question archive On January 1, 2016, Baznik Company adopted a defined benefit pension plan
On January 1, 2016, Baznik Company adopted a defined benefit pension plan
Subject:AccountingPrice: Bought3
On January 1, 2016, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,230,000 on that date (which it did not fund). Baznik has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2016:
Employee Expected Years of Future Service
A 1
B 3
C 4
D 5
E 5
F 6
Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik's pension expense, in addition to the amortization of the prior service cost for 2016 and 2017:
2016 2017
Service cost $406,100 $501,213
Interest cost on projected benefit obligation 114,900 151,937
Expected return on plan assets — 77,600
Baznik contributed $799,300 and $829,900 to the pension fund at the end of 2016 and 2017, respectively.
Required:
1. Next Level Prepare a set of schedules for Baznik to determine (a) the amortization fraction for each year and (b) the amortization of the prior service cost.
2. Next Level Prepare all the journal entries related to Baznik's pension plan for 2016 and 2017.
CHART OF ACCOUNTS
Baznik Company
General Ledger
ASSETS
111 Cash
121 Accounts Receivable
141 Inventory
152 Prepaid Insurance
181 Equipment
198 Accumulated Depreciation
LIABILITIES
211 Accounts Payable
231 Salaries Payable
250 Unearned Revenue
251 Accrued/Prepaid Pension Cost
261 Income Taxes Payable
EQUITY
311 Common Stock
331 Retained Earnings
916 Other Comprehensive Income: Prior Service Cost
REVENUE
411 Sales Revenue
EXPENSES
500 Cost of Goods Sold
511 Insurance Expense
512 Utilities Expense
521 Salaries Expense
522 Pension Expense
532 Bad Debt Expense
540 Interest Expense
541 Depreciation Expense
559 Miscellaneous Expenses
910 Income Tax Expense
