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Chapter 20: Question 4BE (page 1162)

Campbell Soup Company reported pension expense of \(73 million and contributed \)71 million to the pension fund. Prepare Campbell Soup Company鈥檚 journal entry to record pension expense and funding, assuming Campbell has no OCI amounts

Short Answer

Expert verified

Journal entry is the type of entry an organization records for each monetary transaction.Organizations prepare journal books according to accounting principles with their respective occurrence date.

Step by step solution

01

Given the amounts:

Particulars

Amounts (in millions)

Pension Expense

$73

Contribution

$71

02

Journal entry

Campbell Soup Company
Journal Entries

Date

Particulars

Debit (in millions)

Credit (in millions)

Pension Expense

$73

Pension Assets/Liability

$2

Cash

$71

(To record the pension expense and the funding)

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Most popular questions from this chapter

If pension expense recognized in a period exceeds the current amount funded by the employer, what kind of account arises, and how should it be reported in the financial statements? If the reverse occurs鈥攖hat is, current funding by the employer exceeds the amount recognized as pension expense鈥攚hat kind of account arises, and how should it be reported?

Kreter Co. provides the following information about its postretirement benefit plan for the year 2017. Service cost $ 45,000 Contribution to the plan 10,000 Actual and expected return on plan assets 11,000 Benefits paid 20,000 Plan assets at January 1, 2017 110,000 Accumulated postretirement benefit obligation at January 1, 2017 330,000 Discount rate 8% Instructions Compute the postretirement benefit expense for 2017

What is meant by 鈥減rior service cost鈥�? When is prior service cost recognized as pension expense?

Ferreri Company received the following selected information from its pension plan trustee concerning the operation of the company鈥檚 defined benefit pension plan for the year ended December 31, 2017. January 1, December 31, 2017 2017 Projected benefit obligation \(1,500,000 \)1,527,000 Market-related and fair value of plan assets 800,000 1,130,000 Accumulated benefit obligation 1,600,000 1,720,000 Accumulated OCI (G/L)鈥擭et gain 鈥�0鈥� (200,000) The service cost component of pension expense for employee services rendered in the current year amounted to \(77,000 and the amortization of prior service cost was \)120,000. The company鈥檚 actual funding (contributions) of the plan in 2017 amounted to \(250,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of \)1,200,000 on January 1, 2017. Assume no benefits paid in 2017. Instructions (a) Determine the amounts of the components of pension expense that should be recognized by the company in 2017. (b) Prepare the journal entry to record pension expense and the employer鈥檚 contribution to the pension plan in 2017. (c) Indicate the pension-related amounts that would be reported on the income statement and the balance sheet for Ferreri Company for the year 2017.

Many business organizations have been concerned with providing for the retirement of employees since the late 1800s. Increase in this concern resulted in the establishment of private pension plans in most large companies and in many medium- and small-sized ones. The substantial growth of these plans, both in numbers of employees covered and in amounts of retirement benefits, has increased the significance of pension costs in relation to the financial position, results of operations, and cash flows of many companies. In examining the costs of pension plans, a CPA encounters certain terms. The components of pension costs that the terms represent must be dealt with appropriately if generally accepted accounting principles are to be reflected in the financial statements of entities with pension plans.

Instructions

(a) Define a private pension plan. How does a contributory pension plan differ from a noncontributory plan?

(b) Differentiate between 鈥渁ccounting for the employer鈥� and 鈥渁ccounting for the pension fund.鈥�

(c) Explain the terms 鈥渇unded鈥� and 鈥減ension liability鈥� as they relate to: (1) The pension fund. (2) The employer.

(d) (1) Discuss the theoretical justification for accrual recognition of pension costs. (2) Discuss the relative objectivity of the measurement process of accrual versus cash (pay-as-you-go) accounting for annual pension costs.

(e) Distinguish among the following as they relate to pension plans. (1) Service cost. (2) Prior service costs. (3) Vested benefits.
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