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Problem 20-5 Crane Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2017. The insurance company which administers the pension plan provided the following selected information for the years 2017, 2018, and 2019. For Year Ended December 31 2018 $51,000 $87,300 $183,130 45,100 163,400 290,800 61,000 203,910 323,900 2017 2019 Plan assets (fair value) Accumulated benefit obligation Projected benefit obligation Net (gain) loss (for purposes of corridor calculation) Employer\'s funding contribution (made at end of year) 0 78,700 81,518 51,000 61,000 105,800 There were no balances as of January 1, 2017, when the plan was initiated. The actual and expected return on plan assets was 10% over the 3-year period, but the settlement rate used to discount the company\'s pension obligation was 13% in 2017, 11% in 2018, and 8% in 2019. The service cost component of net periodic pension expense amounted to the following: 2017, $61,000; 2018, ss7,300: and 2019, $114,700. The average remaining service life per employee is 12 years. No benefits were paid in 2017, $29,800 of benefits were paid in 2018, and $18,700 of benefits were paid in 2019 (all benefits paid at end of year).

Solution

2017 2018 2019 Plan Asset 51000 87300 183130 Accumulated Benefit Obligation 45100 163400 290800 Projected Benefit Obligation 61000 203910 323900 Net Gain/oss 78700 81518 ER Funding Contribution 51000 61000 105800 (a) Pension Exp for 2017 consist only of the service cost component amounting to 61000 There was no net gain or loss , plan asset or defined plan obligation as of January 1, 2015 Pension Exp for 2018 comprised the following Service Cost $    87,300.00 Interest Exp $      6,710.00 [61000*11%] Interest Revenue $    (5,610.00) [51000*11%] Pension Expense $    88,400.00 Pension Exp for 2019 comprised the following Service Cost $ 114,700.00 Interest Exp $    16,312.80 [203910*8%] Interest Revenue $    (6,984.00) [87300*8%] Pension Expense $ 124,028.80 (b) JOURNAL ENTRY 2017 pension Expense 61000 To Cash 51000 To Pension Asset/Liability 10000 2018 pension Expense $    88,400.00 Other Comprehensive Income/Loss $    78,700.00 To Cash 61000 To Pension Asset/Liability $ 106,100.00 2019 pension Expense $ 124,028.80 Other Comprehensive Income/Loss $      2,818.00 To Cash 105800 To Pension Asset/Liability $    21,046.80