Reference no: EM133119041

Question 1 - Measuring and recording pension expense. Presented below is information related to the pension plan of Zimmer Inc. for the year 2017.

1. The service cost related to pension expense is $240,000 using the projected benefits approach.

2. The projected benefit obligation and the accumulated benefit obligation at the beginning of the year are $300,000 and $200,000, respectively. The expected return on plan assets is 9% and the settlement rate is 10%.

3. The accumulated OCI - prior service cost at the beginning of the year is $140,000. The company has a workforce of 200 employees, all who are expected to receive benefits under the plan. The total number of service-years is 1,000 and the service-years attributable to 2017 is 200. The company has decided to use the years-of-service method of amortization for these costs.

4. At the beginning of the period, fair value of pension plan assets, $280,000. The company had an Accumulated OCI (loss) at the beginning of the period of $90,000. Any amortization of unrecognized net loss is recognized on a straight-line basis over the average remaining service-life of the employees.

5. The contribution made to the pension fund in 2017 was $231,000.

6. Actual return on plan assets in 2017 is $27,000. $35,000 benefits are paid to retirees.

Required -

(a) Determine the pension expense to be reported on the income statement for 2017.

(b) Prepare the journal entries to record pension expense for 2017.

Question 2 - Pension Worksheet - Howard Corp. sponsors a defined-benefit pension plan for its employees. On January 1, 2020, the following balances related to this plan.

Plan assets (market-related value) 450,000

Projected benefit obligation 600,000

Prior service cost (plan amended) 100,000

OCI - Gain 85,000

Average remaining service life in years 10

As a result of the operation of the plan during 2020, the actuary provided the following additional data on December 31, 2020.

Service cost for 2020 75,000

Actual return on plan assets in 2020 45,000

Contributions in 2020 130,000

Benefits paid retirees in 2020 70,000

Settlement rate 7%

Expected return rate 8%

Projected benefit obligation 780,000

Required -

(a) Compute pension expense for Howard Corp. for the year 2020 by preparing a pension worksheet.

(b) Prepare the journal entry for pension expense.