Solucines Cap 20

EXERCISE 20-2 (10–15 minutes)

Computation of pension expense:
Service cost $ 90,000
Interest cost ($700,000 X 10%) 70,000
Expected return on plan assets (64,000)
Prior service cost amortization 10,000
Pension expense for 2010 $106,000


EXERCISE 20-8 (20–25 minutes)

Corridor and Minimum Loss Amortization

| |Projected Benefit Obligation || | |Minimum Amortization of |
| |(a) |Plan |10% Corridor |Accumulated |Loss |
|Year | |Assets | |OCI (G/L) (a) | ||2009 |$2,000,000 |$1,900,000 |$200,000 |$ 0 |$ 0 |
|2010 |2,400,000 |2,500,000 |250,000 |280,000 |3,000(b) |
|2011 |2,950,000 |2,600,000 |295,000|367,000(c) |6,000(d) |
|2012 |3,600,000 |3,000,000 |360,000 |372,000(e) |1,000(f) |

(a) As of the beginning of the year.
(b) ($280,000 – $250,000) ÷ 10 years = $3,000
(c) $280,000 – $3,000 + $90,000 = $367,000
(d) ($367,000 – $295,000) ÷ 12 years = $6,000
(e)$367,000 – $6,000 + $11,000 = $372,000
(f) ($372,000 – $360,000) ÷ 12 years = $1,000



|(a) WEBB CORP. |
|Pension Worksheet|
| |                                 General Journal Entries                                                Memo Record |
| |Annual | |OCI—Prior | |Pension |Projected ||
| |Pension | |Service |OCI— |Asset/ |Benefit | |
|Items |Expense |Cash |Cost |Gain/Loss |Liability |Obligation |Plan Assets |
|Balance,Jan. 1, 2010 | | | | |120,000 Cr. |600,000 Cr. |480,000 Dr. |
|Service cost |90,000 Dr. | | | | |90,000 Cr. | |
|Interest cost*|54,000 Dr. | | | | |54,000 Cr. | |
|Actual return |55,000 Cr. | | | | | |55,000 Dr. |
|Unexpected gain** |3,000 Dr. || |3,000 Cr. | | | |
|Amortization of PSC |19,000 Dr. | |19,000 Cr. | | | | |
|Liability increase | | | |76,000 Dr....