Question

Actuary and trustee reports indicate the following changes in the PBO and plan assets of Lakeside Cable during 2018:

Prior service cost at Jan. 1, 2018, from plan amendment at the beginning of 2016 (amortization: $6 million per year)	$	44	million
Net loss–pensions at Jan.1, 2018 (previous losses exceeded previous gains)	$	60	million
Average remaining service life of the active employee group		10	years
Actuary’s discount rate		9	%

($ in millions)

	PBO				Plan Assets
Beginning of 2018	$	300		Beginning of 2018		$	200
Service cost		98		Return on plan assets,
Interest cost, 9%		27		8.5% (10% expected)			17
Loss (gain) on PBO		(6	)	Cash contributions			42
Less: Retiree benefits		(19	)	Less: Retiree benefits			(19	)
End of 2018	$	400		End of 2018		$	240

Required:
1-a. Determine Lakeside’s pension expense for 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
  

1-b. Prepare the appropriate journal entries to record the expense as well as the cash contribution to plan assets and payment of benefits to retirees? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
  

Answer 1

Journal Entries

Serial No.	Particular	Debit	Credit
1.	Pension Expense	$113.2
	Plan Assets	$20
	Amortization of net loss -OCI		$2.2
	Amortization of prior service cost - OCI		$6
	PBO( $98 + $27)		$125
	( to record pension expense)
2)	Loss-OCI ($200*10%)- ($200*8.5%)	$3
	Plan assets		$3
	( to record gain or loss on asset)
3)	PBO( given)	$6
	Gain -OCI		$6
	( to record the change in PBO)
4)	Plan Assets	$42
	Cash		$42
	( to record the funding)
5)	PBO	$19
	Plan Assets		$19
	( to record retiree banefit)

calculation of pension expense:

Service cost	$98
Interest cost	$27
Expected return on Assets ($200*10%)	- $20
Amortization of prior service cost	$6
Amortization of net loss($60-$38)/10	$2.2
Pension Expense	$113.2