Electronic Distribution has a defined benefit pension plan. Characteristics of t

Question

Electronic Distribution has a defined benefit pension plan. Characteristics of the plan during 2018 are as follows: (S millions) PBO balance, January 1 Plan assets balance, January 1 Service cost Interest cost Gain from change in actuarial assumption Benefits paid Actual return on plan assets Contributions 2018 530 300 50 30 36 (46) 23 40 elated to pensions on January 1, 2018. nd of 2018, the company amended the pension formula creating a prior service cost of $18 million. (Enter your answers in The expected long-term rate of return on plan assets was 9%. There were no AOCI balances but at the millions (i.e., 10,000,000 should be entered as 10).) Required 1. Calculate the pension expense for 2018 2. Prepare the journal entry to record 3. What amount will Electronc Distibuton report in its 2018 balance sheet as a net pension assert or net pension lablity? pension expense. gains or losses, prior service cost, funding, and payment of benefits for 2018 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Calculate the pension expense for 2018 million

Explanation / Answer

1. The pension expenses for 2018 Particulars Amount($) in millions Service Cost 50 Interest Cost 30 Expected return on plan assets (23 actual + 4)                (27) Amortization of prior period cost - Amortization on gain or loss - AOCI - Pension Expense 53 Prior period cost is adjusted at the end of the year, thus it is not amortized 2. Journal Entries Particulars Debit Credit Pension Expenses 53 Plan Assets 27           PBO 80 (To record pension expenses) Plan asset = 300 x 9% = 27 PBO = Service Cost + Interest Cost = 50 + 30 = 80 Prior Service Cost - AOCI 18         PBO 18 (To record prior period cost for 2018 amendment) PBO 36       Gain - AOCI 36 (To record gain from change in assumption) Loss - AOCI 4       Plan Assets 4 (To record loss from return on plan assets) Expected Return = 27 Actual Return = 23 Loss = 23 - 27 = 4 Plan Assets 40         Cash 40 (To record contribution for 2018) PBO 46       Plan assets 46 (To record benefit paid during 2018) 3. Net Pension Liability Particulars Amount($) in millions PBO balance, January 1 530 Service Cost                   50 Interest Cost                   30 Gain from change in acturial assumption                (36) Prior Period Cost                   18 Benefits paid                (46) PBO balance, December 31 546

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