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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

(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.