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Problem: P20-1, Two-Year Work Sheet and Reconciliation Schedule, File 20p-1
Course: X120C Intermediate Accounting III
Date: Homework #4
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Round all amounts in the homework assignment to the nearest dollar [$1], except percentages.
On January 1, 2008, Diana Peter Company has the following defined benefit pension plan balances:
Projected benefits obligation $3,958,700
Fair value of plan assets $4,308,900
The interest (settlement) rate applicable to the plan is 10%. On January 1, 2009, the company amends its pension agreement so that prior service
costs of $534,600 are created. Other data related to the pension plan are as follows:
2008 2009
Service costs $158,500 $164,000
Unrecognized prior service costs amortization 0 87,800
Contributions (funding) to the plan 138,200 185,300
Benefits paid 181,300 285,100
Actual return on plan assets 233,000 255,400
Expected rate of return on assets 5% 8%
Average remaining service life 10 10
Instructions:
(a) Prepare a pension work sheet for the pension plan for 2008 and 2009. Worksheet is in DR-positive, CR-negative format.
(b) As of December 31, 2009, prepare a schedule reconciling the (c) For the year 2010 determine the amount of Unrecognized Net (Gain) or Loss
funded status with the reported liability (accrued pension amortization (if any), using the average remaining service life.
Absolute Greater of:
Reconciliation Schedule—12/31/09 Value
Projected benefit obligation [Col. I] ($5,231,907) Projected benefit obligation [Col. I] $5,231,907 $5,231,907
Fair value of plan assets [Col. J] 4,654,400 Fair value of plan assets [Col. J] 4,654,400
Prepaid / (Accrued) pension cost liability ($577,507) Corridor percentage 10%
(Must equal Column H final amount) Corridor amount 523,191
The (gain) or loss subject to amortization is the amount Accumulated Other Comprehensive Income [Col. G] 86,949
by which absolute value of the gains & losses included in (Gain) or loss subject to amortization, if any (may be zero) $0
[AOCI] exceeds the Corrider amount. If the absolute value Amortization period 10
of AOCI is less than the Corridor amount the (gain) or loss Amortization, if any (may be zero) $0
subject to amortization is zero.