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||$||360|
|Prior service cost||12|
|Interest cost (7.5%)||27|
|Balance, December 31||$||422|
|Plan Assets||($ in millions)|
|Balance, January 1||$||240|
|Actual return on plan assets||27|
|Balance, December 31||$||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.
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.
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