Question

The Kollar Company has a defined benefit pension plan. Pension information concerning the fiscal years 2018 and 2019 are presented below ($ in millions):

Information Provided by Pension Plan Actuary:

1. Projected benefit obligation as of December 31, 2017 = $2,000.
2. Prior service cost from plan amendment on January 2, 2018 = $600 (straight-line amortization for 10-year average remaining service period).
3. Service cost for 2018 = $560.
4. Service cost for 2019 = $610.
5. Discount rate used by actuary on projected benefit obligation for 2018 and 2019 = 10%.
6. Payments to retirees in 2018 = $420.
7. Payments to retirees in 2019 = $490.
8. No changes in actuarial assumptions or estimates.
9. Net gain—AOCI on January 1, 2018 = $250.
10. Net gains and losses are amortized for 10 years in 2018 and 2019.

Information Provided by Pension Fund Trustee:

1. Plan asset balance at fair value on January 1, 2018 = $1,500.
2. 2018 contributions = $580.
3. 2019 contributions = $630.
4. Expected long-term rate of return on plan assets = 12%.
5. 2018 actual return on plan assets = $130.
6. 2019 actual return on plan assets = $180.

Required:

1. Calculate pension expense for 2018 and 2019.
2. Prepare the journal entries for 2018 and 2019 to record pension expense.
3. Prepare the journal entries for 2018 and 2019 to record any gains and losses and new prior service cost.
4. Prepare the journal entries for 2018 and 2019 to record the cash contribution to plan assets and benefit payments to retirees.

Answer 1

Answer

Amortization of net gain or loss-AOCI using Corridor approach Pension Work Sheet 2018 General Journal Entries Memo Record sign indicates Credits Positive Sign Indicates Debits OCI-Prior Projected Pension Service Benefit Cost Gain JLo89 Asset'Liability Plan assets Balance, Jan. 1, 2018 Service cost (600.00) C (2,000.00) Cr (560.00) Cr. 1,600.00 Dr 560.00 Dr Interest cost I settlement rate PBOx 10%) 200.00Dr 200.00) Cr Actual Return 130.001l Cr 130.00 Dr 60.00 Dr nexpected Loss Ngain ) Amortisation of Past service cost (60.001 C Past service cost 600.00Dr Amortization of net gain or loss-AOci Contributions 5.00 Cr 5.00 Dr (680.00) Cr 680.00 Dr (420.00) Cr. 420.00 Dr Decreaselincrease in PBO-(actuarial gal ournal for 2018 575.00 Dr 580.00)l Cr 600.00 Dr 55.00 Cr 650 Accumulated OCI, 1 Jan 18 Balance Dec. 2018 260.00) Cr (2,940.00) Cr.1790.00 Dr. 600.00 Dr (195.00) Cr.(1,150.00) Cr Comidor Projected Benefit Plan assets | Corridor @10% Cumulative Unrecognized amortization Galn or loss of galn or Loss 2018 2.000.00 1,600.00 200.00 260.00 5.00 Gain 10

Pension Expense 2018 575 Answer 1-3 1, Journal entry (or entries) to record all pension effects for 2018 Account title & explanation Debit credit Pension expense 575 Other comprehensive income(PSC) Other comprehensive income(G/L) 600.00 55.00 Pension Asset Liabili 650 Cash 580.00 Record the journal entry for pension expense for 2018 Pension Expense 575.00 180.00 Plann Assets Amortisation of net gain-OCI 5.00 Amortisation of Prior service cost-OCI PBO 760.00 Record the journal entry for gain or losses in plan assets for 2018 50.00 Loss-OCI Plan Assets 50.00 Record the journal entry for prior service cost from plan amendment on January 2, 2018 OCi-Prior Service Cost 600.00 РВО 600.00 Record the journal entry for cash contribution to plan assets for 2018 Plan Assets 580.00 Cash 580.00 Record the journal entry for benefits paid to employees for 2018 420.00 PBO Plan Assets 420.00

Amortization of net gain or loss-AOCI using Corridor approach Pension Work Sheet General Journal Entries Memo Record 2019 sign indicates Credits Positive Sign Indicates Debits OCI-Prior Projected Pension oCI Items Cash Cost Gain JLoss Asset'Liability ation Plan assets 1,790.00 Dr (1,150.00) Cr Balance, Jan. 1, 2019 Service cost (2,940.00) Cr (610.00) Cr 610.00 Dr Interest cost settlement rate PBO x 10% 294.00Dr 294.00) Cr Actual Return 180.001 Cr 180.00 Dr 34.80 Dr Unexpected Loss Ngain Amortisation of Past service cost 34.80 Cr 60.00 Dr Amortlzation of net gain or loss-AOci Dr. Contributions 630.00) Cr. 630.00 Dr. (490.00) Cr 490.00 Dr Decreaselincrease in PB0-actuarial gai Cr. Dr. 749.20 Dr 34.80 Cr for 2019 00) Dr Cr Accumulated OCI, 1 Jan 19 600.00 Dr 196.00) Cr (1,244.00) Cr(3,364.00) Cr. 2,110.00 Dr. Balance Dec. 2019 540.00 Dr (160.20) Cr Comdo Projected Benefit Year Plan assets | Corridor @10% Cumulative Years Unrecogni amortization Gain or loss of gain or Loss 2019 940 1,790 294 196 Gain 10 If the cumulative unrecognized gain or 1088 is equal to or less than the 10% calculated value, no amount need be amortized

Pension Expense 2019 749.20 1, Journal entry (or entries) to record all pension effects for 2019 Account title & explanation Debit credit 749.20 Pension expense Other comprehensive income(G/L) 34.80 94.00 Pension Asset/ Liabil Cash 630.00 60.00 Other comprehensive income(PSC) Record the journal entry for pension expense for 2019 749.20 Pension Expense 214.80 Plann Assets Amortisation of net gain-oCI Amortisation of Prior service cost-OCI 60.00 РВО 904.00 Record the journal entry for gain or losses in plan assets for 2019 Loss-OCI 34.80 34.80 Plan Assets Record the journal entry for cash contribution to plan assets for 2019 630.00 Plan Assets Cash 630.00 Record the journal entry for benefits paid to employees for 2019 490.00 РВО 490.00 Plan Assets