4. Accounting for Pensions (18 points) Libertines Company sponsors a non-contributory defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2020 and 2021: 2020 2021 Projected Benefit Obligation, 1/1 $1,000,000 Fair Value of Plan Assets, 1/1 850,000 Balance in Net Pension Liability/Asset, 1/1 150,000 (Unrecognized) AOCI - Prior Service Cost (S/E), 1/1 40,000 (Unrecognized) AOCI Pension Gain/Loss (S/E), 1/1 120,000 (loss) Service Cost 80,000 $ 75,000 Discount (Settlement) Rate 4% 3% Expected Rate of Return on Plan Assets 6% 5.5% Actual Return on Plan Assets 75,000 50,000 Annual Contributions to the Pension Plan at 12/31 90,000 70,000 Increase in PBO due to decrease in settlement rate (at year-end, 12/31) 60,000 0 Payments from the Pension Plan to retirees at 12/31 70,000 60,000 Average remaining service life of employees 10 years 9 years Required (hint - it is probably helpful to use worksheets): a. Determine Pension Expense for 2020 and 2021. (8 pts) b. Prepare the journal entry necessary to reflect pension transactions in 2020 and 2021. (6 pts) c. What are the balances in Accumulated OCI PSC and Accumulated OCI - Pension Gain/Loss at 12/31/20 and 12/31/21, respectively? (2 pts) d. What is the funded status of the plan on 12/31/20 and 12/31/21, respectively? (2 pts) 4. Accounting for Pensions (18 points) Libertines Company sponsors a non-contributory defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2020 and 2021: 2020 2021 Projected Benefit Obligation, 1/1 $1,000,000 Fair Value of Plan Assets, 1/1 850,000 Balance in Net Pension Liability/Asset, 1/1 150,000 (Unrecognized) AOCI - Prior Service Cost (S/E), 1/1 40,000 (Unrecognized) AOCI Pension Gain/Loss (S/E), 1/1 120,000 (loss) Service Cost 80,000 $ 75,000 Discount (Settlement) Rate 4% 3% Expected Rate of Return on Plan Assets 6% 5.5% Actual Return on Plan Assets 75,000 50,000 Annual Contributions to the Pension Plan at 12/31 90,000 70,000 Increase in PBO due to decrease in settlement rate (at year-end, 12/31) 60,000 0 Payments from the Pension Plan to retirees at 12/31 70,000 60,000 Average remaining service life of employees 10 years 9 years Required (hint - it is probably helpful to use worksheets): a. Determine Pension Expense for 2020 and 2021. (8 pts) b. Prepare the journal entry necessary to reflect pension transactions in 2020 and 2021. (6 pts) c. What are the balances in Accumulated OCI PSC and Accumulated OCI - Pension Gain/Loss at 12/31/20 and 12/31/21, respectively? (2 pts) d. What is the funded status of the plan on 12/31/20 and 12/31/21, respectively? (2 pts)
