Burrito Corporation Has a Defined Benefit Pension Plan

question 93

Essay

Burrito Corporation has a defined benefit pension plan. Burrito received the following information for the current calendar year:
The expected long-term return on plan assets is 10%. There were no other relevant data for the year.
Required:
1) Determine Burrito's pension expense for the year.
2) Prepare the journal entries to record the pension expense and funding for the year.
$\begin{array}{lr}\text { Projected benefit obligation } & \\\text { Balance, January 1 } & \$ 150,000,000 \\\text { Service cost } & 25,000,000 \\\text { Interest cost } & 15,000,000 \\\text { Benefits paid } & (12,000,000) \\\text { Balance, December 31 } & \$ 178,000,000 \\\text { Plan assets } & \\\text { Balance, January 1 } & \$ 90,000,000 \\\text { Actual return on plan assets } & 11,000,000 \\\text { Contribution } & 23,000,000 \\\text { Benefits paid } & (12,000,000) \\\text { Balance, December 31 } & \$ 112,000,000\end{array}$

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Definitions:

FIFO

Stands for "First In, First Out," a method used in inventory and financial accounting to manage and value inventory by selling or using assets in the order they were acquired.