Question

5. (Pensions, 3-Year Worksheet, Journal Entries, and Reporting) Captiva Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2016, with the following beginning balances: plan assets $600,000; projected benefit obligation $600,000. Other data relating to 3 years' operation of the plan are shown below: 2018 Annual service cost Settlement rate and expected rate of retum Actual return on plan assets Annual funding (contributions) Benefits paid Prior service cost (plan amended, 1/1/17) Amortization of prior service cost Change in actuarial assumptions establishes a December 31, 2018, projected benefit obligation of: 2016 $40,000 8% 40,000 11,000 26,000 2017 $ 48,000 8% 50,000 30,000 31,000 280,000 38,000 $ 61,000 8% 60,000 58,000 45,000 56,000 980,000 Instructions (a) Prepare a pension worksheet presenting all 3 years' pension balances and activities. Use of Excel is REQUIRED. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. (c) Indicate the pension-related amounts reported in the financial statements for 2018.

Answer 1

The student’s question involves creating a pension worksheet for a defined benefit pension plan over a three-year period, making corresponding journal entries, and reporting pension-related amounts in the financial statements for 2018.

Step-by-step explanation:

The question provided pertains to accounting treatments for a defined benefit pension plan. Specifically, it involves the creation of a pension worksheet reflecting three years of pension operations, including service costs, rates of return, contributions, benefits paid, and changes due to plan amendments or actuarial assumptions. Furthermore, the question asks for the preparation of journal entries based on the worksheet for the end of each year during the period and requires the identification of pension-related amounts to be reported in the financial statements for 2018.

The concepts involved in this question include present discounted value calculations, an understanding of pension accounting, and financial reporting. To answer this question correctly, one would need access to all the provided data and the ability to use Excel or a similar program for creating the pension worksheet. Additionally, knowledge of Generally Accepted Accounting Principles (GAAP) regarding pensions is necessary for making proper journal entries and for reporting in financial statements.