Abbott and abbott has a noncontributory, defined benefit pension plan. at december 31, 2018, abbott and abbott received the following information: projected benefit obligation ($ in millions) balance, january 1 $ 125 service cost 22 interest cost 15 benefits paid (8 ) balance, december 31 $ 154 plan assets balance, january 1 $ 75 actual return on plan assets 10 contributions 2018 22 benefits paid (8 ) balance, december 31 $ 99 the expected long-term rate of return on plan assets was 12%. there was no prior service cost and a negligible net loss–aoci on january 1, 2018. required: 1. determine abbott and abbott’s pension expense for 2018. 2. prepare the journal entries to record abbott and abbott’s pension expense, funding, and payment for 2018.

The Journal entries are as follows:

1.

Service Cost A/c                           Dr. $22

Interest cost A/c                            Dr. $15

To Expected return- Plan Assets                $9

To Pension expense                                    $28

(To record the pension expense for 2018)

Workings:

Expected return- Plan Assets = 12% of plan assets

                                                 = 0.12 × $75

                                                  = $9

2.

(i) Pension Expense A/c                                           Dr. $28

Plan Assets (expected return on plan assets) A/c Dr. $9

To PBO (22 service cost + 15 interest cost)                           $37

(To record pension expense)

(ii) Plan assets A/c   Dr. $22

To cash                                  $22

(To record the funding)

(iii) PBO A/c    Dr. $8

To plan assets           $8

(To record PBO or plan assets)

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