Question

The Kollar Company has a defined benefit pension plan. Pension information concerning the fiscal years 2018 and 2019 are presented below ($ in millions):

Information Provided by Pension Plan Actuary:

Projected benefit obligation as of December 31, 2017 = $1,850.

Prior service cost from plan amendment on January 2, 2018 = $550 (straight-line amortization for 10-year average remaining service period).

Service cost for 2018 = $550.

Service cost for 2019 = $600.

Discount rate used by actuary on projected benefit obligation for 2018 and 2019 = 10%.

Payments to retirees in 2018 = $410.

Payments to retirees in 2019 = $480.

No changes in actuarial assumptions or estimates.

Net gain—AOCI on January 1, 2018 = $245.

Net gains and losses are amortized for 10 years in 2018 and 2019.

Information Provided by Pension Fund Trustee:

Plan asset balance at fair value on January 1, 2018 = $1,400.

2018 contributions = $570.

2019 contributions = $620.

Expected long-term rate of return on plan assets = 12%.

2018 actual return on plan assets = $120.

2019 actual return on plan assets = $170.

Required: 1. Calculate pension expense for 2018 and 2019. 2. Prepare the journal entries for 2018 and 2019 to record pension expense. 3. Prepare the journal entries for 2018 and 2019 to record any gains and losses and new prior service cost. 4. Prepare the journal entries for 2018 and 2019 to record the cash contribution to plan assets and benefit payments to retirees.

Answer 1

year 2019					General juornal entries						Memo Record
	Annual				OCI-Prior						Projected
	Pension				service		OCI-		pension		Benefit
Particulars	Expense		Cash		Cost		Gain/Loss		asset/liability		Obligation		Plan assets
Balance,january1,2019									495	Cr.	2175	Cr.	1680	Dr.
service cost	600	Dr.									600	Cr.
interest cost(settelement rate PBO*10%)	218	Dr.									218	Cr.
Actual Return	170	Cr.											170	Dr.
Unexpected loss/gain	32	Cr.					32	Dr.
Amortization of PSC	550	D r.			550	Cr.
Amortization of net gain or loss-AOCI	-	Cr.					-	Dr.					620	Dr.
Contributions			620	Cr.							480	Dr.	480	Cr.
Benefits											-	Dr.
Decrease in PBO-actual gain							-	Cr.
Journal entry for 2019	1,166	Dr.	620	Cr.	550	Cr.	32	Dr.	28	Cr.
Accumulated OCI,December 2018					4950	Dr.	191	Cr.
Balance December,2019					4400	Dr.	159	Cr.	523	Cr.	2513	Cr.	1990	Dr.
	2019
1.Journal entry to record all pension effects for 2018											523
Account title & explanation	Debit	Credit									-
Pension expense	1166
other comprehensive income(G/L)	32
Pension Asset/Liability		28
Cash		620
Other comprehensive income(PSC)		550
Year	Projected Benefit Obligation	Plan Asset	Corridor@10%	Cummulative	Minimum
				Unrecognized	amortization
				(GAIN)or loss	of (gain) or loss
2019	2175	1680	218	191	-	Gain

if the cumulative unrecognized gain or loss is equal to or less than the 10% calculated value,no amont need to be amortized

					general journal entries						memo record
	annual				OCI-Prior						projected
	pension				service		OCI-		pension		benefit
items	expense				cost		Gain/loss		asset/liability		obligation		plan assets
			cash
balance january,1,2018									450	Cr.	1850	Cr.	1400	Dr.
service cost	550	Dr.									550	Cr.
interest cost(settelement rate PBO*10%)	185	Dr.									185	Cr.
Actual Return	120	Cr.					48	Dr.					120	Dr.
Unexpected loss/gain	48	Cr.			550	Cr.
amortization of PSC	550	Dr.					6	Dr.
amortization of net gain or loss-AOCI	6	Cr.											570	Dr.
Contributions			570	Cr.							410	Dr.	410	Cr.
benefits											-	Dr.
decrease in PBO-actual gain							-	Cr.
journal entryfor 2018	1111	Dr.	570	Cr.	550	Cr.	54	Cr.	45	Cr.
accumulated OCI,DECEMBER 2017					5500	Dr.	245	Cr.
balance December 2018					4950	Dr.	191	Cr.	495	Cr.	2175	Cr.	1680	Dr.
	2018
1.journal entry (or entries) to record all pension effects for 2018											495
account title and explanation	debit	credit									-
pension expense	1111
other comprehensive income(gain/loss)	54
pension assets/liability		45
cash		570
other comprehensive income (PSC)		550
YEAR	projected benefit obligation	plan assets	corridor@10%	cummulative	minimum
				unrecognized	amortization
				(gain) or loss	of gain or loss
2018	1850	1400	185	245	6	Gain