Pension Data for the Ben Franklin Company Include the Following

question 100

Essay

Pension data for the Ben Franklin Company include the following for the current calendar year:
Discount rate, 8%
Expected return on plan assets, 10%
Actual return on plan assets, 9%
Service cost, $200,000 $\begin{array}{|l|r|}\hline\text { January 1: } & \\\hline \text { PBO } & \$ 1,400,000 \\\hline \mathrm{ABO} & 1,000,000 \\\hline \text { Plan assets } & 1,500,000 \\\hline \text { Amortization of prior service cost } & 20,000 \\\hline \text { Amortization of net gain } & 4,000 \\\hline \text { December 31: } \\\hline \text { Cash contributions to pension fund } & \$ 220,000\\\hline \text { Benefit payments to retirees }& 240,000\\\hline\end{array}$ Required:
1) Determine pension expense for the year.
2) Prepare the journal entries to record pension expense and funding for the year.

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Definitions:

ASPE

The Accounting Standards for Private Enterprises (ASPE) is a set of accounting standards for private companies in Canada, providing guidelines on financial reporting practices.

Accrual Basis

An accounting method where revenues are recorded when earned, and expenses are recorded when incurred, regardless of when cash is exchanged.

Net Income

The net income of a business once all costs and taxes are subtracted from its total earnings.

Cash Basis

The cash basis is an accounting method where revenues and expenses are recognized only when cash is received or paid, as opposed to when they are incurred.