Question

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

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

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