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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.
- Spring '13