Pension data for Sam Adams Inc. include the following for the current calendar y

Question

Pension data for Sam Adams Inc. include the following for the current calendar year:

Discount rate, 8%
Expected return on plan assets, 10%
Actual return on plan assets, 9%
Service cost, $400,000

Required:
1. Determine pension expense for the year.
2. Prepare the journal entries to record pension expense and funding for the year. (two general journals)

January 1: PBO $ 3,000,000 ABO 2,000,000 Plan assets 3,200,000 Amortization of prior service cost 30,000 Amortization of net gain 7,000 December 31: Cash contributions to pension fund $ 275,000 Benefit payments to retirees 310,000

Required:
1. Determine pension expense for the year.
2. Prepare the journal entries to record pension expense and funding for the year. (two general journals)

Explanation / Answer

1) Calculation of Pension Expense :-

2) Journal Entries :-

Particulars Amount($) Service Cost $400000 Add: Interest Cost ($3000000*8%) $240000 Less : Expected Return ($3200000*10%) ($320000) Add : Amortization of prior service cost $30000 Less : Amortization of net gain ($7000) Pension Expense $343000

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