Question

P20-4 (LO1,2,3,4) Pension Expense, Journal Entries for 2 Years               

Gordon Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2017 and 2018.

	2017		2018
Plan assets (fair value), December 31	$ 699,000		$     849,000
Projected benefit obligation, January 1	700,000		800,000
Pension asset/liability, January 1	140,000	Cr	?
Prior service cost, January 1	250,000		240,000
Service cost	60,000		90,000
Actual and expected return on plan assets	24,000		30,000
Amortization of prior service cost	10,000		12,000
Contributions (funding)	115,000		120,000
Accumulated benefit obligation, December 31	500,000		550,000
Interest/settlement rate	9%		9%

Instructions:                     

(a)          Compute pension expense for 2017 and 2018. (Include Debit/Credit Labels and any formulas used)

GORDON COMPANY

Pension Worksheet—2017 and 2018

General Journal Entries

Memo Record

Items

Annual Pension Expense

Cash

OCI - Prior Service Cost

OCI - Gain/Loss

Pension Asset/ Liability

Projected Benefit Obligation

Plan Assets

(b)          Prepare the journal entries to record the pension expense and the company's funding of the pension plan for both years.

				Debit		Credit
2017

2018

Answer 1

Computation of pension expense	2017	2018
service cost	60000	90000
interest at 9% on 700000/800000	63000	72000
expected return on plan assets	-24000	-30000
prior service cost amortization	10000	12000
Pension expense for the year	109000	144000
Entries for 2017
pension expense	109000
pension asset/liability	39000
other comprehensive income (PSC)		10000
other comprehensive income (GL)		23000
cash		115000
Entries for 2018
pension expense	144000
pension asset/liability		12000
other comprehensive income (PSC)		12000
cash		120000