Question

Pension data for Sewell Corporation include the following for the current calendar year:

Discount rate, 8%
Expected return on plan assets, 10%
Actual return on plan assets, 12%
PBO, January 1	$620,000,000
Plan assets, January 1	630,000,000
Plan assets, December 31	670,000,000
Benefit payments to retirees, December 31	55,000,000

Required:

1. Assuming cash contributions were made at the end of the year, what was the amount of those contributions?
2. Prepare all pension-related journal entries

Answer 1

	Plan assets, December 31	$          670,000,000
Add:	Benefit payments to retirees	$            55,000,000
Less:	Plan assets, January 1	$       (630,000,000)
Less:	Actual return on plant assets (630000000*12%)	$          (75,600,000)
	Cash contributions to pension fund	$            19,400,000

Expected return (630000000*10%)	63,000,000
Actual return (630000000*12%)	75,600,000
Unexpected assets loss (gain)	(12,600,000)

	Sewell Corporation
	Pension Worksheet
	Minus sign indicate credit and positive indicate debit.
		Memo fields	OCI	Pension Expense	Cash	Net pension Liability/Assets
		Pension benefits obligation	Plan assets	Net gain
	Beginning Balance	(620,000,000)	630,000,000	-			10,000,000
1	Interest cost (620000000*8%)	(49,600,000)			49,600,000
2	Expected return on plan assets		63,000,000		(63,000,000)
3	Assets gain		12,600,000	(12,600,000)
4	Contribution to pension fund		19,400,000			(19,400,000)
5	Pension benefits paid	55,000,000	(55,000,000)
	Journal Entries			(12,600,000)	(13,400,000)	(19,400,000)	45,400,000
	Ending Balance	(614,600,000)	670,000,000	(12,600,000)			55,400,000

Sewell Corporation
Journal entries
Event	Account title & explanation	Debit	Credit
1	Pension expense	49,600,000
	Pension benefits obligation		49,600,000
	To record interest cost.
2	Plan assets	63,000,000
	Pension expense		63,000,000
	To record expected return on plan assets.
3	Plan assets	12,600,000
	Other compreshensive gain		12,600,000
	To record unexpected assets gain.
4	Plan assets	19,400,000
	Cash		19,400,000
	To record cash contribution to pension fund.
5	Pension benefits obligation	55,000,000
	Plan assets		55,000,000
	To record benefit payments to retirees.