Gottschalk Company sponsors a defined benefit plan for its 100 employees. On Jan

Question

Gottschalk Company sponsors a defined benefit plan for its 100 employees. On January 1, 2014, the company's actuary provided the following information. (a) Determine the components of pension expense that the company would recognize in 2014. (With only one year involved, you need not prepare a worksheet.) (b) Prepare the journal entry to record the pension expense and the company's funding of the pension plan in 2014. (c) Compute the amount of the 2014 increase/decrease in gains or losses and the amount to be amortized in 2014 and 2015. (d) Indicate the pension amounts reported in the financial statement as of December 31, 2014.

Explanation / Answer

Part A

Service costs and interest on liability are the components of pension scheme that the company would recognise.

Part B

The journal entry to record transaction are

Pension scheme dr

Cash cr

Prepaid/ Acctued interest cost

Part 3

Service cost

Add interest on liability

Less estimated returrn on plan asset

Add Amortisation of unamortised prior service cost

Gain or loss

Part 4

Compute pension expense

Service cost

Psc amortization

Less Actual and expected return   

Interest cost

Pension expense

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