Measuring and recording pension expense. Kessler, Inc. received the following in
ID: 2388026 • Letter: M
Question
Measuring and recording pension expense.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, 2013:
January 1, 2013 December 31, 2013
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 2013 is $120,000 and the amortization of prior service cost is $240,000. The company's actual funding of the plan in 2013 amounted to $490,000. The expected return on plan assets and the settlement rate were both 8%.
Instructions
(a) Determine the pension expense to be reported in 2013.
(b) Prepare the journal entry to record pension expense and the employers' contribution to the pension plan in 2013
Explanation / Answer
(a)
Service cost--------------------------------------------------------120,000
Interest on projected benefit obligations ($2,500,000 × 8%)-200,000
Expected return on plan assets ($ 1,250,000 × 8%)------------(100,000)
Amortization of prior service cost------------------------------- $240,000
Pension expense—2013--------------------------------------------$460,000
(b) Pension Expense --------------------460,000
Prepaid/Accrued Pension Cost ---------30,000
Cash----------------------------------------$490,000.