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.

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

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

Account Balances Projected Benefit Obligation Plan Assets Accumulated OCI-Pension Gain/Loss Jan. 1, 2020 $42,000 Cr. 38,500 Dr. 2,100 Cr. Activity 2020 Service cost $14,000 4,200 2,800 Interest cost (interest rate, 10%) Gain in PBO due to change in actuarial assumption Pension benefits paid Actual earnings on plan assets (same as expected return) Plan funding payment contributions) 700 3,500 21,000 Date Account Name Dr. Cr. Dec. 31, 2020 A 0 Od 0 O 0 0 O To record pension expense Dec. 31, 2020 0 O 0 o To record deferral of actuarial gain or loss on PBO Dec. 31, 2020 0 Od - O To record plan funding Dec. 31, 2020 0 o o 0 To record benefits paid