Question

E20-15B (LO1,2,5) (Pension Expense, Journal Entries) Ultra-Home Corporation provides the following information related to its defined-benefit pension plan for 2017. $ 500,000 1,250,000 15,000 210,000 960,000 Pension liability (January 1) Accumulated benefit obligation (December 31) Actual and expected return on plan assets Contributions (funding) in 2017 Fair value of plan assets (December 31) Settlement rate 8% Projected benefit obligation (January 1) Service cost 1,500,000 165,000 Instructions (a) Compute pension expense and prepare the journal entry to record pension expense and the employer's contribution to the pension plan in 2017. (b) Indicate the pension-related amounts that would be reported in the company's income statement and balance sheet for 2017.

Answer 1

Part A

Service cost	165000
Interest cost ($1500000 x 8%)	120000
Expected return on plan assets	(15000)
Pension expense for 2017	$270000

Account titles and explanation	Debit	Credit
Pension Expense	270000
Pension Asset/Liability (500000-15000)	485000
Cash		755000

Part B

Ultra-home Company Income Statement (Partial) For the year ended December 31,2017
Expenses
Pension Expense	270000

Ultra-home Company Balance Sheet (Partial) December 31,2017
Long-term Liabilities
Pension Liability	485000