Chapter 20 Accounting for Pensions
BRIEF EXERCISE 20.1
Service cost
Interest on DBO
Interest revenue on plan assets
Pension expense
HK$316,000,000
342,000,000
(371,000,000)
HK$287,000,000
LO: 1, Bloom: AP, Difficulty: Simple, Time: 5-7, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
BRIEF EXERCISE 20.3
UDDIN COMPANY
Items
1/1/19
Service cost
Interest expense
Interest revenue
Contributions
Benefits
Journal entry
12/31/19
General Journal Entries
Pension
Pension
Asset/
Expense
Cash
Liability
Memo Record
Defined
Benefit
Plan
Obligation
Assets
250,000 Cr.
27,500 Cr.
25,000 Cr.
27,500 Dr.
25,000 Dr.
25,000 Cr.
250,000 Dr.
17,500 Dr.
25,000 Dr.
20,000 Dr.
17,500 Cr.
27,500 Dr. 20,000 Cr. 7,500 Cr.
7,500 Cr. 285,000 Cr.
277,500 Dr.
20,000 Cr.
LO: 2, Bloom: AP, Difficulty: Moderate, Time: 20-25, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
BRIEF EXERCISE 20.5
Pension expense
Service cost (current) .......................................................
Past service cost ..............................................................
Net interest........................................................................
$ 23,000
120,000
8,000
$151,000
LO: 3, Bloom: AP, Difficulty: Simple, Time: 5-7, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
BRIEF EXERCISE 20.6
Current service cost .........................................................
Past service cost ..............................................................
Interest expense ...............................................................
Interest revenue ................................................................
Pension expense ..............................................................
€26,000
(125,000)
9,000
(2,500)
(€92,500)
LO: 3, Bloom: AP, Difficulty: Simple, Time: 5-7, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
BRIEF EXERCISE 20.9
Statement of Comprehensive Income
Revenues ............................................................................
Expenses ............................................................................
Pension expense ................................................................
Net income ..........................................................................
Other comprehensive income
Actuarial loss on defined
benefit plan ......................................................................
Total comprehensive income ............................................
€125,000
85,000
14,000
26,000
750
€ 25,250
LO: 5, Bloom: AP, Difficulty: Moderate, Time: 10-15, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
BRIEF EXERCISE 20.11
Service cost .................................................................................
Interest expense ..........................................................................
Interest revenue ...........................................................................
Postretirement expense ..............................................................
$40,000
52,400
(26,900)
$65,500
LO: 6, Bloom: AP, Difficulty: Simple, Time: 5-7, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
Pension Worksheet—2019
General Journal Entries
Annual
Cash
Pension
Items
Pension
Asset/Liability
Memo Record
Defined
Benefit
Obligation
Plan Assets
700,000 Cr.
640,000 Dr.
Expense
Balance, January 1, 2019
60,000 Cr.
Service cost
90,000 Dr.
90,000 Cr.
Interest expense*
70,000 Dr.
70,000 Cr.
Interest revenue**
64,000 Cr.
Contributions
64,000 Dr.
105,000 Cr.
105,000 Dr.
Benefits
Journal entry for 2019***
Balance, Dec. 31, 2019
96,000 Dr. 105,000 Cr.
40,000 Dr.
40,000 Cr.
820,000 Cr.
769,000 Dr.
9,000 Dr.
51,000 Cr.
EXERCISE 20.3 (15–25 minutes)
VELDRE SpA
Pension Worksheet—2019
Kieso, IFRS, 3/e, Solutions Manual
General Journal Entries
Items
Memo Record
Annual
Pension
Defined
Pension
Asset/
Benefit
Plan
Liability
Obligation
Assets
490,000 Cr.
490,000 Dr.
Expense
Cash
Balance, January 1, 2019
(For Instructor Use Only)
Service cost
40,000 Dr.
40,000 Cr.
Interest expense*
39,200 Dr.
39,200 Cr.
Interest revenue**
39,200 Cr.
Contributions
39,200 Dr.
25,000 Cr.
25,000 Dr.
Benefits
Journal entry, December 31
Balance, December 31, 2019
40,000 Dr.
33,400 Dr.
33,400 Cr.
535,800 Cr.
