Hiatt Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2020. The insurance company which administers the pension plan provided the following selected information for the years 2020, 2021, and 2022.

There were no balances as of January 1, 2020, when the plan was initiated. The actual and expected return on plan assets was 10% over the 3-year period, but the settlement rate used to discount the company?s pension obligation was 13% in 2020, 11% in 2021, and 8% in 2022. The service cost component of net periodic pension expense amounted to the following: 2020, $60,000; 2021, $85,000; and 2022, $119,000. The average remaining service life per employee is 12 years. No benefits were paid in 2020, $30,000 of benefits were paid in 2021, and $18,500 of benefits were paid in 2022 (all benefits paid at end of year).

Instructions

(Round to the nearest dollar.)

a. Calculate the amount of net periodic pension expense that the company would recognize in 2020, 2021, and 2022.

b. Prepare the journal entries to record net periodic pension expense, employer?s funding contribution, and related pension amounts for the years 2020, 2021, and 2022.

Transcribed Image Text:

For Year Ended December 31, 2020 2021 2022 Plan assets (fair value) Accumulated benefit obligation Projected benefit obligation Net (gain) loss (for purposes of corridor calculation) Employer's funding contribution (made at end of year) $ 85,000 $50,000 45,000 $180,000 292,000 324,000 165,000 200,000 60,000 81,033 -0- 78,400 60,000 50,000 105,000