Question

Larson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2018, the following balances related to this plan. Plan assets (market-related value) \(270,000 Projected benefit obligation 340,000 Pension asset/liability 70,000 Cr. Prior service cost 90,000 OCI—Loss 39,000

As a result of the operation of the plan during 2018, the actuary provided the following additional data for 2018. Service cost \)45,000 Actual return on plan assets 27,000 Amortization of prior service cost 12,000 Contributions 65,000 Benefits paid retirees 41,000 Settlement rate 7% Expected return on plan assets 8% Average remaining service life of active employees 10 years Instructions (a) Compute pension expense for Larson Corp. for the year 2018 by preparing a pension worksheet that shows the journal entry for pension expense. (b) Indicate the pension amounts reported in the financial statements

Short answer

Benefit refers to theperksan organization pays to its employees in financial or non-financial terms. These are for employee welfare—for example, insurance, transport facility, etc.

Step-by-step solution

(a) Computation of pension expense by preparing the pension worksheet for the year 2018

Larson Corp.
Pension Worksheet for the year 2018
General journal entries	Memo Record
Particulars	Annual pension expense	Cash	OCI-Prior service cost	OCI-Gain/Loss	Pension asset/liability	Projected benefit obligation	Plan assets
Balance Jan 1, 2018			.		$70,000 Cr.	$340,000 Cr.	$270,000 Dr.
Service cost	$45,000 Dr.					$45,000 Cr.
Interest cost	$23,800 Dr.					$23,800 Cr.
Actual return	$27,000 Cr.						$27,000 Dr.
Unexpected gain	$5,400 Cr.			$5,400 Dr.
Amortization of PSC	$12,000 Dr.		$12,000 Cr.
Amortization of loss	$500 Dr.			$500 Cr.
Contributions		$65,000 Cr.					$65,000 Dr.
Benefits						$41,000 Dr.	$41,000 Cr.
Journal entry for 2018	$59,700 Dr.	$65,000 Cr.	$12,000 Cr.	$5,900Cr.	$23,200 Cr.
Accumulated OCI Dec 31, 2017			$90,000 Dr.	$39,000 Dr.
Balance Dec 31, 2018			$78,000 Dr.	$33,100Dr.	$46,800 Cr.	$367,800Cr.	$321,000 Dr.

Larson Corp
Journal Entry
Date	Particulars	Debit	Credit
2018	Pension expense	$59,700
	Pension asset/liability	$23,200
	Cash		$65,000
	Other comprehensive income (gain/loss)		$5,900
	Other comprehensive income (PSC)		$12,000
	(To record the pension expense)

(b) Preparation of financial statements.

Larson Corp.
Income Statement
Particulars	Amount
Pension expense	$59,700

Larson Corp.
Comparative income statement
Particulars		Amount
Net Income		-
Other comprehensive loss
Asset gain/loss	$5,400
Amortization of loss	$500
Prior service cost amortization	$12,000	$17,900
Comprehensive Income		-

Larson Corp.
Balance sheet
Liabilities	Amount
Pension liability	$46,800
Stockholder’s Equity
Accumulated other comprehensive loss (PSC)	$78,000
Accumulated other comprehensive loss (Gain/Loss)	$33,100