Question

The following facts apply to the pension plan of Sandhill Inc. for the year 2017. Plan...

The following facts apply to the pension plan of Sandhill Inc. for the year 2017.

Plan assets, January 1, 2017 $524,400

Projected benefit obligation, January 1, 2017 524,400

Settlement rate 8 %

Service cost 42,000

Contributions (funding) 25,000

Actual and expected return on plan assets 45,400

Benefits paid to retirees 32,900

Using the preceding data, compute pension expense for the year 2017. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2017 and the year-end balances in the related pension accounts. (Enter all amounts as positive.)

SANDHILL INC.

Pension Worksheet—2017

General Journal Entries

Memo Record

Items

Annual Pension

Expense

Cash

Pension Asset/

Liability

Projected Benefit

Obligation

Plan

Assets

Balance, January 1, 2017

$

$

$

$

$

Service cost

Interest cost

Actual return

Contributions

Benefits

Journal entry, December 31

$

$

Balance, December 31, 2017

$

Business   Accounting   
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Ans- SANDHILL INC.

Pension Worksheet-2017

General Journal Entries Memo Record

Items Annual Pension Expense Cash Pension Asset/ Liability Projected Benefit Obligation Plan Assets
Balance January1,2017 524,400Cr. 524,400Dr.
Service cost 42,000Dr.

42,000Cr.
Interest cost* 41,952Dr. 41,952Cr.
Actual return** 45,400Cr. 45,400Dr.
Contributions 25,000Cr. 25,000Dr.
Benefits 32,900Dr.

32,900Cr.
Journal entry,December 31 38,552Dr. 25,000Cr. 13,552Cr,
Balance,December31,2017 13,552Cr. 575,452Cr. 561,900Dr.

Calculation of Interest cost=*$41,952= $524,400*8%

** Note: We show actual return on the worksheet to ensure that plan assets are properly reported.If expected and actual return differ,then an additional adjustment is made to compute the proper amount of pension expense.

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