Question

American Metals, Inc. has a defined benefit pension plan. Characteristics of the plan during 2018 follow...

American Metals, Inc. has a defined benefit pension plan. Characteristics of the plan during 2018 follow (in $-millions):

PBO balance, January 1

480

Plan assets balance, January 1

300

Service cost

75

Interest cost

45

Gain from change in actuarial assumption

22

Benefits paid

(36)

Actual return on plan assets

20

2018 contributions

60

The expected long-term rate of return on plan assets was 8%. There were no AOCI balances related to pensions on January 1, 2018, but at the end of 2018 the company amended the pension formula, creating a prior service cost of $12 million.

Required:

  1. Calculate pension expense for 2018.
  2. Prepare the journal entries to record pension expense, gains or losses, prior service cost, funding, and payment of benefits for 2018.
  3. What amount will American Metals, Inc. report in its 2018 balance sheet as a net pension asset or liability?
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