Amherst City provides a defined benefit pension plan for employees of the city e

Question

Amherst City provides a defined benefit pension plan for employees of the city electric utility, an enterprise fund. Assume that the projected level of earnings on plan investments is $190,000, the service cost component is $250,000, and interest on the pension liability is $160,000 for the year. Actual returns on plan assets for the year were $175,000, and the City is amortizing a deferred outflow resulting from a change in plan assumptions from a prior year in the amount of $6,000 per year.

Prepare journal entries to record annual pension expense for the enterprise fund. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Explanation / Answer

a)Current Service Cost A/C – Dr 250000

To Net defined Benefit obligation A/C – Cr 250000

(Being Current service cost incurred for the relevant financial year)

b)Interest Accrued A/C –Dr 160000

Net defined Benefit obligation A/C – Dr 15000(Balance)

To Interest earned A/C – Cr – 175000

(being interest expense and received accounted for in defined benefit obligation)

c) Defined Benefit obligation A/C Dr 6000

To profit and loss A/C – Cr 6000

(benefit obligation amortized)

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