Pension plans are f ully f unded when plan asset s

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Unformatted text preview: t he balanc e sheet . Pension plans are f ully f unded when plan asset s equal t he ABO. Pension plans are underf unded when plan asset s are less t han t he ABO. Pension plans are over f unded when plan asset s are more t han t he ABO. Ac c ount ing f or Pension Expense (Wit h and Wit hout a Worksheet ) T he most c ommon c omponent s of pension expense inc lude: Current servic e c ost s Int erest on t he ac c rued benef it obligat ion (ABO) T he expec t ed ret urn on plan asset s Amort izat ion of past servic e c ost s (PSC) Amort izat ion of t he net ac t uarial gain or loss Annual pension expense is t he net of t hese amount s. F or det ailed explanat ion of t he above it ems, ref er t o pages 1238–1240. T he journal ent ry t o rec ord pension expense is: https://blackboar d.tr u.ca/webct/ur w/lc5122001.tp0/cobaltM ainFr ame.dowebct 4/7 10/14/13 Blackboar d Lear ning System T he journal ent ry t o rec ord f unding t he pension plan (sending c ont ribut ions t o t he t rust ee) is: If money is sent t o t he t rust ee at t he same t ime t he pension expense is c alc ulat ed, t hese t wo ent ries may be c ombined. Y our t ext book provides several examples of how t o c alc ulat e pension expense using a worksheet —see pages 1248–1260. T he worksheet is unique t o pension ac c ount ing and is ut ilized t o rec ord bot h t he f ormal ent ries and memo ent ries t hat are nec essary t o keep t rac k of all t he employer's relevant pension plan c omponent s. It ems wort h not ing inc lude t he f ollowing: As wit h any worksheet , debit s always equal c redit s. T he net c hange in t he Ac c rued Pension Asset /Liabilit y is Pension Expense less t he Cash sent t o t he t rust ee. T he c losing balanc e of t he Ac c rued Pension Asset /Liabilit y is report ed on t he c ompany’s balanc e sheet . If t he f inal balanc e is a debit , it is an asset ; if it is a c redit , it is a liabilit y. Ac c rued Pension Asset /Liabilit y will always equal t he t ot al of t he Memo ac c ount s. If t he prepaid/ac c rued ac c ount ’s c losing balanc e is $100,000 debit , t hen t he sum of t he memo ac c ount s...
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This note was uploaded on 02/05/2014 for the course BUS 370 taught by Professor Andreathomas during the Spring '13 term at Capital University.

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