On December 31, 2015, Clemson Company determined that the 2015 service cost on i

Question

On December 31, 2015, Clemson Company determined that the 2015 service cost on its defined benefit pension plan was $245,000. At the beginning of 2015, Clemson had pension plan assets totaling $990,000 and a projected benefit obligation of $750,000. Its discount rate and expected long-term rate of return on plan assets for 2015 were both 12%. 3. Required: 1) Compute the amount of Clemson's pension expense for 2015. 2) Record the journal entries for Clemson's 2015 pension expense if it funds the pension plan in the amount of (a) $225,000 and (b) $210,000.

Explanation / Answer

Computation of Clemson’s pension expense for 2015

Service Cost on Defined Pension Plan: $245000

Interest cost on Projected benefit obligation: $750,000*12%

                                       : $90,000

Expected Return on Pension Plan Assets: $990,000 *12%

                                  : $118,800

Thus Clemson’s Pension Expense=Service Cost +Interest Cost-Expected Return on Plan Assets

                           =$245,000+$90,000-$118,800

                           =$216,200

Journal Entries are as follows:

(A) $225,000

Pension Expense

$216,200

Accrued Pension Cost

$8800

Cash

$225,000

(B) $210,000

Pension Expense

$216,200

Cash

$210,000

Accrued Pension Cost

$6200

Pension Expense

$216,200

Accrued Pension Cost

$8800

Cash

$225,000

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