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netineya [11]
3 years ago
11

At January 1, 2020, Windsor Company had plan assets of $303,000 and a projected benefit obligation of the same amount. During 20

20, service cost was $27,100, the settlement rate was 10%, actual and expected return on plan assets were $25,700, contributions were $20,000, and benefits paid were $17,700. Prepare a pension worksheet for Windsor Company for 2020.

Business
1 answer:
Arte-miy333 [17]3 years ago
4 0

Answer:

The answer is well illustrated as below

Explanation:

Remember: Five factors affects the Pension Liability and Plan assets.

1 & 2. Expenses which includes service cost and interest cost

The increase in expense always increases the pension liability so the entry would be:

Dr Service cost  $27,100

Dr Interest Cost $30,300 ...... $303,000 Opening Pension Liability * 10%

Cr Pension Liability        $57,400

3. Actual return increases the Plan Asset

The Actual return on investment received would increase the Assets worth, which means the journal entry must be passed which would increase the Investment Value (Plan Asset). So the entry would be:

Dr Plan Asset $25,700

Cr Actual return $25,700

4. Contributions made increases the Plan Asset because it is an increase in the investment.

So the journal entry would be:

Dr Plan Asset $20,000

Cr Cash Asset        $20,000

5. The benefits paid to employees are decrease in both pension asset and the pension liability. (We had actually borrowed money from the employees and had invested that money so paying off the benefits actually decreases the pension liability and assets).

So the double entry would be:

Dr Pension Liability $17,700

Cr            Pension Assets $17,700

Kindly input the above values in the following worksheet:

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