Question

Pension data for Barry Financial Services Inc. include the following: ($ in 000) $ 340 Discount rate, 78 Expected return on plan assets, 10% Actual return on plan assets, 99 Service cost, 2018 January 1, 2018: Projected benefit obligation Accumulated benefit obligation Plan assets (fair value) Prior service cost-AOCI (2018 amortization, $40) Net gain-AOCI (2018 amortization, $6) There were no changes in actuarial assumptions. December 31, 2018: Cash contributions to pension fund, December 31, 2018 Benefit payments to retirees, December 31, 2018 2,450 2,150 2,550 340 360 275 300 Required: 1. Determine pension expense for 2018. 2. Prepare the journal entries to record pension expense, gains and losses (if any), funding, and retiree benefits for 2018. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine pension expense for 2018. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands rounded to 1 decimal place (l.e., 5,500 should be entered as 5.5).) Pension Expense

Answer 1

Barry Financial Services Inc. Requirement 1 Requirement 2 Pension Expense Service cost Interest cost Expected return on assets Amortization of prior service cost Amortization of net gain Pension expense 340 172 -256 Journal Enteries Trans. Particulars Debit in $ Credit in $ 1 Pension expense a/c Dr. 290 Plan assets a/c Dr. 256 Amortization of net gain-OCI a/c Dr. To Amortization of prior service cost-OCI 40 То РВО 512 PBO ($340 service cost +$172 interest cost) = $512 -6 290 2 Dr. Interest cost (7% < $2,450) = $172 Expected return on assets = $230 actual, plus $26 loss* *(10% < $2,550) - (9% < $2,550) = 26 Actual Return = 2550 x 9% = 230 Loss-OCI a/c To Plan assets 26 Dr. 275 Plan assets a/c To Cash 275 4 Dr. 300 PBO a/c To Plan assets 300