hi everyone,

I have still trouble understanding the JEs for Pension in becker-F9-13...

Do you guys just memorize them ? Or at least can anyone tell me how to memorize them ? I am not good at memorizing sth i don't understand...thx in advance...

Pension losses, prior service costs, and net transition obligations will increase pension expense when recognized for tax purposes. They will, therefore, result in a deferred tax asset when recorded.
DR Other comprehensive income $XXX
DR Deferred tax asset $XXX
CR Deferred tax benefit ¡V OCI $XXX
CR Pension benefit asset/liability $XXX
When pension losses, prior service costs, and net transition obligations are recognized in net periodic pension cost through the amortization process the following reclassification adjustment is recorded.
DR Net periodic pension cost $XXX
DR Deferred tax benefit ¡V OCI $XXX
CR Deferred tax benefit ¡V net income $XXX
CR Other comprehensive income $XXX
Pension gains and net transition assets will decrease pension expense when recognized for tax purposes. They will, therefore, result in a deferred tax liability when recorded.
DR Pension benefit asset/liability $XXX
DR Deferred tax expense ¡V OCI $XXX
CR Deferred tax liability $XXX
CR Other comprehensive income $XXX
When pension gains and net transition assets are recognized in net periodic pension cost through the amortization process the following reclassification adjustment is recorded.
DR Other comprehensive income $XXX
DR Deferred tax expense ¡V net income $XXX
CR Deferred tax expense ¡V OCI $XXX
CR Net periodic pension cost $XXX

right..i agree with u about net of tax part...it is correct...

Wish you the best of luck tomorrow...

I have posted two questions related to this topic...and I hope it can benefit whoever prepares FAR...

Q1-Giant Jobs, Inc. amended its overfunded pension plan on December 31, 20X7, resulting in the recognition of prior service cost of $700,000.  On December 31, 20X7, Giant Job¡¦s employees had an average remaining service life of 20 years.  The company has an effective tax rate of 30%.  How should the prior service cost be reported in the December 31, 20X7 financial statements?

a.       $490,000 increase in net periodic pension cost

b.    $490,000 decrease in comprehensive income.

c.    $700,000 decrease in net income.

d.    $700,000 increase in pension benefit asset.

The correct answer is B-

JE-

Dr- OCI 700,000

Dr- Deferred tax asset 210,000

Cr-Deferred tax benefit- OCI 210,000

Cr- Pension benefit asset 700,000

Q2-Giant Jobs Inc. amended its overfunded pension plan on December 31, 20X7, resulting in the recognition of prior service cost of $700,000.  On December 31, 20X7, Giant Job¡¦s employees had an average remaining service life of 20 years.  The company has an effective tax rate of 30%.  How will the amortization of the prior service cost affect Giant Job¡¦s December 31, 20X8 financial statements?

a.$24,500 decrease in other comprehensive income.

b. $35,000 decrease in net income.

c. $24,500 increase in pension benefit asset.

d.$35,000 increase in net periodic pension cost.

The correct answer is D.

JE-

Dr- Net periodic pension cost 35,000

Dr- Deferred Tax benefit- OCI 10,500

Cr- Deferred tax benefit- Income statement 10,500

Cr- OCI 35,000