Gordon Company sponsors a defined benefit pension plan. The following informatio
ID: 2472848 • Letter: G
Question
Gordon Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2014 and 2015.
2014
2015
Compute pension expense for 2014 and 2015.
Prepare the journal entries to record the pension expense and the company’s funding of the pension plan for both years. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2014
Dec. 31, 2015
2014
2015
Plan assets (fair value), December 31 $738,144 $896,544 Projected benefit obligation, January 1 739,200 844,800 Pension asset/liability, January 1 147,840 Cr. ? Prior service cost, January 1 264,000 253,440 Service cost 63,360 95,040 Actual and expected return on plan assets 25,344 31,680 Amortization of prior service cost 10,560 12,672 Contributions (funding) 121,440 126,720 Accumulated benefit obligation, December 31 528,000 580,800 Interest/settlement rate 9 % 9 %Explanation / Answer
Computation of Pension Expenses:
2014
2015
Service cost
63,360.00
95,040.00
Interest Cost (9% of Projected benefit obligation
66,528.00
76,032.00
Expected return on plan assets
(25,344.00)
(31,680.00)
Amortization of prior service cost
10,560.00
12,672.00
Pension Expenses
115,104.00
152,064.00
Journal entries:
Date
Account title and explanation
Debit
Credit
Dec. 31, 2014
Pension Asset / Liability
43,296
Pension Expenses
115,104
Other Comprehensive Income (PSC)
10,560
Other Comprehensive Income (Gain / Loss)
26,400
Cash
121,440
Dec. 31. 2015
Pension Expenses
152,064
Cash
126,720
Pension Asset / Liability
12,672
Other Comprehensive Income (PSC)
12,672
Computation of Pension Expenses:
2014
2015
Service cost
63,360.00
95,040.00
Interest Cost (9% of Projected benefit obligation
66,528.00
76,032.00
Expected return on plan assets
(25,344.00)
(31,680.00)
Amortization of prior service cost
10,560.00
12,672.00
Pension Expenses
115,104.00
152,064.00
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