Comprehensive Pension Problem

Comprehensive Pension Problem - Take Home Quiz - a 20 points bonus

The following information relate to the defined benefit pension plan of Lorentz Corp. as of 1/1/x1
	Projected benefit obligation				1,665,000
	Fair value of plan assets				1,513,500
	Unrecognized prior service cost			   221,600
	Unrecognized net pension gain or (loss)			    (65,000)	 
	
Pension data for 20x1 and 20x2:				     20x1		    20x2	
	Service cost					    87,000		    98,000
	Contributions to pension plan				  120,000		  125,000
	Benefits paid to retirees				  132,000		  140,000
	Actual return on pension plan assets			    26,350		  180,000
	Amortization of prior service costs			    53,000		    42,000
	Settlement interest rate				      11%		     11%
	Expected rate of return on plan assets			      10%		     10%
	Accumulated benefit obligation 12/31			1,620,000		1,850,000
	Vested benefit obligation 12/31			1,200,000		1,500,000
	Average remaining service lives of employees		      12 years	     14 years

1.	Calculate the PBO at 12/31/x1 and 12/31/x2
	20x1	20x2
Beginning balance	1,665,000 	
Service cost		
Interest		
Benefits paid to retirees		
Ending balance		

2. 	Calculate the fund balance at 12/31/x1 and 12/31/x2
	20x1	20x2
Beginning balance	1,513,500 	
Contributions to pension plan		
Actual return on pension plan assets		
Benefits paid to retirees		
Ending balance		

3. 	The corridor for amortization of gain or loss is, for 20x1	    $_____________ 	for 20x2	    $_____________


4. 	Calculate the experience gain or loss, if any for 20x1 and 20x2
	20x1	20x2
Actual return on plan assets		
Expected return on plan assets		
Experience gain (loss)		

5. 	Calculate the amortization of gain or loss, if any for 20x1 and 20x2
	20x1	20x2
Cumulative unamortized gains(losses)	(65,000)	
Corridor for gain/loss amortization		
Excess, if any		
Amortization period		
Amount of gain/loss to amortize, if any		


 
6. 	Calculate pension expense (sometimes referred to net pension cost) for 20x1 and 20x2
	20x1	20x2
Service Cost		
Interest		
Return		
Amortization of PSC		
Amortization of gain/loss		
Net Pension Cost		

7. 	Make journal entries to record pension expense for 20x1 and 20x2













8. 	Calculate the funded status for 20x1 and 20x2
	20x1	20x2
Projected benefit obligation		
Fair value of plan assets		
Funded Status		

Assume that all prior years, cumulative pension expense exceeded contributions by $31,500.

9. 	Calculate the balance in Prepaid/Accrued Pension Cost at 12/31/x1 and 12/31/x2
	20x1	20x2
Beginning balance - Debit (Credit)	(31,500)	
Debit (Credit) entry		
Ending balance - Debit (Credit)		

10. 	Calculate the additional liability balance, if any, needed at 12/31/x1 and 12/31/x2
	20x1	20x2
Funded Status - Debit (Credit)		
Debit (Credit) bal (Prepaid/Accrued)		
Additional liability balance		

11. 	Make the adjusting entry, if any, needed to report the balance sheet reporting requirement (Hint, the additional liability balance at 12/31/x0 is zero) at 12/31/x1 and 12/31/x2.