Question
Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2021, Lacy received the following information: Projected Benefit Obligation ($ in millions) Balance,
Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2021, Lacy received the following information:
Projected Benefit Obligation | ($ in millions) | ||||
Balance, January 1 | $ | 1,120 | |||
Service cost | 90 | ||||
Prior service cost | 42 | ||||
Interest cost(5.0%) | 56 | ||||
Benefits paid | (80 | ) | |||
Balance, December 31 | $ | 1,228 | |||
Plan Assets | ($ in millions) | ||||
Balance, January 1 | $ | 530 | |||
Actual return on plan assets | 56 | ||||
Contributions 2021 | 90 | ||||
Benefits paid | (80 | ) | |||
Balance, December 31 | $ | 596 | |||
The expected long-term rate of return on plan assets was 10%. There were no AOCI balances related to pensions on January 1, 2021. At the end of 2021, Lacy amended the pension formula creating a prior service cost of $42 million. Required: 1. Determine Lacy's pension expense for 2021. 2. Prepare the journal entry(s) to record Lacys (a) pension expense, (b) gains or losses, (c) prior service cost, (d) funding, and (e) payment of retiree benefits for 2021.
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