Question

mage 3.jpeg Question 2: Pension data for Sam Adarne Discount rate, 8% Expected return on plans, 10 Actual return on plan asets, 99 Service cost $400,000 January 1: PBO ABO 3.200.000 Plan assets 2.000.000 Amortization of prior service cost 3,200.00 30.000 Amortization of net gain 7.000 December 31: Cash contributions to pension fund $275.000 Benefit payments to retirees 310,000 Required: 1) Determine pension expense for the year. 2) Prepare the journal entries to record pension expense and funding for the year.

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Answer 1

1) Pension expense for the year can be computed as:

Service cost $400,000 Add:Interest cost (8%*3,000,000) Less:Expected return (10%*3,200,000) Add:Amortization of prior service cost Less:Amortization of net gain Pension expense $240,000 -$320,000 $30,000 -$7,000 $343,000

2) Journal entry to record pension expense and funding for the year is:

Pension expense A/C Net gain-pensions A/C $343,000 $7,000 Dr. Dr. A/C $320,000 To pension asset To prior service cost A/C $30,000

*pension asset=$400,000+$240,000-$320,000=$320,000

Pension asset A/C $275,000 To Cash A/C $275,000

To record Cash contributions of $275,000 to pension fund.