Question

Pension data for Barry Financial Services Inc. include the following:

	($ in thousands)
Discount rate, 7%
Expected return on plan assets, 9%
Actual return on plan assets, 8%
Service cost, 2021	$	330
January 1, 2021:
Projected benefit obligation		2,400
Accumulated benefit obligation		2,100
Plan assets (fair value)		2,500
Prior service cost—AOCI (2021 amortization, $35)		335
Net gain—AOCI (2021 amortization, $6)		350
There were no changes in actuarial assumptions.
December 31, 2021:
Cash contributions to pension fund, December 31, 2021		265
Benefit payments to retirees, December 31, 2021		290

Required:
1. Determine pension expense for 2021.
2. Prepare the journal entries to record (a) pension expense, (b) gains and losses (if any), (c) funding, and (d) retiree benefits for 2021.

Answer 1

Particulars	Amount (in $ '000)
Service cost	$ 330
Interest cost ( $ 2,400 x 7% )	$ 168
Expected Return on plan assets ( $ 2,500 x 9% )	($ 225)
Amortization of Prior Service cost	$ 35
Amorization of Net gain	($ 6)
Pension expense	$ 302

No.	Account Titles and Explanation	Debit	Credit
(a)	Pension Expense	$ 302
	Plan Assets	$ 225
	Amortization of Net Gain – OCI	$ 6
	Amortization of Prior Service Cost – OCI		$ 35
	PBO (460+ 3050*7%)		$ 498
	(To record pension expense)
(b)	Loss-OCI ( 2,500 x 9% ) (-) ( $ 2,500 x 10% )	$ 25
	Plan Assets		$ 25
	(To record loss on assets)
(c )	Plan Assets	$ 265
	Cash		$ 265
	(To record the funding)
(d)	PBO	$ 290
	Plan Assets		$ 290
	(To record the retiree benefits paid)