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 $2,480,000 $2,830,000 Fair value of plan assets 1,150,000 1,500,000 Accumulated benefit obligation 1,921,000 2,611,000 Accumulated OCI - (PSC) 532,000 296,000 The service cost component for 2018 is $137,500 and the amortization of prior service cost is $236,000. The company's actual funding of the plan in 2018 amounted to $500,000. The expected return on plan assets and the settlement rate were both 9%. Determine the pension expense to be reported in 2018. Pension expense $ Prepare the journal entry to record pension expense and the employer's contribution to the pension plan in 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Question

Stella Riddle

Business

16 December, 00:00

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 $2,480,000 $2,830,000 Fair value of plan assets 1,150,000 1,500,000 Accumulated benefit obligation 1,921,000 2,611,000 Accumulated OCI - (PSC) 532,000 296,000 The service cost component for 2018 is $137,500 and the amortization of prior service cost is $236,000. The company's actual funding of the plan in 2018 amounted to $500,000. The expected return on plan assets and the settlement rate were both 9%. Determine the pension expense to be reported in 2018. Pension expense $ Prepare the journal entry to record pension expense and the employer's contribution to the pension plan in 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

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Answers (1)

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Sydney Ware · Answer 1

(a) $493,200

Explanation:

(a) Pension expense to be reported in 2018:

= Service cost + Interest on projected benefit obligation - Expected return on plan assets + Amortization of prior service cost

= $137,500 + ($2,480,000 * 9%) - (1,150,000 * 9%) + $236,000

= $137,500 + $223,200 - $103,500 + $236,000

= $493,200

(b) The journal entry is as follows:

Pension expenses A/c Dr. $493,200

Pension Asset / Liability A/c Dr. $242,800

To cash $500,000

To Other comprehensive income $236,000

(To record the pension expense and the employer's contribution to the pension plan)