Question 1:

On January 1, 2021, McGee Co. had the following balances:

Projected benefit obligation $7,800,000

Fair value of plan assets 7,800,000

Other data related to the pension plan for 2021:

Service cost 315,000

Contributions to the plan 459,000

Benefits paid 450,000

Actual return on plan assets 468,000

Settlement rate 9%

Expected rate of return 6%

Instructions

(a) Determine the projected benefit obligation at December 31, 2021. There are no net gains or losses.

(b) Determine the fair value of plan assets at December 31, 2021.

(c) Calculate pension expense for 2021.

(d) Prepare the journal entry to record pension expense and the contributions for 2021.