Question

The following facts apply to the pension plan of Boudreau Inc. for the year 2017. Plan assets, January 1, 2017 $490,000 Projected benefi t obligation, January 1, 2017 490,000 Settlement rate 8% Service cost 40,000 Contributions (funding) 25,000 Actual and expected return on plan assets 49,700 Benefi ts paid to retirees 33,400 Instructions Using the preceding data, compute pension expense for the year 2017. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2017 and the year-end balances in the related pension accounts.

Short answer

Contribution is a term used when an organization contributes a certain percentage of money towards the employees’ defined benefit pension plans.It is regarded as an employees’ provident fund.

Step-by-step solution

Pension Worksheet for Boudreau Inc for the year 2017.

Boudreau Inc
Pension Worksheet for the year 2017
General Journal Entries					Memo Record
Particulars	Annual pension expense	Cash	Pension Asset/Liability		Projected benefit obligation	Plan Assets
Balance Jan 1, 2017					$490,000 Cr.	$490,000 Dr.
Service cost	$40,000 Dr.				$40,000 Cr.
Interest cost $\left(\mathbf{\$}\mathbf{490}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{8}\mathbf{\%}\right)$	$39,200 Dr.				$39,200 Cr.
Actual return	$49,700 Cr.					$49,700 Dr.
Contributions		$25,000 Cr.				$25,000 Dr.
Benefits					$33,400 Dr.	$33,400Cr.
Journal entry for Dec 31, 2017	$29,500 Dr.	$25,000 Cr.	$4,500 Cr.
Balance Dec 31, 2017			$4,500 Cr.		$535,800 Cr.	$531,300 Dr.

Journal entry for recording the transaction of pension expense for the year 2017.

Boudreau Company
Journal Entry
Date	Particulars	Debit	Credit
2017	Pension Expense	$29,500
	Pension Asset/Liability		$4,500
	Cash		$25,000
	(To record the pension expense)