The following information is available for Huntley Corporation’s pension plan for the year 2011:
Expected return on plan
assets ………………………….. $ 15,000
Actual return on plan assets
……………………………… 17,000
Benefits paid to retirees
………………………………….. 40,000
Contributions (funding)
………………………………….. 95,000
Discount rate
……………………………………………… 10%
Accrued benefit obligation,
Jan. 1, 2011 ………………….. 500,000
Service cost
……………………………………………….. 65,000
Huntley uses the deferral
and amortization approach under IFRS to account for its defined benefit plan.
Instructions
(a) Calculate pension
expense for the year 2011, and provide the entries to recognize the pension
expense and funding for the year, assuming that Huntley accounts for its pension
under the deferral and amortization approach.
(b) Calculate pension
expense for the year 2011, and provide the entries to recognize the pension
expense and funding for the year, assuming that Huntley accounts for its pension
with the immediate recognition approach. Assume that the ABO provided at January
1, 2011, for accounting and funding purposes is the same.
(a) Calculation of pension
expense using the deferral and amortization approach:
Service
cost $ 65,000
Interest cost
($500,000 X .10) 50,000
Expected return on
plan assets (15,000 )
Pension expense for
2011 $100,000
Pension
Expense....................... 100,000
Accrued Pension
Asset/Liability... 100,000
Accrued Pension
Asset/Liability....... 95,000
Cash.............................. 95,000
(b) Calculation of pension
expense using the immediate recognition approach:
Service
cost $65,000
Interest cost
($500,000 X .10) 50,000
Actual return on plan
assets (17,000 )
Pension expense for
2011 $98,000
Pension
Expense....................... 98,000
Accrued Pension
Asset/Liability... 98,000
Accrued Pension
Asset/Liability....... 95,000
Cash.............................. 95,000
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