Burrito Corporation has a defined benefit pension plan. Burrito received the fol

Question

Burrito Corporation has a defined benefit pension plan. Burrito received the following information for the current calendar year:

Projected benefit obligation Balance, January 1 $ 143,000,000

Service cost 21,500,000

Interest cost 17,160,000

Benefits paid (8,500,000 )

Balance, December 31 $ 173,160,000

Plan assets Balance, January 1 $ 86,500,000

Actual return on plan assets 12,380,000

Contribution 19,500,000

Benefits paid (8,500,000 )

Balance, December 31 $ 109,880,000

The expected long-term return on plan assets is 12%. There were no other relevant data for the year.

Required:

1. Determine Burrito's pension expense for the year. 2. Prepare the journal entries to record the pension expense and funding for the year.

Explanation / Answer

Burrito's pension expense for the year Service Cost 21,500,000 Interest Cost 17,160,000 Expected Return 86,500,000*12%                           (10,380,000) Pension Expense 28,280,000 General Journal Debit Credit Pension Expense 28,280,000 Prepaid (accrued) pension cost 8,780,000 Cash 19,500,000

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