Castillo Company has a defined benefit pension plan. At the end of the reporting

Question

Castillo Company has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $18,000; interest cost, $5,000; benefits paid for the year, $9,000; ending PBO, $89,000; the expected return on plan assets, $10,000; and cash deposited with pension trustee, $17,000. There were no other pension related costs. The journal entry to record the annual pension costs will include a credit to the PBO for A. $17,000. B. $18,000. C. $23,000. D. $13,000.

Explanation / Answer

PENSION EXPENSES A/C.....................................DR $13000

PLAN ASSET A/C..................................................DR $10000

TO PBO A/C $23000

ANSWER OPTION C

DETAILS AMOUNT SERVICE COST $18000 INTEREST COST $5000 LESS EXPECTED RETURN ON PLANNED ASSET ($10000) PENSION EXPENSES $13000

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