Question

Kessler, Inc. received the following information from its pension plan trustee concerning the operation of the company's defined-benefit pension plan for the year ended December 31, 2018:

                                                                                        January 1, 2018       December 31, 2018

         Projected benefit obligation                                        $2,500,000                  $2,850,000

         Fair value of plan assets                                               1,250,000                    1,600,000

         Accumulated benefit obligation                                  1,930,000                    2,620,000

         Accumulated OCI – (PSC)                                             540,000                       300,000

The service cost component for 2018 is $180,000 and the amortization of prior service cost is $240,000. The company's actual funding of the plan in 2018 amounted to $525,000. The expected return on plan assets and the settlement rate were both 8%.

Instructions

(a)    Determine the pension expense to be reported in 2018.

(b)    Prepare the journal entry to record pension expense and the employers' contribution to the pension plan in 2018.

Answer 1

Answer

(a) Determine the pension expense to be reported in 2018.
Serv Cost                                          180,000	$180,000
Int on PBO                         (2,500,000 x .08)	$200,000
Expected Returns           (1,250,000 x .08)	($100,000)
Amort.of Prior Serv Cost	$240,000
Pension Expense	$460,000
Journal Entry:
Penion Expense	$460,000
Pension Asset / Liability	270000
CASH		$525,000
Other Comprehensive Income (PSC)		$205,000

  

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