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
Plan assets 3,200,000
Amortization of prior service cost 30,000
Amortization of net gain 7,000
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.
(i) Pension expense =
Service costs: $400,000 +
Interest on PBO and ABO: ((3,000,000+2,000,000)*0.09 - discount/interest rate = 9%)
A table leads you to the needed amounts. The actual return on plan assets are determined.