Pension data for John Ferguson Company include the following for the current calendar year:
Discount rate: 7%
Expected return on plan assets: 11%
Actual return on plan assets: 10%
Service cost: $250,000
January 1:
PBO $1,500,000
ABO 1,200,000
Plan assets 1,700,000
Amortization of prior service cost 25,000
Amortization of net gain 2,000
December 31:
Cash contributions to pension fund: $240,000
Benefit payments to retirees 260,000
Required:
1. Determine pension expense for the year.
Service Cost
$250,000
Interest Cost ($1,500,000 × 7%)
105,000
Expected Return ($1,700,000 × 11%)
(187,000)
Amortization of prior service cost
25,000
Amortization of net gain
(2,000)
$191,000
2. Prepare the journal entries to record pension expense and funding and distributions to employees for the year.
Pension Expense
191,000
Plan Assets
187,000
Projected Benefit Obligation
378,000
Plan Assets
240,000
Cash
240,000
Projected Benefit Obligation 260,000
Plan Assets 260,000
What will be an ideal response?
Answer:
1.
Service Cost
$250,000
Interest Cost ($1,500,000 × 7%)
105,000
Expected Return ($1,700,000 × 11%)
(187,000)
Amortization of prior service cost
25,000
Amortization of net gain
(2,000)
$191,000
2.
Pension Expense
191,000
Plan Assets
187,000
Projected Benefit Obligation
378,000
Projected Benefit Obligation 260,000
Plan Assets 260,000
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