Question

Exercise 17-19 (Algo) Record pension expense, funding, and gains and losses; determine account balances [LO17-6, 17-7, 17-8]

Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2021 (the end of Beale's fiscal year), the following pension-related data were available:

Projected Benefit Obligation	($ in millions)
Balance, January 1, 2021		$	520
Service cost			54
Interest cost, discount rate, 5%			26
Gain due to changes in actuarial assumptions in 2021			(10	)
Pension benefits paid			(26	)
Balance, December 31, 2021		$	564

Plan Assets	($ in millions)
Balance, January 1, 2021		$	540
Actual return on plan assets			36
(Expected return on plan assets, $41)
Cash contributions			77
Pension benefits paid			(26	)
Balance, December 31, 2021		$	627

January 1, 2021, balances:	($ in millions)
Pension asset	$	20
Prior service cost—AOCI (amortization $4 per year)		20
Net gain—AOCI (any amortization over 10 years)		94

  
Required:
1. to 3. Prepare the 2021 journal entries to record pension expense, to record any 2021 gains and losses and the contribution to plan assets and benefit payments to retirees.
4. Determine the balances at December 31, 2021, in the PBO, plan assets, the net gain—AOCI, and prior service cost—AOCI [Hint: You might find T-accounts useful.]
5. What amount will Beale report in its 2021 balance sheet as a net pension asset or net pension liability for the funded status of the

Answer 1

Requirement 1 to 3:

No		Account Titles and explanation	Debit	Credit
1		Pension expense	39
		Plan assets	41
		Amortization of Net gain - OCI	4
		Amortization of Prior service cost - OCI		4
		PBO		80
2		PBO	20
		Gain- OCI		20
3		Loss - OCI	5
		Plan assets [41- 36]		5
4		Plan assets	77
		Cash		77
5		PBO	26
		Plan assets		26

Workings:

Service cost	54
Interest Cost	26
Expected return on assets	(41)
Amortization of prior service cost	4
Amortization of net gain (Note)	(4)
Pension expense	39

Note:

Net gain - AOCI	94
10% of PBO beginning 540	(54)
Amortization balance	40
Period	10
Amortization per year net gain	4

4.

Balances on Dec 31,2021
PBO	564
Plan assets	627
Net gain- AOCI	105	[94+20-5-4]
Prior service cost - AOCI	16	[20-4]

5.

Balance sheet as on 2021
Net pension asset	63	million	[627-564]

------HOPE THIS IS HELPFUL