Problem 1 - On January 1, 2012, Harrington Company has the following defined benefit pension plan balances.
| Projected benefits obligation |
$5,600,000 |
| Fair value of plan assets |
6,400,000 |
The interest (settlement) rate applicable to the plan is 9% On January 1, 2013, the company amends its pension agreement so that service costs of $620,000 are created. Other data related to the pension plan are as follows:
|
2012
|
2013
|
|
Service costs
|
$180,000
|
$195,000
|
|
Prior service costs amortization
|
0
|
97,000
|
|
Contributions (funding) to the plan
|
255,000
|
305,000
|
|
Benefits paid
|
225,000
|
300,000
|
|
Actual return on plan assets
|
320,000
|
515,000
|
|
Expected rate of return on assets
|
5%
|
8%
|
Instructions:
(a) Prepare a pension worksheet for the pension plan for 2012 and 2013.
(b) For 2013, prepare the journal entry to record pension-related amounts.
Problem 2 - Allison Co. has the following postretirement benefit plan balances on January 1, 2012.
|
Accumulated Post retirement benefit obligation
|
$2,535,000
|
|
Fair value of plan assets
|
2,535,000
|
The interest (settlement) rate applicable to the plan is 8% On January 1, 2013, the company amends the plan so that prior service costs of $185,000 were created. Other data related to the pension plan are as follows:
|
2012
|
2013
|
|
Service costs
|
$80,000
|
$87,000
|
|
Prior service costs amortization
|
0
|
13,000
|
|
Contributions (funding) to the plan
|
47,000
|
38,000
|
|
Benefits paid
|
41,000
|
43,000
|
|
Actual return on plan assets
|
200,000
|
155,000
|
|
Expected rate of return on assets
|
9%
|
7%
|
Instructions:
(a) Prepare a worksheet for the postreitrement plan for 2012 & 2013.
(b) Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2012.
(c) Prepare any journal entries related to the postretirement plan as of December 31, 2013.
(d) Show the postretirement-benefit-related amounts reported in the 2013 Income Statement and Balance Sheet.