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Intermediate Accounting Iii

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P20-1 (2-Year Worksheet) On January 1, 2010, Cunningham Company has the following defined- benefit pension plan balances.

Projected benefit 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, 2011, 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.
2010 2011
Service cost $150,000 $180,000
Prior service cost amortization –0– 90,000
Contributions (funding) to the plan 240,000 285,000
Benefits 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 2010 and 2011.
• (b) For 2011, prepare the journal entry to record pension-related amounts.

SOLUTION

(a) CUNNINGHAM COMPANY
Pension Worksheet—2010 and 2011 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, 2010 300,000 Cr. 4,500,000 Cr. 4,200,000 Dr.
Service cost 150,000 Dr. 150,000 Cr.
Interest cost* 450,000 Dr. 450,000 Cr.
Actual return 252,000 Cr. 252,000 Dr.
Contributions 240,000 Cr. 240,000 Dr.
Benefits 200,000 Dr. 200,000 Cr.
Journal entry for 2010 348,000 Dr. 240,000 Cr. 0 0 108,000 Cr.
Accumulated OCI, Dec. 31, 2009
Balance, Dec. 31, 2010 408,000 Cr. 4,900,000 Cr. 4,492,000 Dr.
Additional PSC, 1/1/2011 500,000 Dr. 500,000 Cr....

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