Question

Actuary and trustee reports indicate the following changes in the PBO and plan assets of White Inc. during 2017:

Prior service cost at January 1, 2017 from plan amendment at the beginning of 2014 [Amortization: $4,000 per year]	$68,000
Net Gain - AOCI at January 1, 2017	$40,000
Average remaining service life of the active employee group	15 years
Actuary's discount rate	5%
Gain - from changes in actuarial assumptions	$5,000
2017 Pension Expense	$33,500

$ in Millions	PBO		Plan Assets
Beginning of 2017	$240,000	Beginning of 2017	$250,000
Service Cost	$41,000	Return on plan assets, 8%, [ 9% expected]	$20,000
		Cash contributions	$35,000

Required:

A. Prepare the appropriate journal entries to record the expense and the cash contribution to plan assets.

B. Prepare the appropriate journal entries to record any 2017 gains and losses.

C. Where would you find the pension on White Inc.'s balance sheet at the beginning of 2017? What amount would you look for?

Answer 1

Ans:-

A.

journal entries: record the expense

particulars	Debit ($ )	Credit ($)
pension expense (given)	33,500
plan assets (expected return on assets) ( 9% of $250,000)	22,500
net gain AOCI (current amortization)	1,000
prior service cost- AOCI (current amortization)		4,000
PBO ($41,000 + $12,000)		53,000

journal entries: cash contribution to plan assets

particulars	debit($)	credit($)
plan assets	35,000
cash(contributions)		35,000

B.

journal entries: gains and losses

particulars	debit($)	credit($)
loss-OCI($20,000 - $22,500)	2,500
plan assets		2,500

particulars	debit($)	credit($)
PBO	5,000
gain OCI		5,000