Question

Exercise 20-5

Vaughn Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2017 are as follows.

Employee		Future Years of Service
Jim		3
Paul		4
Nancy		5
Dave		6
Kathy		6

On January 1, 2017, the company amended its pension plan, increasing its projected benefit obligation by $84,240.

Compute the amount of prior service cost amortization for the years 2017 through 2022 using the years-of-service method, setting up appropriate schedules.

Year		Annual Amortization
2017		$
2018
2019
2020
2021
2022

Answer 1

	Jim	Paul	Nancy	Dave	Kathy	Total
2017	1	1	1	1	1	5
2018	1	1	1	1	1	5
2019	1	1	1	1	1	5
2020		1	1	1	1	4
2021			1	1	1	3
2022				1	1	2
Total	3	4	5	6	6	24
Cost per service year	3510	=84240/24
Year	Annual Amortization
2017	17550	=3510*5
2018	17550	=3510*5
2019	17550	=3510*5
2020	14040	=3510*4
2021	10530	=3510*3
2022	7020	=3510*2