Exercise 17-1 Determine pension expense L017-6 LO17-7 Text: E 17-10 Hunt Industr

Question

Exercise 17-1 Determine pension expense L017-6 LO17-7 Text: E 17-10 Hunt Industries has a noncontributory, defined benefit pension plan. At December 31, 2016, Hunt received the following information: Projected Benefit obligation (S in millions) Balance, January 1 $360 Service cost 60 Interest cost 36 Benefits paid 2 Balance, December 31 $429 Plan Assets Balance, January 1 $24) Actual return on plan asse Contributions 2016 60 Benefits paid 27) Balance, December 31 $300 The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss-AOCI on January 1, 2016. Required: 1. Determine Hunt's pension expense for 2016. 2. Prepare the journal entries to record Hunt's pension expense, funding, and payment of benefits for 2016.

Explanation / Answer

Solution:

1.

Service cost 60

Interest cost 36

Expected return on the plan assets -24 (240 x 10%)

Pension expense 72

2.

Pension expense ...................72

Plan assets ............................24

PBO.........................................96

Plan assets ............................60

Cash....................................................60

PBO ........................27

Plan assets ......................27

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