Abbott and Abbott has a noncontributory, defined benefit pension plan. At Decemb

Question

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

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.

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

Explanation / Answer

1. Determine Abbott and Abbott’s pension expense for 2018.

Service cost $24

Interest cost $16

Expected return on plan assets($80x10%) ($8)

Pension Expense $32

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

Dr     Pension expense A/c $32

Dr     Plan Assets A/c                              $8

Cr PBO A/c    $40

Dr     Plan assets  A/c                   $24

Cr Cash A/c                                      $24

Dr     PBO A/c $11

Cr      Plan assets A/c                              $11

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