Question

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, 2021: January 1, 2021 December 31, 2021 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 2021 is $180,000 and the amortization of prior service cost is $240,000. The company's actual funding of the plan in 2021 amounted to $525,000. The expected return on plan assets and the settlement rate were both 8%. What was Pension Expense for the year, and prepare the journal entry needed to record the above.

Answer 1

a)Computation of Pension Expense
Service cost	$180,000
Interest on projected benefit obligation ($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	$520,000
b) Preparation of Journal Entry
Account Titles and explanation	Debit (in $)	Credit (in $)
Pension Expense	$520,000
Pension asset/liability	$245,000
Cash		$525,000
Other Comprehensive Income (PSC)		$240,000
(To record pension expense and the employers' contribution)