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Exercise 11

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kenna jensen

on 2 April 2014

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Transcript of Exercise 11

Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2014 in which no benefits were paid
1. The actuarial present value of future benefits earned by employees for services rendered in 2014 amounted to $56,000
2. The company's funding policy requires a contribution to the pension trustee amounting to $145,000 for 2014

3. As of January 1, 2014, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expcected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occured in 2014 and no benefits were epaid.
4. Amortization of prior service cost was $50,000 in 2014. Amortization of net gain or loss was not required in 2014.
Requirement A
Determine the amount of pension expense

Service Cost
Interest Cost ($900,000 x 9%)
Expected return on plan assets
Amortization of prior service expense
Pension Expense
Requirement B
Prepare the journal entry to record pension expense and the employer's contribution to the pension trustee in 2014
Pension Expense 133,000
Pension Asset Liability* 62,000
Cash 145,000
Other Comprehensive Income (PSC) 50,000
* ($133,000 - $145,000 - $50,000)
Requirement C
Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2014

Income Statement
Pension Expense $133,000
Comprehensive Income Statement
Net Income XXX
Other Comprehensive Income (Amortization PSC) $50,000
Comprehensive XXX
Balance Sheet
Pension Liability ($1,037,000 - $799,000) $238,000
Stockholders' Equity
Accumulated OCI Beginning Balance $400,000
Amortization of prior service cost ($50,000)
Accumulated OCI Ending Balance
Exercise 11
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