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Pension data for Sam Adams Inc.

A. Pension data for Sam Adams Inc. include the following for the 2005 calendar year:

Discount rate, 9%
Expected return on plan assets, 9%
Actual return on plan assets, 8%
Service cost $400,000

January 1:
PBO 3,000,000
ABO 2,000,000
Plan assets 3,200,000
Amortization of prior service cost 30,000
Amortization of net gain 7,000

December 31:
Cash contributions to pension fund $275,000
Benefit payments to retirees 310,000

Required:
(i) Determine pension expense for the year.
(ii) Prepare the journal entry to record pension expense and funding for the year.

Solution Preview

(i) Pension expense =
Service costs: $400,000 +
Interest on PBO and ABO: ((3,000,000+2,000,000)*0.09 - discount/interest rate = 9%)
...

Solution Summary

A table leads you to the needed amounts.

$2.19