Name: 11

Problem: P20-1, Two-Year Work Sheet and Reconciliation Schedule, File 20p-1
Course: X120C Intermediate Accounting III
Date: Homework #4
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Round all amounts in the homework assignment to the nearest dollar [$1], except percentages.

On January 1, 2008, Diana Peter Company has the following defined benefit pension plan balances:
Projected benefits obligation $3,958,700
Fair value of plan assets $4,308,900

The interest (settlement) rate applicable to the plan is 10%. On January 1, 2009, the company amends its pension agreement so that prior service
costs of $534,600 are created. Other data related to the pension plan are as follows:

2008 2009
Service costs $158,500 $164,000
Unrecognized prior service costs amortization 0 87,800
Contributions (funding) to the plan 138,200 185,300
Benefits paid 181,300 285,100
Actual return on plan assets 233,000 255,400
Expected rate of return on assets 5% 8%
Average remaining service life 10 10

Instructions:
(a) Prepare a pension work sheet for the pension plan for 2008 and 2009. Worksheet is in DR-positive, CR-negative format.

DIANA PETER COMPANY

Pension Work Sheet—2008 and 2009
General Journal Entries Memo Record
Accum. Other Comp. Income
Annual Prior Pension Projected
(Gains) / Plan
Items Pension Cash Service Asset / Benefit
Losses Assets
Expense Cost Liabilty Obligation
Balance, Jan. 1, 2008 350,200 (3,958,700) 4,308,900
(a) Service cost 158,500 (158,500)
(b) Interest cost 395,870 (395,870)
(c) Actual return on assets (233,000) 233,000

Problem 20-1 Solution, Page 1 of 2, 11/13/2010, 5:59 PM

Name: 11
Problem: P20-1, Two-Year Work Sheet and Reconciliation Schedule, File 20p-1
Course: X120C Intermediate Accounting III
Date: Homework #4
(d) Unexpected gain / loss 17,555 (17,555)
(e) Funding / Contributions (138,200) 138,200
(f) Benefits Paid 181,300 (181,300)
Journal entry, 12/31/08 338,925 (138,200) 0 (17,555) (183,170)
Balance, Dec. 31, 2008 167,030 (4,331,770) 4,498,800
(f) Prior service cost, 534,600 (534,600)
Revised bal. Jan. 1, 2009 167,030 (4,866,370) 4,498,800
(g) Service cost 164,000 (164,000)
(h) Interest cost 486,637 (486,637)
(i) Actual return (255,400) 255,400
(j) Unexpected gain / loss (104,504) 104,504
(k) Amortization of PSC 87,800 (87,800)
(l) Funding (185,300) 185,300
(m) Benefits Paid 285,100 (285,100)
Journal entry, 12/31/09 378,533 (185,300) 446,800 104,504 (744,537)
Balance, Dec. 31, 2009 446,800 86,949 (577,507) (5,231,907) 4,654,400

(b) As of December 31, 2009, prepare a schedule reconciling the (c) For the year 2010 determine the amount of Unrecognized Net (Gain) or Loss
funded status with the reported liability (accrued pension amortization (if any), using the average remaining service life.
Absolute Greater of:
Reconciliation Schedule—12/31/09 Value
Projected benefit obligation [Col. I] ($5,231,907) Projected benefit obligation [Col. I] $5,231,907 $5,231,907
Fair value of plan assets [Col. J] 4,654,400 Fair value of plan assets [Col. J] 4,654,400
Prepaid / (Accrued) pension cost liability ($577,507) Corridor percentage 10%
(Must equal Column H final amount) Corridor amount 523,191
The (gain) or loss subject to amortization is the amount Accumulated Other Comprehensive Income [Col. G] 86,949
by which absolute value of the gains & losses included in (Gain) or loss subject to amortization, if any (may be zero) $0
[AOCI] exceeds the Corrider amount. If the absolute value Amortization period 10
of AOCI is less than the Corridor amount the (gain) or loss Amortization, if any (may be zero) $0
subject to amortization is zero.

Problem 20-1 Solution, Page 2 of 2, 11/13/2010, 5:59 PM