Lacy Construction has a noncontributory, defined benefit pension plan. At Decemb

Question

Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2013, Lacy received the following information: Projected Benefit Obligation ($ in millions) Balance, January 1 $ 500 Service cost 62 Interest cost (5%) 25 Benefits paid (42 ) Balance, December 31 $ 545 Plan Assets ($ in millions) Balance, January 1 $ 250 Actual return on plan assets 28 Contributions 2013 62 Benefits paid (42 ) Balance, December 31 $ 298 The expected long-term rate of return on plan assets was 10%. There were no AOCI balances related to pensions on January 1, 2013. At the end of 2013, Lacy amended the pension formula creating a prior service cost of $14 million. Required: 1. Determine Lacy's pension expense for 2013. (Enter your answer in millions.) 2. Prepare the journal entry(s) to record Lacy’s pension expense, gains or losses, prior service cost, funding, and payment of retiree benefits for 2013. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions. (i.e., 10,000,000 should be entered as 10).)

Explanation / Answer

Solution:1)

Lacy's pension expense for 2013= Service cost + interest cost - Expected return on plan assets

Lacy's pension expense for 2013= 62+ 25-(250*0.10)= 87-25=62 million

Solution:2)

Service cost........62

To PBO...............62

Interest cost.......25

To plan assets......25

Reimbursement gain 25

To plan assts........25

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