Question

E20-3 (Preparation of pension Worksheet) Verde Company provides the following information about its defined benefit pension plan for the year 2017.

Service Cost $90,000

Contribution to the plan $105,000

Prior service cost amortization $10,000

Actual and expected return on plan assets $64,000

Benefits paid $40,000

Plan assets at January 1, 2017 $640,000

Projected benefit obligation at Jaunary 1, 2017 $700,000

Accumulated OCI (PSC) at January 1, 2017 $150,000

Interest/discount(settlement) rate 10%

Instructions:

Prepare a pension worksheet inserting January 1, 2017, balances, showing December 31, 2017, balances, and the journal entry recording pension expense.

Answer 1

Answer
Computation of pension worksheet
Service cost	$       90,000
Interest cost ($700,000*10%)	$       70,000
expected return on plan assets	$ (64,000)
Prior service cost amortization	$       10,000
Pension expense for the year 2017	$    1,06,000
Journal entry
Account Titles and Explanations	Debit	Credit
Pension Expenses	$    1,06,000
To, Pension Liability		$      96,000
To, OCI Prior Service Cost		$      10,000
Pension Liability
Increases PBO ($90,000 + $70,000)	$    1,60,000
Increases Assets	$      -64,000
Pension Liabilitty	$       96,000