Question

Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2018, Lacy received the following information:

Projected Benefit Obligation	($ in millions)
Balance, January 1		$	360
Service cost			60
Prior service cost			12
Interest cost (7.5%)			27
Benefits paid			(37	)
Balance, December 31		$	422

Plan Assets	($ in millions)
Balance, January 1		$	240
Actual return on plan assets			27
Contributions 2018			60
Benefits paid			(37	)
Balance, December 31		$	290

The expected long-term rate of return on plan assets was 10%. There were no AOCI balances related to pensions on January 1, 2018. At the end of 2018, Lacy amended the pension formula creating a prior service cost of $12 million.

Assume Lacy Construction prepares its financial statements according to International Financial Reporting Standards and that the actuary's discount rate is the rate on high quality corporate bonds.

Required:
1. Determine Lacy’s net pension cost for 2018.
2. Prepare the journal entry(s) to record Lacy’s net pension cost, gains or losses, prior service cost, funding, and payment of retiree benefits for 2018.

Determine Lacy’s net pension cost for 2018.

Net pension cost

$61

million

Required 2

Prepare the journal entry(s) to record Lacy’s net pension cost, gains or losses, prior service cost, funding, and payment of retiree benefits for 2018. (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).)

No	Event	General Journal	Debit	Credit
1	1	Pension expense	63
		Plan assets	24
		PBO		87
2	2	Plan assets	3
		Gain—OCI		3
3	3	Prior service cost—OCI	12
		PBO		12
4	4	Plan assets	60
		Cash		60
5	5	PBO	37
		Plan assets		37

Answer 1