Question

Pharoah Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances relate to this plan.

Plan assets $498,300

Projected benefit obligation 614,700

Pension asset/liability 116,400

Accumulated OCI (PSC) 96,900 Dr.

As a result of the operation of the plan during 2017, the following additional data are provided by the actuary.

Service cost $92,500

Settlement rate, 9%

Actual return on plan assets 54,200

Amortization of prior service cost 18,100

Expected return on plan assets 51,200

Unexpected loss from change in projected benefit obligation,

due to change in actuarial predictions 74,200

Contributions 97,200

Benefits paid retirees 82,600

Using the data above, compute pension expense for Pharoah Corp. for the year 2017 by preparing a pension worksheet. (Enter all amounts as positive.)

PHAROAH CORP.

Pension Worksheet

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, 2017

$

$

$

$

$

$

$

Service cost

Interest cost

Actual return

Unexpected gain

Amortization of PSC

Liability increase

Contributions

Benefits

Journal entry for 2017

$

$

Accumulated OCI, Dec. 31, 2016

Balance, December 31, 2017

$

$

$

$

$

Prepare the journal entry for pension expense for 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Answer 1

Pension Worksheet :-

Items	Ann. Pension Exp.	Cash	OCI-Prior Service Cost	OCI-Gain/Loss	Pension Asset/Liability	Projected Benefit Obligation	Plan Assets
Bal. 1 Jan.					116400 Cr.	614700 Cr.	498300 Dr.
Service Cost	92500 Dr.					92500 Cr.
Interest Cost	55323 Dr.					55323 Cr.
Actual Return	54200 Cr.						54200 Dr.
Unexp. Gain	3000 Dr.			3000 Cr.
Amor. of PSC	18100 Dr.		18100 Cr.
Liability Increase				74200 Dr.		74200 Cr.
Contributions		97200 Cr.					97200 Dr.
Benefits						82600 Dr.	82600 Cr.
Journal Entry for 2017	114723 Dr.	97200 Cr.	18100 Cr.	71200 Dr.	70623 Cr.
Accumulated OCI, 31 Dec.2016			96900 Dr.
Bal. 31 Dec. 2017			78800 Dr.	71200 Dr.	187023 Cr.	754123 Cr.	567100 Dr.

Interest Cost = $614700 * 9% = $55323

Unexpected Gain = Actual Return - Expected Return

= $54200 - $51200

= $3000

Journal Entry :-

Date	Particulars	Debit($)	Credit($)
2017	Pension Expense A/c Dr.	114723
	OCI - Loss A/c Dr.	71200
	To Cash A/c		97200
	To OCI - Prior Service Cost		18100
	To Pension Asset		70623