in 2017) 700
Benefits paid in 2017 200
(a) Compute the actual return on the plan assets in 2017.
(b) Compute the amount of other comprehensive income (G/L) as of December 31, 2017. (Assume the January 1, 2017, balance was zero.)
The accounting staff of Usher Inc. 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 Usher Inc. (c) The accounting staff has heard of a pension accounting procedure called “corridor amortization.” Is Usher required to record any amounts for corridor amortization in (1) 2017? In (2) 2018? Explain.
On January 1, 2017, Harrington Company has the following defined benefit pension plan balances. Projected benefi t obligation $4,500,000 Fair value of plan assets 4,200,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2018, the company amends its pension agreement so that prior service costs of $500,000 are created. Other data related to the pension plan are as follows. Insert Page Layout Formulas Data Review View A P18 fx BCD E F G Postretirement Benefit Worksheet—Holder Inc.xls Home 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Postretirement Asset/Liability Other Comprehensive Income—PSC APBO Memo Record Items Plan Assets General Journal Entries Annual Expense Cash (1) (2) (3) 3,000 (6) 410,000 56,000 36,900 5,000 497,900 Cr. 120,000 2,000 (4) 5,000 183,000 Dr. Balance, Jan. 1, 2017 Service cost Interest cost Actual/Expected return Contributions Benefits Amortization of PSC Journal entry for 2017 Accumulated OCI, Dec. 31, 2016 Balance, Dec. 31, 2017 66,000 (7) (5) (8) 30,000 Dr. 27,000 Dr. 290,000 (9) 314,900 Cr. 2017 2018 Service cost $150,000 $180,000 Prior service cost amortization –0– 90,000 Contributions (funding) to the plan 240,000 285,000 Benefi ts paid 200,000 280,000 Actual return on plan assets 252,000 260,000 Expected rate of return on assets 6% 8% Instructions (a) Prepare a pension worksheet for the pension plan for 2017 and 2018. (b) For 2018, prepare the journal entry to record pension-related amounts.
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