520,800 Dr.
25,000 Cr. 15,000 Cr.
15,000 Cr.
EXERCISE 20.4 (10–15 minutes)
Copyright © 2018 Wiley
BOUDREAU PLC.
20-4
EXERCISE 20.5 (10–15 minutes)
(a)
Computation of Actual Return on Plan Assets
Fair value of plan assets at 12/31/19 .......................
Fair value of plan assets at 1/1/19 ...........................
Increase in fair value of plan assets........................
Deduct: Contributions to plan during 2019 ...........
Less benefits paid during 2019 ................
Actual return on plan assets for 2019 .....................
(b)
₺ 2,725,000
(2,400,000)
325,000
₺280,000
350,000
₺
(70,000)
395,000
Asset Gain = [(₺2,400,000 X 7%) – ₺395,000] = ₺227,000.
The gain is reported in other comprehensive income in the statement of comprehensive income.
LO: 1, Bloom: AP, Difficulty: Simple,
Pension Worksheet—2019
General Journal Entries
Items
Annual
Pension
Defined
Pension
Asset/
Benefit
Plan
Liability
Obligation
Assets
13,800 Cr.
560,000 Cr.
Expense
Cash
Balance, Dec. 31, 2018
Past service cost
Memo Record
120,000 Dr.
120,000 Cr.
Balance, Jan. 1, 2019
680,000 Cr.
Service cost
58,000 Dr.
58,000 Cr.
Interest expense*
61,200 Dr.
61,200 Cr.
Interest revenue**
49,158 Cr.
Contributions
65,000 Cr.
Balance, Dec. 31, 2019
190,042 Dr.
546,200 Dr.
49,158 Dr.
65,000 Dr.
Benefits
Journal entry for 2019
546,200 Dr.
65,000 Cr.
40,000 Dr.
40,000 Cr.
759,200 Cr.
620,358 Dr.
125,042 Cr.
138,842 Cr.
*¥61,200 = ¥680,000 X .09.
**¥49,158 = ¥546,200 X .09.
LO: 2,3, Bloom: AP, Difficulty: Moderate, Time: 15-25, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
6
EXERCISE 20.6 (15–25 minutes)
YANG LTD
20-19
Only)
EXERCISE 20.7 (20–25 minutes)
(a)
General Journal Entries
Copyright © 2018 Wiley
Annual
Pension
Expense
Cash
OCI - Gain/Loss
Balance, January 1, 2019
Memo Record
Pension
Asset/Liability
1,400,000 Cr.
Defined Benefit
Obligation
6,300,000 Cr.
Kieso, IFRS, 3/e, Solutions Manual
Service cost
120,000 Dr.
120,000 Cr.
Interest expense ($6,300,000
X .07)
441,000 Dr.
441,000 Cr.
Interest revenue ($4,900,000
X .07)
343,000 Cr.
Contributions
400,000 Cr.
400,000 Dr.
300,000 Dr.
Asset Loss ($343,000 –
$295,000)
48,000 Dr.
Liability Loss
89,000 Dr.
(For Instructor Use
Accumulated OCI 12/31/18
Balance, Dec. 31, 2019
218,000 Dr.
4,900,000 Dr.
343,000 Dr.
Benefits
Journal entry for 2019
Plan Assets
400,000 Cr.
137,000 Dr.
300,000 Cr.
48,000 Cr.
89,000 Cr.
45,000 Dr.
0
137,000 Dr.
1,355,000 Cr.
6,650,000 Cr.
5,295,000 Dr.
EXERCISE 20.7 (Continued)
(b) Pension Expense ........................................................
OCI – G/L .....................................................................
Pension Asset/Liability ...............................................
Cash .............................................................
218,000
137,000
45,000
400,000
(c) The pension loss of $137,000 ($48,000 asset loss; $89,000 liability loss) is recognized in other
comprehensive income. The balance at 12/31/19 of $137,000 is reported in accumulated other
comprehensive income in shareholders’ equity.
LO: 2,5, Bloom: AP, Difficulty: Moderate, Time: 20-25, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
Copyright © 2018 Wiley
Kieso, IFRS, 3/e, Solutions Manual
(For Instructor Use Only)
20-8