Intermediate Accounting 2 Finalchapter-18 PDF

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CHAPTER 18Problem 18-EMPLOYEE BENEFIT EXPENSE 830,Current service cost 700,Interest expense on PBO (10% x 5,000,000) 500,Interest expense on PBO (10% x 5,000,000) 500,EMPLOYEE BENEFIT EXPENSE 1,650, Remeasurement Actual return on plan assets 900,Interest income on FVPA 600,Remeasurement gain on plan...

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CHAPTER 18 Problem 18-1 1. Employee benefit expense Current service cost Interest expense on FVPA(10% x 6,000,000) Interest income on PBO (10% 5,000,000) EMPLOYEE BENEFIT EXPENSE

2. Remeasurement Actual return on plan asset Interest income on PBO REMEASUREMENT GAIN ON PLAN ASSETS 3. Journal Entry Employee benefit expense Cash Accrued benefit cost Remeasurement gain OCI

4. Balance of the accrued benefit cost Accrued benefit cost Credit adjustment ACCRUED BENEFIT COST

1,550,000 600,000 (500,000) 1,650,000

650,000 500,000 150,000

1,650,000 1,200,000 150,000 300,000

(1,000,000) ( 300,000) (1,300,000)

5. Memorandum FVPA-January 1 Contribution to the plan Actual return on plan assets FVPA- DECEMBER 31

5,000,000 1,200,000 650,000 6,850,000

PBO-January Current service cost Interest expense on PBO PBO-December 31

6,000,000 1,550,000 600,000 8,150,000

FVPA – December 31 PBO – December 31 ACCRUED BENEFIT COST

6,850,000 8,150,000 (1,300,000)

Problem 18-2 1. Employee benefit expense Current service cost Interest expense on FVPA (10% x 6,500,000) Interest income on PBO (10% 5,750,000) EMPLOYEE BENEFIT EXPENSE

600,000 650,000 (575,000) 675,000

2. Remeasurement Actual return on plan asset Interest income on PBO REMEASUREMENT GAIN ON PLAN ASSETS

700,000 575,000 125,000

3. Journal Entry Employee benefit expense Accrued benefit cost Cash Remeasurement gain - OCI

675,000 375,000 900,000 125,000

4. Balance of the accrued benefit cost Accrued benefit cost Credit adjustment ACCRUED BENEFIT COST

(750,000) 350,000 (400,000)

5. Memorandum FVPA-January 1 Contribution to the plan Actual return on plan assets Benefits paid FVPA- DECEMBER 31

5,750,000 900,000 700,000 (100,000) 7,250,000

PBO-January 1 Current service cost Interest expense on PBO Benefits paid PBO-December 31

6,500,000 600,000 650,000 ( 100,000) 7,650,000

FVPA – December 31 PBO – December 31 ACCRUED BENEFIT COST

7,250,000 7,650,000 ( 400,000)

Problem 18-3 1. Employee benefit expense Current service cost Past service cost Interest expense on FVPA (10% x 6,500,000) Interest income on PBO (10% 5,750,000) EMPLOYEE BENEFIT EXPENSE

2. Remeasurement Actual return on plan asset Interest income on PBO REMEASUREMENT LOSS ON PLAN ASSETS

3. Journal Entry Employee benefit expense Remeasurement loss- OCI Cash Accrued benefit cost

1,450,000 300,000 760,000 ( 670,000) 1,840,000

500,000 670,000 (170,000)

1,840,000 170,000 1,500,000 510,000

4. Balance of the accrued benefit cost Accrued benefit cost Credit adjustment ACCRUED BENEFIT COST

(900,000) (510,000) (1,410,000)

5. Memorandum FVPA-January 1 Contribution to the plan Interest income on FVPA Remeasurement loss on plan asset Benefits paid FVPA- DECEMBER 31

6,700,000 1,500,000 670,000 ( 170,000) ( 800,000) 7,900,000

PBO-January 1 Current service cost Past service cost Interest expense on PBO Benefits paid PBO-December 31

7,600,000 1,450,000 300,000 760,000 ( 800,000) 9,310,000

FVPA – December 31

7,900,000

PBO – December 31 ACCRUED BENEFIT COST

Problem 18-4 1. Retained earnings Accrued benefit cost 2. Current service cost Interest expense on PBO (8% x 7,500,000) Interest income on FVPA (8% x 6,000,000) EMPLOYEE BENEFIT EXPENSE . 3.Employee benefit expense Cash Remeasurement gain -OCI Accrued benefit cost

9,310,000 (1,410,000)

