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Carolina Consulting Company has a defined benefit pension plan
Carolina Consulting Company has a defined benefit pension plan. The following pension-related data were available for the current calendar year:
PBO: Balance, Jan. 1$238,000 Service cost 39,000 Interest cost (5% discount rate) 11,900 Gain from changes in actuarial assumptions in 2021 (4,800)Benefits paid to retirees (18,000)Balance, Dec. 31$266,100 Plan assets: Balance, Jan.1$248,000 Actual return (expected return was $22,300) 20,000 Contributions 33,000 Benefits paid (18,000)Balance, Dec. 31$283,000 ABO, Dec. 31$242,800 January 1, 2021, balances: Prior service cost-AOCI (amortization $4,880/yr.) 4,880 Net gain-AOCI (amortization, if any, over 15 years) 48,800
There were no other relevant data.
Required:
1. Calculate the 2021 pension expense.
2. Prepare the 2021 journal entries to record pension expense and funding.
3. Prepare any journal entries to record any 2021 gains or losses.
Expert Solution
| 1) Computation of Pension Expense: | ||
| Service cost | 39000 | |
| Interest cost | 11900 | |
| Return on plan assets | -22300 | |
| Amortization of prior service cost | 4880 | |
| Net gain amortization | -1600 | (48800-(248000*10%))/15 |
| Pension Expense | 31880 | |
| 2) Journal Entries: | ||
| Accounts and Explanations | Debit | Credit |
| Pension Expense | 31880 | |
| Plan Assets | 22300 | |
| Amortization of Net Gain-OCI | 1600 | |
| PBO | 50900 | |
| Amortization of Prior Service Cost-OCI | 4880 | |
| Plan Assets | 33000 | |
| Cash | 33000 | |
| 3) Journal Entries: | ||
| Accounts and Explanations | Debit | Credit |
| Loss-Other Comprehensive Income (22300-20000) | 2300 | |
| Plan Assets | 2300 | |
| PBO | 4800 | |
| Gain-Other Comprehensive Income | 4800 |
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