January 1, 2017 December 31, 2017 Components of Pension Expense SHOW LIST OF ACC
ID: 2552375 • Letter: J
Question
January 1, 2017
December 31, 2017
Components of Pension Expense
SHOW LIST OF ACCOUNTS
Account Titles and Explanation
Debit
Credit
(To record pension expense and employer’s contribution)
SHOW LIST OF ACCOUNTS
$XXXX
$XXXX
Blossom Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2017.January 1, 2017
December 31, 2017
Projected benefit obligation $1,514,000 $1,542,000 Market-related and fair value of plan assets 805,000 1,138,500 Accumulated benefit obligation 1,625,000 1,747,400 Accumulated OCI (G/L)—Net gain 0 (201,400 )The service cost component of pension expense for employee services rendered in the current year amounted to $78,000 and the amortization of prior service cost was $122,400. The company’s actual funding (contributions) of the plan in 2017 amounted to $253,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,224,000 on January 1, 2017. Assume no benefits paid in 2017.
Explanation / Answer
1. Components of pension expense:
Service Cost $78,000
Interest Cost (1,514,000*10%) $151,400
Return on Asset (805,000*10%) -$80,500
Prior service cost amortization $122,400
Pension Expense $271,300
2. Journal entry:
Pension Expense $271,300
Pension Asset/Liability $104,100
Cash $253,000
Other Comprehensive Income(PSC) $122,400
3.
Income Statement:
Pension Expense $271,300
Balance Sheet (Liability):
Shareholder's Equity-
Other Comprehensive Income (G/L) $122,400
Assets:
Cash $253,000
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