Abbott and Abbott has a noncontributory, defined benefit pension plan. At Decemb
ID: 2529635 • Letter: A
Question
Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2018, Abbott and Abbott received the following information:
The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss–AOCI on January 1, 2018.
Required:
1. Determine Abbott and Abbott’s pension expense for 2018.
2. Prepare the journal entries to record Abbott and Abbott’s pension expense, funding, and payment for 2018.
Explanation / Answer
Requirement 1 Calculation of pension expense Service Cost $24.00 Interest Cost $16.00 Less :Actual Return on Plan assets -$11.00 Add : Other comprehensice income (w/N-1) $3.00 Total Pension Expense for 2018 $32.00 W/Note-1: Calculation of other comprehensive income Actual return $11.00 Less : Expected Return($80*10%) -$8.00 Other comprehensive income $3.00 Requirement 2: Journal Entries Date Account Tittle & Explanation Debit Credit 31/12/2018 Pension Expenses $32.00 Plan Assets $11.00 To Defined Benefits Obligation $40.00 To Other Comprehensive Income $3.00 (Being Pension Expenses Recorded in books of accounts) 31/12/2018 Plan Assets $24.00 To Bank $24.00 (Being Contribution made) 31/12/2018 Projected Benefit Obligation $11.00 To Plan Assets $11.00 (Being Benefits Paid)