Question

Burrito Corporation has a defined benefit pension plan. Burrito received the following information for the current calendar year:
Projected benefit
obligation
Balance, January 1 $ 150,000,000
Service cost 25,000,000
Interest cost 15,000,000
Benefits paid (12,000,000)
Balance, December 31 $ 178,000,000
Plan assets
Balance, January 1 $ 90,000,000
Actual return on plan assets 11,000,000
Contribution 23,000,000
Benefits paid (12,000,000)
Balance, December 31 $ 112,000,000
The expected long-term return on plan assets is 8%. There were no other relevant data for the year.
Required:
1. Determine Burrito's pension expense for the year. (Enter your answers in millions. Amounts to be deducted should be indicated with a minus sign. Round your answers to 2 decimal places.)
2. Prepare the journal entries to record the pension expense and funding for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to 2 decimal places. Enter your answers in millions.)

Answer 1

Answer:

Pension Expense = $29,200,000  

Explanation:

As per the data given in the question,

1)

Service cost = $25,000,000

Interest cost = $15,000,000

Expected return on the plan assets = $10,800,000

( 12% × $90,000,000)

Pension Expense = $29,200,000

($25,000,000 + $15,000,000 - $10,800,000)

2)

Journal entries to record the pension expense :

Pension expense A/c Dr. $29,200,000

To accrued pension cost A/c $6,200,000

To Cash A/c $23,000,000

($29,200,000 - $6,200,000)