Exercise 20-12

Novak Company received the following selected information from its pension plan trustee concerning the operation of the companys defined benefit pension plan for the year ended December 31, 2020.

		January 1, 2020		December 31, 2020
Projected benefit obligation		$1,471,000		$1,496,000
Market-related and fair value of plan assets		815,000		1,149,500
Accumulated benefit obligation		1,615,000		1,737,100
Accumulated OCI (G/L)Net gain		0		(197,100	)

The service cost component of pension expense for employee services rendered in the current year amounted to $75,000 and the amortization of prior service cost was $122,100. The companys actual funding (contributions) of the plan in 2020 amounted to $253,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,221,000 on January 1, 2020. Assume no benefits paid in 2020.

a) Determine the amounts of the components of pension expense that should be recognized by the company in 2020. (Enter amounts that reduce pension expense with either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).)

b) Prepare the journal entry to record pension expense and the employers contribution to the pension plan in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

c) Indicate the pension-related amounts that would be reported on the income statement and the balance sheet for Novak Company for the year 2020.

1. Novak Company Income Statement (Partial)

2. Novak Company Comprehensive Income Statement

3. Novak Company Balance Sheet (Partial)