Latoya Company provides the following selected information related to its define
ID: 2473705 • Letter: L
Question
Latoya Company provides the following selected information related to its defined benefit pension plan for 2014:
Pension asset/liability (Jan 1) $ 25,000 Credit
Accumulated benefit obligation (Dec 31) $ 400,000
Actual and expected return on plan assets $ 10,000
Contributions (funding) 2014 $ 150,000
Fair value of plan assets (Dec 31) $ 800,000
Settlement rate 10%
Projected benefit obligation (Jan 1) $ 700,000
Service cost $ 80,000
(a) Compute pension expense and prepare the journal entry to record pension expense and the employer's contribution to the pension plan in 2014. Preparation of a pension worksheet is not required. Benefits paid in 2014 were $35,000.
(b) Indicate the pension-related amounts that would be reported in the company's income statement and balance sheet for 2014.
Explanation / Answer
Pension expense= Service cost+ benefit obligation- return on planned assets
=80000+(10%*700,000)-10000=$140,000
Pension liability= 25,000-10,000=$15,000
Pension expense (db) 140,000
Pension Asset/liability(db) 10,000
Cash (cr) 150,000
b) Income statement:
Pension Expense :$140,000
Balance Sheet:
Pension Liabilty= $15,000
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