Question

Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2021, Lacy received the following information:

Projected Benefit Obligation	($ in millions)
Balance, January 1		$	520
Service cost			76
Prior service cost			28
Interest cost(5%)			26
Benefits paid			(77	)
Balance, December 31		$	573

Plan Assets	($ in millions)
Balance, January 1		$	390
Actual return on plan assets			43
Contributions, 2021			76
Benefits paid			(77	)
Balance, December 31		$	432

The expected long-term rate of return on plan assets was 10%. There were no AOCI balances related to pensions on January 1, 2021. At the end of 2021, Lacy amended the pension formula creating a prior service cost of $28 million.

Assume Lacy Construction prepares its financial statements according to International Financial Reporting Standards (IFRS) and that the actuary's discount rate is the rate on high-quality corporate bonds.

Required:
1. Determine Lacy’s net pension cost for 2021.
2. Prepare the journal entry(s) to record Lacy’s (a) net pension cost, (b) gains or losses, (c) prior service cost, (d) funding, and (e) payment of retiree benefits for 2021

Answer 1

credit Answer: y calculation of Lacys net pension cost for 2021. Amount ] particulars Service cost $76,000000 Add: Interest cost $26.000.000 Less Expected rate of Return out plan Asset L$ 390,000,000 x 100%] 39000000 Amortization of pris service cost so Amortization of net gain/Loos 1 $o Lacy's Net persion cost |$63,000,000 .. Lacy's Net pension cost is $63,000,000 2) Journal entries. Date particulars LE Debit a. pension capeuse ale or 463000,000 plan Assets Ale 39.000.000 To projected benefit obligation $102, ad Being record pension expense] I plan Assets ale DY $4,000,000 To Gain-other comprehensive $4,0000001 Actual plangha- plan Assets $39] Being record the gain on plan desets] c prior service cost ale or $28,000000 1$28.000.000 To projected benefit obligalica Being record the prior Service.cost] a plau Assets Ale or $76,000000 Irons To cash $76000,000 Being record cash funding to planeta e projected benefit obligation He or 1$77,000,000 - To plan Assets 77000,000 being record the payments to retiree I benefits] nсоmе.