CHAPTER 17

Problem 17-1

2020
Employee benefit expense 200,000
Cash (4,000,000 x 5%) 200,000

2021
Employee benefit expense 210,000
Cash (4.200,000 x 5%) 210,000

Problem 17-2

2020
Dec. 31 Employee benefit expense 300,000
Accrued benefit payable 300,000

2021
Feb. 15 Accrued benefit payable 300,000
Cash 300,000

Problem 17-3

2020
Dec. 31 Employee benefit expense 350,000
Prepaid benefit expense 50,000
Cash 400,000

Problem 174

2020
Employee benefit expense 850,000
Cash 700,000
Accrued benefit cost 150,000

2021
Employee benefit expense 1,000,000
Prepaid benefit cost 50,000
Cash 1,050,000
2.

Noncurrent liability - 12/31/2020

Accrued benefit cost 150,000

Noncurrent liability - 12/31/2021

Accrued benefit cost 100,000

Problem 17-5

Annual pension payment- PBO

300,000 x 1.48 x 3%x 12 = 159,840

Problem 17-6

Future salary-PBO (500,000 x 2.094) 1,047,000

Annual pension payment-PBO (1,047,000 x 2%x 10 years) 209,400

Multiply by PV of an ordinary annuity of 1 at 8% for 15 years 8.559
Present value-12/31/2045 1,792,255
Multiply by PV of 1 at 8% for 25 periods 0.146
Projected benefit obligation 12/31/2020 261,669

Problem 17-7

Future salary (600,000 x 1.48) 888,000

Annual pension payment (2% x 888,000 x 15 years) 266,400

Multiply by PV of an ordinary annuity of 1 at 10% for 8 periods 5.335
Present value-12/31/2030 1,421,244
Multiply by PV of 1 at 10% for 10 periods 0.386
Projected benefit obligation 12/31/2020 548,600

Problem 17-8
Annual benefit (5% x 1,500,000) = 75,000

Current service cost PV factor Discounted

2020 75,000 .361 27,075
2021 75,000 .404 30,300
2022 75,000 .452 33,900

Date Current service cost Interest cost Liability

12/31/2020 27,075 - 27,075
12/31/2021 30,300 3.249 60,624
12/31/2022 33,900 7.275 101,799

Problem 17-9

1. Annual retirement benefit (10% x 1,440,000) = 144,000

Current service cost PV factor Discounted

2020 144,000 .9079 130,608
2021 144,000 .9524 137,146
2022 144,000 1.0000 144,000
432,000 411,754

2. Schedule

Date Current service cost Interest cost Liability

12/31/2020 130,608 - 130,608
12/31/2021 137,146 6,530 274,284
12/31/2022 144,000 13,716 432,000

Problem 17-10 Answer A

Future salary (500,000 x 1.217) 608,500

Annual pension payment (3% x 608,500x 15) 273,825

Multiply by PV of an ordinary annuity of 1 at 12% for 6 periods 4.111
Present value December 31, 2025 1,125,695
Multiply by PV of 1 at 12% for 5 periods 0.567
Projected Benefit Obligation on December 31, 2020 638,262

Problem 17-11 Answer D

Annual retirement benefit (20% x 1,500,000) = 300,000

Current service cost PV factor Discounted

2020 300,000 .826 247,800
2021 300,000 .909 272,700
2022 300,000 1.0000 300,000
820,500

Date Current service cost Interest cost Present value

Dec. 31, 2020 247,800 - 247,800
Dec. 31, 2021 272,700 24,780 545,280
Dec. 31, 2022 300,000 54,720 900,000

Problem 17-12

1. B 6. C
2. B 7. C
3. C 8. A
4. D 9. B
5. B 10. A

Problem 17-13

1. D 6. C
2. D 7. C
3. D 8. B
4. D 9. D
5. D 10. A