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Latoya Company provides the following selected information related to its define

ID: 2379782 • Letter: L

Question

Latoya Company provides the following selected information related to its defined benefit pension plan for 2012.


(a) Compute pension expense for 2012.


Prepare the journal entry to record pension expense and the employer

Pension asset/liability (January 1) $25,000 Cr. Accumulated benefit obligation (December 31) 400,000 Actual and expected return on plan assets 10,000 Contributions (funding) in 2012 150,000 Fair value of plan assets (December 31) 800,000 Settlement rate 10 % Projected benefit obligation (January 1) 700,000 Service cost 80,000

Explanation / Answer

a)

Computation of Pension Expense:

Service Expense 80,000

Interest Cost (700,000*.10)= 70,000

Expected Return on Plan Assets (10,000)

Pension Expense 80,000 + 70,000 - 10,000 = 140,000


Pension Expense    140,000

Pension Asset/Liability 10,000

        Cash 150,000

b)

Income Statement:

Pension Expense 140,000


Balance Sheet:

Pension Liability (25,000-10,000) = 15,000