Question

Harrison Forklift's pension expense includes a service cost of $10 million. Harrison began the year with a pension liability of $28 million (underfunded pension plan). 1. Interest cost, $6; expected return on assets, $4; amortization of net loss, $2.2. Interest cost, $6; expected return on assets, $4; amortization of net gain, $2. 3. Interest cost, $6; expected return on assets, $4; amortization of net loss, $2; amortization of prior service cost, $3 million.Required:Prepare the appropriate general journal entries to record Harrison's pension expense in each of the above independent situations regarding the other components of pension expense ($ in millions).

Answer 1

Answer:

1. ($ in millions)

Dr Pension expense (total) $14

Dr Plan assets (expected return on assets)$4

Cr PBO $16

Cr Net loss—AOCI(current amortization) $2

2 ($ in millions)

Dr Pension expense (total) $10

Dr Plan assets (expected return on assets) $4

Dr Net gain—AOCI(current amortization) $2

Cr PBO $16

($10 service cost + $6 interest cost)

3. ($ in millions)

Dr Pension expense (total) $17

Dr Plan assets (expected return on assets) $4

Cr PBO $16

Cr Net loss—AOCI(current amortization) $2

Cr Prior service cost(current amortization) $3

Explanation:

Preparation of the appropriate general journal entries to record Harrison's pension expense in

1. ($ in millions)

Dr Pension expense (total) $14

($16+$2-$4)

Dr Plan assets (expected return on assets)$4

Cr PBO $16

($10 service cost + $6 interest cost)

Cr Net loss—AOCI(current amortization) $2

2 ($ in millions)

Dr Pension expense (total) $10

($16-$4-$2)

Dr Plan assets (expected return on assets) $4

Dr Net gain—AOCI(current amortization) $2

Cr PBO $16

($10 service cost + $6 interest cost)

3. ($ in millions)

Dr Pension expense (total) $17

($16+$2+$3-$4)

Dr Plan assets (expected return on assets) $4

Cr PBO($10 service cost + $6 interest cost) $16

Cr Net loss—AOCI(current amortization) $2

Cr Prior service cost(current amortization) $3