Question

Burrito Corporation has a defined benefit pension plan. Burrito received the following information for the current calendar year:

Projected benefit obligation
Balance, January 1	$ 159,000,000
Service cost	29,500,000
Interest cost	15,900,000
Benefits paid	(16,500,000)
Balance, December 31	$ 187,900,000
Plan assets
Balance, January 1	$ 94,500,000
Actual return on plan assets	11,450,000
Contribution	27,500,000
Benefits paid	(16,500,000)
Balance, December 31	$ 116,950,000

The expected long-term return on plan assets is 10%. There were no other relevant data for the year.

Required:

1. Determine Burrito's pension expense for the year.

2. Prepare the journal entries to record the pension expense and funding for the year.

Answer 1

Answer for req 1

service cost	29.50
interest cost	15.90
expected return	(9.45)
pension expense total	35.95

29.50 from 29,500,000

94,500,000*10%= 9,450,000

req 2)

dr. pension expense           35.95

dr. plan assets                       9.45 (45.4-35.95)

  Cr. PBO                                         45.4= 29.50+15.90

dR. plan assets     27.50

   cr. cash                     27.50