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Pension Expense, Journal Entries: pension-related amounts

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Pension Expense
(Pension Expense, Journal Entries) Ultra-Home Corporation provides the following information related to its defined-benefit pension plan for 2010.

Pension liability (January 1) $ 500,000
Accumulated benefit obligation (December 31) 1,250,000
Actual and expected return on plan assets 15,000
Contributions (funding) in 2010 210,000
Fair value of plan assets (December 31) 960,000
Settlement rate 8%
Projected benefit obligation (January 1) 1,500,000
Service cost 165,000

Chapter 20 Accounting for Pensions and Postretirement Benefits (L0 4, 6, 7, 8, 9) (L0 4) (L0 5)

(a) Compute pension expense and prepare the journal entry to record pension expense and the employer's contribution to the pension plan in 2010. (b) Indicate the pension-related amounts that would be reported in the company's income statement and balance sheet for 2010.

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Solution Summary

See guidance attached in excel showing how to gather the expense amount and how the balance sheet and income statement are impacted.

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See Also This Related BrainMass Solution

Two-Year Work Sheet and Reconciliation Schedule

See the attached file.
Below
is copy of problem please use it to complete problem. Explain how you get each answer so I can understand the concept.

On January 1, 2007, Eastern Company has the following defined benefit pension plan balances.
Projected benefits obligation $6,750,000
Fair value of plan assets 6,300,000

The interest (settlement) rate applicable to the plan is 10% On January 1, 2008, the company amends its pension agreement
so that service costs of $750,000 are created. Other data related to the pension plan are as follows:

2007 2008
Service costs $225,000 $270,000
Prior service costs amortization 0 135,000
Contributions (funding) to the plan 360,000 427,500
Benefits paid 300,000 420,000
Actual return on plan assets 378,000 390,000
Expected rate of return on assets 6% 8%

Instructions:
(a) Prepare a pension work sheet for the pension plan for 2007 and 2008.

Eastern Company
Pension Work Sheet?2007 and 2008
General Journal Entries Memo Record
Items "Annual
Pension
Expense" Cash OCI - Prior Service Cost OCI - Gain/Loss "Pension
Asset/
Liability" "Projected
Benefit
Obligation" "Plan
Assets"
Balance, Jan. 1, 2007 (450,000) (6,750,000) Amount
(a) Service cost 225,000 Amount
(b) Interest cost 675,000 (675,000)
(c) Actual return (378,000) Amount
(d) Contributions (360,000) Amount
(e) Benefits Amount Amount
Journal entry, 12/31/07 522,000 (360,000) 0 0 (162,000)
Accum OCI, 12/31/06
Balance, Dec. 31, 2007 Formula Formula Formula
(f) Additional PSC Amount Amount
January 1, 2008 Formula
(g) Service cost Amount Amount
(h) Interest cost Amount Formula
(i) Actual return Amount Amount
(j) Unexpected loss Amount Amount
(k) Amortization of PSC Amount Amount
(l) Contributions Amount Amount
(m) Benefits Amount Amount
Journal entry, 12/31/08 Formula Formula Formula Formula Formula
Accum OCI, 12/31/07 0 0
Balance, Dec. 31, 2008 Formula Formula Formula Formula Formula

Area for calculations as desired
Area for calculations as desired
Area for calculations as desired

(b) For 2008, prepare the journal entry to record pension-related amounts.
Pension Expense Amount
Account title Amount
Account title Amount
Account title Amount
Account title Amount.

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