Question

The following information is available for the pension plan of Blue Company for the year 2020.

Actual and expected return on plan assets		$ 14,900
Benefits paid to retirees		42,000
Contributions (funding)		83,300
Interest/discount rate		9	%
Prior service cost amortization		7,700
Projected benefit obligation, January 1, 2020		511,000
Service cost		55,100

Compute pension expense for the year 2020.

Pension expense for 2020

Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2020.

Answer 1

Computation of pension expense:

Service Cost	$55,100
Interest Cost ($511,000 * 9%)	$45,990
Actual (expected) return on plan assets	($14,900)
Unrecognised prior service cost amortisation	$7,700
Pension expense for 2020	$93,890

Journal entry to record pension expense and the employer’s contribution to the pension plan

Pension Expense Dr $93,890

To Cash. $83,300

To Pension Asset/Liability   $2,890

To Other Comprehensive Income $7,700

(To record pension expense and the employer's contribution to the pension plan for 2020)