Compute Pension Expense and do journal entry

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Question description

E20-1 (Pension Expense, Journal Entries) The following information is available for the pension plan of Radcliffe Company for the year 2014.

Actual and expected return on plan assets  $15,000
Benefits paid to retirees   $40,000
Contributions (funding)     $90,000
Interest/discount rate   10%
Prior service cost amortization   $8,000
Projected benefit obligation, (1/1/2014)    $500,000
Service cost   $60,000

(a)  Compute pension expense for the year 2012.

Computation of pension expense:   Service cost     $ 60,000  Interest cost*     $50,000  Return on plan assets      -$15,000  Prior service cost amortization    $8,000   Pension expense - 2014     $103,000

(b)  Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2012.

Pension Expense  103,000      Cash     95,000  Prepaid Pension Cost    8,000

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