| Course | ACC-2020 Intermediate Accounting II |
|---|---|
| Module | Module 4 |
| Paper type | Written Assignment 4: pensions, postretirement benefits and shareholders' equity |
| Length | About 684 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Bachelor of Science in Business Administration |
| Updated | October 2026 |
Free sample paper for ACC 2020 Module 4
Barnegat Marine Supply, Inc.: Pension Expense, Funded Status and a Year of Equity Transactions
Student Name
Bachelor of Science in Business Administration, Thomas Edison State University
ACC-2020: Intermediate Accounting II
Mentor Name
Month Day, Year
Barnegat Marine Supply, Inc.: Pension Expense, Funded Status and a Year of Equity Transactions
Introduction
Barnegat's older employees are covered by a defined benefit pension plan, frozen to new hires in 2015, and the company's equity changed several times in 2025. Both topics turn on long-term claims: what the company has promised retirees and what belongs to shareholders.
Part A: The Defined Benefit Pension Plan
The actuary's report for 2025 supplies the following. The discount rate is 5% and the expected return on plan assets is 7%.
Funded status at year end is plan assets of $1,986,000 less the obligation of $2,160,000, an underfunded position of $174,000 reported as a noncurrent liability.
On the income statement, only the service cost is reported with other compensation in operating income; the other components are presented outside operating income (Financial Accounting Standards Board [FASB], 2017). No amortization is needed because Barnegat had no unrecognized prior service cost and no accumulated net loss at the start of the year. The $30,000 actuarial loss goes to other comprehensive income and will be amortized only if the accumulated net loss later exceeds the corridor of 10% of the larger of the obligation or plan assets.
Pension accounting smooths volatile items through other comprehensive income, which makes reported expense more stable but harder to read. Picconi (2006) found that analysts and investors overlooked much of what pension footnotes revealed, so companies with big pension numbers saw their later earnings surprises arrive in a predictable direction. That finding is a reason to read the funded status, not only the expense.
| Projected benefit obligation | Amount | |
|---|---|---|
| January 1, 2025 | $2,000,000 | |
| Service cost | 120,000 | |
| Interest cost: $2,000,000 x 5% | 100,000 | |
| Actuarial loss from a lower discount rate assumption | 30,000 | |
| Benefits paid to retirees | (90,000) | |
| December 31, 2025 | $2,160,000 | |
| Plan assets | Amount | |
| January 1, 2025 | $1,800,000 | |
| Actual return, equal to the expected 7% this year | 126,000 | |
| Employer contributions | 150,000 | |
| Benefits paid | (90,000) | |
| December 31, 2025 | $1,986,000 | |
| Pension expense components | Amount | |
| Service cost | $120,000 | |
| Interest cost | 100,000 | |
| Expected return on plan assets | (126,000) | |
| Amortization of prior service cost or net loss | None | |
| Pension expense | $94,000 | |
| 2025 pension entry | Debit | Credit |
| Pension expense | $94,000 | None |
| Other comprehensive income, net loss | 30,000 | None |
| Net pension liability, decreased from $200,000 to $174,000 | 26,000 | None |
| Cash, contributions | None | $150,000 |
Part B: Other Postretirement Benefits
Barnegat also pays part of retirees' health insurance until they reach Medicare age. The accounting mirrors pensions: an accumulated postretirement benefit obligation, service and interest cost and gains and losses through other comprehensive income. The main difference is that these plans are usually unfunded, so the full obligation appears as a liability, and health cost trend assumptions add uncertainty that pension plans do not face.
Part C: Shareholders' Equity Transactions
Barnegat began 2025 with 200,000 shares of $1 par common stock outstanding and 5,000 shares of 6%, $100 par cumulative preferred stock.
Treasury stock is recorded at cost and shown as a reduction of equity, not an asset (Spiceland et al., 2020). The $3 per share gain on reissue goes to paid-in capital, never to income, because a company does not earn profit by trading in its own shares. Had the board declared a small stock dividend instead of cash, retained earnings would have been moved to paid-in capital at market value without any cash leaving the company.
| Date | Transaction | Entry |
|---|---|---|
| April 1 | Raised equity by selling 10,000 fresh common shares at $25 | Dr Cash 250,000; Cr Common Stock 10,000 and Paid-in Capital in Excess of Par 240,000 |
| July 1 | Bought 4,000 treasury shares at $28 | Treasury Stock 112,000; Cash 112,000 |
| October 1 | Reissued 1,500 treasury shares at $31 | Cash 46,500; Treasury Stock 42,000; Paid-in Capital from Treasury Stock 4,500 |
| December 1 | Declared preferred dividend of $6 a share | Retained Earnings 30,000; Dividends Payable 30,000 |
| December 1 | Declared $0.50 per common share on 207,500 shares outstanding | Retained Earnings 103,750; Dividends Payable 103,750 |
Part D: Effect on Equity
Outstanding common shares rose from 200,000 to 207,500. Total paid-in capital grew by $254,500, treasury stock of 2,500 shares at $70,000 reduced equity and dividends of $133,750 reduced retained earnings.