300,000 300,000 900,000 600,000 (480,000) (1,800,000)

1,020,000 500,000 220,000 300,000

4.Accrued benefit cost – January 1 Transitional effect – credit Credit adjustment ACCRUED BENEFIT COST – DECEMBER 31

(1,200,000) ( 300,000) ( 300,000) 1,800,000

5. FVPA-January 1 Contribution to the plan Actual return on plan asset Benefits paid FVPA- DECEMBER 31

6,000,000 500,000 700,000 ( 300,000) 7,050,000

PBO-January 1 Current service cost Interest expense on PBO Benefits paid PBO-December 31

7,500,000 900,000 600,000 ( 150,000) 8,850,000

FVPA – December 31 PBO – December 31 ACCRUED BENEFIT COST

7,050,000 8,850,000 (1,800,000)

Problem 18-5 1. Current service cost Interest expense (10%x 7,500,000) Interest income (10% x 6,500,000) EMPLOYEE BENEFIT EXPENSE

2. Actual return Interest income Remeasurement gain Decrease in PBO-actuarial gain REMEASUREMENT GAIN OCI 3. Employee benefit expense Accrued benefit cost Cash Remeasurement gain - OCI

1,200,000 750,000 650,000 1,300,000

800,000 650.000 150,000 200.000 350,000 1,300,000 250,000 1.200,000 350,000

4. Accrued benefit cost – January 1 Debit adjustment ACCRUED BENEFIT COST – DECEMBER 31

(1,000,000) 250,000 750,000

5. FVPA-January 1 Contribution to the plan Actual return on plan asset Benefits paid FVPA- DECEMBER 31

6,500,000 1,200,000 800,000 (1,500,000) 7,000,000

PBO-January 1 Current service cost Interest expense on PBO Decrease in PBO Benefits paid PBO-December 31

7,500,000 1,200,000 750,000 ( 200,00) (1,500,000) 7,750,000

FVPA – December 31 PBO – December 31 ACCRUED BENEFIT COST

7,000,000 7,750,000 ( 750,000)

Problem 18-6 1. Retained earnings Prepaid/accrued benefit cost Prepaid/accrued benefit cost Retained earnings

1,250,000 1,250,000 850,000 850,000

. 2. Current service cost Interest expense (6% x 5,500,000) Interest income (6% x 4,750,000) EMPLOYEE BENEFIT EXPENSE

925,000 330,000 (285,000) 970,000

3. Actual return on plan asset Interest income Remeasurement gain on plan assets Increase in PBO - actuarial loss NET REMEASUREMENT GAIN -OCI

485,000 (285,000) 200,000 (150,000) 50,000

4. Employee benefit expense Prepaid/accrued benefit cost Cash Remeasurement gain- OCI

970,000 430,000 1,350,000 50,000

5. P/ABC - January1 Transitional effect - credit Transitional effect-debit Debit adjustment P/ABC-DECEMBER 31

( 350,000) (1,250,000) 850,000 430,000 320,000

6. FVPA-January 1 Contribution plan Actual return on plan asset Benefits paid FVPA- December 31

4,750,000 1,350,000 485,000 ( 995,000) 5,590,000

PBO-January 1 Current service cost Interest expense Increase in PBO Benefits paid PBO-DECEMBER 31

5,500,000 925,000 330,000 150,000 ( 995,000) 5,910,000

FVPA – December 31 PBO – December 31 ACCRUED BENEFIT COST

5,590,000 5,910,000 ( 320,000)

Problem 18-7 1. Present value of defined benefit obligation settled Lump sum payment Settlement gain

1,000,000 800,000 200,000

Current service cost Interest expense on PBO (12% x 8,000,000) Interest income on FVPA (12% x 6,000,000) Settlement gain EMPLOYEE BENEFIT EXPENSE

900,000 960,000 (720,000) (200,000) 940,000

2. Actual return on plan asset Interest income on FVPA REMEASUREMENT GAIN ON PLAN ASSETS 3. Employee benefit expense Cash Remeasurement gain-OCI Accrued benefit cost

800,000 720,000 80,000 940,000 700,000 80,000 160,000

4. Accrued benefit cost – January 1 Credit adjustment ACCRUED BENEFIT COST - DECEMBER 31

(2,000,000) ( 160,000) (2,160,000)

5. FVPA-January 1 Contribution to the plan Actual return on plan assets Lump sum payment FVPA - December 31

6,000,000 700,000 800,000 ( 800,000) 6,700,000

PBO-January 1 Current service cost Interest expense Present value of defined benefit obligation settled PBO- December 31

