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16 January, 03:13

Colombo Enterprises has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $78,000; service cost, $17,000; interest cost, $6,400; benefits paid for the year, $8,500; ending PBO, $92,900; and the expected return on plan assets, $11,000. There were no other pension-related costs. The journal entry to record the annual pension costs will include a debit to pension expense for:

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  1. 16 January, 03:23
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    The correct answer is $12,400.

    Explanation:

    According to the scenario, the computation of the given data are as follows:

    We can calculate the pension expense by using following formula:

    Pension expense = Interest cost + Service cost - Expected return on plan assets.

    Where, Interest cost = $6,400

    service cost = $17,000

    Expected return on plan assets = $11,000

    So, by putting the value, we get

    Pension expense = $6,400 + $17,000 - $11,000 = $12,400

    Hence, Journal entry for the following are as follows:

    Pension Expense A/c Dr. $12,400

    To Cash $12,400
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