On January 1, 2016, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,140,000 on that date (which it did not fund). Baznik has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2016: Employee Expected Years of Future Service A 1 B 3 C 4 D 5 E 5 F 6 Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik’s pension expense, in addition to the amortization of the prior service cost for 2016 and 2017: 2016 2017 Service cost $542,500 $558,073 Interest cost on projected benefit obligation 104,000 146,637 Expected return on plan assets — 78,900 Baznik contributed $903,300 and $861,600 to the pension fund at the end of 2016 and 2017, respectively. Required: 1. Next Level Prepare a set of schedules for Baznik to determine (a) the amortization fraction for each year and (b) the amortization of the prior service cost.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter19: Accounting For Post Retirement Benefits

Section: Chapter Questions

Problem 15E

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On January 1, 2016, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,140,000 on that date (which it did not fund). Baznik has six participating employees who are expected to receive the retroactive benefits. Following is a schedule that identifies the participating employees and their expected years of future service as of January 1, 2016:

Employee	Expected Years of Future Service
A	1
B	3
C	4
D	5
E	5
F	6

Baznik decided to amortize the prior service cost to pension expense using the years-of-future-service method. The following are the amounts of the components of Baznik’s pension expense, in addition to the amortization of the prior service cost for 2016 and 2017:

	2016	2017
Service cost	$542,500	$558,073
Interest cost on projected benefit obligation	104,000	146,637
Expected return on plan assets	—	78,900

Baznik contributed $903,300 and $861,600 to the pension fund at the end of 2016 and 2017, respectively.

Required:

1.	Next Level Prepare a set of schedules for Baznik to determine (a) the amortization fraction for each year and (b) the amortization of the prior service cost.
2.	Next Level Prepare all the journal entries related to Baznik’s pension plan for 2016 and 2017.

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