References
Financial Accounting Standards Board. (2017). Compensation, retirement benefits (Topic 715): Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost (Accounting Standards Update No. 2017-07).
Picconi, M. (2006). The perils of pensions: Does pension accounting lead investors and analysts astray? The Accounting Review, 81(4), 925-955. https://doi.org/10.2308/accr.2006.81.4.925
Spiceland, J. D., Nelson, M. W., & Thomas, W. B. (2020). Intermediate accounting (10th ed.). McGraw-Hill Education.
ACC 2020 Module 4 instructions, in plain terms
The fourth homework set pairs two chapters that rarely meet in practice: retirement obligations and owners' equity. Numbered exercises and problems from the pension and equity chapters make up the set, each solved with its roll-forward or entry in view. On the pension side, expect to carry the obligation and the fund forward a year, find the expense and the over- or underfunding, and book the year's entry, sometimes with plan amendments or actuarial surprises. The equity half typically asks for entries on new shares, buybacks and reissues, dividends of both kinds, splits and limits placed on retained earnings. All items on the page were drafted for it in the textbook's layout. Some items also ask for the note disclosure of the plan's assumptions.
How this ACC 2020 Module 4 example is built
Part A builds the pension calculation in a sequence of small tables: the obligation roll-forward, the plan asset roll-forward, funded status, the expense components and the journal entry, so every figure can be traced. A paragraph after the entry explains why the assumption loss bypasses net income and what research says about how carefully the market reads pension notes. Part B contrasts retiree health plans with pensions in a few sentences. Part C records five equity transactions in a dated table, with explanations of why treasury stock gains go to paid-in capital. Part D summarizes the year's net effect on equity, which helps the next assignment's earnings per share calculation. The figures in Part C feed directly into the next assignment's share count.
ACC 2020 Module 4 rubric: what earns full marks
The pension and equity set is one of six that share a third of the ACC-2020 grade, and partial credit depends on the schedules being visible. On pensions, they check each component of the obligation and plan asset roll-forwards, the five expense components, funded status and a journal entry that balances with the actuarial loss in other comprehensive income. On equity, they look for correct par and excess amounts on share issues, treasury stock at cost, reissue differences in paid-in capital and dividends computed on outstanding, not issued, shares. Short explanations of the reasoning show understanding the final practice exam and proctored exam will test. A balanced entry is the quickest self-check before submitting, and mentors notice when one is missing.
ACC 2020 Module 4 help: mistakes that cost marks
Pension problems become manageable when you keep the obligation and plan assets in separate roll-forwards before computing expense. Pension expense uses the return the plan expected to earn; whatever it actually earned above or below that becomes a gain or loss parked in other comprehensive income. Interest cost uses the beginning obligation and the discount rate. In equity problems, compute dividends on shares outstanding, which excludes treasury shares, and never record gains or losses on treasury stock in income. Check that your entries balance. For your own pension and equity items, a writer can prepare roll-forwards and entries like these, starting with a free sample. Write the corridor test out in words if the problem includes an accumulated loss, since it is easy to apply to the wrong year's balances.
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ACC 2020 Module 4 questions, answered
Where can I find a free ACC 2020 Module 4 sample paper?
Above you will find the completed fourth assignment: pension obligation and plan asset roll-forwards, pension expense, funded status and the entry, plus a year of equity transactions.
What are the components of pension expense?
The year's newly earned benefits, interest on the obligation, minus what the fund was expected to earn, plus any write-off of plan amendments and of losses that have outgrown the corridor.
What is a pension plan's funded status?
Plan assets minus the projected benefit obligation; a negative amount is reported as a net pension liability.
Why are treasury stock gains not income?
A company cannot earn profit by buying and selling its own shares, so the difference goes to paid-in capital.
Are dividends paid on treasury shares?
No. Dividends are computed on shares outstanding, which excludes shares held in treasury.