Question 5

Recording Pension Expense, Gains/ Losses, Funding, Benefit Payments and Preparing Worksheet

Amex Company started a noncontributory defined benefit pension plan on January 1, 2019. The records of Amex Company indicate the following for the year 2020.

Account Balances	Jan. 1, 2020
Projected Benefit Obligation	$42,000 Cr.
Plan Assets	38,500 Dr.
Accumulated OCIPension Gain/Loss	2,100 Cr.

Activity	2020
Service cost	$14,000
Interest cost (interest rate, 10%)	4,200
Gain in PBO due to change in actuarial assumption	2,800
Pension benefits paid	700
Actual earnings on plan assets (same as expected return)	3,500
Plan funding payment (contributions)	21,000

• Financial Statement Amounts and Entries
• Pension Worksheet

a. Compute net pension expense for 2020 assuming that the January 1, 2020, Accumulated OCIPension Gain/Loss is amortized in 2020 over a 15-year average remaining service period.

Pension expense, 2020

Answer

b. Prepare the 2020 pension expense, deferral of gain, funding, and benefits paid entries for Amex Company.

• Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	To record pension expense
Dec. 31, 2020	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	To record deferral of actuarial gain or loss on PBO
Dec. 31, 2020	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	To record plan funding
Dec. 31, 2020	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	AnswerCashPlan AssetsAccrued Pension LiabilityProjected Benefit ObligationOCIPension Gain/LossOCIPrior Service CostPension Expense	Answer	Answer
	To record benefits paid

c. Compute the underfunded (overfunded) pension balance as of December 31, 2020.

• Note: Use a negative sign for a net pension liability.

Net pension asset (liability)

Answer