question archive The following balances relate to the defined benefit pension plan of Todd Industries
The following balances relate to the defined benefit pension plan of Todd Industries
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The following balances relate to the defined benefit pension plan of Todd Industries.
Dec. 31, 2005
Dec. 31, 2006
Fair value of plan assets ...........
$414,000
$517,500
Market-related value of plan assets .
370,800
471,000
Projected benefit obligation ........
487,500
611,400
Accumulated benefit obligation ......
442,500
555,000
Prepaid/(accrued) pension cost ......
(18,300)
11,100
Unrecognized prior service cost .....
34,500
27,900
The following balances relate to the defined benefit pension plan of Todd Industries.
|
|
Dec. 31, 2005 |
Dec. 31, 2006 |
|
Fair value of plan assets ........... |
$414,000 |
$517,500 |
|
Market-related value of plan assets . |
370,800 |
471,000 |
|
Projected benefit obligation ........ |
487,500 |
611,400 |
|
Accumulated benefit obligation ...... |
442,500 |
555,000 |
|
Prepaid/(accrued) pension cost ...... |
(18,300) |
11,100 |
|
Unrecognized prior service cost ..... |
34,500 |
27,900 |
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- Determine the minimum pension liability, if any, at December 31, 2005 and December 31, 2006.
- Prepare journal entries for the minimum liability adjustment, if any, at December 31, 2005, and December 31, 2006. Assume that the company had no previously re- cognized additional pension liability under FASB Statement No. 87.
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Answer:
(1)
Minimum Liability Computations:
(ABO - Fair Value = Minimum pension liability) Dec. 31, 2005: $442,500 - $414,000 = $28,500 Dec. 31, 2006: $555,000 - $517,500 = $37,500
(2)
Minimum Liability Adjustment:
|
2005 |
Deferred Pension Cost ($28,500 - $18,300) ................. Additional Pension Liability ....... |
10,200 |
10,200 |
|
2006 |
Deferred Pension Cost ................ Excess of Additional Pension Liability Over Unrecognized Prior Service Cost ......................... |
17,700
20,700 |
|
|
|
Additional Pension Liability ....... |
|
38,400 |
Computations:
|
Minimum liability, Dec. 31, 2006 ..................... |
$37,500 |
|
Prepaid pension cost ................................. |
11,100 |
|
Additional liability, Dec. 31, 2006 .................... |
$48,600 |
|
Balance before adjustment .............................. |
10,200 |
|
Adjustment (credit) to additional liability ............ |
$38,400 |
|
Maximum deferred pension cost, Dec. 31, 2006 ........... |
$27,900 |
|
Balance before adjustment .............................. |
10,200 |
|
Adjustment (debit) to deferred pension cost ............ |
$17,700 |
|
Credit to additional liability ......................... |
$38,400 |
|
Debit to deferred pension cost ......................... |
17,700 |
|
Debit to contra equity account ......................... |
$20,700 |
|
|
|
