Question

Pension data for Barry Financial Services Inc. include the following:

	($ in thousands)
Discount rate, 7%
Expected return on plan assets, 10%
Actual return on plan assets, 9%
Service cost, 2021	$	460
January 1, 2021:
Projected benefit obligation		3,050
Accumulated benefit obligation		2,750
Plan assets (fair value)		3,150
Prior service cost—AOCI (2021 amortization, $40)		400
Net gain—AOCI (2021 amortization, $12)		480
There were no changes in actuarial assumptions.
December 31, 2021:
Cash contributions to pension fund, December 31, 2021		395
Benefit payments to retirees, December 31, 2021		420

Required:
1. Determine pension expense for 2021.
2. Prepare the journal entries to record (a) pension expense, (b) gains and losses (if any), (c) funding, and (d) retiree benefits for 2021.

Answer 1

Answer:
	1)
	The pension expense for 2021 is calculated as follows:
	Service Cost	$      460
	Interest Cost (3050*7%)	$      214
	Expected Return on Plan Assets (3150*10%)	-$      315
	Prior Service Cost	$        40
	Amortization of Net Gain	-$        12
	Pension Expense	$      387
	2)
	The journal entries are as follows:
S.No.	Account Titles	Debit	Credit
1)	Pension Expense	$      387
	Plan Assets	$      315
	Amortization of Net Gain – OCI	$        12
	Amortization of Prior Service Cost – OCI		$       40
	PBO (460 + 3050*7%)		$     674
	(To record pension expense)
2)	Loss-OCI (9%*(3150) – 10%*(3150))	$        32
	Plan Assets		$         2
	(To record loss on assets)
3)	Plan Assets	$      395
	Cash		$     395
	(To record the funding)
4)	PBO	$      420
	Plan Assets		$     420
	(To record the retiree benefits)