8,000,000 900,000 960,000 (1,000,000) 8,860,000

FVPA - December 31 PBO- December 31 ACCRUED BENEFIT COST

6,700,000 8,860,000 (2,160,000)

Problem 18-8 1. FVPA-January 1 Contribution to the plan Actual return on plan assets FVPA-December 31

6,000,000 1,000, 000 900,000 7,900,000

2. PBO-January 1 Current service cost Past service cost Interest expense on PBO (10% x 5,000,000) Decrease in PBO - actuarial gain PBO-December 31

5,000,000 700,000 200,000 500,000 ( 500,000) 5,900,000

3. FVPA-December 31 PBO-December 31 Prepaid benefit cost-surplus Asset ceiling - December 31, 2020 EFFECT OF ASSET CEILING

7,900,000 5,900,000 2,000,000 1,200,000 800,000

4. Current service cost Past service cost Interest expense on PBO (10% x 5,000,000) Interest income on FVPA (10% x 6,000,000) Interest expense on effect of asset ceiling (10%x 300,000) EMPLOYEE BENEFIT EXPENSE

700,000 200,000 500,000 (600,000) 30,000 830,000

5. Actual return Interest income on FVPA Remeasurement gain on plan assets

900,000 600,000 300,000

Decrease in PBO- actuarial gain

500,000

Effect of asset ceiling - December 31 Effect of asset ceiling - January 1 Total change in the effect of asset ceiling Interest expense on effect of asset ceiling (10% x 300,000) Remeasurement loss on the effect of asset ceiling

800,000 300,000 500,000 ( 30,000) 470,000

Remeasurement gain on plan asset Actuarial gain on PBO Remeasurement loss - asset ceiling Net remeasurement gain

300,000 500,000 (470,000) 330,000

6. Employee benefit expense Prepaid benefit cost Cash Remeasurement gain-OCI

830,000 500,000 1,000,000 330,000

7. Prepaid benefit cost January 1, asset ceiling debit Debit adjustment Prepaid benefit cost December 31, asset ceiling- debit

700,000 500,000 1,200,000

Problem 18-9 Answer D. 8,220,000 PBO-January 1 Current service cost Interest expense Benefits paid PBO-December 31

7,200,000 1,800,000 720,000 (1,500,000) 8,220,000

Problem 18-10 Answer A. 700,000 PBO-January 1 Interest expense Benefits paid Total

3,000,000 300,000 ( 500,000) 2,800,000

PBO-December 31 Total Current service cost

Problem 18-11 Answer A. 675,000 PBO-January 1 (120,000/ 8%) Interest expense Benefits paid Total

3,500,000 2,800,000 700,000

1,500,000 120,000 ( 135,000) 1,485,000

PBO-December 31 Total Current service cost

2,160,000 1,485,000 675,000

Problem 18-12 Answer A. 400,000 PBO-January 1 Past service cost

3,500,000 500,000

Interest expense Actuarial loss Benefits paid Total

350,000 200,000 ( 250,000) 4,300,000

Total PBO-December 31 Current service cost

4,300,000 4,700,000 400,000

Problem 18-13 Answer A. 1,500,000 FVPA – January 1 Employee Contributions Benefits paid FVPA – January 1

3,500,000 1,100,000 ( 850,000) 3,750,000

FVPA – January 1 FVPA – December 31 ACTUAL RETURN ON PLAN ASSETS

5,250,000 3,750,000 1,500,000

Problem 18-14 Answer A FVPA-January 1 Contribution to the fund Actual return on plan assets Benefits paid FVPA - December 31

8,750,000 700,000 950,000 ( 600,000) 9,800,000

Problem 18-15 Answer B FVPA-January 1 Contribution to the plan Benefits paid Total

3,500,000 280,000 ( 250,000) 4,150,000

Total FVPA – December 31 ACTUAL RETURN ON PLAN ASSET Problem 18-16 Answer B FVPA-January 1 Contribution to the plan Benefits paid Total

4,150,000 3,900,000 370,000

9,000,000 1,000,000 ( 700,000) 9,300,000

Total FVPA – December 31 ACTUAL RETURN ON PLAN ASSET

9,300,000 9,900,000 600,000

Actual return on plan assets Interest income REMEASUREMENT GAIN ON PLAN ASSETS

600,000 900,000 (300,000)

Problem 18-17 Answer A Current service cost Past service cost Interest expense on PBO Interest income on plan assets Employee benefit expense Contribution or funding Accrued benefit cost during the year Prepaid benefit cost- January 1 Net accrued benefit cost- December 31

