Question 5

Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2018 (the end of Beale's fiscal year), the following pension-related data were available:

Projected Benefit Obligation ($ in millions)

Balance, January 1, 2018 $460

Service cost 48

Interest cost, discount rate, 5% 23

Gain due to changes in actuarial assumptions in 2018 (14)

Pension benefits paid (23)

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Balance, December 31, 2018 $494

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Plan Assets ($ in millions)

Balance, January 1, 2018 $480

Actual return on plan assets 33

(Expected return on plan assets, $38)

Cash contributions 74

Pension benefits paid (23)

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Balance, December 31, 2018 $564

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January 1, 2018, balances: ($ in millions)

Pension asset $20

Prior service cost-AOCI (amortization $7 per year) 49

Net gain-AOCI (any amortization over 10 years) 88

Required:

1. to 3.Prepare the 2018 journal entry to record pension expense, to record any 2018 gains and losses and the contribution to plan assets and benefit payments to retirees.

4.Determine the balances at December 31, 2018, in the PBO, plan assets, the net gain-AOCI, and prior service cost-AOCI [Hint: You might find T-accounts useful.]

5.What amount will Beale report in its 2018 balance sheet as a net pension asset or net pension liability for the funded status of the plan?

Question 6

Data pertaining to the postretirement health care benefit plan of Sterling Properties include the following for 2018:

($ in 000s)

Service cost $136

Accumulated postretirement benefit obligation, January 1 700

Plan assets (fair value), January 1 30

Prior service cost-AOCI none

Net gain-AOCI (2018 amortization, $2) 100

Retiree benefits paid (end of year) 88

Contribution to health care benefit fund (end of year) 200

Discount rate, 8%

Return on plan assets (actual and expected), 10%

Required:

1.Determine the postretirement benefit expense for 2018. (Amounts to be deducted should be indicated with a minus sign.)

2.Prepare the appropriate journal entries to record the postretirement benefit expense, funding, and retiree benefits for 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter you answers in thousands (i.e., 200,000 should be entered as 200).)