Question

ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension

plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014.

Note: Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entry.

Pension asset/liability (January 1)			$0
Actual return on plan assets			$40,000
Expected return on plan assets			$20,000
Contributions (funding) in 2014			$37,000
Fair value of plan assets (December 31)			$75,000
Settlement rate			10%
Projected benefit obligation (January 1)			$0
Service cost			$60,000
Benefits paid in 2014			$0

*For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature.

This is what I have so far:

Dr. Pension expense $40,000

Dr. Pension related asset $17,000

Cr. Cash $35,000

Cr. Other comprehensive income $22,000

Is this correct?

Answer 1

Above is the correct journal. This does involve some assumptions. Explanations are given above. For any further clarifications, please comment