The Warren Group\'s pension expense is $93 million. This amount includes a $50 m
ID: 2557383 • Letter: T
Question
The Warren Group's pension expense is $93 million. This amount includes a $50 million service cost, a $80 million interest cost, a $40 million reduction for the expected return on plan assets, and a $3 milion amortization of a prior service cost. Determine the components of pension expense that affects the net pension liablity. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) 7 Service cost Amortization of prior service cost 12 Interest cost Expected return on plan assets Prepare the journal entry to record the pension expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions. (i.e. 10,000,000 should be entered as 10).) ow transaction lat Journal entry worksheet Record pension expense.Explanation / Answer
Answer:
The Net Pension Liability is affected only by three components of pension expenses, Service Cost, interest Cost and Expected return on Plan assets. Amortization of prior Service cost affects neither Planned Benefit Obligation nor plan assets. Therefore, it does not affe]cts the net pension liability as well.
Journal entry for pension expenses
Pension Expenses A/c Dr $93
Plan Assets A/c Dr $40
To Planned Benefit Obligation A/c $130
To amortization of Prior Service Cost A/c $3
Explanation :
Plan Assets (Expected Return on assets) = $40
Planned Benefit Obligation = Service Cost + Interest Cost
= $50 + $80
= $130
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