Pension data for Barry Financial Services Inc. include the following: ion pensio

Question

Pension data for Barry Financial Services Inc. include the following: ion pension expense oumal entries LO17-6. LO17-7 $ in thousands) Discount rate, 7% Expected return on plan assets, 10% Actual return on plan assets, 9% Service cost, 2018 January 1, 2018: Projected benefit obligation Accumulated benefit obligation Plan assets (fair value) Prior service cost-AOCI (2018 amortization, $25) Net gain-AOCI (2018 amortization, $6) There were no changes in actuarial assumptions. $ 310 2,300 2,000 2,400 325 330 December 31, 2018 Cash contributions to pension fund, December 31, 2018 Benefit payments to retirees, December 31, 2018 245 270 Required: I. Determine pension expense for 2018. 2. Prepare the journal entries to record pension expense, gains and losses (Gif any), funding, and retiree benefits for 2018.

Explanation / Answer

Solution: 1. Pension Expense for 2018 $250 Working Notes: Service cost $310 Interest cost $161 (beg. PBO x Discount rate) (2300 x 7%) Less: Expected return on assets (240.00) (Plan assets (fair market value)   x Expected return on plan assets rate) (2400 x 10%) Add: Amortization of prior service cost $25 Less: Amortization of net gain ($6) Pension expense $250 2. Event General Journal Debit Credit 1. Pension expense 250 Plan assets 240 Amortization of net gain—OCI 6 Amortization of prior service cost—OCI 25 PBO 471 Notes: Pension expense 250 calculated in 1. Plan assets 240 = actual + loss = (9% x 2400) + (expected - actual) =216 + 240 - 216 =240 Amortization of net gain—OCI 6 given Amortization of prior service cost—OCI 25 given PBO 471 PBO ($310 service cost + $161 interest cost) = $471 2. Loss—OCI 24 Plan assets 24 Notes: Loss—OCI = Expected return on assets - actual =240 - 216 =24 3. Plan assets 245 cash 245 given 4. PBO 270 given Plan assets 270 Please feel free to ask if anything about above solution in comment section of the question.

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