Question

Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2018, Abbott and Abbott received the following information:

Projected Benefit Obligation	($ in millions)
Balance, January 1		$	160
Service cost			24
Interest cost			16
Benefits paid			(11	)
Balance, December 31		$	189

Plan Assets
Balance, January 1		$	80
Actual return on plan assets			11
Contributions 2018			24
Benefits paid			(11	)
Balance, December 31		$	104

The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss–AOCI on January 1, 2018.

Required:
1. Determine Abbott and Abbott’s pension expense for 2018.
2. Prepare the journal entries to record Abbott and Abbott’s pension expense, funding, and payment for 2018.

Answer 1

Requirement 1
Calculation of pension expense
Service Cost	$24.00
Interest Cost	$16.00
Less :Actual Return on Plan assets	-$11.00
Add : Other comprehensice income (w/N-1)	$3.00
Total Pension Expense for 2018	$32.00

W/Note-1: Calculation of other comprehensive income
Actual return	$11.00
Less : Expected Return($80*10%)	-$8.00
Other comprehensive income	$3.00

Requirement 2: Journal Entries
Date	Account Tittle & Explanation	Debit	Credit
31/12/2018	Pension Expenses	$32.00
	Plan Assets	$11.00
	To Defined Benefits Obligation		$40.00
	To Other Comprehensive Income		$3.00
	(Being Pension Expenses Recorded in books of accounts)
31/12/2018	Plan Assets	$24.00
	To Bank		$24.00
	(Being Contribution made)
31/12/2018	Projected Benefit Obligation	$11.00
	To Plan Assets		$11.00
	(Being Benefits Paid)