Question

Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2018, Abbott and Abbott received the following information:

Projected Benefit Obligation	($ in millions)
Balance, January 1		$	160
Service cost			24
Interest cost			16
Benefits paid			(11	)
Balance, December 31		$	189

Plan Assets
Balance, January 1		$	80
Actual return on plan assets			11
Contributions 2018			24
Benefits paid			(11	)
Balance, December 31		$	104

The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss–AOCI on January 1, 2018.

Required:
1. Determine Abbott and Abbott’s pension expense for 2018.
2. Prepare the journal entries to record Abbott and Abbott’s pension expense, funding, and payment for 2018.

Answer 1

1. Determine Abbott and Abbott’s pension expense for 2018.

Service cost $24

Interest cost $16

Expected return on plan assets($80x10%) ($8)

Pension Expense $32

2. Prepare the journal entries to record Abbott and Abbott’s pension expense, funding, and payment for 2018.

Dr     Pension expense A/c $32

Dr     Plan Assets A/c                              $8

Cr PBO A/c    $40

Dr     Plan assets  A/c                   $24

Cr Cash A/c                                      $24

Dr     PBO A/c $11

Cr      Plan assets A/c                              $11