190,000 500,000 380,000 (400,000) 670,000 400,000 270,000 20,000 250,000

Problem 18-18 Answer B Fair value of plan assets Projected benefit obligation ACCRUED LIABILITY AT YEAR END

3,450,000 5,700,000 2,250,000

Problem 18-19 1. ANSWER C. 1,350,000 Current service cost Interest expense on PBO (10% x 7,500,000) Interest income on FVPA (10% x 7,000,000) Gain on plan settlement EMPLOYEE BENEFIT EXPENSE

1,400,000 750,000 ( 700,000) ( 100,000) 1,350,000

2. ANSWER C. 340,000 Actual return on plan asset Interest income on FVPA Remeasurement gain on plan assets Decrease in PBO-actuarial gain TOTAL REMEASUREMENT GAIN

840,000 700,000 140,000 200,000 340,000

3. ANSWER A. 7,140,000 FVPA-January 1 Contribution to the plan Actual return on plan assets Benefits paid Settlement price of defined benefit obligation FVPA -December 31

7,000,000 1,200,000 840,000 (1,500,000) ( 400,000) 7,140,000

4. Answer B. 7,450,000 PBO-January 1 Current service cost Interest expense on PBO Benefits paid Decrease in PBO Present value of benefit obligation settled PBO- December 31

7,500,000 1,400,000 750,000 (1,500,000) ( 200,000) ( 500,000) 7,450,000

5. Answer B. 310, 000 credit Fair value of plan assets- January 1 Projected benefit obligation- December 31 Prepaid accrued benefit cost

7,140,000 (7,450,000) ( 310,000)

Problem 18-20 1. Answer A Current service cost Interest cost (9% x 10,000,000) Interest income (9% x 9,200,000) PENSION EXPENSE

1,200,000 900,000 ( 828,000) 1,272,000

2. Answer B. 578,000 loss Actual return on plan assets Interest income on FVPA REMEASUREMENT LOSS

3. Answer A. 1,600,000 liability Accrued benefit cost - January 1 Credit adjustment PENSION LIABILITY – December 31

250,000 (828,000) (578,000)

(800,000) (800,000) (1,600,000)

Problem 18-21 1. Answer A Current service cost Past service cost Interest expense on PBO (5% x 2,200,000) Interest income on FVPA (5% x 2,100,000) EMPLOYEE BENEFIT EXPENSE

30,000 115,000 110,000 (105,000) 150,000

2. Answer A FVPA-January 1 Contribution to the fund Benefits paid Total

2,100,000 21,000 ( 31,000) 2,089,000

FVPA-December 31 Total ACTUAL RETURN

2,400,000 2,090,000 310,000

3. Answer D PBO-January 1 Current service cost Past service cost during the year Interest expense Benefits paid Total PBO -December 31 Increase in PBO- actuarial loss 4. Answer C Actual return on plan assets Interest income Remeasurement gain on plan assets Actuarial loss on PBO NET REMEASUREMENT GAIN

5. Answer C FVPA - January 1 PBO - December 31 ACCRUED BENEFIT COST

2,200,000 30,000 115,000 110,000 ( 31,000) 2,424,000 2,500,000 76,000

310,000 105,000 205,000 ( 76,000) 129,000

2,400,000 (2,500,000) ( 100,000)

Problem 18-22 1. ANSWER A FVPA-January 1 Contribution to the plan Benefits paid Total

2,600,000 350,000 ( 150,000) 2,800,000

FVPA-December 31 Total Actual return on plan assets

3,000,000 2,800,000 200,000

2. ANSWER A. PBO January 1 Current service cost Interest expense on PBO (10% x 2,000,000) Benefits paid Total

2,000,000 100,000 200,000 ( 150,000) 2,150,000

Total PBO-December 31 ACTUARIAL GAIN

2,150,000 2,000,000 50,000

3. ANSWER C. Current service cost Interest expense on PBO (10% x 2,000,000) Interest income on FVPA (10% x 2,600,000) Interest expense on effect of asset ceiling (10% x 400,000) Employee benefit expense

100,000 200,000 (260,000) 40,000 80,000

4. ANSWER D. Actual return Interest income (10% x 2,600,000) Remeasurement loss on plan assets Actuarial gain - decrease in PBO Remeasurement loss on effect of asset ceiling NET REMEASUREMENT LOSS

200,000 (260,000) (60,000) 50,000 (160,000) (170,000)

Problem 18-23 1. A 2. D 3. C 4. A 5. B

6. C 7. D 8. D 9. A 10. C

Problem 18-24 1. B 2. D 3. C 4. D 5. A...