Homework SoursePension data for Sam Adams Inc include the following for the
Pension data for Sam Adams Inc. include the following for the current calendar year:
Discount rate, 8%
Expected return on plan assets, 10%
Actual return on plan assets, 9%
Service cost, $400,000
Required:
1. Determine pension expense for the year.
2. Prepare the journal entries to record pension expense and funding for the year. (two general journals)
| January 1: | |||
| PBO | $ | 3,000,000 | |
| ABO | 2,000,000 | ||
| Plan assets | 3,200,000 | ||
| Amortization of prior service cost | 30,000 | ||
| Amortization of net gain | 7,000 | ||
| December 31: | |||
| Cash contributions to pension fund | $ | 275,000 | |
| Benefit payments to retirees | 310,000 | ||
| Required: |
Solution
1) Calculation of Pension Expense :-
2) Journal Entries :-
| Particulars | Amount($) |
| Service Cost | $400000 |
| Add: Interest Cost ($3000000*8%) | $240000 |
| Less : Expected Return ($3200000*10%) | ($320000) |
| Add : Amortization of prior service cost | $30000 |
| Less : Amortization of net gain | ($7000) |
| Pension Expense | $343000 |
