Question

Presented below is information on the Jones Department Stores, Inc. pension plan for 2021:        

         Service cost                                                                                                       470,000

         Funding contribution for 2021                                                                          380,000

         Settlement rate used in actuarial computation                                                       10%

         Return on plan assets                                                                                          22,400

         Amortization of PSC (due to benefit increase)                                                  90,000

         Projected benefit obligation (at beginning of period)                                      450,000

         Fair value of plan assets (at beginning of period)                                            360,000

      (US GAAP)

(a)    Compute the amount of pension expense to be reported for 2021. (Show computations.)

(b)    Prepare the journal entry to record the annual pension expense and the employer's contribution for 2021.

Answer 1

(a)The amount of pension expense to be reported for 2021 is as follows:

	Amount
Service Cost	470,000
Interest Cost (450,000*10%)	45,000
Expected Return on Plant Asset	(22,400)
Amortisation of Prior Sevice Cost	90,000
Pension expense	$582,600

b)The journal entry to record the annual pension expense and the employer's contribution for 2021 is as follows:

Account and Explanation	Debit	Credit
Pension Expenses	582,600
Cash		380,000
Other Comprehensive Income		90,000
Pension Liability(582,600 - 380,000 - 90,000)		112,600
(Recorded the entry for pension expenses)