1. Illustrated Solution: Problem 17-43
Chapter 17
Illustrated Solution: Problem 17-43
Preparing a
Pension Worksheet

2. Pension Worksheet — Beginning Balances

3. Pension 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).

4. Pension 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.

5. Pension Worksheet — Beginning Balances
+ = – + –

6. Pension Worksheet — Beginning Balances
Balance Sheet Accounts

7. Pension Worksheet — Beginning Balances
Deferred Expense Accounts

8. Pension Worksheet — Beginning Balances=

9. Pension Worksheet — Given Information

10. Interest Cost Projected benefit obligation, Jan. 1, 2001 $3,800
Settlement discount rate  12%
Interest cost $ 456

11. Service Cost 2001 service cost:
Projected benefit obligation, Dec. 31, 2001 $4,161
Less: Projected benefit obligation, Jan. 1, ,800
Increase in projected benefit obligation $ 361
Less: Interest cost (.12  $3,800) (456)
Plus: Benefits paid
Service cost $

12. Pension Worksheet

13. Pension Worksheet

14. Unrecognized 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

15. Pension Worksheet

16. Amortization of Unrecognized Prior Service Cost
Number of years for amortization  12
Amortization per year $ 61

17. Pension Worksheet

18. Corridor Comparison for Unrecognized Gain
Corridor amount, 10% x $3,800, or $380
Unrecognized gain—$60
Amortization is $0 for 2001

19. Pension Worksheet

20. Pension Worksheet

21. Pension Worksheet

22. Pension Worksheet =

23. Pension Worksheet
430

24. Pension Worksheet

25. Pension Worksheet — Completed

26. End of Problem