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On January 1, 2019, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits

On January 1, 2019, 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 $1,200,000 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, 2019:

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 Bazniks pension expense, in addition to the amortization of the prior service cost for 2019 and 2020:

2019

2020

Service cost $397,300 $567,423
Interest cost on projected benefit obligation 104,100 150,337
Expected return on plan assets 90,300

Baznik contributed $772,700 and $875,300 to the pension fund at the end of 2019 and 2020, 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 Bazniks pension plan for 2019 and 2020.

CHART OF ACCOUNTSBaznik CompanyGeneral 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

1a. Prepare a set of schedules for the Baznik Company to determine the amortization fraction for each year.

Additional Instruction

BAZNIK COMPANY

Amortization Fractions

2019 - 2024

1

Employee

Expected Years of Future Service

Number of Service Years Rendered 2019

Number of Service Years Rendered 2020

Number of Service Years Rendered 2021

Number of Service Years Rendered 2022

Number of Service Years Rendered 2023

Number of Service Years Rendered 2024

2

A

3

B

4

C

5

D

6

E

7

F

8

Total

9

Amortization fraction

1b. Prepare a set of schedules for the Baznik Company to determine the amortization of the prior service cost. Use the unrounded decimal to determine the amount of the expense.

Additional Instruction

BAZNIK COMPANY

Prior Service Cost Amortization

2019 - 2024

1

Year

Total Prior Service Cost

Amortization Fraction

Amortization to Increase Pension Expense

Remaining Prior Service Cost

2

2019

3

2020

4

2021

5

2022

6

2023

7

2024

2. Prepare the entries to record the prior service cost on January 1, 2019, and the pension expense and amortization of prior service costs on December 31, 2019 and 2020.

General Journal Instructions

PAGE 2019PAGE 2020

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

1

2

3

4

5

6

7

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