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    Pension data for Sam Adams Inc.

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    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.

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    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. The actual return on plan assets are determined.