Measuring and recording pension expense. Kessler, Inc. received the following in
ID: 2548614 • 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, 2018:
January 1, 2018
December 31, 2018
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 2018 is $180,000 and the amortization of prior service cost is $240,000. The company's actual funding of the plan in 2018 amounted to $525,000. The expected return on plan assets and the settlement rate were both 8%.
Instructions
(a) Determine the pension expense to be reported in 2018.
(b) Prepare the journal entry to record pension expense and the employers' contribution to the pension plan in 2018.
January 1, 2018
December 31, 2018
Explanation / Answer
SOLUTION:
PART-1 Service cost 180,000 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—2018 720,000 PART-2 Debit Credit Pension Expense 720,000 Pension Asset / Liability 245,000 Cash 525,000 Other Comprehensive Income (PSC) 240,000