Question

Chapter 17 (8.)

Pension data for Barry Financial Services Inc. include the following:

	($ in 000s)
Discount rate, 7%
Expected return on plan assets, 10%
Actual return on plan assets, 9%
Service cost, 2018	$	460
January 1, 2018:
Projected benefit obligation		3,050
Accumulated benefit obligation		2,750
Plan assets (fair value)		3,150
Prior service cost–AOCI (2018 amortization, $40)		400
Net gain–AOCI (2018 amortization, $12)		480
There were no changes in actuarial assumptions.
December 31, 2018:
Cash contributions to pension fund, December 31, 2018		395
Benefit payments to retirees, December 31, 2018		420

Required:
1. Determine pension expense for 2018.
2. Prepare the journal entries to record pension expense, gains and losses (if any), funding, and retiree benefits for 2018.

Answer 1

Solution:

1) pension expense for 2018 is calculated as follows:

Service cost	$ 460
Interest cost(3,050,*7%)	$213
Expected Return on plan assets( 3,150 * 10%)	($315)
Prior Service cost	$40
Amorization of Net gain	($12)
Pension expense	$386

2)

The journal entries are as follows:

S.No.	Account Titles	Debit	Credit
1)	Pension Expense	$386
	Plan Assets	$315
	Amortization of Net Gain – OCI	$12
	Amortization of Prior Service Cost – OCI		$40
	PBO (460+ 3050*7%)		$673
	(To record pension expense)
2)	Loss-OCI (9%*( 3,150 ) – 10%*( 3,150 ))	$31.5
	Plan Assets		$31.5
	(To record loss on assets)
3)	Plan Assets	$395
	Cash		$395
	(To record the funding)
4)	PBO	$420
	Plan Assets		$420
	(To record the retiree benefits)