17-1

Preparing aPension Worksheet

Chapter 17Illustrated Solution: Problem 17-43Illustrated Solution: Problem 17-43

17-2

Pension Worksheet — Beginning BalancesPension Worksheet — Beginning Balances

17-3

Pension Worksheet — Beginning BalancesPension Worksheet — Beginning Balances

The “Periodic Pension Expense” column will have a zero balance at the beginning of the period—think of it as an expense account that was closed out at the end of last period just like any other expense account.

The other three highlighted accounts above can be thought of as balance sheet accounts. Assets should have a debit balance (positive sign) and liabilities should have a credit balance (negative sign).

+ – +

17-4

Pension Worksheet — Beginning BalancesPension Worksheet — Beginning Balances

One way to think of these items is to consider them future expenses. (Notice that at the present time they are all “unamortized” or “unrecognized.”) The opening balance in these columns should be a debit (positive sign) if these items will increase pension expense when they are recognized. Likewise, the opening balance should be a credit (negative sign) if these items will reduce pension expense when they are recognized.

+ – + + + –

17-5

Pension Worksheet — Beginning BalancesPension Worksheet — Beginning Balances

+ = – + + + –

17-6

Pension Worksheet — Beginning BalancesPension Worksheet — Beginning Balances

Balance Sheet Accounts

17-7

Pension Worksheet — Beginning BalancesPension Worksheet — Beginning Balances

Deferred Expense Accounts

17-8

=

Pension Worksheet — Beginning BalancesPension Worksheet — Beginning Balances

17-9

Pension Worksheet — Given InformationPension Worksheet — Given Information

17-10

Interest CostInterest Cost

Projected benefit obligation, Jan. 1, 2001

$3,800Settlement discount rate

12%

Interest cost

$ 456

17-11

Service CostService Cost

2001 service cost:

Projected benefit obligation, Dec. 31, 2001$4,161Less: Projected benefit obligation, Jan. 1, 2001 3,800Increase in projected benefit obligation $ 361Less: Interest cost (.12 $3,800)

(456)Plus: Benefits paid 185Service cost $ 90

17-12

Pension WorksheetPension Worksheet

17-13

Pension WorksheetPension Worksheet

17-14

Unrecognized GainUnrecognized Gain

Market-related value of pension plan assets(5-year weighted average) 2,100

Expected rate of return x 10%

Expected return on plan assets 210

Actual return on plan assets 220

Deferred gain 10

17-15

Pension WorksheetPension Worksheet

17-16

Amortization of Unrecognized Prior Service CostAmortization of Unrecognized Prior Service Cost

Unrecognized prior service cost

$732Number of years for amortization

12

Amortization per year

$ 61

17-17

Pension WorksheetPension Worksheet

17-18

Corridor Comparison for Unrecognized GainCorridor Comparison for Unrecognized Gain

Corridor amount, 10% x $3,800, or $380Unrecognized gain—$60

Amortization is $0 for 2001

17-19

Pension WorksheetPension Worksheet

17-20

Pension WorksheetPension Worksheet

17-21

Pension WorksheetPension Worksheet

17-22

Pension WorksheetPension Worksheet

=

17-23

Pension WorksheetPension Worksheet

430

17-24

Pension WorksheetPension Worksheet

17-25

Pension Worksheet — CompletedPension Worksheet — Completed

17-26

End of ProblemEnd of Problem