Question

Pension data for Barry Financial Services Inc. include the following:

	($ in thousands)
Discount rate, 7%
Expected return on plan assets, 12%
Actual return on plan assets, 11%
Service cost, 2021	$	360
January 1, 2021:
Projected benefit obligation		2,550
Accumulated benefit obligation		2,250
Plan assets (fair value)		2,650
Prior service cost—AOCI (2021 amortization, $50)		350
Net gain—AOCI (2021 amortization, $8)		380
There were no changes in actuarial assumptions.
December 31, 2021:
Cash contributions to pension fund, December 31, 2021		295
Benefit payments to retirees, December 31, 2021		320

Required:
1. Determine pension expense for 2021.
2. Prepare the journal entries to record (a) pension expense, (b) gains and losses (if any), (c) funding, and (d) retiree benefits for 2021.

Answer 1

Solution-

1)

Particulars	Amount ($ in thousands)
Service Cost	360
Interest Cost [2550*7%]	178.5
Expected Return on Asset [2650*12%]	(318)
Amortization of Prior Service Cost	50
Amortization of Net Gain	(8)
Pension Expense	$262.5

2)

No.	Account Titles and Explanation	Debit ($ in thousands)	Credit ($ in thousands)
a.	Pension Expense	262.5
	Plan Asset	318
	Net Gain-AOCI	8
	Prior Service Cost-OCI		50
	PBO [360 + 178.5]		538.5
	(To record the pension expense)
b.	Loss OCI	26.5
	Plan Asset [(2650*12%) - (2650*11%)]		26.5
	(To record the gain or loss on asset)
c.	Plan Asset	295
	Cash		295
	(To record the funding)
d.	Projected Benefit Obligation	320
	Plan Asset		320
	(To record the retiree benefits)