Answer:
a. Computation of Pension Expenses
Particulars Amount
Service cost $600,000
Interest on projected benefit obligation $480,000
($6,000,000 * 8%)
Expected Return on plan assets -$144,000
($1,600,000 * 9%)
Amortized of prior service costs <u>$0 </u>
Pension Expense <u>$936,000</u>
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b. Account Titles and Explanation Debit Credit
Pension Expenses $936,000
<em> Pension Asset/Liability $664,000</em>
Cash $1,600,000
Other Comprehensive Income $0
c. Tucker Inc.
Income Statement (Partial)
For the year ended December 31, 2017
Expenses:
Pension Expenses $936,000
Tucker Inc.
Balance sheet (Partial)
For the year ended December 31, 2017
Long term Liabilities:
Pension Liability $3,736,000
Stockholders' Equity
Accumulated Other $5,040,000
Comprehensive Income
($5,040,000 - $0)
Workings
Projected benefit obligation, before adjustment $6,000,000
Add: Service cost $600,000
Add: Interest on projected benefit obligation <u>$480,000</u>
($6,000,000 * 8%)
Projected benefit obligation $7,080,000
Fair value of pension assets $1,000,000
Add: Expected return on plan assets $144,000
Add: Cash contribution <u>$1,600,000</u>
Plan assets <u>$3,344,000</u>
Pension Liability <u>$3,736,000</u>
