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Accounting
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13 Dec 2019

Which of the following items should be included in pension expense calculated by an employer who sponsors a defined-benefit pension plan for its employees?

Amortization of

Fair value prior

of plan assets service cost

a. Yes Yes

b. Yes No

c. No Yes

d. No No

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Sixta Kovacek
Sixta KovacekLv2
17 Dec 2019
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Related questions

Pharoah Corp. sponsors a defined benefit pension plan for itsemployees. On January 1, 2017, the following balances relate tothis plan.

Plan assets $498,300

Projected benefit obligation 614,700

Pension asset/liability 116,400

Accumulated OCI (PSC) 96,900 Dr.

As a result of the operation of the plan during 2017, thefollowing additional data are provided by the actuary.

Service cost $92,500

Settlement rate, 9%

Actual return on plan assets 54,200

Amortization of prior service cost 18,100

Expected return on plan assets 51,200

Unexpected loss from change in projected benefit obligation,

due to change in actuarial predictions 74,200

Contributions 97,200

Benefits paid retirees 82,600

Using the data above, compute pension expense for Pharoah Corp.for the year 2017 by preparing a pension worksheet. (Enter allamounts as positive.)

PHAROAH CORP.

Pension Worksheet

General Journal Entries

Memo Record

Items

Annual Pension

Expense

Cash

OCI—Prior

Service Cost

OCI— Gain/

Loss

Pension Asset/

Liability

Projected Benefit

Obligation

Plan

Assets

Balance, Jan. 1, 2017

$

$

$

$

$

$

$

Service cost

Interest cost

Actual return

Unexpected gain

Amortization of PSC

Liability increase

Contributions

Benefits

Journal entry for 2017

$

$

Accumulated OCI, Dec. 31, 2016

Balance, December 31, 2017

$

$

$

$

$

Prepare the journal entry for pension expense for 2017. (Creditaccount titles are automatically indented when amount is entered.Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

San Francisco Company sponsors a single-employer IRS qualified defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the net pension cost recognized for a period are service cost, interest cost, and expected return on plan assets.

Required:

What is a qualified pension plan? How does it differ from a non-qualified plan?

What types of assumptions must a company make when accounting for a defined benefit pension plan? Are assumptions also needed when accounting for a defined contributions plan? Explain.

Explain how San Fran should determine the service cost component of the net pension cost.

Explain how San Fran should determine the interest cost component of the net pension cost.

Explain how San Fran should determine the unexpected return on plan assets component of the net pension cost.

Explain the corridor method of accounting for gains and losses.

San Francisco Company sponsors a single-employer IRS qualified defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the net pension cost recognized for a period are service cost, interest cost, and expected return on plan assets. Required: What is a qualified pension plan? How does it differ from a non-qualified plan? What types of assumptions must a company make when accounting for a defined benefit pension plan? Are assumptions also needed when accounting for a defined contributions plan? Explain. Explain how San Fran should determine the service cost component of the net pension cost. Explain how San Fran should determine the interest cost component of the net pension cost. Explain how San Fran should determine the unexpected return on plan assets component of the net pension cost. Explain the corridor method of accounting for gains and losses.

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