Question
On January 1, 2019, Smith Company adopted a defined benefit pension plan. At that time, Smith awarded retroactive benefits to its employees, resulting in a
On January 1, 2019, Smith Company adopted a defined benefit pension plan. At that time, Smith awarded retroactive benefits to its employees, resulting in a prior service cost that created a projected benefit obligation of $1,250,000 on that date (which it did not fund). Smith decided to amortize the prior service cost by the straight-line method over the 20-year average remaining service life of its active participating employees. Smiths actuary has also provided the following additional information for 2019 and 2020: (1) service cost: 2019, $145,000; 2020, $152,000; (2) expected (and actual) return on plan assets: 2020, $32,000; and (3) projected benefit obligation: 1/1/2020, $1,520,000. The discount rate was 10% in both 2019 and 2020. Smith contributed $330,000 and $350,000 to the pension fund at the end of 2019 and 2020, respectively. There are no other components of Smiths pension expense.
Required:
1. | Compute the amount of Smiths pension expense for 2019 and 2020. |
2. | Prepare all the journal entries related to Smiths pension plan for 2019 and 2020. |
3. | Next Level If the prior service cost was vested, explain how Smiths pension expense for 2019 would be different under amended IAS 19. |
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