Question

Crane Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2020 in which no benefits were paid.

1.		The actuarial present value of future benefits earned by employees for services rendered in 2020 amounted to $56,000.
2.		The company’s funding policy requires a contribution to the pension trustee amounting to $145,023 for 2020.
3.		As of January 1, 2020, the company had a projected benefit obligation of $894,700, an accumulated benefit obligation of $803,700, and a debit balance of $397,300 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $595,600 at the beginning of the year. The actual and expected return on plan assets was $53,900. The settlement rate was 9%. No gains or losses occurred in 2020 and no benefits were paid.
4.		Amortization of prior service cost was $49,500 in 2020. Amortization of net gain or loss was not required in 2020.

(a)

Determine the amounts of the components of pension expense that should be recognized by the company in 2020. (Enter amounts that reduce pension expense with either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).)

Components of Pension Expense
select a component of Pension Expense Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService CostPension Expense		$enter a dollar amount
select a component of Pension Expense Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService CostPension Expense		enter a dollar amount
select a component of Pension Expense Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService CostPension Expense		enter a dollar amount
select a component of Pension Expense Actual Return on Plan AssetsAmortization of Prior Service CostBenefits PaidContributions to PlanExpected Return on Plan AssetsInterest on Projected Benefit ObligationService CostPension Expense		enter a dollar amount
select a component of Pension Expense         Actual Return on Plan Assets    Amortization of Prior Service Cost    Benefits Paid    Contributions to Plan    Expected Return on Plan Assets    Interest on Projected Benefit Obligation    Service Cost    Pension Expense		$enter a total amount

Attempts: 1 of 5 used

(b)

Prepare the journal entry or entries to record pension expense and the employer’s contribution to the pension trustee in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

(a)
Components of Pension Expense
Service Cost	$ 56,000
Interest on Projected Benefit Obligation ( $ 894,700 x 9% )	$ 80,523
Expected Return on Plan Assets	($ 53,900)
Amortization of Prior service Cost	$ 49,500
Pension Expense	$ 132,123

(b)
Account Titles and Explanations	Debit   (in $ )	Credit (in $ )
Pension Expense	$ 132,123
Pension Asset / Liability   - Bal. Fig.	$ 62,400
Cash		$ 145,023
Other Comprehensive Income (PSC)		$ 49,500
(To record pension expense and the employer’s contribution to the pension trustee )