Question

P20-4B (L01,2,3,4) (Pension Expense, Journal Entries for 2 Years) Biker Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2017 and 2018. 2018 $462,000 500,000 Plan assets (fair value), December 31 Projected benefit obligation, January 1 Pension asset/liability, January 1 Prior service cost, January 1 Service cost Actual and expected return on plan assets Amortization of prior service cost Contributions (funding) Accumulated benefit obligation, December 31 Interest/ settlement rate 2017 $396,000 400,000 60,000 Cr. 300,000 30,000 26,000 40,000 30,000 320,000 6% 260,000 42,000 32,000 46,000 34,000 380,000 6% Instructions (a) Compute pension expense for 2017 and 2018. (b) Prepare the journal entries to record the pension expense and the company's funding of the pension plan for both years.

Answer 1

The Pension expense could be calculated in the excel and for the same computation is as follows-

Computation of Pension Expense Particulars 2014 2015 service cost 30000 42000 interest at 6% 24000 30000 expected retum on plan -26000 -32000 assets prior service cost 40000 46000 amortization Pension expense for 68000 86000 the year

Entries for the year ending 2017 are as follows –

Pension Expense A/c                       dr.                         68000

Pension asset/liability A/c dr.                       

To other comprehensive income (PSC)                    

To other comprehensive income (GL)                      

To cash                                                                            30000

Pension Expense A/c                       dr.                         86000

To Pension asset   

To other comprehensive income (PSC)

To cash                                                                            34000