Question

7. Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2018, Abbott received the following information:

Projected Benefit Obligation ($ in millions)

Balance, January                                                                                                          $100

     Service cost                                                                                                                  21

    Interest cost                                                                                                                10

     Benefits paid                                                                                                               (10)

Balance, December 31 $121

Plan Assets

Balance, January 1                                                                                                   $ 80

     Actual, return on plan assets                                                                                   10

     Contributions 2018                                                                                                   21

      Benefits paid                                                                                                              (10)

   Balance, December 31                                                                                                $101

The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss—AOCI on January 1, 2018.

Required:

1. Determine Abbott and Abbott’s pension expense for 2018.
2. Prepare the journal entries record Abbott and Abbott’s pension expense, funding, and payment for 2018.

Answer 1

a.

Compar Musement As sales ar Me costs ar dit for or in buil Ver Cadilo Their value des За". ) Салаваком довіри приш ч .pro Net Pension ear. powus = Service Costa +Inkut could + Acheal relun on Plan feut- +Amortisation of Peios Service cost + Gain/loss. Fast of all we will caclucate Acturial gain/loss. Calculation of expected return. Rehua Expected rate of rehun = 101. Changing lale - 11+0.10 -1 - 4.88 $ 8 $ 0.5368 Kehun en opening value of Plan Asset ($80 X 10.4.) + Renuren on nor gain of a 11 (421-10) @ 4.881. $8.5368 Expected Rehun. Cal. of 4. Gain of loss. Opening Balance (Plan Asset) + Contribution G) Benefit Paid 8.5368 (t) Expected rehun . Toral. 99.5368 101 Closing Balace 1.4632 Acrural Gain 10+ 0 +1.4632 • Net Pension expenses = 21+ 10+ = $42.4632

b.

Youth 21 Jounal 1. Current Service Lost Dr Intl Cost To PVABO (Being csc & IL recognised) 2. PUDBO ahl Ar To Bank (Being benefit paid 10 31 3. SPLU To cse To 1с 4. Plan Asset To Bank (being contribution Paid) 10 Ar Bank an To Plan Asset (being benefit rea 8.5368 8.5368 1-4632 1.4632 . 6. Plan Asset ase Ar To Expected retun 7 Plan Asset al ar To Acturial Gain Pensioue esperades se ho ho 8. Expected rehun ar 8.5368 1.4632 Achurial Gain Ar To SPL